Taking enforcement on its own terms: EPA's heavy-duty diesel engine litigation

Taking enforcement on its own terms: EPA’sheavy-duty diesel engine litigation

Jonathan CannonSchool of Law, University of Virginia, Charlottesville, VA, USA

AbstractThe authors of Regulation by Litigation characterize the US Environmental Protection Agency

(EPA)’s enforcement action against diesel engine manufacturers as an effort to achieve by litigation

what the Agency was unable to achieve by regulation: immediate reductions in emissions of

nitrogen oxides. By substituting litigation for rulemaking, the authors of the book argue, the

Agency avoided political and judicial accountability and put itself on a suboptimal policy track.

This comment argues that the diesel engine litigation may be better understood as what it pur-

ported to be, an enforcement action, not rulemaking in disguise. The authors’ characterization of

the litigation is questionable on at least two grounds. First, it fails to fully appreciate the distinct

functions of enforcement and policymaking in a regulatory setting. The goal of enforcement is not

primarily to make policy, but to enforce it – to punish violators, deter future violations, and

mitigate harms caused by violations. That goal supplies the proper measure of the litigation’s

success. Second, in applying public choice analysis to create a story of agency circumvention of

appropriate rulemaking procedures, the authors’ account misses key features of how agency

enforcement decisions are made – and were made in this litigation. This latter shortcoming raises

broader questions about the difficulties of applying public choice analysis in complex institutional

settings.

Keywords: Enforcement, public choice, agencies.

1. Introduction

In this comment I address an account of the US Environmental Protection Agency (EPA)enforcement litigation in Regulation by Litigation by Andrew P. Morriss, Bruce Yandle,and Andrew Dorchak (Morriss et al. 2008). Based on a public choice analysis, thataccount characterizes the Agency’s 1998 judicial enforcement action against the manu-facturers of heavy-duty diesel engines as an effort to achieve by litigation what the Agencywas unable to achieve by regulation: immediate reductions in emissions of nitrogenoxides (NOX) by diesel trucks that would assist states in achieving National Ambient AirQuality Standards (NAAQS) (Morriss et al. 2008, pp. 78–79). The authors contend that,by using litigation rather than rulemaking to impose forward-looking emissions con-straints on virtually all heavy-duty diesel engines manufactured or sold in the US, the EPAexceeded its regulatory authority under the Clean Air Act (CAA) (1955), avoided public

Correspondence: Jonathan Cannon, School of Law, University of Virginia, 580 Massie Road,Charlottesville, VA 22903, USA. Email: [email protected]

Accepted for publication 21 December 2010.

Regulation & Governance (2011) 5, 262–274 doi:10.1111/j.1748-5991.2011.01102.x

© 2011 Blackwell Publishing Asia Pty Ltd

engagement, and cut off meaningful judicial review. The authors’ account is carefullyresearched and well considered and has a plausible theoretical and factual footing, but Ioffer here a different (the reader will judge whether more persuasive) version of the dieselengine litigation that challenges the book’s thesis respecting misuse of enforcementactions by regulatory agencies like the EPA. I do not address the other forms of “regula-tion by litigation” developed in the book.

Using the diesel litigation as its main exhibit, the authors argue that we should beconcerned about misuse of enforcement by executive branch agencies, as these agenciesseek to avoid the delays, broad public participation, and political and judicial account-ability associated with rulemaking (Morriss et al. 2008, pp. 90–92). But there are reasonsnot to be too concerned. First, the authors admit that the regulation-by-litigation char-acter of the diesel engine cases is a “relative rarity” among enforcement actions (Morrisset al. 2008, p. 92). I do not find reference to other instances of regulation by litigationundertaken by regulatory agencies such as the EPA, and my analysis will suggest why suchlitigation is unlikely. Second, as I will argue, the diesel engine litigation itself may be betterunderstood as what it purported to be, an enforcement action, not rulemaking in dis-guise. Enforcement cases arise in a different institutional setting from rulemaking,respond to different incentives, and have different goals and different procedural safe-guards appropriate to those goals. The diesel engine litigation has some characteristicsidentified with rulemaking, but judged by its institutional origins and purposes, it isbetter understood as an enforcement action. The authors’ analysis and conclusions relyon an unduly narrow understanding of the enforcement function in agencies such as theEPA and an unrealistic assumption about the susceptibility of that function to directionby unidentified senior policy officials. My aim here is to correct these shortcomings, sothat a fair assessment of the Agency’s behavior can be made against the authors’ claims ofprocedural and substantive circumventions. I conclude with some observations on publicchoice analysis as a tool for diagnosing government failures.

The authors provide a detailed chronology of the litigation that I will not duplicatehere. To the extent that additional facts are relevant, I will introduce them at appropriatepoints in the discussion.

