Ford Motor Company in this case challenges the constitutionality of §§ 108(a)(1)(D), 109, 152(a) and 155(b) of the 1974 amendments to the National Traffic and Motor Vehicle Safety Act of 1966, (Act), 15 U.S.C. §§ 1397(a)(1)(D), 1398, 1412(a) and 1415(b). It seeks a preliminary injunction in this three-judge district court
restraining the operation of the statutory penalties for noncompliance with the order of the National Highway and Traffic Safety Administration (NHTSA) to give notification to purchasers of 1968 and 1969 Mustang and Cougar automobiles and to remedy without charge any seat back pivot pin brackets in those cars.
Ford seeks a tolling of the penalties until it is able to obtain a judicial determination of the validity of the Administrator's underlying premise that seat pin breakage constitutes "a defect which relates to motor vehicle safety" within the meaning of the Act.
Ford maintains that the provision permitting a penalty of $800,000 for noncompliance creates an in terrorem atmosphere calculated to deter manufacturers from exercising their right to a de novo hearing in district court, and there to require the Government to meet the burden of showing by a preponderance of the evidence, that there exists a safety-related defect.
Ford objects to its exposure to penalties for (1) the initial noncompliance, asserting that the statutory procedure for obtaining a stay pending the outcome of the de novo district court hearing is constitutionally inadequate because it shifts the burden onto the manufacturer to show that his noncompliance was "reasonable" and that "he is likely to prevail on the merits";
and (2) possible future noncompliance with an additional order to give provisional notification, which the Administrator may issue should Ford succeed in staying the operation of the first set of penalties, and which cannot be avoided even if Ford ultimately wins on the merits.
In our view, the proper construction of the Act, taking into account the statutory language, legislative history, and the sound doctrine that calls for interpretation in the light of traditional principles of equity in the federal courts, is consistent with constitutional dictates. In accordance with that construction, and in the exercise of its pendent jurisdiction, this court restrains the operation of the statutory penalties until Ford's motion for a preliminary injunction is ruled on in the Government's enforcement action, which was filed the same day as Ford's complaint, and has been assigned to District Judge Hart as a related case.
That injunction is in conformance with the Act, not predicated on the Act's unconstitutionality.
I. STATUTORY FRAMEWORK AND FACTUAL BACKGROUND
Section 152(b), 15 U.S.C. § 1412(b) empowers the Administrator, as the Secretary of Transportation's delegate,
to require the manufacturer of a motor vehicle "which contains a defect which relates to motor vehicle safety" to furnish notification of the defect to owners, purchasers and dealers and to remedy it without charge. The determination of a safety-related defect is made on the basis of the Administrator's investigation and after an informal hearing at which the manufacturer has "an opportunity to present data, views and arguments" to show the absence of safety-relatedness.
Noncompliance with a § 152(b) order constitutes a violation under § 108(a)(1)(D), 15 U.S.C. § 1397(a)(1)(D), exposing the manufacturer to a civil penalty under § 109, id. § 1398, not to exceed $1000 for each violation (presumably for each defect-marked motor vehicle) and $800,000 "for any related series of violations." The Secretary determines the amount of the penalty to be sought in light of "the appropriateness of such penalty to the size of the business of the person charged and the gravity of the violation. . . ."
But it is the court that determines whether a penalty shall be ordered and in what amount.
Enforcement takes place in the context of either an action under § 110(a), 15 U.S.C. § 1399(a), to restrain a violation of the § 152(b) order or under § 109 to collect a civil penalty with respect to such violation. The enforcement action is to be brought by the Government in the district court for the District of Columbia or for a judicial district in the state of incorporation of the manufacturer. Section 155(a), id. § 1415 requires expedited consideration and consolidation of "all actions . . . brought with respect to the same order," in accordance with the order of the court in which the first action is brought. During the pendency of an action relating to a § 152(b) order, the Secretary may, under § 155(b), id. § 1415(b), order the manufacturer to issue provisional notification of the existence of the defect.
