United States v. Volvo Powertrain Corporation

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 11, 2013 Decided July 18, 2014

No. 12-5234

UNITED STATES OF AMERICA,

APPELLEE

v.

VOLVO POWERTRAIN CORPORATION,

APPELLANT

CALIFORNIA AIR RESOURCES BOARD,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 1:98-cv-02547)

Aaron M. Streett argued the cause for appellant. With him

on the briefs were Lauren Tanner, William H. Jeffress, Jr., and

William M. Bumpers.

Russell S. Frye was on the brief for amici curiae the

National Association of Manufacturers, et al. in support of

appellant.

Brian C. Toth, Attorney, U.S. Department of Justice, argued

the cause for appellee the United States. With him on the brief

was Lori Jonas, Attorney.

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Kamala D. Harris, Attorney General, Office of the Attorney

General for the State of California, Robert W. Byrne, Senior

Assistant Attorney General, and Nicholas Stern, Deputy

Attorney General, were on the brief for appellee California Air

Resources Board.

Before: GRIFFITH and SRINIVASAN, Circuit Judges, and

SENTELLE, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge SRINIVASAN.

SRINIVASAN, Circuit Judge: Under the Clean Air Act,

manufacturers of new motor vehicle engines need to obtain

certificates of conformity from the Environmental Protection

Agency before selling their engines in the United States. To

obtain the certificates, manufacturers must verify that their

engines comply with EPA emissions standards. In 1998, EPA

alleged that several major engine manufacturers had violated

federal law by equipping certain engines with “defeat devices”

designed to suppress emissions during EPA tests even though

emissions exceeded the legal limit in normal operating

conditions. The manufacturers settled the allegations, and each

entered into similarly worded consent decrees with the federal

government.

The consent decrees required the manufacturers to satisfy

future EPA emissions standards ahead of schedule. In

particular, the decrees provided that certain model year 2005

engines for which the manufacturers sought certificates of

conformity would meet model year 2006 limits on emissions of

oxides of nitrogen (NOx). The decrees’ requirements apply to

engines “manufactured at any facility owned or operated by” the

settling companies.

3

Volvo Powertrain Corporation, a wholly owned subsidiary

of the Swedish conglomerate AB Volvo, is one of the companies

subject to such a decree. Volvo Powertrain owns and operates

a facility in Skövde, Sweden, where it and other Volvo

subsidiaries manufacture engines. Another wholly owned Volvo

subsidiary, AB Volvo Penta, sought certificates of conformity

from EPA for 8,354 model year 2005 engines manufactured at

the Skövde facility. Those engines did not comply with EPA’s

model year 2006 NOx emissions standard.

Volvo Powertrain now argues that the consent decree has no

application to the Volvo Penta engines even though, under the

language of the decree, the engines were manufactured at a

“facility owned or operated by” a settling company. The district

court disagreed, and it held Volvo Powertrain liable for the

failure of the 2005 engines to satisfy the 2006 emissions

standard. As a remedy, the court ordered Volvo Powertrain to

pay approximately $72 million, an amount calculated in

accordance with the consent decree’s schedule of stipulated

penalties for violations of the decree’s requirements.

We agree with the district court that the consent decree

applies to the 8,354 Volvo Penta engines manufactured at the

Volvo Powertrain plant. Although Volvo Penta, not Volvo

Powertrain, sought the certificates of conformity in question, we

read the terms of the consent decree to impose liability on Volvo

Powertrain for its affiliate’s engines manufactured at its facility.

We also conclude that the district court committed no abuse of

discretion when it ordered Volvo Powertrain to pay

approximately $72 million as a remedy for the violations of the

decree. We therefore affirm the judgment of the district court.

4

I.

A.

The Clean Air Act requires the EPA Administrator to

prescribe standards for emissions of air pollutants from new

motor vehicles and motor vehicle engines if the emissions

“cause, or contribute to, air pollution which may reasonably be

anticipated to endanger public health or welfare.” Clean Air Act

§ 202(a)(1), 42 U.S.C. § 7521(a)(1). A manufacturer who

desires to sell new motor vehicle engines in the United States

must conduct tests to show that the engines meet emissions

standards prescribed under section 202. See id. § 206(a)(1), 42

U.S.C. § 7525(a)(1); see also 40 C.F.R. § 89.119(a)-(b). If the

engine meets EPA standards, the agency issues a “certificate of

conformity” allowing the manufacturer to sell the engines in the

United States for up to one year. See Clean Air Act § 206(a)(1),

42 U.S.C. § 7525(a)(1). It is unlawful to sell new motor vehicle

engines in the United States or to import new engines into the

country without a certificate of conformity. See id. § 203(a)(1),

42 U.S.C. § 7522(a)(1).

The Clean Air Act also allows the State of California to

adopt and enforce emissions standards for new motor vehicles

and motor vehicle engines if California determines that its

standards “will be, in the aggregate, at least as protective of

public health and welfare as applicable Federal standards.” Id.

§ 209(b)(1), 42 U.S.C. § 7543(b)(1); see also Chamber of

Commerce of the U.S. v. EPA, 642 F.3d 192, 196 (D.C. Cir.

2011). A vehicle or engine generally cannot be sold in

California or imported into the state until the California Air

Resources Board certifies compliance with state emissions

standards. See Cal. Health & Safety Code §§ 43151-43153

(Deering 2014). Certificates issued by the California Air

Resources Board are called “executive orders.”