2. Goals of enforcement

The authors distinguish between regulation by litigation and litigation of enforcementactions. Enforcement actions seek “penalties for past behavior” and compliance in thefuture. They “do not lead to regulatory action but simply bring a regulated entity intocompliance with existing regulations” (Morriss et al. 2008, p. 48). Compliance can beaccomplished with “the pro forma promise not to violate the law routinely included inenforcement-suit settlements” (Morriss et al. 2008, p. 48). Based on these understandings,the authors offer several factors to determine whether litigation purporting to be anenforcement action is in fact regulatory, including the following: (i) the government seeks(or “coerces” the defendant to accept) “substantive constraints on the defendant’s behav-ior in the future;” (ii) the government proceeds “against the vast majority of the regulatedcommunity;” and (iii) the government seeks to avoid an adverse ruling on a disputed legalissue through settlement with the defendant (Morriss et al. 2008, pp. 48–49). Thesecriteria, which I develop below, for distinguishing real enforcement from regulation indisguise rest on a simplified view of the goals and strategies of enforcement: actions

EPA’s heavy-duty diesel engine litigation J. Cannon

© 2011 Blackwell Publishing Asia Pty Ltd 263

containing any or all three of these elements may be fully justifiable as enforcementactions.

Although there are elements of policymaking at the margins of enforcement activi-ties, as with virtually any action taken by a public agency like the EPA, the main businessof enforcement is to vindicate policies that have been determined in other proceedings.These policies are established in rules, permits, and licenses. The purpose of enforcementis to ensure that public benefits anticipated by these policies are not lost in implemen-tation. The several goals of the EPA’s enforcement program derive from this centralpurpose: (i) punishing violators and deterring violations by others; (ii) returning viola-tors to compliance (and keeping them there); and (iii) mitigating environmental harmcaused by violations (EPA n.d., describing goals of the EPA’s civil enforcement program).1

The first goal is crucial to maintaining a collective solution to the environmental problemaddressed by a policy. If violators suffer no disadvantage from their violations, but insteadare allowed to benefit economically from them, compliers will effectively be punished foradhering to the policy. This dynamic undermines incentives for compliance and may leadto increasingly widespread violations in the future. To avoid this, the EPA seeks civilpenalties against violators at levels designed to remove the economic benefit of theirnon-compliance and to deter future violations by them and by others (EPA 1984, p. 3).The second goal – returning the violator to compliance – is also essential to maintainingthe collective solution and assuring the anticipated public benefits. The book’s authorsrepresent this goal as routinely achievable through a “pro forma promise not to violate thelaw.” But, in practice, returning the violator to compliance is often a prolonged andcomplex effort, because it is not feasible, technologically or economically, for the violatorto come into compliance right away. In that circumstance, the EPA seeks judiciallyenforceable schedules with specific interim actions and dates that will assure complianceas quickly as feasible as well as reduce adverse environmental impacts during the timerequired to achieve compliance. The third goal seeks to recoup benefits lost to the publicby mitigating the environmental harms caused by the violations. Even in cases where theeffects of the violations have dissipated or been absorbed into the environment, the EPAmay seek mitigation for the past harm (Cruden & Gelber 2007, p. 8).

The EPA’s 1998 enforcement action against heavy-duty diesel engine manufacturersand the terms of its settlement can be fully explained and justified within the frameworkof these enforcement goals.

2.1. Imposing substantive constraints on future behaviorThe authors’ main criterion for determining regulation by litigation is imposition offorward-looking constraints on defendants that change the requirements applicable inthe absence of the action. In the heavy-duty diesel engine litigation, the governmentalleged that the engines sold by the manufacturers contained “defeat devices” in violationof the CAA. The alleged defeat devices in this case were electronic engine controllers(computers) that the manufacturers programmed to meet applicable NOX emissionsstandards when the engines were operating under conditions of the EPA’s Federal TestProcedure (FTP) but which allowed the engines to exceed those limits (and achievehigher fuel efficiency) when operating outside the test conditions (Morriss et al. 2008, p.76). As a result, the engines built and marketed by all the defendants operated at thehigher NOX emissions levels about 90% of their time on the road and produced up tothree times the NOX emissions the EPA claimed were permitted by its standards.