The district court in such an action may hold the manufacturer liable for noncompliance with the § 152(b) order only upon finding, after a de novo hearing,
that the Secretary has established by a preponderance of the evidence the existence of a defect which relates to motor vehicle safety. Moreover, § 155(c)(1), id. § 1415(c)(1), authorizes the court to " restrain the enforcement of such an order only if it determines, (A) that the failure to furnish notification is reasonable, and (B) that the manufacturer has demonstrated that he is likely to prevail on the merits." Liability for noncompliance with a § 155(b) provisional notification order, however, attaches regardless of the validity of the underlying § 152(b) determination, and no similar stay pendente lite procedure is set forth in the Act.
In the case before the court, the Administrator notified Ford on March 13, 1975, that investigation indicated "that the front inboard seat back pivot arm pin bracket on 1968-69 Mustang and Cougars is subject to failure which can result in loss of vehicle control, accident or injury."
Ford was given an opportunity to present arguments and data in rebuttal, and rebuttal was presented on April 22, 1975. On August 12, 1975, Ford received notification of the Administrator's final determination that seat back pivot pin bracket breakage constitutes a safety-related defect, accompanied by a § 152(b) order to furnish notification and to remedy without charge. On August 18, 1975, Ford filed its complaint in district court, and applied for a temporary restraining order, preliminary injunction and convocation of a three-judge district court. The same day, the Government filed its enforcement action in the district court. Judge Hart granted the temporary restraining order. This three-judge court was duly convened. At argument, this court continued the restraint against enforcement of the penalty provisions pending further order of the court.
The Government's brief contended that this court does not have jurisdiction to hear Ford's constitutional challenge because § 155(c)(1) provides the exclusive means for obtaining a stay of the penalties provision -- as a motion in the Government's enforcement action.
This jurisdictional contention was abandoned at oral argument,
and is without merit.
Under Ford's theory, the § 155(c)(1) stay procedure comes too late because the penalties for noncompliance have already worked their chilling effect on the right to seek judicial review of the order, and is constitutionally inadequate also because it places the burden of establishing a right to equitable relief on Ford, rather than require the Government to convince the court of the need for coercing immediate compliance. The challenge here is to the constitutional adequacy of the § 155(c)(1) stay in the context of civil penalties accruing immediately upon noncompliance. The jurisdictional objection would foreclose effective judicial consideration of Ford's constitutional objections. Ford is entitled to three-judge court review of the constitutionality of the statutory scheme as a whole.
Moreover, this Act does not embody a Congressional direction confining judicial jurisdiction to enforcement proceedings. Section 155(a)(1) of the statute, 15 U.S.C. § 1415(a)(1), expressly provides for consolidation of "all actions (including enforcement actions) brought with respect to the same order under" § 152(b). The stay procedure itself is not restricted in terms to enforcement actions.
Even if the § 155(c)(1) stay procedure were restricted to enforcement actions, in the absence of language unmistakably withdrawing all equitable jurisdiction outside of the enforcement proceeding
this court would have inherent power to do equity in the face of an unconstitutional statute. But rather than legislate such withdrawal, Congress was willing to permit even pre-enforcement review of § 152(b) orders, expressly leaving the question to the courts.
These provisions fall short of the "clear and convincing" congressional intent required before a statute will be construed to restrict access to judicial review,
here of the penalty scheme as a whole.
III. THE PENALTY SCHEME
Ford's basic claim is that the penalty scheme is calculated to deter it from exercising its right to judicial review, by putting it to the Hobson's choice of either submitting to what it considers an erroneous agency determination based on informal procedures or challenging the order in the courts at the risk of a penalty of $800,000.
Ford argues that due process requires a tolling period during which it can secure a complete judicial review of the validity of the Government's order, and only upon a final judgment in the Government's favor should Ford's liability for noncompliance begin to run.
We do not take up Ford's further objection to the provisional notification provision, as exacerbating the chilling effect of the penalty scheme by exposing Ford to liability for noncompliance even if the underlying agency determination is ultimately deemed unlawful. The Administrator has not ordered provisional notification in this case. In the absence of agency implementation of this section of the Act, we have no basis for determining its reach, let alone for measuring it against the command of the Constitution. The Administrator may view his authority to order provision notification as limited to emergency situations -- where the defect can be correlated with a significant incidence of highway accident and injury.
The mere possibility that the Administrator might exercise that power in this case is too speculative to warrant judicial consideration at this juncture.
