Case 1:21-cv-00323-DLC Document 1 Filed 01/14/21 Page 1 of 28
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`AUDREY STRAUSS
`Acting United States Attorney for the
`Southern District of New York
`By: ROBERT WILLIAM YALEN
` DOMINIKA TARCZYNSKA
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`JENNIFER A. JUDE
`Assistant United States Attorneys
`86 Chambers Street, 3rd Floor
`New York, New York 10007
`Telephone: (212) 637-2722/2748/2663
`Fax: (212) 637-2686
`robert.yalen@usdoj.gov
`dominika.tarczynska@usdoj.gov
`jennifer.jude@usdoj.gov
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`UNITED STATES OF AMERICA,
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`TOYOTA MOTOR CORPORATION,
`TOYOTA MOTOR NORTH AMERICA,
`INC., TOYOTA MOTOR SALES, U.S.A.,
`INC., and TOYOTA MOTOR
`ENGINEERING & MANUFACTURING
`NORTH AMERICA, INC.,
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`Defendants.
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`Plaintiff,
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`v.
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` No. 21 Civ. _____ ( )
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`JURY TRIAL DEMANDED
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`Plaintiff United States of America, by its attorney, Audrey Strauss, the Acting United
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`States Attorney for the Southern District of New York, on behalf of the Administrator of the United
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`States Environmental Protection Agency (“EPA”), alleges as follows:
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`NATURE OF THE ACTION
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`1.
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`For a decade, from approximately 2005 to at least late 2015, Toyota Motor
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`Corporation, Toyota Motor North America, Inc., Toyota Motor Sales U.S.A, Inc., and Toyota
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`Case 1:21-cv-00323-DLC Document 1 Filed 01/14/21 Page 2 of 28
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`Motor Engineering & Manufacturing North America, Inc. (collectively “Toyota”) systematically
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`violated Clean Air Act automobile defect reporting requirements designed to protect public health
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`and the environment from harmful air pollutants.
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`2.
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`Clean Air Act regulations require manufacturers to notify EPA when twenty-five
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`or more vehicles or engines in a given model year have the same defect in an emission control part
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`or an element of design installed in order to comply with emission standards and other EPA
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`regulations. They also require vehicle manufacturers to report to EPA when they perform a recall
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`to correct defects in emission-related parts, and to update EPA on the progress of such recalls.
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`These mandatory reporting requirements are central to the Clean Air Act’s purpose of protecting
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`human health and the environment from harmful air pollutants: They encourage manufacturers to
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`investigate and voluntarily address defects that may result in excess emissions of harmful air
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`pollutants, and they provide EPA information regarding emission-related defects to use in its
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`oversight of manufacturers’ compliance.
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`3.
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`Toyota systematically violated these reporting requirements over the course of a
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`decade. It materially delayed filing hundreds of reports about approximately 78 emission-related
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`defects. Some reports were filed as late as eight years after they were due and only when Toyota
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`finally disclosed its years of noncompliance to EPA. Toyota’s late filings related to potential
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`defects in millions of vehicles.
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`4.
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`This was not an oversight by Toyota. During the relevant period, Toyota managers
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`and staff in Japan knew that the company was no longer taking the necessary steps to determine
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`whether it was aware of twenty-five instances of the same emission-related defect—the threshold
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`requirement for filing an Emission Defect Information Report, or “EDIR.” Rather than follow this
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`legally required standard, Toyota decided to file EDIRs principally when it was independently
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`Case 1:21-cv-00323-DLC Document 1 Filed 01/14/21 Page 3 of 28
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`required to file distinct reports with California regulators under a less strict standard—a standard
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`that EPA had rejected as too lenient when Toyota had previously proposed to rely on it for federal
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`reporting. Time and again, Toyota managers and staff in Japan identified the discrepancy between
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`the company’s procedures and the plain language of the federal requirements, but failed to bring
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`Toyota into compliance. Moreover, Toyota’s American unit, responsible for actually submitting
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`the reports to EPA, was well aware of red flags indicating Toyota’s noncompliance, but shut its
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`eyes to the problem. As Toyota’s key U.S.-based employee wrote in one email: “As long as EPA
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`is not asking about EDIR[s] then I do not want to change.”
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`5.