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The pollutants subject to emissions limits under the Clean

Air Act and California law include oxides of nitrogen, or NOx.

See Clean Air Act § 202(a)(3)(A)(i), 42 U.S.C.

§ 7521(a)(3)(A)(i); 40 C.F.R. § 89.112; Cal. Code Regs. tit. 13,

§ 2423. NOx emissions contribute to the formation of fine

particulate matter, also known as PM2.5, as well as ground-level

ozone, a primary component of smog. See North Carolina v.

EPA, 531 F.3d 896, 903 (D.C. Cir. 2008). Elevated levels of

fine particulate matter have been linked to “adverse human

health consequences such as premature death, lung and

cardiovascular disease, and asthma.” Catawba Cnty. v. EPA,

571 F.3d 20, 26 (D.C. Cir. 2009). And “even at very low

levels,” inhalation of ozone “can cause serious health problems

by damaging lung tissue and sensitizing lungs to other irritants.”

Ass’n of Irritated Residents v. EPA, 686 F.3d 668, 671 n.1 (9th

Cir. 2012).

In 1998, the United States brought enforcement actions in

federal district court against seven major engine manufacturers,

alleging that they had been using “defeat devices” to meet EPA

standards for NOx emissions. The devices enabled the engines

to meet EPA emissions standards in laboratory testing even

though the engines produced NOx emissions far above the

applicable limit in ordinary use. See Crete Carrier Corp. v.

EPA, 363 F.3d 490, 491 (D.C. Cir. 2004). The manufacturers

collectively negotiated settlement terms with the federal

government. Most of the manufacturers agreed to be bound by

similarly worded consent decrees so that none would gain a

competitive advantage by negotiating a better deal. The

manufacturers did not admit to using defeat devices, but they

agreed to pay civil penalties exceeding $80 million collectively.

To offset excess NOx emissions caused by the alleged

violations, the manufacturers also agreed to comply with certain

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EPA emissions standards earlier than EPA regulations otherwise

required. Most significantly for purposes of this case, the

manufacturers agreed that their nonroad compression-ignition

(or diesel) engines with 300 to 750 horsepower would comply

with EPA’s model year 2006 emissions standards one year

ahead of schedule, starting with model year 2005. The parties

refer to that provision of the consent decree as the “nonroad

pull-ahead” requirement. The manufacturers agreed to pay

stipulated penalties to the United States under an established

formula if they certified nonroad compression-ignition engines

for model year 2005 that failed to comply with the nonroad pull-

ahead requirement.

Volvo Truck Corporation (Volvo Truck, or VTC), a wholly

owned subsidiary of AB Volvo, was one of the manufacturers

covered by the standard form consent decree. Its decree states

that all heavy-duty diesel and nonroad compression-ignition

engines “manufactured at any facility owned or operated by

VTC on or after January 1, 1998, for which a Certificate of

Conformity is sought, must meet all applicable requirements of

this Decree, regardless of whether VTC still owned, owns,

operated, or operates that facility at the time the engine is

manufactured.” Consent Decree ¶ 110. Another wholly owned

subsidiary of AB Volvo, Volvo Construction Equipment

Components AB, filed a motion to intervene in the case. Volvo

Construction stated that it “is the Volvo Group company that

sells [nonroad] engines in the United States” and that it sought

to intervene “[t]o ensure that the proper Volvo Group company

is subject to the jurisdiction of the Court for purposes of the

Consent Decree requirements applicable to Nonroad CI

Engines.” Mot. to Intervene at 2 (June 11, 1999). The district

court granted Volvo Construction’s motion to intervene, and, on

July 1, 1999, approved the consent decree.

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Volvo Truck and Volvo Construction entered into a

similarly worded settlement agreement with the California Air

Resources Board. Like the consent decree with EPA, the

settlement agreement with the California Air Resources Board

includes a nonroad pull-ahead requirement, a schedule for

stipulated penalties, and a provision confirming that the

agreement applies to all heavy-duty diesel and nonroad

compression-ignition engines “manufactured at any facility

owned or operated by” Volvo Truck. The settlement agreement

with the California Air Resources Board was not incorporated

into a consent decree. See Smyth ex rel. Smyth v. Rivero, 282

F.3d 268, 280-81 (4th Cir. 2002) (consent decree is enforceable

as order of the court, whereas settlement agreement generally is

not).

B.

At the time of the consent decree, Volvo Powertrain

Corporation, a subsidiary of Volvo Truck, owned a facility in

Skövde, Sweden. Volvo Truck produced engines at the site. In

2001, as part of a corporate reorganization, Volvo Powertrain

ceased to be a subsidiary of Volvo Truck and became a direct

subsidiary of AB Volvo. In 2002, Volvo Powertrain informed

the district court and the California Air Resources Board that it

would assume Volvo Truck’s responsibilities under the consent

decree and settlement agreement.

Although Volvo Powertrain owns the Skövde facility,

another wholly owned subsidiary of AB Volvo, AB Volvo

Penta, also manufactures engines there. Volvo Penta has

produced nonroad engines at Skövde since before 1995 and has

obtained certificates of conformity from EPA (and executive

orders from the California Air Resources Board) for those

engines every year since 1997. In late 2004, Volvo Penta sought

certificates of conformity from EPA and executive orders from

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the California Air Resources Board for 8,354 model year 2005

nonroad compression-ignition engines produced at Skövde.

