Opinion ID: 4561488
Heading Depth: 2
Heading Rank: 1

Heading: The CAFE penalty is a “civil monetary penalty.”

Text: We begin, as in all “statutory interpretation disputes, . . . [with] a careful examination of the ordinary meaning and structure of the law itself.” 43 To assess “ordinary meaning,” we consider the commonly 41Id. § 706(2); see Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 41 (1983); NRDC v. NHTSA, 894 F.3d at 107. 42NHTSA does not argue that the States and NGOs lack standing to challenge NHTSA’s reversal of the CAFE penalty increase. Nor could it under our holding in NRDC v. NHTSA, 894 F.3d at 103–05, that the petitioners had standing on the basis of declarations very similar — and in some instances identical — to those submitted in this case. 43 Food Mktg. Inst. v. Argus Leader Media, 139 S. Ct. 2356, 2364 (2019). 20 understood meaning of the statute’s words “at the time Congress enacted the statute,” 44 and “with a view to their place in the overall statutory scheme.” 45 If the meaning is unambiguous, that is the end of our inquiry. “[O]nly when a statute’s text is ambiguous [may] we turn to other tools of statutory interpretation to help clarify the ambiguity.” 46 In this case, the phrase of critical importance is “civil monetary penalty,” as used in the Improvements Act. If the CAFE penalty is not a “civil monetary penalty,” then NHTSA is correct that the Improvements Act did not mandate the increase to a $14 base penalty rate. If, on the other hand, the CAFE penalty is a “civil monetary penalty,” then NHTSA was required to apply the Improvements Act and adjust the penalty rate accordingly (unless, of course, one of the Act’s exceptions apply). 44 New Prime Inc. v. Oliveira, 139 S. Ct. 532, 539 (2019) (cleaned up). 45 Nat’l Ass’n of Home Builders v. Defs. of Wildlife, 551 U.S. 644, 666 (2007) (cleaned up). 46 Mei Xing Yu v. Hasaki Rest., Inc., 944 F.3d 395, 408 (2d Cir. 2019). 21 As a preliminary matter, we agree with NHTSA that we did not decide whether the CAFE penalty is a “civil monetary penalty” in NRDC v. NHTSA, for the simple reason that the question was not presented to us for decision. Our pronouncements in that case about the mandatory nature of the timing in the Improvements Act assumed, without deciding, that the Act applied to the CAFE penalty. 47 Because we “have not [previously] decided that the statutory language at issue in this case . . . is unambiguous,” this question is not water under the bridge. 48 The statutory definition of “civil monetary penalty” is our starting point: (2) “civil monetary penalty” means any penalty, fine, or other sanction that — (A) (i) is for a specific monetary amount as provided by Federal law; or 47 See generally 894 F.3d 95. 48Catskill Mountains Chapter of Trout Unlimited, Inc. v. EPA, 846 F.3d 492, 510 (2d Cir. 2017). 22 (ii) has a maximum amount provided for by Federal law; and (B) is assessed or enforced by an agency pursuant to Federal law; and (C) is assessed or enforced pursuant to an administrative proceeding or a civil action in the Federal courts . . . . 49 EPCA, in turn, defines the CAFE penalty as follows: (b) Penalty for manufacturer violations of fuel economy standards. — Except as provided in subsection (c) of this section, a manufacturer that violates a standard prescribed for a model year under section 32902 of this title is liable to the Government for a civil penalty of $5 multiplied by each .1 of a mile a gallon by which the applicable average fuel economy standard under that section exceeds the average fuel economy — (1) calculated under section 32904(a)(1)(A) or (B) of this title for automobiles to which the standard applies manufactured by the manufacturer during the model year; (2) multiplied by the number of those automobiles; and (3) reduced by the credits available to the manufacturer under section 32903 of this title for the model year. 50 49 28 U.S.C. § 2461 note sec. 3(2). 50 49 U.S.C. § 32912(b). 23 It is undisputed that the CAFE penalty is “assessed and enforced by an agency” (NHTSA) “pursuant to Federal law” (EPCA), as required by subsection (2)(B) of the Improvements Act, and that the CAFE penalty is “assessed or enforced pursuant to an administrative proceeding or a civil action in the Federal courts,” as required by subsection (2)(C). 51 The inquiry therefore turns on whether the CAFE penalty is “for a specific monetary amount” under subsection (2)(A). 52 We conclude that it is. As relevant here, the base rate used to calculate the CAFE penalty is very specific, and it is framed in terms of a particular monetary amount: It is a fixed dollar figure, which Congress originally established at $5 when it enacted EPCA, and which NHTSA later increased by rulemaking to $5.50 and later to $14. Although the dollar figure has been updated twice, it has 51 28 U.S.C. § 2461 note sec. 3. 