Opinion ID: 426344
Heading Depth: 1
Heading Rank: 4

Heading: manufacturers' obligations extended

Text: 44 Besides defining which of the vehicle manufacturers' parts must be warranted, the regulations require the manufacturer to take responsibility, at least in the first instance, for short test failures that result from their dealers' acts and from the use of their competitors' parts. Petitioners challenge various aspects of these regulations as exceeding EPA's statutory grant of authority.
45 To begin with, petitioners challenge the sundry regulations that hold vehicle manufacturers responsible for ensuring that warranty repairs are properly and timely made. These regulations require vehicle manufacturers to honor warranty claims, valid or not, if the repair facility does not finish or reject (in writing) such claims within 30 days. See 40 C.F.R. Secs. 85.2106(f), 85.2107(d) (1982). Similarly, they prohibit vehicle manufacturers from denying claims on the basis of any work performed by an authorized facility, id. Sec. 85.2104(h), and subject these manufacturers to fines of up to $10,000 per offense for warranty work that cannot reasonably be expected to allow the vehicle to meet applicable emission standards, id. Sec. 85.2111(b). 46 In our view, these regulations simply ensure that vehicle manufacturers assume the responsibilities the Act places upon them. In Section 207(b) Congress identified the vehicle manufacturer as being responsible for a broad performance warranty. 42 U.S.C. Sec. 7451(b). In Section 203(a)(4)(D) Congress prohibited these manufacturers from failing or refusing to comply with the terms of the warranty with respect to any vehicle. Id. Sec. 7522(a)(4)(D). And in Section 207(d) Congress specifically prohibited such manufacturers from transferring any of their warranty cost to their dealers. Id. Sec. 7541(d). In these sections of the statute Congress made clear that it wanted vehicle manufacturers to assume full responsibility for the performance warranty. The regulations implement this congressional intent. They do not impose vicarious liability on the vehicle manufacturers or make them responsible for activities they cannot control. Rather, they ensure that the vehicle manufacturers will not be able to escape their performance warranty obligations by delegating the repair work to others. 52 So long as vehicle manufacturers choose to authorize others to perform their obligations, they must also be prepared to accept responsibility for the inadequate performance of their delegates. 53 These regulations simply ensure that consumers do not face unreasonable hurdles in bringing their warranty claims and that, when performed, the performance warranty work is adequate. 54 The Act clearly gives EPA authority to make the vehicle manufacturers responsible for their authorized dealers' acts.
47 In addition to ensuring that vehicle manufacturers remain responsible for warranty service provided by their authorized dealers, EPA attempted to implement Congress' mandate, in Section 207(b), that vehicle manufacturers not be allowed to deny warranty claims where a competitor's certified replacement part was used. 55 In this effort EPA published replacement part regulations, which provide, in pertinent part: 48 (a) No emission performance warranty claim shall be denied on the basis of the use of a properly installed certified part in the maintenance or repair of a vehicle.(b) Except as provided in Sec. 85.2104(h), a vehicle manufacturer may deny an emission performance warranty claim on the basis of an uncertified replacement part used in the maintenance or repair of a vehicle if the vehicle manufacturer presents evidence that the uncertified replacement part is: 49 (1) Either defective in materials or workmanship, or not equivalent from an emissions standpoint to the original equipment part; and 50 (2) The owner is unable to rebut the evidence.    51 40 C.F.R. Sec. 85.2105(a) & (b) (1982) (emphasis added). 56 These regulations thus make the vehicle manufacturers responsible, at least in the first instance, for all warranty claims arising from use of their competitors' parts.
