                      RECOMMENDED FOR FULL-TEXT PUBLICATION
                           Pursuant to Sixth Circuit Rule 206
                                 File Name: 08a0442p.06

               UNITED STATES COURT OF APPEALS
                              FOR THE SIXTH CIRCUIT
                                _________________


                                                X
                           Plaintiff-Appellant, -
 INTERMODAL TECHNOLOGIES, INC.
                                                 -
                                                 -
                                                 -
                                                          No. 07-2196
            v.
                                                 ,
                                                  >
                                                 -
                                                 -
 MARY E. PETERS, Secretary of
                                                 -
 Transportation, and DAVID KELLY, Acting
                                                 -
 Administrator of the National Highway
 Traffic Safety Administration,                  -
                        Defendants-Appellees. N


                      Appeal from the United States District Court
                    for the Eastern District of Michigan at Bay City.
                 No. 06-12282—Thomas L. Ludington, District Judge.

                             Submitted: October 30, 2008
                        Decided and Filed: December 10, 2008
             Before: KENNEDY, SUTTON and McKEAGUE, Circuit Judges.

                                 _________________

                                      COUNSEL
ON BRIEF: J. Hatcher Graham, LAW OFFICE, Warner Robins, Georgia, for Appellant.
Kathleen Moro Nesi, ASSISTANT UNITED STATES ATTORNEY, Detroit, Michigan, for
Appellees.

                                 _________________

                                       OPINION
                                 _________________

       SUTTON, Circuit Judge. In this appeal, InterModal claims that the National
Highway Traffic Safety Administration (NHTSA) acted arbitrarily and capriciously in
denying its application for a temporary exemption from a tractor-trailer safety standard.


                                           1
No. 07-2196          InterModal Technologies, Inc. v. Peters et al.                   Page 2


Because NHTSA acted within its discretion in interpreting and applying its own regulation,
we affirm.

                                             I.

        The National Traffic and Motor Vehicle Safety Act of 1966, Pub. L. No. 89-563, 80
Stat. 718 (codified as amended at 49 U.S.C. § 30101 et seq.), charges the Secretary of
Transportation with prescribing motor-vehicle safety standards, see 49 U.S.C. § 30111(a),
a duty the Secretary has delegated to NHTSA, see 49 C.F.R. § 501.2. The Act makes it
unlawful to manufacture a motor vehicle for sale that does not meet NHTSA’s safety
requirements, 49 U.S.C. § 30112(a)(1), though it empowers NHTSA to grant exemptions
from its safety standards under certain circumstances, see id. §§ 30113–30114.

        One of NHTSA’s safety standards, Standard 121, 49 C.F.R. § 571.121, establishes
a detailed set of “performance and equipment requirements for braking systems on vehicles
equipped with air brake systems.” Id. § 571.121 S1. NHTSA amended Standard 121 in
1995 to require truck trailers outfitted with air brakes to have an “antilock brake system”
(ABS), id. § 571.121 S5.2.3.1, a term the regulation defines in detail, id. § 571.121 S4; see
60 Fed. Reg. 13,216 (Mar. 10, 1995). The revised rule also requires trailers to have an
external malfunction-warning light powered by an electrical circuit. 49 C.F.R. § 571.121
S5.2.3.2, 5.2.3.3.

        Over the last several years, at various junctures of the administrative-law process,
InterModal’s president, William Washington, has insisted that Standard 121 improperly and
unnecessarily excludes a pneumatic, non-electronic brake system, the MSQR-5000, that
InterModal’s sister company, Air Brake Systems, Inc., spent more than a decade developing.
See Air Brake Sys., Inc. v. Mineta, 357 F.3d 632, 636 (6th Cir. 2004). Two days after
NHTSA issued the amended Standard 121 in March 1995, Washington filed suit in federal
court seeking review of the agency’s new rule. Washington argued (unsuccessfully) that
Standard 121 amounted to a design standard, not a performance standard within NHTSA’s
purview. See Washington v. Dep’t of Transp., 84 F.3d 1222, 1223–25 (10th Cir. 1996). Five
years later, after NHTSA’s chief counsel issued two informal opinion letters to prospective
purchasers of the MSQR-5000 concluding that the device fell short of Standard 121’s
requirements, Air Brake Systems brought a second suit challenging that conclusion. See Air
No. 07-2196         InterModal Technologies, Inc. v. Peters et al.                     Page 3


Brake Sys., 357 F.3d at 636–37. We rejected that challenge without reaching the merits,
holding that the opinion letters did not amount to reviewable final agency action. See id. at
646.