As to Ford's principal claim, it is our view that the statute, fairly read, permits the manufacturer who has a substantial, nonfrivolous challenge to the validity of the Administrator's determination to obtain a preliminary injunction either in the Government's enforcement suit or, if the Government does not act promptly in bringing such a suit, in a pre-enforcement action. The court has jurisdiction to issue a temporary order restraining the operation of the penalties pending its determination of the motion for preliminary injunction, and to issue a preliminary injunction that will stay the accrual of the penalties until the completion of the de novo enforcement proceeding in district court on the underlying order. However, if the court hearing the preliminary injunction motion deems the challenge insubstantial, it may deny such full relief and start up the clock that it has temporarily suspended. In that event, the manufacturer must give notification and remedy in accordance with the Administrator's directive or risk the payment of penalties should it lose on the merits in the Government's enforcement action.
Ford's contentions carry the infirmity of causing the Constitution to forbid Congress from placing barriers in the path of insubstantial litigation, embarked upon for delay and in the hope that an agency may settle for less protection for the public than the law contemplates. In our view, and our reading of the cases, the basic constitutional requirement is satisfied if the manufacturer has an opportunity to convince a court that its grounds for contesting the validity of the order are substantial, and the adequacy of that opportunity is established where it is made available before liability for noncompliance attaches.
The pertinent doctrine was registered by Justice Van Devanter -- acknowledged for his learning in matters of jurisdiction -- in St. Louis, Iron Mountain & Southern Railway Company v. Williams, 251 U.S. 63, 64-65, 64 L. Ed. 139, 40 S. Ct. 71 (1919):
It is true that the imposition of severe penalties as a means of enforcing a rate . . . is in contravention of due process of law, where no adequate opportunity is afforded the carrier for safely testing, in an appropriate judicial proceeding, the validity of the rate . . . before any liability for the penalties attaches. . . .
And it also is true that where such an opportunity is afforded and the rate is adjudged valid, or the carrier fails to avail itself of the opportunity, it then is admissible, so far as due process of law is concerned, for the State to enforce adherence to the rate by imposing substantial penalties for deviations from it.
In that case the state law provided a penalty of "not less than fifty dollars, nor more than three hundred dollars and costs of suit, including a reasonable attorney's fee" for each instance of a railroad's passenger rates exceeding statutory limits, id. at 64. Justice Van Devanter found that there was constitutionally adequate opportunity "for safely testing" the rate in a judicial proceeding because of the railroad's ability "to secure a determination of [the validity of the statutorily prescribed rates] by a suit in equity against the Railroad Commission of the State, during the pendency of which the operation of the penalty provision could have been suspended by injunction." Id. at 65. The crucial element -- that the penalty "could have been suspended" -- is far removed from Ford's contention that the penalty must automatically be suspended while it is litigating. Ford is afforded an adequate opportunity "for safely testing, in an appropriate judicial proceeding," the validity of the Administrator's directive, because it has the means to seek a suspension preventing penalties from accruing during litigation, assuming it can demonstrate grounds for injunctive relief -- assuming it can show, what the Supreme Court has uniformly required in such cases, including Oklahoma Operating Co. v. Love on which Ford places emphasis, that the litigant had "reasonable ground to contest" the order.
We have studied the line of cases cited by Ford -- notably, Ex parte Young, Wadley Southern Railway v. Georgia, and Oklahoma Operating Co. v. Love -- and are clear that they are consistent with the Iron Mountain teaching, that the Constitution is satisfied by the provision of an opportunity "for safely testing" administrative action.
They do not support the broader proposition asserted by Ford, that the Constitution dictates risk-free litigation. These decisions do take up a separate point, that the Constitution is offended when the penalty system is of such a nature as to create a virtual roadblock to judicial review. In Ex parte Young, where the statutes provided criminal (felony) sanctions, the Supreme Court noted that the risk of imprisonment may deter all challenge, as the manufacturer will be unable to find a willing violator among his employees, and the jury in a criminal trial will not be able to adequately scrutinize the validity of the underlying regulatory statute or order.
