The government claims Chrysler "illegally sold or caused the illegal sale of approximately 103,828 diesel-fueled" Ram 1500 pickups and Jeep Grand Cherokees by installing and not disclosing software that helped them cheat emission tests.
The lawsuit comes after months of negotiations and discussions between the Auburn Hills, Mich., automaker, the EPA, the California Air Resources Board and other federal investigators. FCA denies that it "engaged in any deliberate scheme to install defeat devices to cheat USA emissions tests".
Fiat Chrysler has applied for certification to sell 2017 diesel models from USA and California regulators and said it was in talks to win approval for a software update to address regulators' concerns about emissions in vehicles on the road.
That ultimately snowballed into a global scandal that has cost VW Group more than $20 billion and ended the development of new diesel vehicles from Volkswagen, Audi, and Porsche for the US market.
Following news of the civil suit, FCA's stock reportedly took a 2.4 percent dive to $10.50 in midday US trading.
In a statement Tuesday, DOJ officials contended that the control devices in the Ram and Grand Cherokee resulted "in cars that meet emission standards in the laboratory and during standard EPA testing, but during certain normal on-road driving emit oxides of nitrogen. that are much higher than the EPA-compliant level". The Department of Justice sued Volkswagen over the "defeat devices".
Fiat Chrysler CEO Sergio Marchionne vehemently denied the accuracy of these accusations, commenting that drawing such a comparison is "absolute nonsense".
Chrysler's shares were down almost 4% Tuesday afternoon. Shares fell sharply after Reuters first reported the government's plan to file suit.
At the center of this dispute is the accusation that the company used something called auxiliary emission control devices (AECDs), machines which automakers that can deactivate a vehicle's emission control system, legally, in certain conditions.
US Judge Edward Chen in San Francisco set a Wednesday hearing on a series of lawsuits filed by owners of vehicles and some dealers against Fiat Chrysler.
Automakers around the world are facing diesel scrutiny. Earlier Tuesday German automaker Daimler AG said that prosecutors will search several of its offices in Germany as part of a preliminary investigation into suspected manipulation of diesel emission controls.