UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

)

NA VISTAR, INC., )

Petitioner, ))

v. ))

)

U.S. ENVIRONMENTAL PROTECTION )

AGENCY, and LISA JACKSON, Administrator, )

) Respondents. )

)

Case No. 09-1113

(Consolidated with

No. 09-1114)

and

Case No. 09-1317

SETTLEMENT AGREEMENT

WHEREAS, Navistar Inc. ("Navistar") fied petitions for review against the

United States Environmental Protection Agency ("EPA") in this United States

Court of Appeals for the D.C. Circuit styled as Navistar, Inc. v. U.S. Environmental

Protection Agency, et aL, and docketed as Case No. 09-1113 (fied March 31,

2009), Case No. 09-1114 (fied March 31, 2009, and consolidated under Case No.

09- 1113), and Case No. 09-1317 (fied December 18, 2009) (collectively, the

"Petitions for Review");

WHEREAS, on April 13,2009, December 7,2009, and January 12,2010,

Navistar also initiated requests pursuant to the Freedom of Information Act, 5

U.S.c. § 552 (the "FOIA Requests");
WHEREAS, EPA intends to undertake a public process to review its policies

with regard to the use of selective catalytic reduction ("SCR") emission control

technologies on heavy-duty diesel engines; and

WHEREAS, EPA and Navistar (collectively the "Parties") wish to

implement this Settlement Agreement ("Agreement") to avoid protracted and

costly litigation and to preserve judicial resources;

NOW, THEREFORE, the Parties, intending to be bound by this Agreement,

hereby stipulate and agree as follows:

1. EP A shall engage in a public process to reexamine its policies, for

future model year 2011 and later heavy-duty diesel engines, for operation of SCRequipped engines without DEF, with improper DEF, or when tampering (or some

other defect in the SCR system) is detected. The public process shall take the form

of a workshop, hearing, or other public process as EP A determines to be

appropriate.

2. Not later than June 30,2010, or twenty-eight (28) days after the date

this Agreement becomes final, whichever is later, EP A shall issue a public notice

of the selected public process to be published in the Federal Register. EPA shall

include in the public notice statements that: (a) the public process is designed to

provide a thorough review ofEPA's policies regarding operation ofSCR-equipped

heavy-duty diesel engines without DEF, with improper DEF, or when tampering

2
(or some other defect in the SCR system) is detected for future 201 1 and later

model year engines, in order to ensure, among other things, that SCR-equipped

engines are designed to properly control emissions as required under applicable

law and regulations; (b) it is appropriate for EP A to review and reexamine its

policies as technologies are introduced into the marketplace; ( c) EP A intends to

review any information that has become available to determine whether its policies

regarding SCR-equipped engines should be revised; and (d) the scope of the

review includes the "Revised Guidance for Certification of Heavy-Duty Diesel

Engines Using Selective Catalyst Reduction (SCR) Technologies" dated December

30, 2009 (the "December 2009 Guidance").

3. EPA shall conduct the selected public process not later than sixty (60)

days after the publication of the public notice in the Federal Register.

4. EPA may suspend all work on the FOIA Requests. At such time as

this Agreement becomes final, Navistar's FOIA Requests shall be deemed

withdrawn.

5. Not later than ten (10) days after this Agreement becomes final, the

Parties shall fie a joint stipulation of dismissal with prejudice of Navis tar's

Petitions for Review, in accordance with Rule 42(b) of the Federal Rules of

Appellate Procedure. The joint stipulation of dismissal shall state that each part

shall bear its own costs and attorney's fees.

3
". '-"'-' --- ~'''~-: - :"''''-'':--'-''''-'---~--~- .--

6. If this Agreement does not become final, the Parties agree that

Navistar may pursue its pending Petitions for Review and FOIA Requests. With

respect to the Petitions in the above-captioned matter, Navistar wil promptly move

the Court to lift the stay dated May 6, 2010, and to reschedule the oral argument as

soon as possible. EP A wil not oppose such motion.