In this context the Court held that to impose on a party the burden of obtaining a judicial decision "only upon the condition that, if unsuccessful, he must suffer imprisonment and pay fines, as provided in these acts, is, in effect, to close up all approaches to the courts . . . . "
In the case at bar, in contrast, Congress contemplated and has provided for a judicial stay that will protect the contestant, assuming a threshold showing, even if unsuccessful on the merits, against accrual of penalties pendente lite. Furthermore, in Ex parte Young, and its line of cases, the appearance of a scheme providing cumulative penalties, mounting each day in severity, operated as a direct impost inflating with, and because of, the time required for the very exercise of the right to judicial review.
In our view, the 1974 Amendments to the National Traffic and Safety Act, read in light of the legislative history and against the backdrop of general principles of federal equity practice, provide a constitutionally adequate tolling procedure, with the ultimate sanctions properly discretionary and noncumulative in nature.
A. A Constitutionally Adequate Tolling Procedure
Section 155(c)(1) of the Act expressly provides for a judicial order of "restraint" in the Government's enforcement action -- and this encompasses temporary restraining orders as well as preliminary injunctions. Congress intended authority in the court to provide plenary protection through a "restraint" in an appropriate case. We think it plain, as Government counsel acknowledged at oral argument, that the statute's provision for a "restraint" encompasses both the temporary restraining order and the preliminary injunction (Tr. 35), that "a very low threshold of showing need be made" for a temporary restraining order (Tr. 37-38), and that the temporary restraint could have a retroactive effect, staying the accrual of penalties from the date of the Administrator's directive (Tr. 38). That restraint remains binding whether the further ruling is one granting or denying a preliminary injunction.
In any case where the manufacturer presents a nonfrivolous question, a temporary restraining order is appropriate, for the nonfrivolous question shows that "the failure to furnish [immediate] notification is reasonable," and the equitable context of the statute establishes power to issue a temporary restraining order until the court has had opportunity to hear and consider the motion for preliminary injunction and opposition thereto.
Furthermore, it is our view that although a manufacturer can obtain this relief in a nonfrivolous case in the enforcement action, there is jurisdiction in a district court to entertain a petition to review an order of notification-and-remedy, though filed before enforcement, if filed in one of the district courts which Congress contemplated as having venue of matters arising under this statute -- the District Court for the District of Columbia, and the district where the manufacturer is incorporated.
The concept of meaningful judicial restraint would permit that court to enter a restraint pending the institution of an enforcement action and pending further consideration by the court in that enforcement action. If the enforcement action is brought promptly by the Government,
the action filed by the manufacturer should be consolidated with the enforcement action.
Section 155(c)(1) permits the manufacturer to obtain a preliminary injunction if he can convince the court in the Government's enforcement action "that the failure to furnish notification is reasonable," and that "he is likely to prevail on the merits."
If the manufacturer makes this showing, he obtains a preliminary injunction which absolves him of liability for noncompliance pendente lite. Even if he has not previously obtained a temporary restraining order, the court has jurisdiction to issue an order of "restraint" that has a retroactive effect, tolling the penalties for the interim period between the point of noncompliance and its ruling, either way, on the application for preliminary injunction.
Insofar as Ford claims it wants a "'grace period' in which to try for the preliminary [injunction] free from the threat of penalties,"
the statute permits that. The manufacturer will have had a meaningful day in court; the agency's order will not have obtained coercive effect in the face of a substantial challenge to its validity.
Ford argues that the § 155(c)(1) stay procedure is constitutionally defective because it contemplates the grant of a preliminary injunction only where plaintiff shows he is "likely to prevail on the merits," and this, it is argued, works a shift in the burden of proof which raises the cost of challenging the order to a constitutionally prohibitive level.
In our opinion, Ford misconstrues the statutory language and thereby overstates its plight. Since the ultimate burden of proof remains with the Government, probable success on the merits for a manufacturer in Ford's position means only, as the Government here concedes (Tr. 41-42, 43-44), that he need show that the evidence is (probably) in equipoise. By "evidence in equipoise" we mean that on some item that it is material for the Government to establish, as the party with the burden of proof, the court cannot fairly say whether the item or its contrary is the more probable. It is entirely sound and straightforward analysis, though perhaps novel in formulation, to say that at the preliminary injunction stage a manufacturer establishes a requisite likelihood of ultimate success on the merits, if he shows at that time that the case is in equipoise as to a material item the Government must establish by a preponderence of evidence in the ultimate finding.