Volvo Penta did not certify that those engines comply with the

model year 2006 emissions standards, as would be required if

the nonroad pull-ahead provision applied to the engines.

In an October 2004 e-mail, a California Air Resources

Board official asked a Volvo Penta certification engineer if

Volvo Penta is part of Volvo Construction and, “[i]f so,”

whether Volvo Penta is “aware of the provisions of the consent

decree.” The certification engineer responded that “Volvo Penta

is an independent company and we are not a part of the consent

decree.” According to a Volvo Penta executive’s affidavit, no

one on the certification staffs of EPA or the California Air

Resources Board advised Volvo Penta that the 8,354 engines

were subject to the nonroad pull-ahead requirement. EPA issued

certificates of conformity covering the engines, and the

California Air Resources Board issued corresponding executive

orders.

In September 2005, a tip from Caterpillar Inc., a competing

engine manufacturer subject to a similarly worded consent

decree, prompted federal officials to seek additional information

about Volvo Penta’s model year 2005 engines. Volvo

Powertrain acknowledged that the model year 2005 Volvo Penta

engines failed to comply with the nonroad pull-ahead

requirement, but asserted that those engines “are not subject to”

the consent decree. Federal officials maintained that the decree

by its terms encompassed the Volvo Penta engines because they

were “manufactured at [a] facility owned or operated by” Volvo

Powertrain. In July 2008, the United States sent a demand letter

to Volvo Powertrain seeking $72,006,337 in stipulated penalties

and interest. Volvo Powertrain invoked the consent decree’s

dispute resolution mechanism, which provides for the district

court to adjudicate disputes between the parties if informal

9

negotiations fail. The California Air Resources Board

intervened in the action to enforce parallel provisions of the

settlement agreement.

In April 2012, the district court concluded that all 8,354

Volvo Penta engines in question are subject to the nonroad pull-

ahead requirement in the consent decree and settlement

agreement. But the court also concluded that the stipulated

penalty provisions in the consent decree and the settlement

agreement “do not clearly apply” when Volvo Penta, rather than

Volvo Powertrain, certifies the noncompliant engines. United

States v. Volvo Powertrain Corp., 854 F. Supp. 2d 60, 65, 75

(D.D.C. 2012). The court explained that, if the consent decree

were an “ordinary contract,” the court would find the stipulated

penalty provision to be ambiguous and “would proceed to

examine extrinsic evidence of the parties’ intent.” Id. at 72. But

because the agreement between Volvo Truck and EPA had been

embodied in a consent decree, the court held that it had

discretion to “fashion an equitable remedy for the violation that

it has found.” Id. It then looked for “guidance” to the formula

established by the stipulated penalty provision. Id. at 73. The

court calculated that Volvo Powertrain would owe $65,759,212

in stipulated penalties under that formula, plus $6,247,125 in

interest, for a total of $72,006,337. The court ordered Volvo

Powertrain to pay that amount to the United States. The court

decided to conduct further proceedings to determine Volvo

Powertrain’s liability to the State of California. Id. at 75.

After the district court’s decision, the parties jointly

stipulated that their intent throughout had been that any award

for violations of the consent decree and settlement agreement

would be divided such that the United States would receive 80%

and the California Air Resources Board would receive 20%.

The parties further agreed that the interest award should be

revised downward to $5,866,428, bringing the total amount of

10

the judgment to $71,625,640. In June 2012, the district court

entered final judgment against Volvo Powertrain in line with the

parties’ proposal. Volvo Powertrain appeals.

II.

Because the district court’s judgment against Volvo

Powertrain was based on violations of the consent decree with

the United States, and because the parties stipulated that further

proceedings to determine Volvo Powertrain’s liability to the

California Air Resources Board are “unnecessary,” we review

the district court’s construction of the consent decree but not of

the settlement agreement. Our review is de novo. See Nix v.

Billington, 448 F.3d 411, 414 (D.C. Cir. 2006).

A.

As an initial matter, Volvo Powertrain contends that the

district court should have interpreted and enforced the consent

decree according to the standards governing a motion to find a

party in contempt for violating a consent decree’s provisions.

“A party seeking to hold another in contempt faces a heavy

burden, needing to show by ‘clear and convincing evidence’ that

the alleged contemnor has violated a ‘clear and unambiguous’

provision of the consent decree.” United States v. Microsoft

Corp., 147 F.3d 935, 940 (D.C. Cir. 1998) (quoting Armstrong

v. Exec. Office of the President, 1 F.3d 1274, 1289 (D.C. Cir.

1993)). We decline to apply those standards here. As for the

“clear and convincing evidence” aspect of that framework,

Volvo Powertrain affirmatively waived the argument in the

district court and the standard would have no discernible effect

on our disposition in any event. As for the requirement to show

that the language of the decree is “clear and unambiguous,”

Volvo Powertrain forfeited the argument by failing to raise it in

the district court.

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Volvo Powertrain directs us only to two points in the record

at which it even remotely referenced contempt principles. First,

in its brief to the district court, Volvo Powertrain cited Stewart

v. O’Neill, 225 F. Supp. 2d 6 (D.D.C. 2002), for the proposition

that “a movant seeking enforcement of a court order through

civil contempt must prove ‘a violation of the Court’s Order by

clear and convincing evidence.’” Mem. in Supp. of Mot. for

Judicial Review 13, ECF No. 40 (alteration omitted) (quoting

Stewart, 225 F. Supp. 2d at 10). Second, at a motions hearing in

the district court in January 2012, counsel for Volvo Powertrain

stated:

[T]here are a couple of principles, Your Honor, on

which the parties do agree. One is that in interpreting

a consent decree the Court applies ordinary principles

of contract interpretation. The second on which we

agree is that the government has the burden. You will

see mentioned in our brief that we contend that it is

clear and convincing evidence that’s required. The

government says that’s not true, it’s preponderance.

