Products Liability Law Daily Daimler AG reaches $1.5B settlement with U.S., California over alleged emissions cheating in Mercedes-Benz diesel vehicles
News
Tuesday, September 15, 2020

Daimler AG reaches $1.5B settlement with U.S., California over alleged emissions cheating in Mercedes-Benz diesel vehicles

By WK Editorial Staff

In addition to paying penalties, the company must implement a recall and repair program to remove all defeat devices from affected vehicles at no cost to consumers and to bring the vehicles into compliance with applicable emissions standards under the Clean Air Act.

The U.S. Department of Justice, U.S. Environmental Protection Agency (EPA), and California Air Resources Board (CARB) have announced a proposed settlement with German automaker Daimler AG and its American subsidiary Mercedes-Benz USA, LLC (collectively, Daimler) resolving alleged violations of the Clean Air Act and California law associated with emissions cheating. The company will pay approximately $1.5 billion in penalties (Department of Justice Press Release, No. 20-927, September 14, 2020).

Under the proposed settlement, filed in the U.S. District Court for the District of Columbia, Daimler will recall and repair the emissions systems in Mercedes-Benz diesel vehicles sold in the U.S. between 2009 and 2016 and will pay $875,000,000 in civil penalties and approximately $70,300,000 in other penalties. In addition, the company will extend the warranty period for certain parts in the repaired vehicles, perform projects to mitigate excess ozone-creating nitrogen oxides (NOx) emitted from the vehicles, and implement new internal audit procedures designed to prevent future emissions cheating. It is expected that the recall program and federal mitigation project will cost the company about $436,000,000. Daimler also will pay $110,000,000 to fund mitigation projects in California. As a whole, the settlement is valued at about $1.5 billion, according to the Department of Justice press release on the agreement.

Clean Air Act requirements and settlement. The Clean Air Act and federal regulations require vehicle manufacturers to apply for and receive a certificate of conformity from EPA before selling a new model year vehicle in the U.S. As part of the application process, manufacturers must demonstrate through testing that a vehicle meets applicable emissions standards and must disclose to EPA all auxiliary emission control devices (AECDs) and any defeat devices installed in the vehicle.

The settlement addresses allegations made in separate civil complaints filed by the United States and CARB that from 2009 to 2016, Daimler manufactured, imported, and sold more than 250,000 diesel Sprinter vans and passenger cars with undisclosed AECDs and defeat devices programmed into the vehicles’ complex emissions control software. While these devices cause the vehicles to produce compliant results during emissions testing, when the vehicles are not running, their emission controls perform differently, and less effectively, resulting in an increase in NOx emissions above compliant levels. Such NOx emissions negatively impact human health. Studies have indicated that breathing ozone may cause damage to lung tissue in children and adults, and it may worsen conditions like asthma, emphysema, and bronchitis. There also are links to cardiac disease. Of the 250,000 vehicles sold nationwide at issue, 37,000 of the affected vehicles are in California, according to a CARB news release.

EPA and CARB discovered the defeat devices through testing conducted in the wake of the Volkswagen scandal at EPA’s National Vehicle and Fuel Emissions Laboratory in Michigan and at CARB’s test laboratory in El Monte, California. The settlement requires Daimler to implement a recall and repair program to remove all defeat devices from the affected vehicles at no cost to consumers and to bring the vehicles into compliance with applicable emissions standards under the Clean Air Act. The repair will consist of a software update and replacement of select hardware, which differs across models and model years. Further, Daimler must repair at least 85 percent of the affected passenger cars within two years and at least 85 percent of the affected vans within three years. The company also must offer an extended warranty covering all updated software and hardware, and it must test repaired vehicles each year for the next five years to ensure that the vehicles continue to meet emissions standards over time. If any category of updated vehicles fails to meet applicable emissions standards or if the company does not meet the 85 percent recall rate for passenger cars or vans, Daimler will face stiff penalties, the press release noted.

Daimler must implement systemic corporate reforms to detect and try to eliminate violations in the future under the settlement terms. This includes (1) conducting significant testing on new diesel and gasoline motor vehicles using a portable emissions measurement system to assess compliance under real-world conditions, (2) installing a robust whistleblower program, (3) enhancing annual AECD and defeat device training for its employees, and (4) performing internal audits subject to review and critique by an external compliance consultant. In addition, Daimler must replace 15 old locomotive engines with new, less-polluting engines to offset excess NOx emitted from its vehicles.

The proposed settlement is subject to a 30-day public comment period and court review and approval. In its own release on the matter, Daimler observed that it "has fully cooperated with the U.S. authorities" and "has not received a Notice of Violation (NOV) from the EPA or the CARB during this process." The company also noted that by settling, it "avoids lengthy court actions with respective legal and financial risks." Moreover, the release stated that unlike other diesel settlements by original equipment manufacturers (OEMs), the consent decrees do not require an external compliance monitor.

Companies: Daimler AG; Mercedes-Benz USA, LLC

MainStory: TopStory MotorVehiclesNews

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More

Product Liability Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on product liability legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.