52 The petitioners also argue that the CAFE penalty satisfies subsection (2)(A)(ii) because it “has a maximum amount provided for by Federal law.” Because we hold that the CAFE penalty is “for a specific amount” under subsection (2)(A)(i), we need not reach that argument. 24 always been clearly identified and has never been ambiguous. Moreover, the base rate is just that — a fixed dollar rate that is used as a multiplier to determine the overall penalty to be assessed against a noncompliant manufacturer. The fact that the CAFE penalty’s base rate is what NHTSA describes as “an input in a formula” 53 does not exclude it from the Improvements Act’s definition of a “civil monetary penalty.” A penalty can be “specific” if it is based on a rate with an identified dollar amount; and the use of a rate necessarily implies that the rate will be multiplied by something. This interpretation comports with how other agencies have consistently construed the Improvements Act to apply to civil monetary penalties that are calculated using formulas, including by multiplying a particular dollar amount by some other ascertainable figure, such as the 53 NHTSA Br. at 24. 25 number of violations, days in violation, or units in violation. 54 Thus, even assuming that NHTSA is correct that the CAFE penalty should be conceptualized as the total amount for which a manufacturer is liable after conducting all the calculations set forth in § 32912(b), that final amount is still based on a fixed-dollar multiplier and is therefore “for a specific monetary amount.” That manufacturers can lower a penalty amount by applying credits does not change our assessment. Under EPCA, credits are not a means of 54 See, e.g., Civil Monetary Penalty Adjustments for Inflation, 81 Fed. Reg. 42,987, 42,994 (July 1, 2016) (Department of Homeland Security increasing, pursuant to the Improvements Act, the baseline penalty for discharge of oil or a hazardous substance in violation of 33 U.S.C. § 1321(b)(7)(D) from $4,000 to $5,345 “per barrel of oil or unit discharged,” as listed in 33 C.F.R. § 27.3); Civil Monetary Penalty Adjustments for Inflation, 84 Fed. Reg. 13,499, 13,510 (Apr. 5, 2019) (Department of Homeland Security increasing, pursuant to the Improvements Act, the base penalty rate for towing vessels in violation of 46 U.S.C. § 55111 from “$60 per ton of the towed vessel” to “$159 per ton of the towed vessel,” as listed in 19 C.F.R. § 4.92); Civil Monetary Penalties Inflation Adjustment, 81 Fed. Reg. 41,196, 41,197, 41,199–200 (June 24, 2016) (Federal Election Commission increasing, pursuant to the Improvements Act, the base figures for the penalties in 11 C.F.R. § 111.43, which are calculated by selecting the applicable base penalty amount based on the level of monetary activity involved, adding that base dollar figure to the product of a base penalty rate multiplied by the number of days that a latefiled report was overdue, and multiplying this sum by the product of a calculation based on the number of previous violations). 26 paying a penalty, but are themselves a method of complying with the CAFE standard. The statute states that “[c]ompliance is determined after considering credits available to the manufacturer under section 32902 of this title.” 55 In § 32912(b), overcompliance with the CAFE standards (which a manufacturer may earn or purchase from another manufacturer) is netted out against undercompliance, yielding what is effectively a total net violation. It is this total net violation that is multiplied by the CAFE base penalty rate to yield the aggregate penalty. Credits are therefore just one more input in the CAFE penalty formula, not unlike the number of vehicles in a manufacturer’s fleet or a manufacturer’s mpg shortfall. Accordingly, this credit system does not push the CAFE penalty beyond the Improvements Act’s reach. Context provides additional support for our reading. 56 The statutory purpose of the Improvements Act is to adjust civil monetary penalties to 55 49 U.S.C. § 32911(b) (emphasis added). 56 See Nat’l Ass’n of Home Builders, 551 U.S. at 666. 27 keep pace with inflation. 57 Whether a statute describes a penalty as a standalone dollar figure or as a dollar amount to be multiplied by other factors, that penalty will lose value over time as inflation creeps up. 58 And regardless of whether the dollar figure is to be multiplied by the number of violations, days of violation, or some other increment of noncompliance, it remains equally vulnerable to inflation – and therefore equally suited to indexing for inflation. For these reasons, the CAFE penalty is a “civil monetary penalty” under the Improvements Act. 59 57 See Improvements Act § 701, 129 Stat. at 599–600. 