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LG Electronics U.S.A., Inc. v. United States Dep't of Energy

January 18, 2010

LG ELECTRONICS U.S.A., INC., PLAINTIFF,
v.
UNITED STATES DEPARTMENT OF ENERGY, AND STEPHEN CHU, PHD., UNITED STATES SECRETARY OF ENERGY, DEFENDANT.



The opinion of the court was delivered by: John D. Bates United States District Judge

MEMORANDUM OPINION

The Department of Energy ("DOE") has ordered LG Electronics U.S.A., Inc. ("LG") to remove the "Energy Star" energy efficiency label from approximately 40,000 of its refrigerators by January 20, 2010. Currently before the Court is [3] LG's motion for a preliminary injunction that would allow it to retain the Energy Star label on these refrigerators. LG argues that DOE's actions violate the Administrative Procedure Act, 5 U.S.C. § 551 et seq., the Energy Policy and Conservation Act, 42 U.S.C. § 6291 et seq., and LG's due process rights. The Court heard oral argument on the motion on January 11, 2010. Upon consideration of the relevant legal authorities, the parties' memoranda, the entire record herein, and for the reasons discussed below, the Court denies LG's motion.

BACKGROUND

I. Statutory Background

The Energy Policy and Conservation Act ("EPCA") establishes an energy conservation program for major household appliances. EPCA, along with the National Energy Conservation Policy Act of 1978, grants DOE the authority to regulate the energy efficiency of household appliances such as refrigerators and freezers, and prescribes minimum energy efficiency standards for such appliances. See 42 U.S.C. § 6295.

Federal law also governs the now-ubiquitous Energy Star labeling program. The Energy Star program, jointly administered by DOE and the Environmental Protection Agency, seeks to "identify and promote energy-efficient products and buildings . . . through voluntary labeling of . . . products and buildings that meet the highest energy conservation standards." 42 U.S.C. § 6294a(a). Manufacturers whose products comply with certain energy efficiency standards may enter into a licensing agreement with the government to permit their qualifying products to carry the Energy Star label. See Defs.' Opp'n to Pl.'s Mot. ("Defs.' Opp'n") [Docket Entry 10], Decl. of Catherin Zoi ("Zoi Decl."), ¶ 6.

For most refrigerators and freezers to qualify for the Energy Star program, they must be at least 20% more energy efficient than the minimum efficiency standards set by law. See Department of Energy, Energy Star Program Requirements for Residential Refrigerators and/or Freezers (Aug. 3, 2007), at 3-4, available at http://www.energystar.gov/ia/partners/product_specs /program_reqs/refrig_prog_req.pdf. Federal regulations detail the testing criteria that DOE uses to determine the energy efficiency of refrigerators and freezers. See 10 C.F.R. pt. 430, subpt B, app. A1. Pursuant to these regulations, a refrigerator's "[o]perational conditions" during testing --such as the temperature of the refrigerator -- are supplied by the so-called AHAM-HRF-1-1979 test ("HRF-1 test"), a procedure initially developed by the Association of Home Appliance Manufacturers. Id. § 2.2. Of relevance here, the HRF-1 test provides that, during energy efficiency testing, "[a]utomatic ice makers are to be inoperative." See Pl.'s Mem. in Support of its Mot. ("Pl.'s Mem.") [Docket Entry 3], Exhibit 7 (HRF-1 test) ¶ 7.4.2.

II. Factual Background

This dispute concerns the interpretation of the HRF-1 test's term "inoperative," as applied to icemakers on certain LG "French Door" refrigerator models. French Door refrigerators have a bottom drawer freezer and double doors on top for fresh food, and they offer through-the-door ice and water service. See Pl.'s Mem., Decl. of Timothy McGrady ("McGrady Decl."), ¶¶ 4-5. These refrigerators are the fastest growing segment of the refrigerator market. See Pl.'s Mem., Decl. of Timothy Kavanaugh ("Kavanaugh Decl."), ¶ 5.

French Door refrigerators incorporate a separate ice-making assembly within the fresh food compartment of the refrigerator. See Defs.' Opp'n, Decl. of Michael McCabe ("McCabe Decl."), ¶ 9. As the refrigerators' "fresh food compartment must be maintained above freezing temperatures, and the ice making assembly within it must be maintained below freezing temperatures," French Door models use heaters to function properly. Id. at ¶ 10.

The parties' disagreement in this case centers around how energy usage should be calculated for two heaters found in LG's French Door refrigerators: the "fill tube heater" and the "ice ejection heater."*fn1 These components consume significant amounts of energy even when the refrigerator is not actively making ice. Thus, whether the HRF-1 test's requirement that the icemaker be "inoperative" during testing means that the icemaker is "powered completely off," or that it is "powered on, but not actively making ice," could determine whether a refrigerator qualifies for the Energy Star label, or fails to meet even the statutory minimum energy efficiency standards.