Frankly, when you’re not really finding facts, I’m not

sure there’s much difference, and we’re satisfied with

the preponderance standard.

Insofar as its district court brief invoked the rule that

violations of a consent decree must be proven by “clear and

convincing evidence,” Volvo Powertrain waived that argument

at the January 2012 hearing by embracing a preponderance

standard. See Barone v. Williams, 199 F.2d 189, 191 (D.C. Cir.

1952). In any event, as Volvo Powertrain’s counsel explained,

the evidentiary standard makes little difference in this case

because there is no dispute that the 8,354 engines certified by

Volvo Penta were manufactured at Powertrain’s facility in

Skövde, Sweden, or that those engines failed to comply with the

12

nonroad pull-ahead requirement. As for any argument that

liability should be limited to violations of “clear and

unambiguous” provisions of the consent decree, it is likewise

unclear whether that standard would make any difference: we

find below that the nonroad pull-ahead requirement

unambiguously applies to the Volvo Penta engines at issue.

Volvo Powertrain, at any rate, made no mention in the district

court of the “clear and unambiguous” standard and gives us no

reason to disregard our ordinary practice of refusing to

“entertain an argument made for the first time on appeal.”

Meijer, Inc. v. Biovail Corp., 533 F.3d 857, 867 (D.C. Cir.

2008).

Volvo Powertrain contends that contempt standards should

govern regardless of whether it raised the issue in the district

court, but the two decisions on which it relies fail to support that

proposition. In Reynolds v. Roberts, 207 F.3d 1288 (11th Cir.

2000), the district court acted sua sponte in enforcing the

consent decree and the appellants had only a limited opportunity

to present their objections. Id. at 1296-97 & n.13. Volvo

Powertrain, by contrast, had a full opportunity in the district

court to argue in favor of applying the contempt framework.

And in Reynolds v. McInnes, 338 F.3d 1201 (11th Cir. 2003),

the court reaffirmed the “general principle of appellate review”

that “an appellate court will not consider issues not presented to

the trial court,” id. at 1209 (internal quotation marks omitted),

and declined to consider whether the district court should have

applied contempt principles because the argument “was not

raised in the district court,” id. at 1204. We adhere to the same

practice here.

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B.

Having rejected Volvo Powertrain’s argument to apply the

contempt framework, we review the district court’s

interpretation of the decree according to general principles of

contract law. See Segar v. Mukasey, 508 F.3d 16, 21 (D.C. Cir.

2007) (consent decree is “essentially a contract,” and

“construction of a consent decree is essentially a matter of

contract law”) (internal quotation marks omitted). “[U]ltimately

the question for the lower court, when it interprets a consent

decree incorporating a settlement agreement, is what a

reasonable person in the position of the parties would have

thought the language meant.” Richardson v. Edwards, 127 F.3d

97, 101 (D.C. Cir. 1997).

Here, the key language appears in paragraph 110 of the

consent decree. That paragraph states that “[a]ll” nonroad

compression-ignition engines “manufactured at any facility

owned or operated by VTC on or after January 1, 1998, for

which a Certificate of Conformity is sought, must meet all

applicable requirements of this Decree, regardless of whether

VTC still owned, owns, operated, or operates that facility at the

time the engine is manufactured.” One of the “requirements” of

“this Decree” is the nonroad pull-ahead. See Consent Decree

¶ 60. Volvo Powertrain is the successor to Volvo Truck under

the decree, and the 8,354 Volvo Penta engines in question were

manufactured at a “facility owned [and] operated by” Volvo

Powertrain. Thus, when a “Certificate of Conformity [was]

sought” for each of those engines, the engines were required to

“meet all applicable requirements of [the] Decree,” including the

nonroad pull-ahead.

Volvo Powertrain’s contentions to the contrary are

unavailing. Volvo Powertrain argues that paragraph 110 intends

only to ensure that, if a manufacturer were to sell one of its

14

factories, the acquiring company would inherit the

manufacturer’s obligations under the consent decree. Under that

reading, paragraph 110 would take effect only if Volvo

Powertrain no longer owns or operates one of its former

facilities. But paragraph 110 by its terms applies to all engines

manufactured at a Volvo Powertrain facility “regardless of

whether” Volvo Powertrain still owns or operates the facility.

Volvo Powertrain’s interpretation ignores the import and plain

meaning of the word “regardless.” Volvo Powertrain also

contends that paragraph 110 mandates only that engines

manufactured at its facilities comply with the “applicable

requirements” of the consent decree, and the nonroad pull-ahead

provision on its face does not apply to engines manufactured by

Volvo Penta. See Consent Decree ¶ 60 (“Nonroad CI Engines

manufactured by VTC or its affiliate, [Volvo Construction], on

or after January 1, 2005” are subject to model year 2006

requirements) (emphasis added). That is, Volvo Powertrain

reads the phrase “applicable requirements” in paragraph 110 to

refer only to any requirements that already apply to the engines

in question by virtue of another provision of the consent decree,

i.e., if paragraph 110 never existed. We reject that reading

because it would render the operative terms of paragraph 110

entirely superfluous. See Rumpke of Ind., Inc. v. Cummins

Engine Co., 107 F.3d 1235, 1243 (7th Cir. 1997) (consent

decrees, like contracts, should be interpreted so that no

provisions are superfluous).