58 NHTSA argues that the CAFE penalty has not been weakened by inflation because periodic increases to the fuel efficiency targets have increased the monetary value of the penalty over time. This argument, however, fails to recognize that the fuel efficiency targets are designed to keep pace with scientific feasibility rather than inflation. See 49 U.S.C. § 32902. Keeping scientific feasibility constant, the CAFE penalty has indeed lost ground to inflation because the base rate has been the same since 1997. And while the 2019 Final Rule also points out that the penalty per gallon of gas consumed will increase as vehicles become more fuel efficient, 84 Fed. Reg. at 36,018, it is for Congress (not NHTSA) to decide whether that fact requires exempting the CAFE penalty from inflation adjustment. 59 This conclusion applies with equal force to the $10 cap found in the EPCA provision that permits the Secretary of Transportation to increase the base penalty rate. See 49 U.S.C. § 32912(c)(1)(A)–(B). To account for inflation, that cap must be increased to $25. See 81 Fed. Reg. at 43,526. Indeed, if the cap is not subject to the Improvements Act, 28 NHTSA argues that to the extent there is ambiguity as to whether the CAFE penalty constitutes a “civil monetary penalty,” we should resolve it in favor of the agency’s 2019 Final Rule, giving deference to the agency’s interpretation under Chevron or, at least, Skidmore. 60 Because we have found no ambiguity in the statute, neither form of agency deference is implicated. But even if we agreed with NHTSA that the meaning of “civil monetary penalty” was ambiguous when the Inflation Adjustment Act was passed, any ambiguity would have been resolved when Congress enacted the Improvements Act, which re-used the phrase “civil monetary penalty” without alteration after NHTSA had consistently applied it to the CAFE penalty. 61 As the Supreme Court has instructed, “[w]hen administrative . . . then EPCA’s grant of discretion to the Secretary would be rendered a nullity as the penalty’s new base rate of $14 is already above the cap’s original $10 limit. See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 865–66 (1984); 60 Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944). See Bragdon v. Abbott, 524 U.S. 624, 631 (1998) (“Congress’ repetition of a well61 established term carries the implication that Congress intended the term to be construed in accordance with pre-existing regulatory interpretations.”); Haig v. Agee, 453 U.S. 280, 297 (1981) (assuming congressional awareness and adoption of “longstanding 29 interpretations have settled the meaning of an existing statutory provision, repetition of the same language in a new statute indicates, as a general matter, the intent to incorporate its administrative . . . interpretations as well.” 62 Justice Frankfurter once said that “if a word is obviously transplanted from another legal source, whether the common law or other legislation, it brings the old soil with it.” 63 It’s also fair to say that when administrative construction” of legislation enacted by prior congress where “[t]here is no evidence of any intent to repudiate” the construction); Fed. Deposit Ins. Corp. v. Philadelphia Gear Corp., 476 U.S. 426, 437 (1986) (“When the statute giving rise to the longstanding interpretation has been reenacted without pertinent change, the congressional failure to revise or repeal the agency's interpretation is persuasive evidence that the interpretation is the one intended by Congress.” (internal quotation marks omitted)). 62 Bragdon, 524 U.S. at 645; see Lorillard v. Pons, 434 U.S. 575, 581 (1978) (“[W]here . . . Congress adopts a new law incorporating sections of a prior law, Congress normally can be presumed to have had knowledge of the interpretation given to the incorporated law, at least insofar as it affects the new statute.”); New York v. U.S. Dep’t of Homeland Sec., Nos. 19-3591, 19-3595, mem. op. at 56–58 (2d Cir. Aug. 4, 2020) (considering the “settled meaning” of a statutory provision based on previous administrative and judicial constructions); ANTONIN SCALIA & BRYAN A. GARNER, READING LAW 322 (2012) (“If a statute uses words or phrases that have already received . . . uniform construction by . . . a responsible administrative agency, they are to be understood according to that construction.”). 63 Felix Frankfurter, Some Reflections on the Reading of Statutes, 47 COLUM. L. REV. 527, 537 (1947), quoted in Stokeling v. United States, 139 S. Ct. 544, 551 (2019); see also Garcia v. Teitler, 443 F.3d 202, 207 (2d Cir. 2006) (“We should assume that Congress legislated 30 Congress plants the same seed in the same soil, it can expect the same plant to grow. By the time Congress enacted the Improvements Act in 2015, the term “civil monetary penalty” had a settled legal meaning — both in terms of its statutory definition generally and its application to the CAFE penalty specifically. The term was originally used in the Inflation Adjustment Act of 1990, which adopted the definition currently in use. 64 In its report to OMB following Congress’s enactment of the Inflation Adjustment Act, NHTSA identified the CAFE penalty as a “civil monetary penalty.” 