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`A similar disregard for compliance is reflected in Toyota’s routine failure to file
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`two other types of defect reports: “Voluntary Emissions Recall Reports,” or “VERRs,” which
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`notify EPA of the existence and technical details of a manufacturer’s voluntary recall of emission-
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`related parts, and “Quarterly Reports,” which inform EPA of the progress of a recall campaign.
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`Toyota’s American office had reason to doubt that the Japanese decision-makers were satisfying
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`VERR filing requirements, yet it did not cause Toyota to address the problem. And Toyota almost
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`entirely failed to file Quarterly Reports during this period. In fact, between approximately 2009
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`and 2015, the only time that Quarterly Reports were filed for Toyota vehicles was when another
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`manufacturer—a joint venture partner—advised Toyota of the need to do so and filed the forms
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`for Toyota, after which Toyota continued ignoring the requirement for all other defects.
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`6.
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`As a result of its conduct, Toyota deprived EPA of timely information regarding
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`emission-related defects and recalls and avoided the early focus on emission-related defects
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`contemplated by the regulations. Toyota’s reporting failures likely resulted in delayed or avoided
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`performance of voluntary remedial actions, with Toyota obtaining a significant financial benefit,
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`pushing costs onto consumers, and lengthening the time that unrepaired vehicles with emission
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`defects remained on the road.
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`7.
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`The United States brings this civil action pursuant to Sections 204 and 205 of the
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`Clean Air Act (the “Act”), 42 U.S.C. §§ 7523 and 7524, to address Toyota’s longstanding failure
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`to maintain the emission defect reporting program required by the Clean Air Act and applicable
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`regulations, for the imposition of civil penalties, and for injunctive relief.
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`JURISDICTION AND VENUE
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`8.
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`This Court has subject-matter jurisdiction over this matter under Sections 203, 204
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`and 205 of the Act, 42 U.S.C. §§ 7523, 7524 and 7525, and under 28 U.S.C. §§ 1331, 1345 and
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`1355.
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`9.
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`10.
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`This Court has personal jurisdiction over each defendant.
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`Venue is proper in the Southern District of New York pursuant to Section 205 of
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`the Act, 42 U.S.C. § 7524 and 28 U.S.C. § 1391(b) and (c).
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`THE PARTIES
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`11.
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`Plaintiff is the United States of America. EPA is an agency of the United States of
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`America.
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`12.
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`Defendant Toyota Motor Corporation (“Toyota Motor Corp.” or “TMC”) is a
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`publicly held Japanese automotive manufacturer headquartered in Toyota City, Japan. Assisted
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`by its subsidiaries and affiliates worldwide, TMC designs, manufactures, assembles, and sells
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`“Toyota” and “Lexus” brand vehicles, including vehicles sold in the Southern District of New
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`York and including vehicles located in the Southern District of New York as to which Toyota
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`failed to timely file mandatory defect reports as described herein. Toyota is registered on the New
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`York Stock Exchange and maintains its American Depository Shares in the Southern District of
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`New York.
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`13.
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`Defendant Toyota Motor North America, Inc. (“TMNA”) is a subsidiary of TMC
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`incorporated in California. TMNA was headquartered in the Southern District of New York during
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`most of the period relevant to this complaint, and continues to maintain a principal office in
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`Manhattan. TMNA operates as a holding company of sales and manufacturing subsidiaries of
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`TMC in the United States, and is responsible, among other things, for government and regulatory
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`affairs and environmental matters for Toyota’s U.S. business. TMNA, in combination with other
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`defendants, causes and has caused the design, manufacture, assembly, and sale of “Toyota” and
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`“Lexus” brand vehicles, including vehicles sold in the Southern District of New York and
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`including vehicles located in the Southern District of New York as to which Toyota failed to timely
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`file mandatory defect reports as described herein. TMNA is a registered foreign business
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`corporation with the New York State Department of State and has an authorized agent for
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`accepting service of process in New York.
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`14.
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`Defendant Toyota Motor Engineering & Manufacturing North America, Inc.