52 Petitioners first challenge that aspect of the replacement parts regulations that makes the vehicle manufacturers responsible for warranty claims in which uncertified parts were used in the maintenance or repair of the vehicle. This portion of the regulations effectively shifts the parts manufacturers' burden of demonstrating equivalency--a prerequisite to certification--to the vehicle manufacturers when an uncertified part is alleged to have been relevant to the vehicle's failure to comply with the emission standards. 57 Petitioners claim that EPA reaches beyond its statutory authority in forcing them to carry this burden of proof before they may deny a warranty claim. We agree. 53 On its face, Section 207(b) prohibits vehicle manufacturers from denying warranty claims if certified parts were used in a vehicle's repair. 42 U.S.C. Sec. 7541(b). The statute says nothing about requiring vehicle manufacturers to accept warranty claims where uncertified parts were used, or of requiring vehicle manufacturers to demonstrate that uncertified parts were defective or not equivalent to original equipment parts before a claim can be denied. Indeed, the fairest implication from the language of the statute is that if an uncertified part is relevant to the failure to comply with the emission standards, then the manufacturer may deny the warranty claim. 54 When Congress was considering Section 207(b), it obviously was aware of existing law that governed the vehicle manufacturers' responsibilities to consumers. 58 That law--the Magnuson-Moss Act, 15 U.S.C. Sec. 2301 et seq. (1982)--specifically prohibits manufacturers from conditioning their warranties on the consumers' use of articles identified by brand, trade, or corporate name. Id. Sec. 2302(c). But that law did not prohibit manufacturers from conditioning their warranties on the use of the equivalent of original equipment parts because Congress recognized that the manufacturers' reputation and customer goodwill were at stake in warranty work and that manufacturers should be able to protect their interests by requiring reputable and effective repairs. Cf. id. Sec. 2307 (manufacturer can designate facilities for performing warranty repairs). 55 Congress faced this same concern when it addressed the performance warranty issue under the Clean Air Act. It recognized that the performance warranty exposed vehicle manufacturers to 56 such vast liability that these companies have a legitimate interest in limiting the scope of their liability by conditioning the validity of their performance warranties on the proper care and maintenance of the vehicle.    [T]his interest carries with it the ability to establish criteria to protect the vehicle manufacturer from liability which it, in no way, caused, but which resulted solely from the owner's negligence or the installation of independently produced inferior parts or improper nonfranchised service. 57 [Congress further recognized] the legal and economic considerations[,] as well as the inability to establish effective quality control measures [, which] prohibit the vehicle manufacturer from publicly identifying non-OEM equivalent parts and nonfranchised service outlets.    58 H.R.Rep. No. 93-1628, supra, at 30, JA 547 (emphasis added). 59 Thus Congress enacted a scheme whereby EPA was to shoulder responsibility for establishing the criteria for equivalency--the parts certification scheme. Congress was concerned that vehicle owners, because of the duration of the warranty, would use only original equipment parts in maintenance or repair of their motor vehicle emission systems in order to avoid disputes about the equivalence of their parts. Congress feared that these psychological and financial incentives would adversely affect the competitive position of aftermarket parts manufacturers. 59 It therefore directed EPA to establish a system whereby all parts manufacturers could, through a relatively simple and inexpensive procedure, 60 certify that their parts were equivalent to those of the vehicle manufacturer. 61 See 42 U.S.C. Sec. 7541(a)(2). This system was to become effective within two years. Id. Thus, if a vehicle owner had installed a certified aftermarket part, the vehicle manufacturer could no longer assert that the part was not equivalent and so refuse to honor the owner's warranty repair claim. But at no time did Congress indicate it wanted vehicle manufacturers to bear the burden of proving nonequivalence for parts not so certified. 62 60 To the contrary, Congress understood what a delicate task it had assumed in balancing the needs of vehicle manufacturers, parts manufacturers, and consumers. It clearly wanted to mitigate the potential anticompetitive impact of the performance warranty on parts manufacturers and, to that end, directed EPA to establish a certification scheme that would minimize the warranty's anticompetitive impacts. But this scheme also sought to provide certain quality control assurances to both vehicle manufacturers and consumers about the equivalency of independent manufacturers' parts. Thus EPA had to establish a scheme whereby parts manufacturers could establish such equivalency. 40 C.F.R. Sec. 85.2105(a)(2) (1982) undermines this balance by shifting to the vehicle manufacturers the responsibility for establishing nonequivalency, thereby making them potentially liable for aftermarket parts that have not been processed and checked through EPA's certification scheme. The regulation clearly exceeds EPA's statutory grant of authority and must be invalidated. 63
