UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES, et al.;
Plaintiffs,
v. Civ. Action No. 20-2564 (EGS)
DAIMLER AG, et al.,
Defendants.
Memorandum Opinion
Pending before the Court are the United States’ Motion to
Enter Consent Decree, ECF No. 7, 1 and the State of California’s
Motion to Enter California Partial Consent Decree, ECF No. 9.
The proposed consent decrees lodged with the Court resolve
claims the United States and the California Attorney General’s
Office, on behalf of the California Air Resources Board
(“CARB”), assert against the Defendants Daimler AG and Mercedes-
Benz USA, LLC (collectively, “Daimler”) for certain violations
of California law and the Clean Air Act (“CAA”), 42 U.S.C. §§
7521 et seq. See Unopposed Mot. Enter Consent Decree (“Gov’t’s
Mot.”), ECF No. 7 at 8; Calif. Mot. Enter Calif. Partial Consent
Decree (“Calif. Mot.”), ECF No. 9 at 2.
1 When citing electronic filings throughout this Opinion, the Court cites to the ECF page number, not the page number of the filed document. Upon careful consideration of the motions, the arguments
therein, the relevant law, and for the reasons set forth below,
the Court GRANTS the United States’ motion and California’s
motion.
I. Background
A. Factual and Procedural History
On September 14, 2020, the United States filed a complaint
against Daimler, alleging four types of violations of the CAA
arising from the sale of “more than 250,000 diesel-engine vans
and passenger cars in the United States that contain undisclosed
auxiliary emission control devices (AECDs) and unlawful ‘defeat
devices’ used to circumvent emissions testing.” See Gov’t’s
Mot., ECF No. 7 at 9.
With respect to the first type of violation, Section
203(a)(1) of the CAA “prohibits vehicle manufacturers from
selling any new motor vehicle in the United States that is not
covered by a valid certificate of conformity (COC) issued by the
Environmental Protection Agency (EPA).” Id. According to the
allegations in the government’s complaint, Daimler allegedly
“failed to disclose numerous AECDs installed in its diesel
vehicles when applying for COCs, meaning that the vehicles were
not covered by a valid COC issued under EPA’s regulations when
Daimler sold them to consumers.” Id. at 9-10. With respect to
the second type of violation, Section 203(a)(3)(B) of the CAA
2 prohibits “knowingly selling or installing a part or component
in a vehicle to bypass, defeat, or render inoperative any aspect
of the vehicle’s emissions control system, unless certain narrow
exceptions apply.” Id. at 10. The complaint alleges that Daimler
installed “unlawful defeat devices that cause the vehicles’
emissions control systems to perform less effectively during
normal driving than they perform while undergoing federal
emissions testing.” Id. With respect to the third type of
violation, Section 203(a)(3)(A) of the CAA prohibits “tampering
with a vehicle’s emissions control system by removing or
rendering inoperative a part installed to comply with the CAA.”
Id. The complaint alleges that, by installing undisclosed AECDs
and defeat devices in the affected vehicles prior to their sale,
Daimler tampered with the vehicles. Id. With respect to the
fourth type of violation, Section 203(a)(2) of the CAA “requires
vehicle manufacturers to provide information required under
Section 208 of the CAA, including information that the EPA
Administrator requires to determine compliance with the Act.”
Id. at 11. The complaint alleges that Daimler failed to provide
information regarding the undisclosed AECDs and defeat devices
to the EPA, which the EPA needed to determine whether the
company was in compliance with the CAA. Id.
On the same day it filed the complaint, the government
lodged a consent decree that had been agreed to and signed by
3 all parties. See Notice Lodging Consent Decree, ECF No. 2. The
government requested that the Court take no action pending
publication of the proposed consent decree in the Federal
Register and the running of the comment period, stating that it
would move for entry of the proposed consent decree as a final
order at a later date. Id. at 1-2.
Also on September 14, 2020, the California Attorney
General’s Office, on behalf of CARB, filed a separate eleven-
count complaint against Daimler under Civil Action Number 20-cv-
2565 (“California Action”). See Compl., ECF No. 1, California v.
Daimler AG, No. 20-cv-2565 (D.D.C. Sept. 14, 2020) (EGS).