J. Cannon EPA’s heavy-duty diesel engine litigation

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In their settlements with the EPA, the heavy-duty diesel engine manufacturers agreedto requirements for emissions reductions that the EPA could not otherwise have imposedwithout additional rulemaking or changes in statutory authority or both. The authorsmention three of these requirements in particular as indicative of the regulatory characterof the action. First, the EPA and the manufacturers agreed to advance new, more stringentemissions standards, which the EPA had already promulgated for model year 2004, toapply beginning in model year 2002 (see, e.g., United States v. Caterpillar, Inc. ConsentDecree (1999)). This bringing forward of the model year 2004 standards ratcheted downthe controls applicable to heavy-duty diesel engines from 2002 to 2004, a step that theEPA would not have been authorized to take unilaterally under the CAA. Second, the EPAand the manufacturers agreed to supplement the test for determining compliance withemissions standards, adding a “Euro III” test to the FTP provided for in the EPA’sregulations. The new test accommodated interim arrangements under which new engineswere not required to meet the emissions standard under the FTP at all times duringoperation but were allowed to meet a less stringent standard under the Euro III testoutside the FTP cycle (Morriss et al. 2008). Finally, the EPA and the manufacturers agreedthat the manufacturers would design and fund engine retrofit programs, to reduceemissions from diesel engines that were already in service (United States v. Caterpillar, Inc.Consent Decree 1999, Par. 64–82, low NOX rebuild program).

These three conditions, while forward looking, had legitimate enforcement justifica-tions as facilitating compliance or offsetting the environmental impacts of the allegednon-compliance. The manufacturers argued, and the EPA agreed, that it was technologi-cally and economically infeasible in the near term to build and sell engines that met theNOX emission standards outside the FTP cycle. This required negotiation of a schedule tobring the manufacturers into full compliance (as the EPA viewed it) as soon as feasible andto limit emissions from new engines as much as feasible during the interim. The use of aninterim standard under the Euro III test was one element of the agreed-upon complianceschedule, allowing the manufacturers to make and sell engines through 2002 that, whilenot in full compliance, were required to meet some limits outside the FTP cycle.

Consistent with its enforcement purpose, the consent decrees also sought to mitigatethe environmental harm caused by the violations. The pre-settlement violations of theemissions standards as well as the continued exceedances of those standards pending finalcompliance meant that more NOX had been and would be emitted than was allowedunder the standard, increasing human exposure to harmful pollution. The amounts weresubstantial: the EPA claimed that “the affected engines emitted more than 1.3 milliontons of excess NOX in 1998 alone, which is six percent of all NOX emissions from cars,trucks and industrial sources this year” (EPA 1998). A number of the consent decrees’provisions were designed at least partially to recoup or offset these excess emissions.These included bringing forward the 2004 standard by two years and the retrofit pro-grams.2 These were not provisions that the EPA had the authority mandate outside thelitigation, but they functioned to remedy the effects of the violations complained of, andthus were properly within the scope of relief requested by the government and theresolution agreed to by the parties (United States v. Alcoa 2000).

2.2. Resolving disputed legal issuesAnother of the authors’ criteria for regulation by litigation is the settlement of disputedlegal issues avoiding judicial resolution. The main legal issue in the heavy-duty diesel



engine litigation was whether the controllers were functioning as “defeat devices” inviolation of the CAA or were merely performing to the test, as the manufacturers con-tended was permitted by the Act and the EPA’s regulations. In support of their positionon this issue, the manufacturers asserted that the EPA program officials had knowledge oftheir programming practice for several years before the litigation, had raised no objec-tions, and had issued yearly certifications of compliance for the engines in possession ofthis knowledge (Morriss et al. 2008, p. 76). This disputed interpretation represented legalrisks for both the government and the manufacturers, and these risks were undoubtedlya factor in the calculations of both sides leading to the settlement of the case.

Settlement by parties, whether public or private, to manage risks associatedwith uncertain legal interpretations is a characteristic of all litigation and therefore doesnot provide a distinctive marker for regulation by litigation. The authors suggest,however, that settlements by the government to avoid judicial resolution of legal issuesin cases such as the heavy-duty diesel engine litigation are suspect, because the deck isstacked against defendants in these cases in a way that leaves “the net welfare effect ofsettlements” uncertain (Morriss et al. 2008, pp. 49–50). This argument is based on thelarge statutory penalties theoretically available to the government in enforcementactions and on the ability of the Agency to retaliate against recalcitrant corporatedefendants in future regulatory decisions. In the absence of such coercive power, cor-porate defendants might be expected to fight governmental overreaching on legalissues. But in the face of it, they can be expected to buckle, granting regulatory con-cessions to the government that are unwarranted by the merits of the government’sclaims.

How overwhelming is the government’s leverage in cases such as this one? Thegovernment’s weapons are certainly formidable, but they are tempered by defendants’recourse to independent review and determination by federal judges and juries. In civiljudicial actions such as the suit against heavy-duty diesel engine manufacturers, defen-dants are entitled to a trial by jury on the question of whether they have violated theirlegal obligations and are liable for penalties (Tull v. United States 1987). If the defendantis found liable, civil penalties are set, in the absence of settlement, at a level determined bya judge, taking into account the range of equitable factors listed in the statute and any“other factors as justice may require” (CAA 1955, Sec. 7413(e)(1); Clean Water Act 1998,Sec. 1319(d)). Judges exercising this discretion have often set penalties at a fraction of themaximum penalties provided for in the statute.3