The district court therefore correctly concluded that

paragraph 110 “means what it says”: all nonroad compression-

ignition engines manufactured at Volvo Powertrain facilities for

which certificates of conformity are sought must meet the

requirements of the consent decree, including the nonroad pull-

ahead. Volvo Powertrain, 854 F. Supp. 2d at 66. Volvo

Powertrain contends that paragraph 110, if read in that fashion,

would amount to “an elephant in the mousehole.” Appellant’s

15

Br. 32; cf. Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 468

(2001) (“Congress . . . does not alter the fundamental details of

a regulatory scheme in vague terms or ancillary provisions—it

does not, one might say, hide elephants in mouseholes.”). We

disagree. For one thing, paragraph 110 is not a “vague”

provision: it broadly applies on its face to “all” nonroad engines

“manufactured at any” Volvo Powertrain facility. Nor do we

think it “implausible” that the parties would have intended to

apply the consent decree’s applicable requirements to the Volvo

Penta engines at issue. Cf. Whitman, 531 U.S. at 468 (applying

the elephants-in-mouseholes principle where it is “implausible”

that Congress would delegate vast powers through such “modest

words”). Indeed, Volvo Powertrain’s interpretation is the more

implausible one. It would leave a sizable loophole in the

consent decree, allowing Volvo to manufacture nonroad

compression-ignition engines at the Skövde facility entirely

without regard to the decree’s requirements as long as some

wholly owned Volvo subsidiary other than Volvo Powertrain or

Volvo Construction could identify itself as the manufacturer.

EPA presumably would have sought to avoid that result, and did

so through paragraph 110.

C.

Volvo Powertrain argues that the circumstances

surrounding the negotiation of the decree and the parties’ post-

decree actions support the conclusion that the nonroad pull-

ahead requirement is inapplicable to the 8,354 Volvo Penta

engines. In interpreting a consent decree, however, “a court

may not look to extrinsic evidence of the parties’ subjective

intent unless the document itself is ambiguous.” Segar, 508

F.3d at 22; see also Microsoft, 147 F.3d at 945 n.7. Because we

believe that the nonroad pull-ahead requirement unambiguously

applies to the Volvo Penta engines, we have no occasion to

consider the circumstances surrounding the decree’s negotiation

16

or the parties’ post-decree actions. Those considerations, in any

event, would not alter our understanding of the decree’s

provisions.

Volvo Powertrain says that officials with EPA and the

California Air Resources Board “knew that Penta manufactured

nonroad engines at the time of the negotiations, but they

nevertheless omitted Penta from the Decree.” Appellant’s Br.

35. In Volvo Powertrain’s view, the fact that the United States

asked Volvo Construction—but not Volvo Penta—to intervene

in the enforcement action “speaks volumes about the meaning

of the Decree.” Id. at 36. We are unpersuaded. In 1998, Volvo

Penta sought certificates of conformity for only 150 nonroad

engines manufactured at the Skövde facility, fewer than 100 of

which were imported into the United States. Volvo

Construction, by contrast, sold more than 2,300 nonroad engines

in the United States that year. Volvo Powertrain points to no

evidence indicating that the federal negotiators involved with

drafting the consent decree knew of the Volvo Penta engines.

By contrast, Volvo officials presumably did know of the Volvo

Penta engines, but evidently made no effort to exclude those

engines from a provision whose terms encompass them. Indeed,

Volvo Construction’s motion to intervene, filed by Volvo

Truck’s attorneys, represented that Volvo Construction “is the

Volvo Group company that sells these engines in the United

States.” Mot. to Intervene at 2 (emphasis added). Volvo

Powertrain asserts that the misleading language in the motion

was initially drafted by a lawyer for the United States. But if so,

that would only further undercut any suggestion that the

government officials who negotiated the consent decree knew

that Volvo Penta manufactured nonroad engines for the U.S.

market and intended to exclude Volvo Penta from the decree’s

scope.

As for the parties’ post-decree actions, Volvo Powertrain

17

emphasizes that its sister company Volvo Penta “openly

applied” for certificates of conformity under EPA’s general

regulations for model year 2005 vehicles rather than under the

consent decree’s nonroad pull-ahead requirement. Appellant’s

Br. 37. Volvo Powertrain supplies an affidavit from a Volvo

Penta executive stating that Volvo Penta would have acted

differently if it believed that the consent decree applied to its

engines. And Volvo Powertrain notes that both EPA and the

California Air Resources Board “certified the very Penta engine

families for which they now seek penalties.” Id. But even

assuming Volvo executives believed they were complying with

the consent decree, and even if certain EPA officials knew of

Volvo Penta’s conduct, the United States could still assert

violations of the consent decree. See United States v. Huebner,

752 F.2d 1235, 1245 (7th Cir. 1985) (federal government not

estopped from seeking enforcement of consent decree despite

evidence that some federal officials were “cognizant” of

defendants’ conduct and failed to inform the defendants that

they were violating the decree); cf. Heckler v. Cmty. Health

Servs., 467 U.S. 51, 63 (1984) (“general rule” is “that those who

deal with the Government are expected to know the law and may

not rely on the conduct of Government agents contrary to law”).