Similar to the above, the complaint in the California Action
alleged that Daimler violated certain provisions of the CAA, the
California Health and Safety Code, the California Business and
Professions Code, and the California Code of Regulations. See
Calif. Mot., ECF No. 9 at 2. The complaint alleged, among other
things, that the affected diesel vehicles contained undisclosed
AECDs and defeat devices, “as well as several unreported,
unapproved running changes and field fixes that have resulted
in, and continue to result in, increased NOx emissions from each
Subject Vehicle in excess of California limits.” Id. The State
of California lodged a partial consent decree on the same day it
filed its complaint. Notice Lodging, ECF No. 3, California v.
Daimler AG, No. 20-cv-2565 (D.D.C. Sept. 14, 2020) (EGS). The
4 State of California indicated that it would submit a motion
requesting entry of the proposed partial consent decree at a
future date. Id. at 2.
The Court thereafter consolidated the California Action
with this case pursuant to Federal Rule of Civil Procedure
42(a), see Min. Order (Sept. 14, 2020), California v. Daimler
AG, No. 20-cv-2565 (D.D.C. Sept. 14, 2020) (EGS); and the
California Action was terminated on September 23, 2020. On
December 17, 2020, the United States filed its motion for an
order entering a consent decree (“Consent Decree”), 2 Gov’t’s
Mot., ECF No. 7, and the State of California joined in the
United States’ motion the same day, see Calif.’s Notice Joinder,
ECF No. 8. The State of California subsequently filed its motion
for an order entering the partial consent decree (“California
Partial Consent Decree”). Calif. Mot., ECF No. 9. Daimler does
not oppose the motions. See Gov’t’s Mot., ECF No. 7 at 7; Calif.
Mot., ECF No. 9 at 1.
2 The government notes that during the notice-and-comment period, the parties discovered typographical errors in the initial proposed consent decree lodged on September 14, 2020. The errors, which did not relate to any of the public comments received, were corrected, but the Consent Decree the parties ask this Court to adopt is otherwise the same. See Gov’t’s Mot., ECF No. 7 at 9 n.1; Calif. Notice Joinder, ECF No. 8 at 1 n.1. 5 B. The Consent Decree And The California Partial Consent Decree
The Consent Decree requires Daimler to:
(1) fix its vehicles at no cost to consumers;
(2) offer an extended warranty on all parts expected to be impacted by the fix;
(3) conduct future testing of the affected vehicles to demonstrate compliance with emissions standards for their full useful life;
(4) perform projects to fully mitigate damage caused to the Nation’s air;
(5) implement new corporate compliance measures to discourage future cheating; and
(6) pay a civil penalty of $875 million, plus retroactive stipulated penalties of about $70.3 million.
Gov’t’s Mot., ECF No. 7 at 11. The settlement’s total value will
reach $1.5 billion, according to the government. Id.
The government notes that it held a 30-day public comment
period on the Consent Decree, received 16 comments which it
carefully considered, and concluded that none of the comments
provided a basis for withholding its consent to the entry of the
decree. Id. at 15-16.
The California Partial Consent Decree requires Daimler to
make a $110,000,000 payment to CARB and a $17,500,000 payment to
the California Attorney General. Calif. Mot., ECF No. 9 at 3-5.
The California Partial Consent Decree also resolves: (1) all
6 civil claims for relief that were or could have been brought
under Section 17200 of the California Business & Professions
Code “to the extent that those claims are predicated on
allegations that Daimler engaged in unlawful business acts or
practices,” within the meaning of the provision, “by virtue of
having violated certain provisions of California and [f]ederal
law”; and (2) all claims related to the affected vehicles and
the allegations in the California Complaint or “facts disclosed
to California before the lodging of the Consent Decree” that the
California Attorney General could have brought pursuant to
certain provisions of California law and federal law. Id.
Finally, the California Partial Consent Decree enjoins Daimler
from: (1) introducing any vehicles that contain undisclosed
AECDs or defeat devices, or that otherwise fail to comply with
certain California Health and Safety Code provisions; (2)
“engaging in unlawful business acts or practices, within the
meaning of California Business and Professions Code § 17200 et
seq.,” by violating certain California Health and Safety Code
provisions; (3) failing to notify relevant authorities if
Daimler has reason to believe that a vehicle with an undisclosed
AECD or defeat device has been sold or offered for sale; (4)
failing to comply with any injunctive terms obtained that apply
to the vehicles at issue or Daimler; and (5) submitting “a copy
of any report filed under Paragraph 44” of the Consent Decree to
7 the California Attorney General. Ex. 1 to Calif. Mot. (“Calif.