61 Petitioners further challenge that aspect of the replacement parts regulations that prohibits vehicle manufacturers from denying a performance warranty claim on the basis that a certified part was defective, decertified, or otherwise not equivalent to the original equipment part. Joint brief of petitioners and intervenor at 21; see 40 C.F.R. Sec. 85.2105(a) (1982); 45 Fed.Reg. 34840, JA 420; 40 C.F.R. Sec. 85.2121(f) (1982); 45 Fed.Reg. 78462 (Nov. 25, 1980), JA 519. 64 We must reject this challenge because EPA's regulations track the clear language of the statute 65 and fulfill the overriding purpose of the parts certification program. 66 62 Section 207(b) flatly prohibits invalidation of any performance warranty on the basis of any part used in the maintenance or repair of a vehicle or engine if such part was certified   . 42 U.S.C. Sec. 7541(b). By its very terms, this provision covers any part that is certified, and there is no indication whatever that Congress meant to create any exception for defective, decertified, or nonequivalent parts. 67 To the contrary, Congress wanted to protect consumers from being caught in the middle of disputes between vehicle and parts manufacturers and to make it less risky for them to buy less expensive, nonoriginal equipment parts. 68 Consumers would be spared such disputes and encouraged to use independent manufacturers' parts only if the vehicle manufacturers were required to honor all consumers' claims on parts that were certified when bought. 69 For that reason Congress enacted Section 207(b) requiring vehicle manufacturers to honor any claim based on a certified part, whether equivalent or not. 70 63 Petitioners contend that two other pieces of legislative history--a 1976 House Report 71 and a 1977 House Committee Report 72 --demonstrate that Congress did not intend for the warranty obligation to apply so broadly and that EPA's regulations are contrary to congressional intent. Both of these reports explained that use of a certified part could not be considered as a basis for voiding the performance warranty, unless the actual part in question [was] proven by the vehicle manufacturer to be defective in workmanship or materials. But neither of the bills these reports accompanied was enacted into law. H.R. 10498 (which the 1976 report accompanied) died in the 1976 Congress. 73 H.R. 6161 (which the 1977 report accompanied) was a starting point for the legislation ultimately enacted, but contained language very different from that actually included in the final bill. 74 In the final version Congress chose the wording offered in S.252, 75 and this Senate bill (and its language) 76 contained no such exception for defective, decertified, or nonequivalent parts. 77 64 In describing the final compromise, the Conference Committee concluded that no warranty shall be invalidated by the use of any part certified under regulations promulgated by the Administrator not to result in failure of an engine to comply with emission standards. H.R.Rep. No. 95-564, 95th Cong., 1st Sess. 548 (1977), JA 557. The Committee understood that a certified parts warranty could be invalidated in only one circumstance: where the manufacturer showed that the owner had not performed the required maintenance or repair as set forth in the owner's manual or had abused the vehicle in its operation. Id. Thus the Conference Committee could not have intended that vehicle manufacturers escape initial responsibility for allegedly defective, but certified, parts. Nor could the Committee have intended that vehicle manufacturers escape initial responsibility for nonequivalent or decertified parts, since the very purpose of creating a certification program was to allow consumers to insure against such charges. Thus, EPA's program seems entirely consistent with the Committee's understanding of the final compromise. 65 Petitioners object to EPA's reading of the statute (and the legislative history) because it imposes what they term vicarious liability on the vehicle manufacturers. 78 But EPA's interpretation does no such thing. Rather, it merely commands vehicle manufacturers to make or authorize repairs and then to obtain reimbursement from the parts manufacturers. Contrary to petitioners' intimations, 79 this is the only interpretation of the statute that the agency has suggested: 66 [T]he Agency believes that Congress intended that the vehicle manufacturer honor claims involving certified parts, even if the parts are defective, provided the vehicle manufacturer may be reimbursed for the expenses of such activities by the aftermarket part manufacturer. 67 45 Fed.Reg. 34835 (May 22, 1980), JA 415. Furthermore, this interpretation is entirely consistent with Congress' desire to protect consumers from excessive prices and to minimize the difficulties that consumers might face in obtaining their warranted repairs, provided an acceptable reimbursement scheme is in place. 80 Thus we can find no basis for describing EPA's scheme as one that imposes vicarious liability or for finding the interpretation inconsistent with congressional intent. 68 Because we find EPA's interpretation of the statute to be a reasonable one, our decisions in Chrysler Corp. v. EPA, 600 F.2d 904 (D.C.Cir.1979), 81 and Amoco Oil Co. v. EPA, 543 F.2d 270 (D.C.Cir.1976), 82 are completely inapposite. Both of these cases involved regulations that imposed liability (without reimbursement) on one party for the acts of another. In each case the court found that EPA lacked statutory authority to do so. See 600 F.2d at 916-917; 543 F.2d at 275-276. By contrast, this case involves a statute that fully authorizes EPA to shift primary liability from one party to another, provided an acceptable reimbursement scheme accompanies the shift. 83