FCA's emission issues came to light in January when the EPA and CARB accused the company of equipping more than 104,000 diesel-engine SUVs and trucks made and sold since 2014 with hidden software that could have compromised the vehicles' emissions control systems.
The lawsuit against FCA would likely be filed by May 24, the date a federal judge in California is expected to hold a hearing on several lawsuits filed by owners of the carmakers' vehicles.
Fiat Chrysler Automobiles NV FCHA.MI (FCA) shares fell 1 percent in US trading on Thursday on reports the Justice Department is preparing to file a civil suit against the automaker for selling 104,000 vehicles that emit excess diesel emissions. But FCA says any litigation would be "counterproductive" to its talks with the EPA.
Last year, Germany had started the investigation by accusing FCA of using an illegal device for emissions testing in its Fiat 500X, Fiat Doblo, and Jeep Renegade models.More news: World Health Organization eyes vaccine trial for Ebola-hit DR Congo
The company added that "in the case of any litigation, FCA US will defend itself vigorously, particularly against any claims that the company deliberately installed defeat devices to cheat USA emissions tests".
The EU has just launched legal action against Italy for failing to respond to allegations of FCA's emission-test tampering. If the situations escalates and if the DOJ successfully makes its case, the automaker could face fines of up to $44,539 per vehicle, or up to $4.6 billion in total.
"Considering that after the end of the mediation procedure, we did not receive any request for additional details ... we ask that you postpone starting the infringement procedure while we wait for a letter asking for clarification on issues raised by your pertinent offices", Delrio informed EU Market Commissioner Elzbieta Bienkowska.
In total, VW has agreed to spend up to $25 billion to address US claims from owners, environmental regulators, states and dealers and offered to buyback polluting USA vehicles.