Partial Consent Decree”), ECF No. 9-1 at 9-10.
The California Partial Consent Decree was not subject to
any notice and comment requirements. Calif. Mot., ECF No. 9 at
1.
II. Standard for Entry of Consent Decree
The “generally applicable” standard for the review of a
consent decree in the District of Columbia Circuit is whether
the consent decree “fairly and reasonably resolves the
controversy in a manner consistent with the public interest.”
Massachusetts v. Microsoft Corp., 373 F.3d 1199, 1206 n.1 (D.C.
Cir. 2004) (quoting New York v. Microsoft Corp., 231 F. Supp. 2d
203, 205 (D.D.C. 2002)) (citing Citizens for a Better Env’t v.
Gorsuch, 718 F.2d 111, 1126 (D.C. Cir. 1983)). “[P]rior to
approving a consent decree a court must satisfy itself of the
settlement’s overall fairness to beneficiaries and consistency
with the public interest.” Citizens for a Better Env’t, 718 F.2d
at 1126 (internal quotation marks and citation omitted).
“Approval of a settlement is a judicial act that is
committed to the informed discretion of the trial court.” United
States v. Hyundai Motor Co., 77 F. Supp. 3d 197, 199 (D.D.C.
2015) (quoting United States v. District of Columbia, 933 F.
Supp. 42, 47 (D.D.C. 1996)). The Court is not to “substitute its
judgment” for that of the parties to the decree and “may not
8 modify but only approve or reject a consent decree.” United
States v. Akzo Coatings of Am., Inc., 949 F.2d 1409, 1435 (6th
Cir. 1991). “Naturally, the agreement reached normally embodies
a compromise; in exchange for the saving of cost and elimination
of risk, the parties each give up something they might have won
had they proceeded with litigation.” United States v. Armour &
Co., 402 U.S. 673, 681-82 (1971).
“The trial court in approving a settlement need not inquire
into the precise legal rights of the parties nor reach and
resolve the merits of the claim or controversy, but need only
determine that the settlement is fair, adequate, reasonable and
appropriate under the particular facts and that there has been
valid consent by the concerned parties.” Citizens for a Better
Env’t, 718 F.2d at 1126 (citing Metro. Hous. Dev. Corp. v. Vill.
of Arlington Heights, 616 F.2d 1006, 2014 (7th Cir. 1980)).
“[I]t is precisely the desire to avoid a protracted examination
of the parties’ legal rights which underlies consent decrees.
Not only the parties, but the general public as well, benefit
from the saving of time and money that results from the
voluntary settlement of litigation. Thus, ‘[v]oluntary
settlement of civil controversies is in high judicial favor.’”
Id. (quoting Autera v. Robinson, 419 F.2d 1197, 1199 (D.C. Cir.
1969)). That said, “[a] decree, even entered as a pretrial
settlement, is a judicial act, and therefore the district judge
9 is not obliged to accept one that, on its face and even after
government explanation, appears to make a mockery of judicial
power.” Microsoft Corp., 56 F.3d at 1462. “Finally, broad
deference should be afforded to EPA’s expertise in determining
an appropriate settlement and to the voluntary agreement of the
parties in proposing the settlement.” District of Columbia, 933
F. Supp. at 48 (citing In re Cuyahoga Equip. Corp., 980 F.2d
110, 118 (2d Cir. 1992)).
III. Analysis
The Court must determine whether the government has met its
burden to demonstrate that the consent decrees are fair,
reasonable, and in the public interest. United States v. Davis,
11 F. Supp. 2d 183, 189 (D.R.I. 1998) (“The United States is
obliged to proffer sufficient facts and reasons to establish
that these factors have been satisfied and that approval is
warranted.”).
