New York v. National Highway Traffic Safety Administration

The Second Circuit Court of Appeals vacated the National Highway Traffic Safety Administration’s (NHTSA’s) reversal of a 2016 increase to the penalty for violations of fuel economy standards. In 2016, NHTSA increased the penalty pursuant to Federal Civil Penalties Inflation Adjustment Act Improvements Act (the Improvements Act) from $5.50 to $14 for every tenth of a mile per gallon below the applicable standard, multiplied by the number of cars in a manufacturer’s fleet. In 2019, NHTSA reversed the increase based on its conclusion that the Improvements Act did not apply to the fuel economy penalty and that, even if the Act did apply, the penalty’s “negative economic impact” was sufficient to support reversal. The Second Circuit rejected both rationales. First, the Second Circuit held that the penalty was a “civil monetary penalty” under the Improvements Act. NHTSA therefore was required to adjust the penalty rate in accordance with the Improvements Act’s requirements. Second, the court held that reconsideration and reversal of the increase based on economic consequences was untimely and therefore beyond NHTSA’s authority.

Twelve states, the District of Columbia, and two environmental groups filed petitions for review in the Second Circuit Court of Appeals challenging the National Highway Traffic Safety Administration’s (NHTSA’s) decision to reverse an inflation adjustment to the civil penalty for violations of Corporate Average Fuel Economy standards. NHTSA determined that the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation Adjustment Act) did not apply and further concluded that even if the Inflation Adjustment Act did apply, the increased penalty rate would have a negative economic impact and therefore that in accordance with the Energy Policy and Conservation Act of 1975 and the Energy Independence and Security Act of 2007, the lower rate should be reinstated.