LawFlash

DC Circuit Denies Standing to Aftermarket Parts Manufacturers Challenging EPA Tampering Rules

August 31, 2022

Citing a lack of standing and no final agency action, the US Court of Appeals for the DC Circuit dismissed the petition of an association representing businesses that make and sell aftermarket racing parts seeking review of a 2016 rule promulgated by the EPA that more explicitly prohibited the modification of on-road motor vehicles for racing use.

The ruling involves an action brought by the by the Racing Enthusiasts and Suppliers Coalition (Coalition) seeking to challenge certain EPA rules promulgated under the Clean Air Act (CAA) that restrict amateur racers from modifying on-road vehicles for competition racing use and, likewise, restrict businesses from selling and installing aftermarket parts that convert on-road vehicles into race vehicles.

While the legal challenge sought to answer the question of whether on-road vehicles can legally be modified so that they can be used in competition racing, the DC Circuit’s opinion was decided on narrow, jurisdictional grounds and focuses instead on the standing requirements for suits challenging EPA policy changes under the CAA.

CLEAN AIR ACT ANTI-TAMPERING PROVISION AND COMPETITION RACING EXEMPTION

Section 203 of the CAA (42 USC § 7522(a)(3)) prohibits, among other things, the manufacture, sale, or installation of any motor vehicle part or component where a principal effect of the part or component is to bypass, defeat, or render inoperative (commonly referred to as “tampering”) any emissions control device or element of design installed on or in a motor vehicle or motor vehicle engine. Under the CAA, a motor vehicle is defined as a “self-propelled vehicle designed for transporting persons or property on a street or highway” (42 USC § 7550(2)).

Aftermarket racing parts manufacturers, dealers and amateur racers have generally interpreted this statutory language as permitting modifications to on-road motor vehicles to convert them to vehicles for competition-race use only because racing vehicles, as modified, are no longer designed for street or highway use.

Historically, the EPA’s regulatory and enforcement focus has not been on racing vehicles; rather, the agency has been primarily concerned with tampered vehicles that are used on public roads and, specifically, with aftermarket parts manufacturers that sell devices that defeat emission control systems on vehicles licensed to be used on public roads.

In 2015, the EPA proposed a rule banning the practice of converting on-road vehicles for racing use. The proposed rule originally stated that “there is no exemption from the tampering and defeat-device prohibitions that would allow for converting [an] engine or vehicle for competition use,” and “it is not permissible to remove a motor vehicle or motor vehicle engine from its certified configuration regardless of the purpose for doing so.” Stakeholders and interested parties, particularly those associated with the racing community, objected to the rules change, and the EPA omitted the objectionable language from the final rule. The final rule ultimately adopted by the EPA in 2016 stated in its preamble that the “proposed language was not intended to represent a change in the law or in EPA’s policies or practices towards dedicated competition vehicles.”

Notwithstanding this aside in the preamble, with the 2016 version of the rule, the EPA promulgated several amendments concerning requirements for nonroad engines and equipment (like snowmobiles and tractors) and updated the regulatory definition of motor vehicle. Under the new definition, a motor vehicle remains a motor vehicle even after removal of certain safety features from a motor vehicle, unless “absence of [those safety features] would prevent operation on highways” (40 CFR § 85.1703(b)).

COALITION AND EPA ARGUMENTS

The Coalition argued in support of its petition that the EPA unlawfully inserted into the 2016 rule a prohibition against the “decades-long tradition” of converting on-road vehicles into competition racing vehicles. The Coalition asserted that this prohibition “creates new legal liability” for both mechanics and companies selling racing parts, and that “an entire multi-billion dollar industry post-2016 faces legal jeopardy” under the new definition. The Coalition argued it had standing to challenge the regulation, since it represents companies that sell racing parts, and are thus “the object of” the regulation. The EPA maintained that it always had the authority to regulate vehicles tampered with for the purpose of racing and that its anti-tampering position went back decades.

DC CIRCUIT DISMISSES COALITION’S CLAIMS BUT LEAVES OPEN POSSIBILITY OF FUTURE LEGAL CHALLENGES

The DC Circuit addressed the Coalition’s challenges to the EPA’s 2016 rule by categorizing the disputes into three different groups: (1) seven “cosmetic amendments” regarding the competition exemption for nonroad engines and equipment; (2) an update to the regulatory definition of motor vehicle; and (3) the aside in the rule’s preamble regarding no change in law or policy with respect to race vehicles.