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`(“TEMA”) was a subsidiary of TMC during most of the period relevant to this complaint. During
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`that time, it was incorporated and maintained corporate offices in Kentucky. TEMA was
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`consolidated with TMNA in January 2017 and its operations thereafter continued as part of
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`TMNA. TEMA was responsible (and continues to be responsible as part of TMNA) for Toyota’s
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`engineering, design, research and development, and, and manufacturing activities in the United
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`States and elsewhere, including vehicles sold in the Southern District of New York and including
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`vehicles located in the Southern District of New York as to which Toyota failed to timely file
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`mandatory defect reports. TEMA’s Toyota Technical Center provided (and continues to provide
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`as part of TMNA) certain defect reporting and other functions for Toyota vehicles throughout the
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`United States, again including vehicles sold in the Southern District of New York and including
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`vehicles located in the Southern District of New York as to which Toyota failed to timely file
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`mandatory defect reports.
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`15.
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`Defendant Toyota Motor Sales, U.S.A, Inc. (“Toyota Motor Sales” or “TMS”) is
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`a subsidiary of TMC. It is incorporated under the laws of Delaware and during most of the
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`period relevant to this complaint had its principal place of business in California. TMS provides
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`sales and service functions for Toyota nationwide and elsewhere, including with respect to
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`vehicles sold in the Southern District of New York and including vehicles located in the
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`Southern District of New York as to which Toyota failed to timely file mandatory defect reports
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`as described herein. TMS also provides certain defect reporting and other functions for Toyota
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`vehicles throughout the United States, again including vehicles sold in the Southern District of
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`New York and vehicles located in the Southern District of New York as to which Toyota failed
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`to timely file mandatory defect reports. TMS is a registered foreign business corporation with
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`the New York State Department of State and has an authorized agent for accepting service of
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`process in New York.
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`16.
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`Each of the defendants is a “person” within the meaning of Section 302(e) of the
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`Act, 42 U.S.C. § 7602(e), and a “manufacturer” within the meaning of Section 216(1) of the Act,
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`42 U.S.C. § 7550(1).
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`A.
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`BACKGROUND
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`The Clean Air Act and Emission Standards
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`17.
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`Congress enacted the Clean Air Act, 42 U.S.C. §§ 7401 et seq., to protect and
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`enhance the quality of the nation’s air resources in order to promote the public health and welfare.
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`Title II of the Act, as amended, and the regulations promulgated thereunder, protect human health
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`and the environment by reducing emissions from mobile sources of air pollution, including motor
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`vehicles. 42 U.S.C. §§ 7521 et seq.
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`18. Motor vehicles emit, among other things, nitrogen oxides, hydrocarbon, sulfur
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`dioxide, carbon monoxide, and particulate matter. These and other pollutants emitted by motor
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`vehicles can cause severe health problems, either directly or as a result of chemical reactions in
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`the atmosphere. For example, particulate matter is associated with various severe health
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`conditions, such as aggravated asthma and decreased lung function. Similarly, nitrogen oxides
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`interact with other chemicals in the atmosphere to create ground-level ozone pollution (also known
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`as “smog”), which can cause or exacerbate various respiratory health conditions such as chronic
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`obstructive pulmonary disease.
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`19.
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`To limit this pollution and protect the public health, the Clean Air Act requires EPA
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`to promulgate emission standards limiting the types and levels of pollutants that motor vehicles
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`sold in the United States may emit. 42 U.S.C. § 7521; see 40 C.F.R. §§ 86.1811-04, 86.1811-09,
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`86.1811-10 (light-duty vehicle emission standards). No manufacturer may sell motor vehicles in
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`or into the United States unless the vehicles are designed to comply with emission standards and
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`the manufacturer has obtained a “certificate of conformity” from EPA prior to sale. 42 U.S.C.
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`§§ 7521, 7541(a)(1); 40 C.F.R. part 85, Appendix VIII.
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`B.
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`Emission Defect Reporting
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`20.
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`Even if properly designed and certified, vehicles may fail to perform as designed
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`because of a defect. The defect may be, for example, a design or manufacturing error, a
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`malfunctioning part, or an error in the software controlling vehicle functions. If the defect affects
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`one of the many vehicle components designed to control emissions, the vehicle may, in actual use,
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`emit more pollutants than the levels approved in its certificate of conformity and permitted by law.
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`21.