The authors cite the coercive effect of potential adverse regulatory actions directedagainst non-settling defendants. In particular, they argue that in the diesel litigation, athreat by the EPA not to certify the next year’s engines would have posed a catastrophicoutcome that the manufacturers would seek to avoid at any cost (Morriss et al. 2008, p.174). Although the authors offer no evidence that such a threat was made by the EPA’senforcers, the manufacturers would certainly have foreseen the possibility that theirexisting engines, with the alleged defeat devices, would not be certified, resulting inproduction shutdowns. Even in this event, however, the companies would not have beenwithout redress. A denial, suspension, or revocation of certification by the EPA is directlyappealable to a US appellate court to determine whether the Agency’s action was arbi-trary and capricious or not in accord with law and to grant appropriate relief (CAA[appellate jurisdiction]; Administrative Procedure Act [1966] [arbitrary and capriciousreview]). Among other things, the reviewing court may stay the effective date of an agency



action or take other actions to avoid irreparable harm pending completion of the reviewproceedings (Administrative Procedure Act [relief pending review]).

The real question prompted by the authors’ analysis is whether the allegations ofviolations by the government were substantial and made in good faith for an enforcementpurpose or whether they were made to draw the defendants into a regulatory processunder the guise of enforcement litigation. While defendant manufacturers faced signifi-cant downside risks, they were free to litigate their issues, as other corporate defendantshave chosen to do in high-stakes environmental enforcement cases (e.g. United States v.Ohio Edison Co. 2003; United States v. Cinergy Corp. 2009; United States v. EasternKentucky Power Co-op, Inc. 2007, all on EPA application of New Source Review require-ments and exemptions under the CAA). The magnitude of their concessions in thislitigation, valued by the EPA at more than $1 billion and including the largest civil penaltyin EPA history up to that time, indicates that the defendants believed they had seriousexposure on the legality of their controllers (EPA 1998). The Agency’s allegations ofviolations were substantial, the kind of allegations that, while not beyond dispute, rou-tinely form the basis of civil judicial enforcement cases and resulting settlements, and theterms of the settlements were consistent with these actions’ having been brought in goodfaith for an enforcement purpose.

2.3. Suing an industryThe authors contend that suing the vast majority of a regulated community rather thanindividual companies is symptomatic of regulation by litigation. But it is not clear whypercentage of industry targeted should be a criterion of backdoor regulation. If the EPAhad sought and obtained extra-statutory relief from only one major diesel engine manu-facturer rather than from all of them, would the authors agree that the Agency wasinnocent of regulation by litigation? Moreover, suing the the vast majority of an industrymay be entirely consistent with, indeed necessitated by, an enforcement purpose. In thislitigation, the EPA sued all the major engine manufacturers, comprising 95% of the USheavy-duty diesel engine market, because the Agency determined that they all engaged inthe same illegal practice (EPA 1998).

3. Institutions of enforcement

So far, I have shown that key elements of the heavy-duty diesel engine enforcement actionand settlement are consistent with a legitimate enforcement purpose; I have not ruled outthe authors’ alternative story that the Agency’s real motivation or goal in the action wasto circumvent the rulemaking process. Between these two competing accounts, theywould argue, their story more likely fits the reality.

Here is the gist of their account. Having just recently tightened NAAQS for NOX

(ozone) and instituted a new NAAQS for fine particulate matter, the EPA’s leadership wasunder political pressure to help states find immediate reductions in NOX and particulatesthat would enable them to develop approvable state implementation plans (SIPs) withoutrequiring expensive further reductions by stationary sources (Morriss et al. 2008, p. 78).Tighter federal emissions controls on diesel engines offered significant reductionsbecause rapid growth in the use of these engines had led to their recent emergence as amajor source of NOX emissions. Tighter controls on diesels were attractive to stateofficials because they came at little or no political cost to those officials compared with the



high costs to them of imposing more stringent controls on stationary sources or vehicularuse through state implementation plans (Morriss et al. 2008, pp. 69–70). Rulemaking andnegotiation did not offer the EPA viable options for responding to this political pressurefrom the states, due to limitations on legal authority for reducing NOX emissions fromdiesel engines, the length of time needed to produce results, or lack of bargainingcollateral. Regulation by litigation also limited political accountability of federal officialsfor the necessary policy changes. Therefore, regulation under the guise of enforcementlitigation became the Agency’s policymaking vehicle of choice.

While this account is coherent and rich in insight, I argue below that it is less likelythan the more obvious and mundane alternative.

4. Subagency incentives

The authors’ account seems necessarily to imply that the heavy-duty diesel engine liti-gation was prepared and resolved at the direction of senior policy officials at the EPA whowere feeling political pressure to produce NOX reductions that could be claimed by thestates in their implementation planning. But this assumption is undercut by the inde-pendence of the enforcement function within the EPA, by the unique culture and incen-tives that characterize the Agency’s enforcement office, and by the bottom-up processthrough which the action was developed and resolved and the corresponding lack ofevidence of influence by senior EPA policymakers.