65 Congress then reused that phrase — subject to the same definition — in the 1996 amendments that required agencies to increase their “civil monetary against a background of law already in place and the historical development of that law.” (internal quotation marks and ellipsis omitted)). 64 Inflation Adjustment Act § 3(2), 104 Stat. at 890. 65OFF. OF MGMT. & BUDGET, CIVIL MONETARY PENALTY ASSESSMENTS AND COLLECTIONS: 1990 REPORT TO CONGRESS AND CIVIL MONETARY PENALTY INFLATION ADJUSTMENT REPORT Ex. 1 at 25, Ex. 2 at 25 (1991). 31 penalties” to account for inflation. 66 Most importantly, in 1997, NHTSA promulgated a final rule that increased the base rate for the CAFE penalty from $5 to $5.50 based on its application of the 1996 amendments. 67 Thus, when Congress used the phrase “civil monetary penalties” for the third time, in the 2015 Improvements Act, the term had already received a particular administrative construction — that it encompassed the CAFE penalty, despite its use of a formula, including multipliers and a credit offset. 68 By the time of the 2015 enactment, any arguable question over 66 Pub. L. No. 104-134, § 31001(s)(1), 110 Stat. at 1321-373. 67 62 Fed. Reg. at 5,168. 68 The actions of other relevant entities after adoption of the “civil monetary penalties” definition in the Inflation Adjustment Act in 1990, and before enactment of the 2015 Improvements Act, were consistent with the view that the CAFE penalty is a “civil monetary penalty.” For example, in 2003, the U.S. General Accounting Office (now the Government Accountability Office) cited the CAFE penalty as a civil monetary penalty that no longer created sufficient deterrence and needed an inflation adjustment. U.S. GENERAL ACCOUNTING OFFICE, AGENCIES UNABLE TO FULLY ADJUST PENALTIES FOR INFLATION UNDER CURRENT LAW 2, 29 (2003), gao.gov/assets/240/237592.pdf. A few years later, the Congressional Research Service highlighted the same issue, also identifying the CAFE penalty as a civil monetary penalty covered under the Inflation Adjustment Act. CURTIS W. COPELAND, CONG. RESEARCH SERV., ADJUSTMENT OF CIVIL MONETARY PENALTIES FOR INFLATION 9 (2008). Even the Alliance of Automobile Manufacturers and the Association of Global Automakers, which now comprise the intervenor, the Alliance for Automotive Innovation, conceded that the CAFE penalty was a “civil monetary 32 whether the CAFE penalty was a “civil monetary penalty” covered by the Improvements Act had been settled in the affirmative. 69 penalty” under the Improvements Act when they initially petitioned for reconsideration of the 2016 increase to the base penalty rate. NHTSA draws our attention to only one instance in which an agency has not listed the CAFE penalty as a “civil monetary penalty”: a 1988 study that the President’s Council on Integrity and Efficiency submitted to the Senate. See OMB, Letter of Concurrence, at 6 & n.34 (July 12, 2019), whitehouse.gov/wp-content/uploads/2019/07/ NHTSA.pdf. But that study preceded adoption of the Inflation Adjustment Act in 1990 and therefore can hardly be considered an authoritative construction of that act. 69We add that Chevron deference to NHTSA’s interpretation of the Improvements Act is, in any event, “clearly not warranted,” because “the Act applies to all federal agencies, meaning [that] NHTSA has no special expertise in interpreting its language.” NRDC v. NHTSA, 894 F.3d at 112 n.10. Moreover, NHTSA’s authority to interpret EPCA does not provide reason to afford its interpretation Chevron deference because its interpretation of EPCA “limits the work of [the Improvements Act, which] . . . it does not administer.” Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1629 (2018). Nor do we owe Chevron deference to OMB’s new interpretation of the Improvements Act. Although Congress delegated authority to OMB to “issue guidance to agencies on implementing the inflation adjustments required” under the Improvements Act, 28 U.S.C. § 2461 note sec. 7(a), OMB did not issue such formal guidance here. Instead, all OMB did was issue an informal opinion letter to the Secretary of Transportation. See Off. of Mgmt. & Budget, Exec. Off. of the President, Opinion Letter (July 12, 2019). Such a letter does not carry the force of law, so it is not entitled to Chevron deference. See Christensen v. Harris County, 529 U.S. 576, 587 (2000) (“Interpretations such as those in opinion letters—like interpretations contained in policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law—do not warrant Chevron-style deference.”); see also Buffalo Transp., Inc. v. United States, 844 F.3d 381, 385 (2d Cir. 2016). 