The statutory procedure does put on the manufacturer a burden of coming forward. It can discharge that burden by producing some evidence that its challenge is undergirded with substance. That burden is in substance no different from the showing generally required of litigants seeking to restrain the operation of a statute or regulation which, it is claimed, invalidly restricts their actions. Ordinarily, the statute or regulation is presumed valid, and regardless of the injury claimed to flow from the statute's operation, a preliminary injunction will not issue unless probable success on the merits is demonstrated.
There is no automatic right to interlocutory relief in the law. Even in the highly sensitive First Amendment area, where the courts are alert to remove "prior restraints" on protected expression, a "persuasive demonstration" of likely success on the merits is a necessary predicate to obtaining a preliminary injunction.
Moreover, where preservation of the status quo operates to the active detriment of the non-moving party, probable success on the merits takes on added importance as the critical prerequisite for relief.
Particularly where the public interest may be sacrificed by the grant of a preliminary injunction, courts of equity require a substantial showing by the moving party of the strength of its claim. "Courts of equity may, and frequently do, go much farther both to give and withhold relief in furtherance of the public interest than they are accustomed to go when only private interests are involved."
If the public interest is important enough, it may even justify an outright ban on all interlocutory relief, even though the effect is to confer immediate coercive power on administrative orders.
This Act, of course, does not go nearly that far.
In light of the above, we cannot say that § 155(c)(1) works an injury of constitutional dimension because it places the initial burden of coming forward on the manufacturer, to make some showing on, to establish at least substantiality for, the claim of invalidity of an order to give notification to consumers who may be driving unsafe vehicles.
This is the reality of the "restraint" procedure under the Act:
(1) Once Ford comes forward with evidence establishing the substantiality of its objections, it obtains a preliminary injunction, subject to (2). (2) The injunction will be denied if the Government meets the burden of proving its case, of the existence of a safety-related defect, sufficiently to overcome the claim of mere equipoise, notwithstanding the proof tendered by the manufacturer. (3) If the preliminary injunction is denied, the manufacturer may continue to resist compliance, and to litigate, only by shouldering an exposure to an assessment of penalties if it loses on the merits.
B. Discretionary, Noncumulative Penalties
Ford would have a basis for attacking the statutory scheme if the penalties attached to noncompliance were inflexibly set at an amount "so heavy as to erect an unfair barrier against the endeavor of an honest litigant to obtain the judgment of a court." Life & Casualty Co. v. McCray, 291 U.S. 566, 574-75, 78 L. Ed. 987, 54 S. Ct. 482 (1934).
But this is plainly not such a case. It does not have the infirmity existing in most of the cases relied on by plaintiff, where the penalty involved criminal sanctions, including imprisonment,
or was cumulative -- per day of violation -- so that the time naturally required for substantial litigation served to penalize the act of litigating.
The cases upholding the substantially similar penalty provision of the National Traffic and Motor Vehicle Act, before its amendment in 1974,
have found this distinction conclusive. Nor is there even a minimum penalty. Section 109(a) of the Act
protects the manufacturer with two separate limitations prescribing maxima on civil penalties. One maximum is $1,000 per violation. The other is the overall maximum of $800,000 for any related series of violations. Even in gross, the $800,000 figure must be taken in conjunction with the fact that the class which will be affected -- manufacturers or assemblers of motor vehicles or motor vehicle equipment -- will not be denied access to the courts. It may well be within the range of the cost of litigation for such challenges.
More important, the $800,000 figure represents a maximum, not a minimum. There clearly is room for the court to set a substantially lower figure. The statute expressly authorizes the court to consider "the size of the business of the person charged and the gravity of the violation" in determining the amount of the penalty. Moreover, as the Government concedes (Tr. 42-43), the reasonableness and good faith of the manufacturer's noncompliance may properly be considered in mitigation of the statutory maximum.
And it must be reiterated that even this exposure will attach only if the court has denied a preliminary injunction because it was convinced, as of that time, that the proof was not in equipoise, but rather more on the Government's side. The denial of a preliminary injunction, moreover, is not conclusive with regard to the penalties ultimately assessed, for in appraising good faith for purposes of assessing civil penalties the court can take it into account that in the case at hand the manufacturer had substantial strengths on the merits, and was not merely relying on judicial disinclination to treat even a weak dispute as sham. "The essence of equity jurisdiction has been the power of the Chancellor to do equity and to mould each decree to the necessities of the particular case. Flexibility rather than rigidity has distinguished it. The qualities of mercy and practicality have made equity the instrument for nice adjustment and reconsideration between the public interest and private needs . . . ." The Hecht Co. v. Bowles, 321 U.S. 321, 329, 88 L. Ed. 754, 64 S. Ct. 587 (1944).