        Most recently, Washington formed InterModal, a new trailer-manufacturing
company, and on its behalf he filed an application with NHTSA in January 2004 requesting
an exemption from Standard 121’s warning-light requirement for trailers equipped with the
MSQR-5000. The company sought an exemption on several grounds, including that setting
it free from Standard 121’s restrictions would aid the “development or field evaluation of a
new motor vehicle safety feature providing a safety level at least equal to the safety level of
the standard,” 49 U.S.C. § 30113(b)(3)(B)(ii).

        InterModal’s application languished for more than two years before NHTSA finally
rendered a decision denying it on the merits in February 2006. See 71 Fed. Reg. 7,614
(NHTSA Feb. 13, 2006). After NHTSA denied its application, InterModal brought this
lawsuit seeking review of the decision under the Administrative Procedure Act, 5 U.S.C.
§ 704. The district court granted NHTSA’s motion for summary judgment, and InterModal
now appeals.

                                              II.

        NHTSA gave several reasons for denying InterModal’s application for an exemption.
Yet only one of them—that the air-brake system InterModal seeks to install in its trailers, the
MSQR-5000, does not meet Standard 121’s definition of an ABS—need concern us here.
If the device fails to clear that threshold requirement, nothing else matters. For even if
InterModal could satisfy the other statutory criteria for an exemption from the warning-light
requirement, it still cannot market a trailer not equipped with an ABS—at least absent an
exemption from the ABS definition itself (something InterModal has not sought). We
review the district court’s decision de novo, see Max Arnold & Sons, LLC v. W.L. Hailey &
Co., 452 F.3d 494, 498 (6th Cir. 2006), but we may set aside NHTSA’s decision denying
InterModal’s exemption application only if it was arbitrary or capricious, see 5 U.S.C.
§ 706(2)(A); Kroger Co. v. Reg’l Airport Auth., 286 F.3d 382, 387 (6th Cir. 2002). We must
defer to the agency’s interpretation of its own regulations unless the text is unambiguous or
the agency’s interpretation is “plainly erroneous or inconsistent with the regulation,” Ky.
No. 07-2196         InterModal Technologies, Inc. v. Peters et al.                      Page 4


Waterways Alliance v. Johnson, 540 F.3d 466, 474–75 (6th Cir. 2008); see Auer v. Robbins,
519 U.S. 452, 461 (1997); Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414 (1945),
and that deference does not depend on the agency crystallizing its construction through
formal rulemaking or adjudication, see Spectrum Health Continuing Care Group v. Anna
Marie Bowling Irrecoverable Trust, 410 F.3d 304, 319 (6th Cir. 2005); cf. Air Brake Sys.,
357 F.3d at 644.

        Judicial deference to the agency’s actions in this case goes a long way to resolving
this dispute. Standard 121 defines an ABS as

        a portion of a service brake system that automatically controls the degree of
        rotational wheel slip during braking by:
        (1) Sensing the rate of angular rotation of the wheels;
        (2) Transmitting signals regarding the rate of wheel angular rotation to one
        or more controlling devices which interpret those signals and generate
        responsive controlling output signals; and
        (3) Transmitting those controlling signals to one or more modulators which
        adjust brake actuating forces in response to those signals.
49 C.F.R. § 571.121 S4. As NHTSA has interpreted this provision of its regulation, the
MSQR-5000 comes up short in meeting the regulation’s requirements in two fundamental
respects.

        First, the agency found that the MSQR-5000 does not meet the requirement that it
“automatically control[] the degree of rotational wheel slip during braking.” Id. “Wheel
slip,” the agency explained, means “the proportional amount of wheel/tire skidding relative
to the forward motion (velocity) of the vehicle.” JA 64 (internal quotation marks omitted).
How much, in other words, is the tire sliding over the road (instead of rotating and
maintaining traction with the road) as a proportion of how fast the vehicle is traveling?
According to NHTSA, this component of the regulation requires brakes to control the degree
of wheel slip without any additional action by the driver. And the brake must be able to do
so even when the wheel stops spinning entirely—that is, when the driver encounters “100
percent wheel slip,” a condition the regulations call “wheel lockup,” 49 C.F.R. § 571.121 S4.
No. 07-2196          InterModal Technologies, Inc. v. Peters et al.                     Page 5


        NHTSA concluded that the MSQR-5000 fails to satisfy this requirement. The
agency, to begin, doubted the engineering theory behind the brake’s operation. The device’s
design starts from the premise that “wheel lockup occurs because of pressure spikes and
pressure differentials inside the braking system,” JA 67, which are caused by the brake shoe
coming into contact with slight irregularities in the surface of the rotating brake drum. The
idea behind the MSQR-5000 is to turn these problematic “pressure pulses” into the solution:
According to InterModal, as the rotating wheel generates these pulses, the MSQR-5000
“generates responsive waves that dampen pressure increases.” JA 69–70; cf. JA 79–81
(InterModal’s expert describing the MSQR-5000’s operation in greater detail).