A. The Consent Decrees Are Fair
“A review of the fairness of a proposed consent decree
requires an assessment of the good faith of the parties, the
opinions of the counsel, and the possible risks involved in
litigation if the settlement is not approved.” District of
Columbia, 933 F. Supp. at 48 (quoting United States v. Hooker
Chem. & Plastics Corp., 607 F. Supp. 1052, 1057 (W.D.N.Y.
1985)). “Fairness incorporates both procedural and substantive
10 components.” United States v. Telluride Co., 849 F. Supp. 1400,
1402 (D. Colo. 1994). “An assessment of procedural fairness
involves looking ‘to the negotiating process and attempt[ing] to
gauge its candor, openness, and bargaining balance.’” District
of Columbia, 933 F. Supp. at 47 (quoting Telluride Co., 849 F.
Supp. at 1402). “A consent decree that is substantively fair
incorporates ‘concepts of corrective justice and accountability:
a party should bear the cost of harm for which it is legally
responsible.’” Id. at 47 (quoting United States v. Cannons Eng'g
Corp., 899 F.2d 79, 87 (1st Cir. 1990)).
The Consent Decree and the California Partial Consent
Decree proposed in this litigation are fair. Regarding the
procedural fairness of the consent decrees, all of the parties
involved support entry of the decree. See Gov’t’s Mot., ECF No.
7 at 7; Calif. Mot., ECF No. 9 at 1. Each party was represented
by experienced counsel and engaged in settlement negotiations
that lasted more than three years, resulting in the drafting of,
and agreement on, the provisions of the consent decrees. Gov’t’s
Mot., ECF No. 7 at 17. Furthermore, “there is no suggestion of
impropriety in the negotiation of the agreement[s],” Hyundai
Motor Corp., 77 F. Supp. 3d at 200; rather, the consent decrees
are “a reflection of the parties’ arms-length efforts to reach a
just and equitable outcome,” Gov’t’s Mot., ECF No. 7 at 17. In
addition, the United States complied with the CAA’s required
11 notice-and-comment procedures and duly considered each of the 16
comments it received. Id. Regarding the substantive fairness of
the consent decrees, “[t]he proposed settlement requires Daimler
to atone for its misconduct” through repairing affected
vehicles, mitigating excess NOx emitted into the air, taking
steps to prevent future environmental violations, and paying
substantial financial penalties. Id. at 18; see also Calif.
Mot., ECF No. 9 at 4.
Accordingly, the Court finds that the consent decrees are
fair.
B. The Consent Decrees Are Reasonable
“In examining the reasonableness of a decree there are
three factors for the Court to consider: (1) whether the decree
is technically adequate to accomplish the goal of cleaning the
environment, (2) whether it will sufficiently compensate the
public for the costs of the remedial measures, and (3) whether
it reflects the relative strength or weakness of the
government’s case against the environmental offender.” District
of Columbia, 933 F. Supp. at 50 (quoting Telluride, 849 F. Supp.
at 1402). “‘[T]he court must determine whether the proposed
consent decree is reasonable from an objective point of view.’”
Appalachian Voices v. McCarthy, 38 F. Supp. 3d 52, 56 (D.D.C.
2014) (quoting Env’t Def. v. Leavitt, 329 F. Supp. 2d 55, 71
(D.D.C. 2004)).
12 The United States argues that the first factor has been met
because the Consent Decree will force Daimler to: (1) “bring the
majority of the affected vehicles into compliance with
applicable NOx emission standards”; (2) “perform projects to
fully mitigate excess NOx emitted into the air”; and (3)
“implement corporate governance reforms to help ensure
compliance with the CAA in the future.” Gov’t’s Mot., ECF No. 7
at 19. In addition, the State of California argues that the
California Partial Consent Decree is reasonable, noting that the
relief provided is “substantial, and it directly addresses the
violations alleged by California.” Calif. Mot., ECF No. 9 at 3.
The Court agrees. Based on the current record, it appears that
the consent decrees are “technically adequate to accomplish the
goal of cleaning the environment,” District of Columbia, 933 F.
Supp. at 51; will bring Daimler into compliance with the CAA and
ensure future compliance with the CAA; and will increase the
likelihood that Daimler will meet its obligations going forward.