In 2008, a dispute arose between LG and DOE concerning the procedures LG was using to test the energy efficiency of certain French Door refrigerator models.*fn2 In November of that year, the two sides entered into an agreement which detailed how these refrigerator models were to be tested. See Pl.'s Mem., Exhibit 2 (LG-DOE 2008 Agreement), ¶ 3. Specifically, the Agreement provided that energy efficiency tests of affected refrigerator models would be performed using testing procedures consistent with DOE's interpretation of the operating conditions specified in [the] HRF-1 [test], which require that the ice making system of the refrigerator-freezer be disabled for purposes of making ice but that all other system components remain on during testing with the exception of the fill tube and ice ejection heaters, which may remain off for the purposes of testing under this Agreement subject to further notice by DOE.

Id.

In the fall of 2009, DOE received reports from two laboratories which concluded that certain LG refrigerators bearing the Energy Star label did not meet the Energy Star criteria, and that some did not meet even the statutory minimum efficiency standards. McCabe Decl. at ¶¶ 40-41. Although the record is largely silent as to what happened next, it appears that LG wrote to DOE that it believed these tests were not performed according to the procedures specified in the parties' 2008 Agreement. See Pl.'s Mem., Exhibit 1 (November 10, 2009 Letter from DOE to LG ("November 10 Letter")), at 1 (referring to a September 22, 2009 letter from LG to DOE).

On November 10, 2009, in a letter that would eventually prompt this lawsuit, DOE wrote to LG that the agency had concluded that "LG's reliance on the test procedure exception set out in the [parties' November 2008] Agreement" -- allowing the fill tube and ice ejection heaters to remain off during energy efficiency testing -- "has given LG an unintended advantage in the marketplace and resulted in significant underreporting of the energy consumption of LG models to both DOE and consumers." November 10 Letter at 2. The letter continued: "consistent with the terms of the Agreement, DOE is providing LG with notice that the agency is revoking the exception provided in . . . the Agreement and [is] requiring LG to follow the DOE test procedure," which, according to the agency, would require the fill tube and ice ejection heaters to remain on during testing. Id. DOE demanded that LG remove the Energy Star label from certain French Door refrigerator models still within its possession, and that it notify retailers to remove the label from these refrigerators in their stores. Id.*fn3 At oral argument, LG represented that approximately 40,000 refrigerators already in or on their way to the U.S. market are affected. See Tr. at 12.

After efforts to resolve the dispute proved unsuccessful, LG filed suit on December 4, 2009. LG's complaint seeks injunctive relief as well as a declaratory judgment that, inter alia, DOE's November 10 letter ordering LG to remove the Energy Star label from existing refrigerators is arbitrary and capricious. Compl. at 35-36.*fn4 LG filed a motion for a preliminary injunction on December 9, 2009. The Court heard oral argument on the motion on January 11, 2010.

STANDARD OF REVIEW

A preliminary injunction is an extraordinary and drastic remedy, one that should be granted only when the moving party, by a clear showing, carries the burden of persuasion. See Mazurek v. Armstrong, 520 U.S. 968, 972 (1997); see also Munaf v. Geren, 128 S.Ct. 2207, 2219 (2008). To obtain a preliminary injunction, the moving party must demonstrate (1) a substantial likelihood of success on the merits, (2) that it would suffer irreparable harm without injunctive relief, (3) that an injunction would not substantially harm the defendants or other interested parties (balance of harms), and (4) that issuance of the injunction is in the public interest. See Chaplaincy of Full Gospel Churches v. England, 454 F.3d 290, 297 (D.C. Cir. 2006); Cobell v. Norton, 391 F.3d 251, 258 (D.C. Cir. 2004).

A district court weighing whether to grant a preliminary injunction must "'balance the strengths of the requesting party's arguments in each of the four required areas.'" Chaplaincy of Full Gospel Churches, 454 F.3d at 297 (quoting CityFed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 747 (D.C. Cir. 1995)). Despite this flexibility, "a party seeking a preliminary injunction must demonstrate . . . a likelihood of success on the merits." Munaf, 128 S.Ct. at 2219 (internal quotation marks omitted). Further, "[a] movant's failure to show any irreparable harm is . . . grounds for refusing to issue a preliminary injunction, even if the other three factors entering the calculus merit such relief." Chaplaincy of Full Gospel Churches, 454 F.3d at 297; see also Winter v. Natural Res. Def. Council, Inc., 129 S.Ct. 365, 375 (2008) (a plaintiff must "demonstrate that irreparable injury is likely in the absence of an injunction," and not a mere "possibility").

Many of LG's claims arise under the Administrative Procedure Act ("APA"). Under the APA, a court must "hold unlawful and set aside agency action, findings, and conclusions" that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law," 5 U.S.C. § 706(2)(A), in excess of statutory authority, id. § 706(2)(C), or "without observance of procedures required by law," id. § 706(2)(D). The scope of review, however, is narrow. See Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). The court is to presume that the agency's action is valid. See Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415 (1971). And the "court is not to substitute its judgment for that of the agency." State Farm, 463 U.S. at 43. Nonetheless, the court must be satisfied that the agency has "'examine[d] the relevant data and articulate[d] a satisfactory explanation for its action including a rational connection between the facts found and the choice made.'" Alpharma, Inc. v. Leavitt, 460 F.3d 1, 6 (D.C. Cir. 2006) (quoting State Farm, 463 U.S. at 43).

ARGUMENT

I. Likelihood of Success

A. LG's APA Challenges

LG contends that DOE's actions violate both the APA's procedural and substantive requirements. The ...


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