And as the EPA official responsible for managing the agency’s

engine certification program explains in an affidavit, EPA issues

certificates of conformity after determining that the applicant

has submitted the required information and that the emissions

performance data included in the application is consistent with

the regulatory standard for the engine type, size, and model year.

A certificate of conformity does not reflect a conclusion that the

engine satisfies other applicable requirements, such as those

imposed by consent decrees and settlement agreements. Rather,

EPA relies on applicants to include the information necessary to

meet all applicable requirements and to assure the information’s

accuracy.

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D.

Although Volvo Powertrain principally contends that none

of the 8,354 Volvo Penta engines falls within the terms of the

consent decree, it argues in the alternative that it should—at

most—face liability only for engines actually imported into the

United States and used in a non-stationary capacity. The

consent decree defines nonroad compression-ignition engine to

“mean[] a compression-ignition engine subject to the regulations

in 40 C.F.R. Part 89.” Consent Decree ¶ 3. The 8,354 engines

in question undisputedly qualify as “compression-ignition

engines.” The only question is whether those engines qualify as

“subject to the regulations in 40 C.F.R. Part 89” regardless of

ultimate importation into the United States or ultimate use in a

non-stationary capacity. We conclude they do.

While a certificate of conformity permits importing an

engine into the United States, certain provisions of Part 89 apply

only to engines in fact imported into the United States. See, e.g.,

40 C.F.R. § 89.1003(a)(1)(ii) (“importation into the United

States of any new nonroad engine” is prohibited “unless such

engine is covered by a certificate of conformity”). But other

regulations in Part 89 apply to all engines for which a

manufacturer seeks a certificate of conformity, regardless of

whether the engines ultimately are sold into the United States.

See, e.g., id. § 89.115(d) (required content of application for

certificate of conformity); id. § 89.117 (procedures for selecting

test fleet for certificate of conformity application). Still other

provisions of Part 89 apply to all engines for which a

manufacturer obtains a certificate of conformity—again, without

regard to whether the engines are imported into the United

States. See, e.g., id. § 89.123(a) (manufacturer must notify EPA

of changes to certain information for engines covered by

certificate of conformity); id. § 89.124(b) (emission test data

must be retained for one year after certificate of conformity is

19

issued). The Volvo Penta engines thus would be “subject to the

regulations in 40 C.F.R. Part 89” even if they remained outside

the United States. Volvo Powertrain seeks to rely on the canon

of statutory interpretation under which federal laws are

presumed “‘to apply only within the territorial jurisdiction of the

United States.’” EEOC v. Arabian Am. Oil Co., 499 U.S. 244,

248 (1991) (quoting Foley Bros., Inc. v. Filardo, 336 U.S. 281,

285 (1949)). But because a manufacturer brings itself within the

jurisdiction of the United States when it affirmatively asks EPA

to issue certificates of conformity, there is no issue of

extraterritoriality here.

We are likewise unpersuaded by Volvo Powertrain’s

argument that an engine ultimately put to final use in a

stationary capacity is not “subject to the regulations in 40 C.F.R.

Part 89.” Part 89 states that it “applies for all compression-

ignition nonroad engines,” 40 C.F.R. § 89.1(a), and the

certificates of conformity sought by Volvo Penta allowed its

engines to be used in the United States in non-stationary

applications. It is true that the definition of “nonroad engine”

excludes engines that “remain[] or will remain at a location for

more than 12 consecutive months.” Id. § 89.2. But as we have

explained, certain Part 89 provisions apply to engines at the time

of seeking a certificate of conformity, regardless of the engines’

eventual use. See, e.g., id. §§ 89.115(d), 89.117. Moreover,

EPA’s regulatory scheme enables manufacturers to identify their

engines as either mobile or stationary. See, e.g., U.S. Envt’l

Prot. Agency, Technical Highlights: Emission Regulations for

Stationary and Mobile Engines 2 (Sept. 2002). Indeed, even

after Volvo Penta chose to identify its engines as nonroad

engines for purposes of obtaining certificates of conformity, it

had an additional opportunity to designate some of the engines

as stationary when importing them into the United States, but

did not do so. See EPA Form 3520-21, Engine Declaration

Form (OMB No. 2060-0320) (allowing importers to check a box

20

in order to designate engines as stationary). Volvo Powertrain’s

understanding of the consent decree also would raise serious

workability concerns, calling for constant and long-term

monitoring of each engine to identify its use as stationary or

non-stationary. But when asked by EPA in 2008 for information

concerning the current whereabouts of the 8,354 Volvo Penta

engines, Volvo Powertrain estimated that it and other Volvo

entities would have that sort of information for less than 10% of

their engines. For those reasons, the engines in question qualify

as “nonroad engines” subject to the consent decree regardless of

their eventual use in a stationary or non-stationary application.

III.

Having concluded that the consent decree’s nonroad pull-

ahead requirement applies to the 8,354 Volvo Penta engines, we

turn to the district court’s choice of remedy. The parties agree

that our review of the remedy is for abuse of discretion. See,

e.g., Shy v. Navistar Int’l Corp., 701 F.3d 523, 532-33 (6th Cir.

2012); Stone v. City & Cnty. of San Francisco, 968 F.2d 850,

861 (9th Cir. 1992). We note that, under our precedent, “it is

unclear whether such deferential review is appropriate”

when—as here—“the trial judge’s decision was based on an

interpretation of orders drafted by a different judge.” Nix, 448

F.3d at 414. But we need not resolve that issue in light of the

parties’ agreement on the standard of review.