33 Finally, our conclusion that the CAFE penalty is a “civil monetary penalty” does not conflict with EPCA. NHTSA and the intervenor, Alliance for Automotive Innovation, argue that the Improvements Act does not apply to the CAFE penalty because its directive to increase civil monetary penalties conflicts with the limitations on penalty increases in EPCA. But as we have previously recognized, “[n]othing in EPCA contradicts or undermines th[e] mandate” in the Improvements Act to increase civil monetary penalties. 70 EPCA merely authorizes discretionary increases to the CAFE penalty base rate under certain conditions. 71 The penalty-increase provisions of the Improvements Act and EPCA “are capable of co- 70NRDC v. NHTSA, 894 F.3d at 112 (“In implementing the Improvements Act, Congress articulated purposes that transcended the confines of any given agency’s regulatory functions . . . [and] ECPA does not contravene this government-wide policy.”). 71 See 49 U.S.C. § 32912(c)(1)(A) (“The Secretary of Transportation shall prescribe by regulation a higher amount for each .1 of a mile a gallon to be used in calculating a civil penalty . . . if the Secretary decides that the increase in the penalty . . . will result in, or substantially further, substantial energy conservation for automobiles . . . and . . . will not have a substantial deleterious impact on the economy of the United States, a State, or a region of a State.”). 34 existence,” and it is therefore our “duty” to interpret the provisions in a manner that renders “each . . . effective.” 72 B. The Improvements Act did not authorize NHTSA to reconsider the economic effects of its rule outside the timeline specified by Congress. Having concluded that the Improvements Act mandates an inflation adjustment to the CAFE penalty, we now consider whether — in 2019 — NHTSA was permitted to reconsider the economic effects of the increase it had already promulgated in 2016. We reject NHTSA’s argument that, at the time it issued the 2019 Final Rule, it was permitted to reverse the penalty increase on the grounds that the increase would create a “negative economic impact.” 73 The Improvements Act outlined a “highly circumscribed schedule for . . . penalty increases.” 74 NHTSA maintains that although the Improvements 72 FCC v. NextWave Pers. Commc’ns Inc., 537 U.S. 293, 304 (2003) (quoting J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Int’l, Inc., 534 U.S. 124, 143–44 (2001)). 73 See 84 Fed. Reg. at 36,013. 74 NRDC v. NHTSA, 894 F.3d at 109 (cleaned up). 35 Act includes a deadline for the publication of an interim final rule, “nothing in the statute imposes a deadline on any final rule following further comments or consideration in that interim final rule-making.” 75 It is true that the Act permitted agencies to “adjust the amount of a civil monetary penalty by less than the otherwise required amount [for the initial catch-up adjustment] . . . after publishing a notice of proposed rulemaking and providing an opportunity for comment,” so long as the agency met certain requirements. 76 But this provision did not give the agency an unlimited amount of time to reconsider its initial catch-up adjustment. The timesensitive nature of the final rule is clear in the full context of the Improvements Act, which requires not only an interim final rule increasing each penalty by “no[] later than July 1, 2016,” but also additional increases to each penalty by “no[] later than January 15 of every year thereafter.” 77 In 75 NHTSA Br. at 36 (emphases added and removed). 76 28 U.S.C. § 2461 note sec. 4(c). 77 Id. § 2461 note sec. 4(a). 36 other words, the annual increases starting in 2017 would necessarily build on the initial catch-up adjustment. Thus, even if we agreed with NHTSA that the Improvements Act permitted reconsideration of the catch-up increase following its publication of an interim final rule, the window for that reconsideration was narrow and limited to the year 2016 — or more precisely, two weeks into the next year, before the next required increase due by January 15, 2017. As in NRDC v. NHTSA, we cannot here “read the Improvements Act to permit the very kind of indefinite delay that it was enacted to end.” 78 We need not reach the merits of NHTSA’s conclusions regarding negative economic impact because it was not authorized to undertake this reconsideration at the time it did so. 79 78 894 F.3d at 111. 79 In light of our holding, we also need not reach the other arguments raised by the petitioners to challenge the 2019 Final Rule. See, e.g., Time Warner Cable Inc. v. FCC, 729 F.3d 137, 171 n.18 (2d Cir. 2013). 37