The court ultimately determined that it did not have jurisdiction to consider any of these issues, ruling that the Coalition lacked standing to challenge the amendments and the revised definition of motor vehicle, and that the disputed language in the rule’s preamble is not a challengeable final agency action.

First, the DC Circuit determined that the Coalition lacked standing to challenge the rule’s seven disputed amendments. The court’s analysis focused on the fact that the challenged amendments applied only to nonroad engines and equipment, not on-road motor vehicles being converted for race use. Since the amendments in question were “merely cosmetic” in that regard (i.e., both before and after the 2016 rule change, the competition exemption applied only to nonroad engines and equipment), they “had no effect on the rights and responsibilities of the Coalition’s members” vis-à-vis on-road motor vehicles.

Accordingly, the DC Circuit concluded that the Coalition failed to establish that any of its members suffered an injury in fact and thus lacked standing to challenge the regulatory amendments.

Second, the DC Circuit held that the Coalition lacked standing to challenge the regulatory definition of motor vehicle because the manufacturer group had failed to offer sufficient evidence to establish injury, and instead relied on mere “conclusory assertions” in its proffered declaration. The court recognized that before the 2016 rule, the regulatory definition of motor vehicle expressly excluded any vehicle that “lacks features customarily associated with safe and practical street or highway use” and that the amended 2016 language providing that the “[a]bsence of a particular safety feature is relevant only when absence of that feature would prevent operation on highways” was an expansion of the prior regulatory definition.

The DC Circuit acknowledged that this expanded definition could “potentially injure someone” and suggested that a challenge to the EPA rulemaking might be considered where a group of racers could prove that they had but can no longer modify their on-road vehicles to take them outside the regulatory definition of motor vehicle or where aftermarket parts manufacturers could marshal evidence that they had but can no longer sell products to convert on-road vehicles for racing use because more vehicles fall within the regulatory definition of motor vehicle.

Ultimately, the court concluded that the Coalition had simply failed to meet its burden to show that any member was injured by the EPA’s updated regulatory definition of motor vehicle, and thus could not establish standing.

Finally, the DC Circuit held that the CAA authorizes review of only “final action,” and applied the two-prong test in Bennett v. Spear in concluding that that the Coalition had not demonstrated that the aside included in the preamble to the 2016 rule was final agency action. To satisfy the Bennett test, the court explained that an agency action must cause “direct and appreciable legal consequences,” and reasoned that “an agency action does not have sufficient concrete consequences when it imposes ‘no obligations, prohibitions, or restrictions’ on a regulated party.” While the DC Circuit noted that evidence of the EPA’s past approach to the competition racing exemption is “mixed,” the court determined that the Coalition had not proven that the EPA’s interpretation constituted a change in law or position.

Thus, the DC Circuit again concluded that the Coalition had not been able to demonstrate that the language in the preamble had “sufficiently concrete consequences” to amount to final agency action. As a result, the court dismissed the Coalition’s petition for review.

CONCLUSION

While the DC Circuit’s decision to dismiss the Coalition’s legal challenge is a blow to racing enthusiasts and aftermarket parts manufacturers seeking to clarify that EPA lacks the authority to restrict the modification of on-road motor vehicles for race use, the court left open the possibility that “a different party might have standing to bring this challenge” or that “this Coalition with a different declaration could have had standing.”

A group that can demonstrate a more concrete harm could challenge EPA’s anti-tampering policy or the Coalition itself might look to develop more specific evidence of harms to support a new lawsuit. The court’s guidance on what it determined was lacking in the Coalition’s declaration could be instructive for other parties seeking to challenge agency action under the CAA and other environmental statutes.

CONTACTS

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Los Angeles
James J. Dragna
Rick R. Rothman
David K. Brown
Elisabeth Hazelton

Philadelphia
Jeffrey N. Hurwitz

Princeton
John McGahren
Christopher J. McAuliffe

San Francisco
Ella Foley Gannon

Washington, DC
Duke K. McCall, III
Bryan M. Killian