A.

Volvo Powertrain argues that the monetary penalties

allowed under the consent decree are confined to those set forth

in the stipulated penalty provision. That provision states, with

respect to the nonroad pull-ahead requirement, that if Volvo

Truck (or its successor, Volvo Powertrain) “seeks certificates of

conformity for any affected HDDEs [(Heavy-Duty Diesel

21

Engines)], but cannot certify compliance with . . . the Nonroad

CI Engine standard pull-ahead requirements,” then penalties

“shall be calculated in accordance with the . . . procedures,

equations, and values found in 40 CFR Part 86, Subpart L.”

Consent Decree ¶ 116(a). Volvo Powertrain contends that the

stipulated penalty provision does not apply when an entity not

specifically named in its terms, such as Volvo Penta, “seeks

certificates of conformity.”

As the district court observed, however, the “poorly

drafted” stipulated penalty provision, if read literally, amounts

to “nonsense.” Volvo Powertrain, 854 F. Supp. 2d at 72. The

provision’s terms apply only to heavy-duty diesel engines. But

heavy-duty diesel engines are on-road engines, see 40 C.F.R. §

86.082-2, and thus by definition could never be subject to the

nonroad pull-ahead requirement. If the district court could only

impose monetary penalties where the stipulated penalty

provision squarely applied, the court would be barred from

imposing any monetary penalties even if Volvo Powertrain itself

sought a certificate of conformity for model year 2005 nonroad

compression-ignition engines that it knew to be out of

compliance with the nonroad pull-ahead requirement.

Where, as here, a consent decree “does not specify the

consequences of a breach,” the district court has “equitable

discretion” to fashion a remedy for violations of the decree.

Cook v. City of Chicago, 192 F.3d 693, 698 (7th Cir. 1999);

accord Shy, 701 F.3d at 532-33; United States v. Virgin Islands,

363 F.3d 276, 290-91 (3d Cir. 2004); United States v. Local 359,

United Seafood Workers, 55 F.3d 64, 69 (2d Cir. 1995). Of

course, “if parties to a consent decree wish to cabin the district

court’s equitable discretion by stipulating the remedies for

breach, they are free to do so,” and “the stipulation will fix the

measure of relief to which the victim of a breach is entitled.”

Cook, 192 F.3d at 698. But we cannot read the ambiguous and

22

self-defeating provision for stipulated penalties here as

embodying an intention to “cabin the district court’s equitable

discretion” in the circumstances of this case. Nothing in the

decree expressly or impliedly precludes the district court from

exercising its equitable discretion to fashion an alternative

remedy. Rather, the consent decree fails to specify the

consequences of the breach that occurred. See id. The district

court therefore retained equitable discretion to craft a remedy for

Volvo Powertrain’s violations.

B.

When a district court exercises its equitable discretion to

impose monetary penalties for violations of a consent decree,

“the court must explain why it chose the calculation method it

did and how the record supports its calculations.” FTC v.

Trudeau, 579 F.3d 754, 773 (7th Cir. 2009). The penalty figure

must be “a reasonable approximation of losses, gains, or some

other measure the court finds appropriate.” Id.; see also Leman

v. Krentler-Arnold Hinge Last Co., 284 U.S. 448, 455-57 (1932)

(when court exercises equitable discretion to impose monetary

penalty for violation of its own order, penalty not limited to “the

pecuniary injury or damage which the act of disobedience

caused the complaining party”) (internal quotation marks

omitted).

The district court adequately explained its calculation

method here. As the court noted, paragraph 129 of the consent

decree provides that, when reviewing any dispute under the

decree, the court “should consider the effect of the resolution”

on the other manufacturers who settled under comparable terms.

Consent Decree ¶ 129. The consent decrees covering the other

manufacturers contain similar stipulated penalty provisions.

And one of the other manufacturers, Caterpillar, has already

paid penalties for consent decree violations in line with the

23

stipulated penalty formula. See United States v. Caterpillar,

Inc., 227 F. Supp. 2d 73, 86-89 (D.D.C. 2002). The district

court explained that, “[t]o allow Volvo Powertrain to pay a

lesser penalty here might place it at a competitive advantage

relative to the settling manufacturers who either complied with

the emissions standards in their consent decrees or else paid the

stipulated penalties.” Volvo Powertrain, 854 F. Supp. 2d at 73.

Accordingly, the court followed the formula specifying

stipulated penalties for violations of the nonroad pull-ahead,

resulting in a penalty of $65,759,212 before interest.

Volvo Powertrain seeks to distinguish the Caterpillar case

on the ground that Caterpillar made a “conscious decision” to

certify engines in violation of the consent decree, while Volvo

Powertrain had no opportunity to make an “informed, ex ante

choice” between complying with the decree and paying a

penalty. Appellant’s Br. 58-59. Volvo Powertrain did,

however, have an opportunity to seek clarification from the

district court of its obligations concerning the Penta engines. As

a general rule, “a party may ask the district court to issue an

order clarifying . . . a [consent] decree.” Nehmer v. U.S. Dep’t

of Veterans Affairs, 494 F.3d 846, 860 (9th Cir. 2007) (emphasis

omitted); see, e.g., SEC v. Am. Int’l Grp., 712 F.3d 1, 3 (D.C.

Cir. 2013); Microsoft, 147 F.3d at 942; see also United States v.