In this overall context, the statute does not give a right to judicial consideration that is only "nominal and illusory [because] the party to be affected can appeal to the courts only at the risk of having to pay penalties so great that it is better to yield to orders of uncertain legality rather than to ask for the protection of the law." Wadley Southern Ry. v. Georgia, 235 U.S. 651, 661, 59 L. Ed. 405, 35 S. Ct. 214 (1915). There is no risk unless the party is unable to convince the court to issue a preliminary restraint, and in that case its exposure is "no more than the fair price of the adventure" of contesting the order; "the litigant must pay for his experience, like others who have tried and lost." Life and Casualty Co. v. McCray, 291 U.S. 566, 575, 78 L. Ed. 987, 54 S. Ct. 482 (1934).
IV. EXPEDITED REVIEW
The procedure for temporary relief outlined above envisions a foreshortening of the district court review process. Many, if not most challenges will be resolved, for all intents and purposes, by the disposition of the motion for preliminary injunction rather than after a more extensive trial. Litigants who fail to obtain temporary relief may well prefer to comply rather than press on in the hope of changing the court's appraisal, with the risk of both litigation costs and civil penalties.
But due process is not offended by expedition, as long as nonfrivolous claims can be reasonably aired.
Moreover, insofar as the statute does not give the manufacturer a "free ride" -- to litigate without any risk of penalties -- it advances the important public policy, embodied in the 1974 amendments, of a "timely remedy", and prompt adjudication of controversies relating to highway and motor vehicle safety.
The public interest embraces measures to add a surcharge to deter frivolous litigation.
The 1974 amendments to the National Traffic and Motor Vehicle Safety Act sought to deter frivolous litigation by attaching a cost to challenges, without substantial merit, maintained for purposes of delaying the implementation of the statutory mandate.
We believe that Congress can constitutionally penalize such challenges, particularly where the public interest in safety demands prompt corrective action, as long as manufacturers can obtain an expedited hearing at which they can petition for immunity from penalties pendente lite upon a showing that their non-compliance rests on a challenge that is substantial.
Plaintiff's motion for a preliminary injunction, enjoining enforcement of the penalty scheme of the Act, as unconstitutional, is denied. It is in compliance with the Act, and not in its teeth, that in the exercise of its pendent jurisdiction this court issues a preliminary restraint, pending ruling by the District Court in the enforcement action on plaintiff's timely application in that action for a preliminary injunction.
Judge Parker concurs in all respects in the foregoing opinion.
Harold Leventhal United States Circuit Judge
Barrington D. Parker United States District Judge
In accordance with the foregoing Memorandum Opinion, it is this 22nd day of September, 1975
DECLARED that the penalty provisions of the National Traffic and Motor Vehicle Safety Act of 1966, 80 Stat. 718 as amended by the Motor Vehicle and Schoolbus Safety Amendments of 1974, 88 Stat. 1470, sections 108, 109, 152, and 155(c) are not repugnant to the due process clause of the Fifth Amendment of the United States Constitution; and it is further
ORDERED that plaintiffs Motion for a Preliminary Injunction restraining the operation, enforcement and execution of the aforesaid sections as unconstitutional be and it hereby is denied; and it is further
ORDERED in the exercise of this court's pendent jurisdiction, the court hereby grants an injunction restraining the operation of the statutory penalties, pending a determination by the District Court in Civil Action No. 75-1345 (D.D.C. filed August 18, 1975), the Government's enforcement proceeding, of the Ford Motor Company's Motion for a Preliminary Injunction, if promptly made, this injunction to be subject to the further order of the court in that proceeding; and it is further
ORDERED that the three-judge court convened herein be and it hereby is, dissolved.
Entered: September 22nd, 1975.
George L. Hart, Jr. United States District Judge
Harold Leventhal United States Circuit Judge
Barrington D. Parker United States District Judge