With regard to “whether [the consent decrees] will
sufficiently compensate the public for the costs of remedial
measures,” District of Columbia, 933 F. Supp. at 50; the
substantial financial penalties in the Consent Decree and the
California Partial Consent Decree were negotiated in good faith
taking into account applicable statutory factors, as well as
Daimler’s cooperation and the risks of litigation. In addition,
13 the penalties are commensurate with other mobile source
settlements. See Gov’t’s Mot., ECF No. 7 at 20.
The final factor in the reasonableness inquiry is “whether
[the consent decrees] reflect[] the relative strength or
weakness of the government’s case against the environmental
offender.” District of Columbia, 933 F. Supp. at 50. “While it
is true that the [agreements] may have extracted less than was
possible from the defendant, it must be remembered that a
consent decree by its very nature will contain elements of
compromise.” Id. at 51. Here, the government notes that the
settlement “includes compromises,” but that it also “includes
significant injunctive relief to benefit the Nation’s air and
the citizens who breathe it and a substantial civil penalty to
punish and deter Daimler and would-be violators.” Gov’t’s Mot.,
ECF No. 7 at 21. Furthermore, the consent decrees provide relief
to the parties now, as compared to the potential years of
litigation the parties could face if the United States and
California elected to pursue their claims to trial. See District
of Columbia, 933 F. Supp. at 51 (“[I]t is almost axiomatic that
voluntary compliance on an issue where there is a potential
disagreement is a better alternative than the uncertainty of
litigation over that issue.”).
Accordingly, for all of these reasons, the Court finds that
the consent decrees are reasonable.
14 C. The Consent Decrees Are In The Public Interest
“A settlement agreement which seeks to enforce a statute
must be consistent with the public objectives sought to be
attained by Congress.” Stewart v. Rubin, 948 F. Supp. 1077, 1087
(D.D.C. 1996). The purpose of the CAA is “to protect and enhance
the quality of the Nation’s air resources so as to promote the
public health and welfare and the productive capacity of its
population.” 42 U.S.C. § 7401(b)(1). The Court’s inquiry is
limited. “[P]rior to approving a consent decree a court must
satisfy itself of the settlement’s ‘overall fairness to
beneficiaries and consistency with the public interest.’” United
States v. Trucking Emps., Inc., 561 F.2d 313, 317 (D.C. Cir.
1977) (quoting United States v. Allegheny-Ludlum Indus., 517
F.2d 826, 850 (5th Cir. 1975)). “‘[T]he [district] court’s
function is not to determine whether the resulting array of
rights and liabilities is the one that will best serve society,
but only to confirm that the resulting settlement is within the
reaches of the public interest.’” United States v. Microsoft
Corp., 563 F.3d 1448, 1460 (D.C. Cir. 1995) (quoting United
States v. W. Elec. Co., 900 F.2d 283, 325 (D.C. Cir. 1990)).
The Court is satisfied with the decree’s “overall fairness
to beneficiaries and consistency with the public interest.”
Trucking Emps., Inc., 561 F.2d at 317 (citations omitted). As
described above, the consent decrees further the goal of the CAA
15 and California law provisions by “secur[ing] significant
injunctive relief to bring the affected vehicles into compliance
with the law, mitigate[ing] excess NOx emissions; and
promot[ing] compliance in the future.” Gov’t’s Mot., ECF No. 7
at 22; see also Calif. Mot., ECF No. 9 at 2 (“The California
Partial Consent Decree, along with the US/CARB/Daimler Consent
Decree, form an integration resolution to remedy the violations
alleged in the California Complaint. The relief provided is
substantial, and it directly addresses the violations alleged by
California.”). The substantial financial penalties provided for
in the consent decrees also send a strong deterrence signal to
other manufacturers who may consider installing undisclosed
AECDs or defeat devices in their vehicles.
the consent decrees are in the public interest.
16 IV. Conclusion
For the reasons explained above, the United States’ Motion
to Enter Consent Decree, ECF No. 7, and the State of
California’s Motion to Enter California Partial Consent Decree,
ECF No. 9, are GRANTED. A signed Order entering the Consent
Decree and California Partial Consent Decree, as well as the
Consent Decree and California Partial Consent Decree,
accompanies this Memorandum Opinion.
SO ORDERED.
Signed: Emmet G. Sullivan United States District Judge March 9, 2021