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`To encourage manufacturers to timely and appropriately respond to defects that
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`may affect emissions, Clean Air Act regulations require manufacturers to file prompt reports
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`notifying EPA of defective emission-related parts and of manufacturers’ efforts to recall and repair
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`vehicles with emission-related defects. 40 C.F.R. part 85, subpart T (emission defect reporting
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`regulations); see also 42 U.S.C. § 7542(a) (requiring manufacturers to “maintain records, perform
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`tests . . . make reports, and provide information the Administrator may reasonably require”
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`regarding compliance with emission standards). These defect reporting requirements are a “critical
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`. . . compliance tool[]” for ensuring that passenger cars and trucks, in particular, continue to
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`comply with federal emission standards after sale. EPA, Vehicle & Engine Compliance Activities,
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`2014-2017 Progress Report, at 7.
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`22.
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`Specifically, a manufacturer must file an “Emission Defect Information Report,” or
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`“EDIR,” whenever the manufacturer determines that a “specific emission-related defect exists in
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`twenty-five or more vehicles or engines of the same model year.” 40 C.F.R. § 85.1903(a). The
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`report is due within “fifteen working days after an emission-related defect is found to affect
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`twenty-five vehicles or engines of the same model year.” 40 C.F.R. § 85.1903(b). An “emission-
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`related defect” is defined as any “defect in design, materials, or workmanship” that occurs in (i)
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`“a device, system, or assembly described in” the manufacturer’s approved application for a
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`certificate of conformity that affects various emission-related parameters stated in the regulations
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`or (ii) “one or more emission-related parts, components, systems, software or elements of design
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`which must function properly to ensure continued compliance with emission standards.” 40 C.F.R.
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`§ 85.1902(b). An EDIR must contain a description of the defect, an estimate of the number of
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`affected vehicles, an evaluation of the emissions impact of the defect, an indication of the
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`manufacturer’s intended further actions with respect to the defect (such as whether a recall is
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`anticipated), and other information. 40 C.F.R. § 85.1903(c).
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`23.
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`An EDIR filing serves two key functions. First, it encourages manufacturers to
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`identify emission-related defects early and to promptly conduct voluntary recalls to remedy those
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`defects that warrant action.1 It does this by “extend[ing] . . . surveillance” of emission-related
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`defects “to . . . the manufacturers themselves,” 40 Fed. Reg. 18176, 18177 (Apr. 25, 1975), and
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`by requiring them to report to EPA, upon identifying twenty-five instances of a specific defect in
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`a model year, an “evaluation of the emissions impact of the defect” and “[a]n indication of any
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`anticipated manufacturer follow-up,” among other information, 40 C.F.R. § 85.1903(b)(5), (7).
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`In requiring manufacturers to grapple with emission-related defects promptly and to disclose
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`relevant information to EPA, the regulations put in place a process to prompt manufacturer-
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`initiated recalls. See 40 Fed. Reg. at 18177 (EPA intent “to encourage manufacturers to repair
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`voluntarily emission-related defects which they discover and report to EPA”); id. at 18178
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`(intent to “encourage manufacturers to repair voluntarily emission-related defects which they
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`determine to exist in vehicles or engines.”).
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`1 As used throughout this complaint (and in EPA’s regulations), a “recall” includes any “repair, adjustment, or
`modification program . . . to remedy any emission-related defect for which direct notification of vehicle or engine
`owners has been provided,” 40 C.F.R. § 85.1902(d), regardless of whether the manufacturer calls the program a
`“recall,” “service action,” “service campaign,” “warranty extension,” or some other term.
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`24.
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`Second, EDIRs provide EPA with an early warning that a vehicle or engine class is
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`at risk of failing to perform as described in the certificate of conformity and required by emission
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`standards. This information, taken together with other indicia of vehicle defects, such as consumer
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`complaints, may lead EPA to investigate a defect and, where appropriate, press the manufacturer
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`to conduct a voluntary recall in cases where the manufacturer was not otherwise doing so. If the
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`manufacturer refuses to recall the vehicles voluntarily, an EPA investigation may ultimately lead
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`EPA to order a mandatory recall. 42 U.S.C. § 7541(c)(1) (providing that EPA may order a recall
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`when it “determines that a substantial number of any class or category of vehicles or engines,
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`although properly maintained and used, does not conform to” applicable regulations).
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`25.