Philip Morris USA, Inc., 793 F. Supp. 2d 164, 168-69 (D.D.C.

2011) (collecting cases in which parties filed successful motions

for clarification “ask[ing] the Court to construe the scope of its

Order by applying it in a concrete context or particular factual

situation”). And the decree in this case specifically states that

the district court “retains jurisdiction . . . for the purpose of

enabling any of the Parties to apply to the Court at any time for

such further order, direction, and relief as may be necessary or

appropriate for the construction . . . of this Consent Decree.”

Consent Decree ¶ 151. That option was available to Volvo

Powertrain, for instance, when the California Air Resources

24

Board official asked in late 2004 whether the Volvo Penta

engines were subject to the consent decree.

Volvo Powertrain also argues that EPA has presented no

“specific evidence” that Volvo entities obtained a competitive

advantage by certifying the noncompliant Penta engines.

Appellant’s Br. 59. We acknowledge that the district court

could have chosen to deviate downward from the consent

decree’s formula for stipulated penalties based on that

consideration. But the “abuse of discretion” standard “means

‘that the [district] court has a range of choice, and that its

decision will not be disturbed as long as it stays within that

range and is not influenced by any mistake of law.’” United

States v. Dockery, 955 F.2d 50, 54 (D.C. Cir. 1992) (emphasis

omitted) (quoting Kern v. TXO Prod. Corp., 738 F.2d 968, 970

(8th Cir. 1984)). We believe the district court’s decision to

follow the stipulated penalty formula lies comfortably within

that range of choice.

Volvo Powertrain further contends that the district court

should have considered the statutory factors enumerated in

section 205(c) of the Clean Air Act for civil penalties in EPA

administrative actions. See Clean Air Act § 205(c), 42 U.S.C.

§ 7524(c) (EPA Administrator may assess civil penalty for

violations of Clean Air Act certificate-of-conformity

requirements, taking into account “gravity of the violation,”

“economic benefit or savings,” “size of the violator’s business,”

“violator’s history of compliance,” “action taken to remedy the

violation,” “effect of the penalty on the violator’s ability to

continue in business,” and “such other matters as justice may

require”); accord 40 C.F.R. § 89.1006(c)(2) (restating same

seven statutory factors). But Volvo Powertrain is charged with

violations of the consent decree, not with violations of the Clean

Air Act. See Microsoft, 147 F.3d at 944 (“As the settlement of

a litigation, the decree may require less than the statute under

25

which the suit was brought, or more, so the violation of one is

not necessarily a violation of the other.”) (citations omitted).

And while the consent decree provides that Volvo Truck (and its

successor Volvo Powertrain) “shall be subject to and comply

with all requirements of 40 C.F.R. Part 89 and of the Act,”

Consent Decree ¶ 61, it does not say that the district court shall

be bound by the factors set forth in the Clean Air Act and Part

89 with respect to the assessment of penalties.

None of this is intended to suggest that the district court

could not consider the statutory factors in section 205 when

crafting an equitable remedy. Those factors reflect traditional

equitable principles, which of course guide the district court in

its exercise of equitable discretion. See Leman, 284 U.S. at 456-

57; Connolly v. J.T. Ventures, 851 F.2d 930, 932-34 (7th Cir.

1988). But the district court was not required expressly to

address each of those factors one by one. And we cannot say

that the district court’s ultimate decision to impose a monetary

penalty of $65,759,212 plus interest was inequitable.

C.

Finally, Volvo Powertrain contests the district court’s

calculation of its liability for interest. Volvo Powertrain argues

that it should not be held liable for interest that accrued before

the date of the United States’ written demand. The United

States acknowledges that interest ordinarily should not accrue

before the written demand, but contends that the assessment of

pre-demand interest should be upheld because another settling

manufacturer paid pre-demand interest on stipulated penalties

for violation of a parallel consent decree.

We need not resolve the merits of the issue because Volvo

Powertrain failed to preserve its challenge to the assessment of

pre-demand interest. Under the dispute resolution provisions of

26

the consent decree, the parties must first seek to resolve any

dispute through informal negotiations, see Consent Decree

¶ 132; if those negotiations fail, “the position advanced by the

United States shall be considered binding, unless, within 30 days

after the conclusion of the informal negotiation period,” Volvo

Truck (or its successor Volvo Powertrain) “invokes the formal

dispute resolution procedures of this Section by serving on the

United States a written Statement of Position on the matter in

dispute.” Id. ¶ 133. The parties agreed that the prescribed

procedure would be the “exclusive mechanism” to resolve

disputes related to the decree. Id. ¶ 129. And while Volvo

Powertrain invoked the formal dispute resolution procedures by

serving a written statement of position on the United States, that

statement contained no challenge to the inclusion of interest

accruing before the United States’ written demand.

Volvo Powertrain argues that it preserved its challenge to

the award of pre-demand interest by raising the matter in district

court. Ordinarily, that would suffice to preserve an issue for

appellate review. Here, however, the parties assented to a

different dispute resolution procedure, and agreed that the

United States’s position would prevail on any matter unless

Volvo Powertrain contests the matter promptly. Volvo

Powertrain does not dispute that its statement of position

omitted any mention of pre-demand interest, and it identifies no

other document that might qualify as “a written Statement of

Position on the matter” within the 30 days allotted. Volvo

Powertrain thus forfeited its challenge to the award of pre-

demand interest.

* * * * *

The judgment of the district court is affirmed.

So ordered.