        Based on extensive testing of similar devices and based on consultation with outside
experts, however, NHTSA came to doubt the real-world existence of the critical air-pressure
pulses. But even if they are real, NHTSA concluded that they provide only a partial
solution: Brakes that depend on them are powerless to respond to wheel lockup, since by
definition a locked-up wheel has stopped rotating, and not every wheel has enough
irregularities to produce the pulses. In addition, without the ability to vent air, the MSQR-
5000 can modulate only small pressure pulses but cannot relieve more intense pressure
spikes. When the agency subjected this system to real-world tests, moreover, both the
MSQR-5000 and similar airbrake designs failed to prevent wheel lockup.

        Second, NHTSA determined that the MSQR-5000 cannot “[s]ens[e] the rate of
angular rotation of the wheels,” which is what the regulation requires. 49 C.F.R. § 571.121
S4. As the agency interpreted this part of Standard 121, it means an ABS must be able to
determine not merely whether a wheel is rotating but how fast it is spinning. To make that
measurement, the MSQR-5000 depends once again on the controversial pressure pulses. But
even if they exist, the pulses do not enable a brake to determine how fast a wheel is rotating:
Because the MSQR-5000’s only means of measuring speed depends on the frequency of
pulses it detects, it cannot distinguish between a wheel with just a few irregularities rotating
rapidly and a wheel with many irregularities turning slowly.

        In resisting this agency determination, InterModal argues that all of this amounts to
an agency attempt to amend its regulation without formal rulemaking. As InterModal
correctly points out, an agency may not “under the guise of interpreting a regulation”
No. 07-2196         InterModal Technologies, Inc. v. Peters et al.                    Page 6


effectively create “a new regulation” out of an existing unambiguous rule. Christensen v.
Harris County, 529 U.S. 576, 588 (2000). It then argues that NHTSA did just that when it
added two requirements to Standard 121’s ABS definition that have no support in the
regulation’s text. By reading the performance requirement to require an ABS to “process[]
information about the angular rotation of the wheels” as a means to “calculate the wheel
slip,” JA 71, the agency effectively “requires an ABS device to be computerized,” Br. at 20.
And by concluding that the MSQR-5000 cannot adequately “vent air from the brake
chambers in order to reduce brake pressure,” JA 71, the agency added a requirement that the
regulation’s language does not support.

        We disagree on both fronts. For one thing, even if, as InterModal insists, NHTSA
had attempted a stealth revision of its regulation, it would not warrant remanding this case
to the agency because it would not affect the outcome. Cf. NLRB v. Wyman-Gordon Co.,
394 U.S. 759, 766 n.6 (1969) (plurality opinion); Xiao Ji Chen v. U.S. Dep’t of Justice, 471
F.3d 315, 338 (2d Cir. 2006). Aside from the computerization and air-venting requirements
the agency allegedly added, Standard 121 still requires an ABS to prevent and react to wheel
lockup, a performance standard NHTSA concluded the MSQR-5000 cannot meet. It is far
from clear, at any rate, that NHTSA’s reading in fact imposes these new requirements. The
references in the agency’s decision to “processing information” and “calculat[ing] . . . wheel
slip,” JA 71, do not add up to a computerization requirement.              Read in context,
“calculat[ion]” simply means accounting and compensating for the difference between the
vehicle’s speed and the rate of wheel rotation—something even non-electronic devices
apparently can perform, see 60 Fed. Reg. 13,216, 13,263 (NHTSA Mar. 10, 1995).
Likewise, in noting the MSQR-5000’s inability to vent enough air to reduce brake pressure
quickly, the agency did not announce a new across-the-board regulatory requirement but
rather identified a reason InterModal’s brake could not perform a critical function. Having
failed to show that the agency erred, much less acted arbitrarily and capriciously, in
concluding that the MSQR-5000 does not meet the threshold definition of an ABS,
InterModal cannot prevail in seeking an exemption from other aspects of Standard 121’s
restrictions.
No. 07-2196      InterModal Technologies, Inc. v. Peters et al.   Page 7


                                         III.

      For these reasons, we affirm.