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`EPA publicly reports the number of EDIRs filed by each manufacturer. EPA’s
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`“compliance activity reports” containing this and related information are posted on EPA’s website.
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`26.
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`If a manufacturer conducts a recall to remedy an emission-related defect in twenty-
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`five or more vehicles or engines, it must also file a Voluntary Emissions Recall Report, or “VERR”
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`with EPA. This report is due within fifteen working days of when the manufacturer notifies vehicle
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`owners of the recall. 40 C.F.R. § 85.1904(a). In the VERR, the manufacturer must describe the
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`substance of the recall, including technical details about the proposed fix. Id.
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`27.
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`28.
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`EPA publicly reports the number of VERRs filed by each manufacturer.
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`Finally, once an emission-related recall is underway, a manufacturer must file
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`reports describing the progress of the recall (including the percentage of vehicles actually fixed)
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`after each of the subsequent six consecutive quarters (“Quarterly Reports”) with EPA. 40 C.F.R.
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`§ 85.1904(b).
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`29.
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`It is a violation of the Clean Air Act for a manufacturer to fail to file EDIRs,
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`VERRs, or Quarterly Reports when required to do so. 42 U.S.C. § 7522(a)(2)(A); 42 U.S.C.
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`§ 7542(a). It is also a violation for any person to cause a manufacturer to fail to make such filings.
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`42 U.S.C. § 7522(a).
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`C.
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`Toyota
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`30.
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`Toyota is one of the largest vehicle and engine manufacturers in the world, selling
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`nearly 2.1 million cars and trucks in the United States in 2020 alone. As of December 9, 2020,
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`TMC’s market capitalization was US $185.3 billion.
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`31.
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`The Toyota defendants named in this complaint were, at all times relevant to this
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`action, engaged in a single enterprise, in the business of manufacturing new motor vehicles to be
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`sold in the United States, including the Southern District of New York, and elsewhere, and in the
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`importation, sale, and distribution of such vehicles to and in the United States, including the
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`Southern District of New York, and elsewhere.
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`32.
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`Toyota’s decision-making is highly centralized, with the Japanese parent company,
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`Toyota Motor Corp., making critical decisions for its affiliates and subsidiaries, including with
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`respect to compliance with emission-defect reporting requirements.
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`33.
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`Toyota cultivates a public perception of “quality” and “environmental friendliness”
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`of its vehicles through marketing, statements in public filings, and Toyota’s website, among other
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`things.
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`34.
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`The United States has previously brought two major enforcement actions against
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`Toyota on subject matters related to this complaint. First, in 1999, the United States on behalf of
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`EPA brought a civil action against Toyota in the United States District Court for the District of
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`Columbia, seeking injunctive relief and civil penalties from Toyota Motor Corp., Toyota Motor
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`Sales, and the Toyota Technical Center (now part of TEMA) for selling 2.2 million cars with
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`noncompliant “on-board diagnostic systems,” a key emission control system. United States v.
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`Toyota Motor Corp., 99-cv-1888 (RWR) (DAR) (D.D.C filed Nov. 22, 1999). This lawsuit was
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`ultimately resolved in a 2003 consent decree, committing Toyota to injunctive relief, a $20 million
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`“supplemental environmental project,” and a civil penalty. Id., Dkt. Entry 69. This consent decree
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`was not terminated until March 2014.
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`35.
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`Also in March 2014, the United States charged Toyota in the U.S. District Court
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`for the Southern District of New York with criminal wire fraud in connection with certain
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`automobile safety recalls. United States v. Toyota, No. 14 Cr. 186 (WHP), Dkt. Entry 2
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`(Information). The prosecution “concern[ed] Toyota’s concealment of, and failure to disclose,
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`two safety-related issues causing unintended acceleration in its vehicles.” Id., Dkt. Entry 21
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`(Opinion & Order), at 4. To resolve the criminal matter, Toyota entered into a Deferred
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`Prosecution Agreement (“DPA”) and agreed to a Statement of Facts. The Court described the
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`admitted facts as “present[ing] a reprehensible picture of corporate misconduct.” Id. (internal
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`quotation marks omitted). Pursuant to the DPA, Toyota paid a $1.2 billion fine and agreed to the
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`appointment of a monitor for the term of the DPA. In 2017, the DPA expired and the Court entered
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`an order of nolle prosequi, dismissing the information.