In 1993 the Agency moved enforcement functions from five program offices andconsolidated them in the new Office of Enforcement and Compliance Assurance (OECA)(EPA 1993). This new independence was designed to “toughen enforcement” by protect-ing the integrity of the enforcement process and insulating it from exactly the kind ofprogrammatic pressures that the authors suggest were at work in the prosecution andresolution of the heavy-duty diesel engine litigation. In developing this action, the OECAworked with engineers in the Office of Mobile Sources in the EPA’s Office of Air andRadiation (OAR) as well as with lawyers from the Department of Justice (DOJ), but allaspects of the development of the litigation within EPA were under the OECA’s direction.OECA attorneys came to their own conclusions about the legality of the industry’spractices and documented the case for formal referral to the DOJ (conversations withOECA enforcement staff, 24 August 2009). Only when the referral documents werecomplete did the enforcement office advise the senior EPA policymaker for air pollutionissues – the Assistant Administrator for OAR – of its intent to institute the action (emailexchange with Steven Herman, former Assistant Administrator of the Office of Enforce-ment and Compliance Assurance, 14 August 2009). By then, the enforcement die was cast.

OECA lawyers who worked on the case emphasize the bottom-up nature of theprocess by which the action was selected, advanced, and resolved (conversations withOECA enforcement staff, 24 August 2009). They received no message from the top thatinitiated or guided this process, and the authors do not offer evidence that such a messagewas delivered (EPA 1993). Had it been, it would almost certainly be known within theenforcement community.

The enforcement office has its own culture and its own political economy, which aredifferent from those of the program offices. OECA’s culture is dominated by lawyers andis generally understood to be more adversarial than that of its program counterparts. Asthe authors themselves note, enforcement has different incentives:



For example, the program offices have reason to value highly their relationships withaffected industries because they must work with them in repeated interactions. Theenforcement office’s incentives are focused on winning discrete victories. (Morrisset al. 2008, p. 80)

These different incentives are reinforced by different accountability measures inexecutive branch reviews (e.g. under the Government Performance and Results Act[1993]) and Congressional oversight. The enforcement office is evaluated on factors suchas the number of enforcement actions brought each year, the amount of fines levied, andthe environmental benefits of injunctive relief obtained, whereas program offices areevaluated on their efficiency and effectiveness in policymaking and implementation.4

The authors’ acknowledgement of the independence of the enforcement office and itsunique incentives is in some tension with their contention that the selection and pros-ecution of the heavy-duty diesel engine case was policy-driven: producing reductions toassist the states in meeting their SIPs would not appear on the OECA’s agenda. Theauthors attempt to resolve that tension by stating, after noting the distinctiveness of theenforcement function:

. . . if the controller issue went from being framed internally as a problem to besolved looking forward to being framed as a need to punish bad past behavior, thetop agency decision makers would choose different solutions as appropriate.(Morriss et al. 2008, p. 81)

Although what this means is not entirely clear, it suggests the possibility that the authors’claim is more modest than I have supposed – that this enforcement action happened tosurface from the enforcement office at a propitious time for the Agency’s senior policyofficials and that they benefitted from it in ways that exceeded its value as merely anenforcement exercise. But if that is the claim, the benefit is merely fortuitous, not theresult of intentional action by these officials, and the claim seems of little consequence forthe larger questions of agency governance that the authors raise.

The institutional and cultural separateness of enforcement is perfectly consistent withthe alternate account of the heavy-duty diesel engine litigation as an enforcement action.It also explains what in the authors’ account seems aberrational: why the Agency shouldsuddenly flip from an established approach to regulation by rulemaking and cooperationin dealing with the diesel engine manufacturers to regulation by litigation and then backagain (Morriss et al. 2008, pp. 56–61). Understanding policymaking and enforcement asrelatively independent functions makes the pattern comprehensible. The EPA was notflipping from one mode to another, it was proceeding in parallel fashion in both modes.Certainly what happened on the enforcement side affected the program side, and viceversa. But these were not different faces of a continuous policy function; they wereexpressions of different functions. One might argue, as some have, that this degree ofseparation is unhealthy, precisely because it creates a disconnect between policymakingand enforcement. But to closely tie these functions under the direction of senior agencypolicy officials would only increase the likelihood of regulation by litigation.