7. If this Agreement becomes final, Navistar shall be precluded from

filing any petition for review: (a) challenging directly or indirectly individual

certificates of conformity issued for a model year prior to the 2012 model year,

provided, however, that nothing herein shall prevent Navistar from bringing suit,

instituting action of any kind, or otherwise exercising its rights regarding

certifications of its own engines in any model year; and (b) challenging the

December 2009 Guidance, provided; however, that nothing herein shall prevent

Navistar from bringing suit, instituting action of any kind, or otherwise exercising

its rights regarding any changes or modifications to such Guidance issued after the

public process selected by EPA.

8. Except for the specific petitions identified above in Paragraph 7,

Navistar shall retain all its rights and remedies to challenge EPA's final action that

(

occurs following the public process selected by EPA. With respect to such

challenges under this Paragraph 8, nothing in this Agreement shall limit Navistar's

right to seek whatever remedies Navistar believes are appropriate, or prohibit EPA

4
from raising any defenses it believes are appropriate to any challenge brought by

Navistar.

9. EPA and Navistar agree and acknowledge that before this Agreement

is final, EPA must provide notice in the Federal Register and an opportnity for

comment pursuant to Clean Air Act § 113(g), 42 V.S.C. § 7413(g). EPA wil

forward such notice to the Federal Register within ten (10) business days of the

date all Parties have signed this Agreement. After this Agreement has undergone

notice and an opportnity for comment, the Administrator and/or the Attorney

General, as appropriate, shall promptly consider any such written comments and

determine whether to withdraw or withhold his/her consent to this Agreement, in

accordance with Section 113(g) of the Clean Air Act. EPA shall provide written

notice of the Administrator's and/or Attorney General's decision to Navistar as

expeditiously as possible. If the Administrator and/or the Attorney General elects

not to withdraw or withhold his/her consent to this Agreement, this Agreement

shall become final on the date that EPA provides written notice of such finality to

Navistar.

10. Except as set forth above, nothing in the terms of this Agreement shall

limit or modify the discretion accorded EPA by the Clean Air Act or by general

principles of administrative law. The obligations undertaken by EPA under this

Agreement can only be undertaken using appropriated funds. No provision of this

5
Agreement shall be interpreted as or constitute a commitment or requirement that

EPA obligate funds in contravention of the Anti-Deficiency Act, 31 U.S.C. § 1341.

Furthermore, nothing in the terms of this Agreement shall be construed to limit

EPA's authority to alter, amend or revise any final rule or policy EPA may issue

pursuant to this Agreement or to promulgate superseding regulations or issue

superseding policies.

11. The undersigned representatives of each part certifY that they are

fully authorized by the part that they represent to bind that respective part to the

terms of this Agreement.

Dated: Juneß( 2010

cJ

La ence H. Levine (IlL. Bar o. 1 459)

L URENCE H. LEVINE LAW OFFICES

190 S. LaSalle St.

Suite 3120

Chicago, IL 60603

Phone: (312) 291-7010

Fax: (312) 291-7015

Laurence. Levine(§)hlevine. com

Cary R. Perlman (IlL. Bar No.6 i 97698)

LATHAM & WATKINS LLP

233 South Wacker Dr.

Suite 5800

Chicago, IL 60606-6401

Phone: (312) 876-7700

Fax: (312) 993-9767

Cary.Perlman(fJw. com

Attorneys for Petitioner Navistar, Inc.

6
Kent E. Hanson

Matthew B. H 'um

United States Department of Justice

Environment & Natual Resources Division

Environmental Defense Section

P.O. Box 23986

Washington, D.C. 20026-3986

Tel: (202) 514-2327

Fax: (202) 514-8865

Of Counsel:

Michael Horowitz

Offce of General Counsel

U.S. Environmental Protection Agency

Ariel Rios Building North, 7340M

1200 Pennsylvania Avenue, N.W.

Washington, D.C. 20460

Counsel for Respondents

7