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`TOYOTA’S VIOLATIONS
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`36.
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`For at least a decade—from approximately 2005 until at least late 2015—Toyota
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`failed to timely disclose emission-related defects and recall information to EPA. In many cases,
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`required disclosures regarding specific emission-related defects known to Toyota were not filed at
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`all during this period. In other cases, Toyota did file reports during this period, but did so
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`materially late.
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`37.
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`This conduct occurred while Toyota was already subject to a consent decree for
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`Clean Air Act violations, and it continued while Toyota was subject to the DPA for concealment
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`and non-disclosure of safety issues ultimately requiring a recall.
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`38.
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`Toyota personnel, including managers, knew or should have known about the
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`company’s noncompliance with defect reporting regulations, but allowed this conduct to continue
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`unabated for a decade. More generally, Toyota entirely failed to take seriously this important
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`environmental compliance function, lacking basic management, operational, and oversight
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`structures necessary to ensure compliance.
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`D.
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`Toyota’s Defect Reporting Departments
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`39.
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`At least through late 2015, Toyota divided responsibility for emission defect filings
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`among three distinct offices. The Japan-based Quality Audit Department of Toyota Motors Corp.
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`(the “Audit Department”) was assigned responsibility for determining whether and when EDIRs
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`and VERRs needed to be filed. It was also charged with drafting these filings. But Toyota failed
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`to provide the Audit Department adequate training, resources, and oversight to ensure that Toyota
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`complied with its reporting obligations. The assigned Audit Department personnel often had a
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`weak understanding of EPA regulations and weak English language skills. Toyota management
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`did not conduct internal reviews to determine whether EDIR or VERR filings were being prepared
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`as required by law.
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`40.
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`Once the Audit Department determined that an EDIR or VERR should be filed, it
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`would send a draft filing to a second Toyota office, TEMA’s Ann Arbor, Michigan-based Toyota
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`Technical Center (“Technical Center”). The Technical Center was Toyota’s principal point of
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`contact with EPA and was charged with editing the Audit Department drafts and filing them. The
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`Technical Center employee principally responsible for this process was not provided access to
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`adequate information to ensure that Toyota complied with its reporting obligations to EPA. Toyota
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`did not provide adequate training, resources, and oversight to ensure that this office properly
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`performed its defect reporting responsibilities.
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`41.
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`Finally, a third office, within Toyota Motor Sales and located at the time in
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`Torrance, California, was responsible for filing Quarterly Reports with EPA after an emission-
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`related recall was commenced. That office’s personnel were untrained and unsupervised with
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`respect to emission-defect reporting, and were allowed to remain untrained and unsupervised even
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`after problems became known to Toyota management.
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`E.
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`Toyota Presented an EDIR Compliance Process to EPA and then Stopped Following
`It Without Informing EPA
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`42.
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`In 2002, Toyota met with EPA’s Office of Transportation and Air Quality
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`(“OTAQ”) and Office of Enforcement and Compliance Assurance (“OECA”) to describe Toyota’s
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`approach to complying with EPA’s EDIR regulations. Toyota’s team included a manager from
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`the Audit Department who traveled from Japan for the meetings, as well as Technical Center
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`employees and managers based in Ann Arbor.
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`43.
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`At an initial meeting in March 2002, Toyota described its EDIR process as relying,
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`in significant part, on filing EDIRs when Toyota was otherwise making a separate filing with
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`California state authorities. That California filing was due after Toyota received warranty claims
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`for an emission-related part in 4% of Toyota’s California fleet. Although EPA advised Toyota
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`that it agreed that warranty claims should be considered in making the decision whether twenty-
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`five emission-related defects existed, EPA rejected Toyota’s process as not considering warranty
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`claims earlier enough in the process.
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`44.