The alternate account fits well within the larger story of diesel emissions reductions inthe US. In 1977, Congress criticized the EPA for failure to adequately regulate dieselengine emissions and amended the CAA to direct regulation of emissions from heavy-duty engines to “reflect the greatest degree of emission reduction achievable” taking into



account costs and other factors (CAA 1955, Sec. 7521(a)(3)(A)). In the decades after that,the EPA successively tightened emissions standards for diesel engines and also regulatedthe constituents of diesel fuel; this regulatory process began significantly before the EPAadopted the new NAAQS for ozone and fine particulate matter in 1997 and continuedafter that.5 This successive tightening of the standards has reduced diesel emissions to afraction of their 1977 levels and has shown enormous net public health benefits overtime.6 The direct effect of the heavy-duty diesel engine litigation on the overall trajectoryof these reductions was modest (Thorton et al. 2008, fig. 1; see also Morriss et al. 2008, p.85, arguing that pre-buy behavior reduced or negated the near-term air quality benefits ofthe 2002 standard). But without a credible enforcement presence, the increasinglydemanding standards, the policy driver of the reductions, would not have been effectivein securing the substantial benefits promised. Hence the crucial role of the litigation inasserting, and vindicating, the integrity of the EPA’s regulatory program.

4.1. Enforcement process versus rulemaking processThe authors are concerned about the loss of public participation and political account-ability in regulation by litigation. In the case of agencies like the EPA, they argue,regulation by litigation avoids full public participation as afforded by rulemakingprocedures, limits accountability-enhancing oversight by the legislative and executivebranches, and allows the appropriation of policymaking authority assigned elsewhere inthe political process (Morriss et al. 2008, pp. 47–52). These concerns are appropriate incases where litigation usurps the policymaking function, but not in cases that carry out alegitimate enforcement function.

Enforcement cases have their own set of procedural and institutional safeguards. Thesesafeguards are designed not to assure that these actions and any settlements that grow outof them are an optimal resolution of competing public interests, as in the policy context,but rather to assure that they are “fair, reasonable, and in the public interest” (Cruden &Gelber 2007, p. 13). Judicial enforcement actions face a set of procedural checks to ensurethese criteria are met, including review by senior officials in the Environment and NaturalResources Division (ENRD) of the DOJ before they are filed. The DOJ can, and does,decline to file enforcement cases that it concludes have inadequate factual or legal basis.Settlements also must be approved by senior officials in DOJ’s ENRD as well as in EPA’sOECA as meeting the criteria for entry. DOJ’s policy requires that it publish notice ofconsent decrees that enjoin discharges of pollutants in the Federal Register and requestpublic comment before it requests entry of the decree by a federal judge (28 C.F.R. 50.7).In the heavy-duty diesel engine litigation, the district court received substantial publiccomment from a variety of sources through this process and held a hearing prior to entryat which those comments as well as the comments of the parties were considered (Cruden& Gelber 2007, p. 13). The judge entered the decrees after review to determine that theywere “fair, reasonable and consistent with public policy” and retained jurisdiction over thecases to enforce the decrees or modify them as circumstances warranted (see, e.g., UnitedStates v. Caterpillar, Inc. Order 1999). If the litigation had not settled or if the settlement hadnot been approved by the court, the government would have had the burden of persuadingthe jury or the judge of its version of the facts and the law as well of the appropriate relief.

These procedures are elaborate. They offer potentially even more intensive judicialscrutiny of the basis of the government’s position than rulemaking proceedings, in whichreviewing courts show deference to agency factual findings and legal interpretations.7



They do not offer the same potential for influence by interest groups or other politicalactors. But that is consistent with the enforcement purpose to vindicate existing policy,rather than frame new policies. Responsiveness to competing interests is particularlyimportant to the one; rule of law is particularly important to the other.

5. Storytelling and public choice analysis

The authors’ efforts to “see behind” the public face of agency actions, such as theheavy-duty diesel engine litigation, are laudable. Their preferred analytic instrument forthis, public choice theory, is a useful one. But the account rests on an oversimplified viewof the enforcement function and on a willingness to reach conclusions about the moti-vations behind these cases based on suppositions about the preferences of senior agencypolicymakers and their influence over the selection and prosecution of the cases. TheAgency is not a single actor, with a single will, but a collection of actors whose goalswithin institutional subcultures are diverse. To some degree, these diverse goals areorchestrated by central leadership, but to a significant degree, they are not. Because of thecentral roles of the EPA’s independent enforcement office as well as that of a separateagency, the DOJ, the decisionmaking in these cases was more complex – or at leastdifferent – than suggested by the authors’ analysis. Senior policy officials in the EPA’s airprogram and elsewhere may have had strong incentives to respond to pressure from thestates and secure more stringent diesel emissions controls without the risk and delay ofrulemaking proceedings, but it is not clear that those incentives drove the selection andresolution of these cases. On balance the evidence seems to point in the other direction.The genesis and settlement of these cases appear to have followed a standard enforcementprotocol that is not consistent with the orchestrated circumvention of rulemaking pro-cedures that the authors suggest.