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`At a follow up meeting in May 2002, Toyota presented a new process, which it
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`described internally as an “enhancement” to its then existing EDIR process. Pursuant to this
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`Case 1:21-cv-00323-DLC Document 1 Filed 01/14/21 Page 15 of 28
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`proposal, Toyota represented to EPA that Toyota would investigate whether there were twenty-
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`five instances of an emission-related defect (the trigger for filing an EDIR) under three scenarios:
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`(i) when Toyota received unscreened warranty claims for an emission-related part in 1% of the
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`relevant vehicles nationwide, (ii) when Toyota received 500 such unscreened warranty claims,
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`regardless of percentage, or (iii) when TMS issued to TMC twenty-five or more reports, known as
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`“early warning reports,” regarding defects in an emission-related part. If its investigation showed
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`that it had twenty-five of the same defect, Toyota would file as required. Toyota was aware (and
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`noted internally) that this process would be “more stringent” and “stricter” than a separate
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`reporting process that Toyota was required to comply with under California regulations.
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`45.
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`The process presented by Toyota is reflected in the following flow chart submitted
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`by Toyota to EPA in 2002:
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`Case 1:21-cv-00323-DLC Document 1 Filed 01/14/21 Page 16 of 28
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`46.
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`Toyota reiterated to EPA that these were its procedures in 2003, 2004, and 2005,
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`attaching the same flow chart in submissions made by Technical Center managers to EPA in
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`connection with its annual vehicle certifications.
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`47.
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`But, in approximately 2005, Toyota’s Audit Department stopped following the
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`process that Toyota had told EPA it would follow. In fact, the Audit Department entirely stopped
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`trying to determine if there had been twenty-five instances of the same defect, or indeed making
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`any other independent assessment of whether an EDIR was required.
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`Case 1:21-cv-00323-DLC Document 1 Filed 01/14/21 Page 17 of 28
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`48.
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`Instead, Toyota began filing EDIRs principally as an afterthought when it was
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`otherwise making the same California filing that EPA had rejected as insufficient at the March
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`2002 meeting. Because this filing was not due until Toyota had received unscreened warranty
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`claims for a particular emission-related part amounting to 4% of the vehicles in an engine family
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`for that model year in operation in California,, even assuming that Toyota timely made its
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`California filings, the California standard was significantly more generous to Toyota than the
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`twenty-five defect trigger for filing an EDIR under federal regulations. After it abandoned the
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`federal standard, Toyota made fewer and later filings to EPA.
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`49.
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`Toyota also filed EDIRs in some instances where it was otherwise filing a VERR
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`with EPA. As noted above, VERR filings are required when a manufacturer conducts a recall on
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`an emission-related part in twenty-five or more vehicles or engines, which could be well after the
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`date the EDIR should have been filed. Also, on a handful of occasions, Toyota filed EDIRs in
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`response to external triggers, such as a telephone call from EPA expressing concern about
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`consumer complaints related to a particular defect. But Toyota had ceased performing any
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`independent screening or assessment of whether twenty-five instances of a defect existed
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`necessitating the filing of an EDIR and potentially requiring a recall.
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`50.
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`Toyota did not inform EPA that it had abandoned the process that it had told EPA
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`it would follow. Nor did it advise EPA that Toyota had entirely stopped determining whether
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`twenty-five instances of the same defect existed.
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`F.
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`Knowledge of Noncompliance Within Toyota
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`51.
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`Over the ten years that followed, Toyota personnel time and again learned of
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`Toyota’s noncompliance or observed red flags, but took no action. And over that same period,
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`Toyota repeatedly failed to notify EPA of defects.
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`Case 1:21-cv-00323-DLC Document 1 Filed 01/14/21 Page 18 of 28
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`52.
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`In the Audit Department, multiple managers and employees through the years
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`realized that Toyota’s process was inconsistent with the plain language of EPA’s regulations.
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`53.
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`For example, in 2009, the assistant manager who had been responsible for preparing
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`EDIRs (“Assistant Manager 1”)—and who was not considering whether twenty-five defects
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`existed—was assigned a new supervisor, a “group manager.” The group manager reviewed the
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`regulations and saw that they required Toyota to file an EDIR when it identified twenty-five of the
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`same emission-related defect. He also knew that Toyota was not applying the twenty-five defect
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`standard. He raised this discrepancy with Assistant Manager 1, who did not deny the discrepancy
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`but instead simply informed the group manager that applying the California 4% standard was
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`Toyota’s standard practice. The group manager failed to take any action to correct this. Although
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`he now claims that he “assumed” that this approach “must have been approved by EPA”—because
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`that was how Toyota conducts business—he admits that he wa