The divergence between the authors’ and my accounts may say something generallyabout the application of public choice theory in complex institutional settings. Thetheory rests on the premise, as the authors explain, that politicians and bureaucrats, likethe rest of us, are personal welfare maximizers: they “carefully weight costs and benefitswhen taking action” (Morriss et al. 2008, p. 3). Personal welfare enhancement for politi-cians and bureaucrats is “to keep their jobs” (Morriss et al. 2008, p. 3). The authorselsewhere acknowledge that agency officials’ calculations are “not simply monetary” butmay include the satisfaction of advancing an agency’s mission (Morriss et al. 2008, p. 26,34). But the basic premise remains that public officials act based on personal calculus andthat calculus may or may not lead in a direction consistent with the public interest. Evenif we accept this premise, however, much remains to be determined in employing publicchoice theory as an explanatory or diagnostic device.

The application is particularly difficult in a complex institutional setting of the sortpresented by the heavy-duty diesel engine litigation. We may assume that each of the EPAofficials that was or might have been involved in the decisionmaking was motivated by adesire for job security or enhanced reputation or other form of personal utility. But thedirection of each actor’s self-interest is likely to depend on the actor’s place in theorganization, which significantly defines his or her relationship to the agency’s oftencompeting internal constituencies and goals. In addition, each actor’s interests or pref-erences may shift with actions by others. If perceptions of self-interest among those in aposition to make or affect EPA decisions are diverse and shifting, which are the most



relevant? How do we weigh their effect on the Agency’s choices? There may be severalinterpretations or scenarios that are roughly consistent with the known facts, based ondifferent assumptions about how competing interests played out on the ground (Morrisset al. 2008, p. 77, acknowledging “numerous hypotheses about the rationales for EPA’sbehavior”). Public choice analysis can help us frame stories, but the true story and thelessons we should take from it may remain elusive.

When public choice analysis is used to diagnose government failure, as it is inRegulation by Litigation, these different interpretations lead to different conclusionsabout whether the government has acted well or poorly. In the authors’ analysis, regula-tion by litigation is always inferior to regulation by rulemaking; it is a “net negative for thepublic at large” (Morriss et al. 2008, p. 52). To characterize an agency action as regulationby litigation is to conclude that the agency put itself on a suboptimal policymaking track.The authors make a point of this in their discussion of the heavy-duty diesel enginelitigation by citing uncertainties about whether the negotiated consent decrees actuallyreduced emissions or reduced them cost-effectively – uncertainties that they argue couldhave been avoided by public rulemaking (Morriss et al. 2008, pp. 84–88). The authors donot contend, however, that enforcement is a net negative. Indeed, for reasons alreadydiscussed, enforcement is essential to prevent collapse of the regulatory system and thenet benefits that it is designed to provide to the public. To characterize an agency actionas enforcement presumes its value in maintaining the integrity of the system. This doesnot mean that all enforcement actions are good, but their evaluation is not in terms ofalternative policymaking tracks, such as rulemaking, but in terms of whether they meettheir enforcement goals.

Notes

1 See also Bardach and Kagan (1982), discussing an enforcer’s option of seeking actions “not

specifically required by regulations, such as changes . . . that would help prevent serious viola-

tions in the future” (pp. 141–142).

2 See United States v. Caterpillar, Inc., Memorandum Opinion and Order, p. 3 (2002), character-

izing the “pull ahead” requirement as intended “to partially offset the alleged excess emissions

from the engines defendants sold during the years prior to the decree and the three years

between entry of the decree and the deadline for elimination of the defeat devices.”

3 For example, Atlantic States Legal Foundation v. Universal Tool & Stamping Co. (1992), imposing

a penalty of $450,000 against a statutory maximum of $26 million; Chesapeake Bay Foundation

v. Gwaltney (1986), assessing a penalty of $1.3 million against a statutory maximum of

$6.66 million; and Sierra Club v. Cedar Point Oil Co. (1996), upholding the district court’s fine

of $186,070 against a maximum penalty of more than $20 million.

4 See EPA (2010), reporting on enforcement measures. In the EPA’s strategic plan, enforcement

is represented by its own goal (“Compliance and Enforcement Stewardship”) separate from

programmatic goals such as “Clean Air and Global Climate Change,” although the plan includes

“cross-goal strategies.” See EPA (2006). Annual EPA performance and accountability reports

address these goals separately. See EPA (2008, pp. 10–11 [reporting against clean air measures],

pp. 18–19 [reporting against enforcement measures]).

5 For example, EPA (2001), announcing final 2007 standards.

6 See EPA (2000, p. xvi), showing annual compliance costs of $4.2 billion against PM (particulate

matter)-related benefits of $69 billion.

7 5 U.S.C., Sec. 706 (defining limited scope of judicial review of agency actions, e.g. determining

whether actions are “arbitrary, capricious . . . or otherwise not in accordance with law”) and



Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (establishing

judicial deference to agency legal interpretations developed in rulemaking). American Law

Institute.

References

Bardach E, Kagan R (1982) Going by the Book: The Problem of Regulatory Unreasonableness. Temple

University Press, Philadelphia, PA.

Cruden JC, Gelber BS (2007) Federal Civil Environmental Enforcement – Processes, Actors and

Trends. SM072 ALI-AMA 695.

EPA (Environmental Protection Agency) (1984) EPA Policy on Civil Penalties. General Enforcement

Policy #GM-21, 16 Feb.

EPA (Environmental Protection Agency) (1993) EPA Administrator Details Design of Reorganized

Enforcement Office, Press Release, 13 Oct. [Last accessed 19 Jan 2011.] Available from URL:

http://www.epa.gov/history/org/oeca/02.htm

EPA (Environmental Protection Agency) (1998) DOJ, EPA Announce One Billion Dollar Settlement

with Diesel Engine Industry for Clean Air Violations, Press Release, 22 Oct.

EPA (Environmental Protection Agency) (2000) Regulatory Impact Analysis: Heavy Duty Engine and

Vehicle Standards and Highway Diesel Fuel Sulfur Control Regulations. [Last accessed 19 Jan

2011.] Available from URL: http://www.epa.gov/oms/highway-diesel/regs/exec-sum.pdf

EPA (Environmental Protection Agency) (2001) Control of Air Pollution from New Motor Vehicles:

Heavy-duty Engine and Vehicle Standards and Highway Diesel Fuel Sulfur Control Requirements,

66 Fed. Reg. 5001, Jan 18.

EPA (Environmental Protection Agency) (2006) 2006–2011 EPA Strategic Plan. USEPA, Washing-

ton, DC.

EPA (Environmental Protection Agency) (2008) FY 2008 Performance and Accountability Report.

USEPA, Washington, DC.

EPA (Environmental Protection Agency) (2010) Office of Compliance National Enforcement Trends

Report. [Last accessed 19 Jan 2011.] Available from URL: http://www.epa.gov/compliance/

resources/reports/nets/nets.pdf

EPA (Environmental Protection Agency) (n.d.) Enforcement. [Last accessed 19 Jan 2011.] Available

from URL: http://www.epa.gov/compliance/index-e.html

Morriss AP, Yandle B, Dorchak A (2008) Regulation by Litigation. Yale University Press, New Haven,

CT.

Thorton D, Kagan RA, Gunningham N (2008) Compliance Costs, Regulation, and Environmental

Performance: Controlling Truck Emissions in the U.S. Regulation & Governance 2, 275–292.

Cases cited

Atlantic States Legal Foundation v. Universal Tool & Stamping Co., 786 F. Supp. 743 (D. Ind. 1992).

Chesapeake Bay Foundation v. Gwaltney, 611 F. Supp. 1542, 1555 (D. Va. 1985), aff’d 791 F.2d 304

(4th Cir. 1986).

Chevron, U.S.A., Inc. v., Natural Resource Defense Council, Inc., 467 U.S. 837 (1984). American Law

Institute.

Sierra Club v. Cedar Point Oil Co., 73 F. 3d 546 (5th Cir.), cert. denied, 519 U.S. 811 (1996).

Tull v. United States, 481 U.S. 412 (1987).

United States v. Alcoa, Inc., 98 F. Supp. 2d 1031 (N.D. Ind. 2000).

United States v. Caterpillar, Inc., 277 F. Supp.2d 73, 78 (Memorandum Opinion and Order, Aug 28,

2002).

United States v. Caterpillar, Inc. Civ. Action 98-02544, Consent Decree Pars. 14, 17, 19, 20, 64–82

(entered July 1, 1999).



United States v. Caterpillar, Inc. (Order, July 1, 1999).

United States v. Cinergy Corp., 618 F. Supp. 2d 942 (S.D. Ind. 2009).

United States v. East Kentucky Power Co-op, Inc., 2007 498 F. Supp. 2d 976 (E.D. Ky. 2007).

United States v. Ohio Edison Co. 276 F. Supp.2d 829 (S. D. Ohio 2003).

Statutes cited

Administrative Procedure Act (1966) 5 U.S.C. Sec. 705, 706.

Clean Air Act (1955) 42 U.S.C. Sec. 7521(a)(3)(A), 7521(a)(3)(C), 7522(a)(3)(B), 7525(b)(2)(B),

7413(e)(1), 7607(b)(1).

Clean Water Act (1998) 33 U.S.C. Sec. 1319(d).

28 C.F.R. Sec. 50.7.

Government Performance and Results Act (1993), Amending Titles 5, 31 and 34 of the U.S. Codes.



Taking enforcement on its own terms: EPA's heavy-duty diesel engine litigation

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