Stаte of Ohio, ex rel. [Dave Yost], Ohio Attorney General v. Volkswagen Aktiengesellschaft d.b.a. Volkswagen Group and/or Volkswagen AG, et al.
No. 19AP-7
IN THE COURT OF APPEALS OF OHIO TENTH APPELLATE DISTRICT
December 10, 2019
2019-Ohio-5084
C.P.C. No. 16CV-10206; REGULAR CALENDAR
Rendered on December 10, 2019
On brief: Dave Yost, Attorney General, Aaron S. Farmer, and Karia A. Ruffin, for appellant. Argued: Aaron S. Farmer.
On brief: Reminger Co., L.P.A., and Hugh J. Bode; Sullivan & Cromwell, LLP, Robert J. Giuffra, Jr., David M.J. Rein, Matthew A. Schwartz, and Judson O. Littleton, for appellees Volkswagen Aktiengesellschaft d.b.a. Volkswagen Group and/or Volkswagen AG, Audi AG, Volkswagen Group of America, Inc. d.b.a. Volkswagen of America, Inc., or Audi of America, Inc., Volkswagen of America, Inc., and Audi of America, LLC. Argued: Matthew A. Schwartz.
On brief: Porter, Wright, Morris & Arthur LLP, Terrance M. Miller, and Elizabeth L. Moyo; King & Spalding LLP, and Joseph Eisert, for appellees Dr. Ing. h.c. F. Porsche AG d.b.a. Porschе AG, and Porsche Cars North America, Inc.
APPEAL from the Franklin County Court of Common Pleas
{1} Plaintiff-appellant, State of Ohio, ex rel. Dave Yost, Ohio Attorney General (the “State“), appeals from a judgment of the Franklin County Court of Common Pleas granting the motion to dismiss of defendants-appellees, Volkswagen Aktiengesellschaft d.b.a. Volkswagen Group and/or Volkswagen AG, Audi AG, Volkswagen Group of America, Inc., d.b.a. Volkswagen of America, Inc. or Audi of America, Inc., Volkswagen of America, Inc., Audi of America, LLC, Dr. Ing. h.c. F. Porsche AG d.b.a. Porsche AG, and Porsche Cars North America, Inc. (collectively “Volkswagen“). For the following reasons, wе reverse and remand.
I. Factual and Procedural Background
{2} In October 2016, the State initiated this action against Volkswagen under Ohio‘s Air Pollution Control Act,
{3} In November 2016, and pursuant to
{4} In August 2017, Volkswagen moved to dismiss the State‘s complaint pursuant to Civ.R. 12(B)(6) on the basis that the State‘s claims were preempted by the federal Clean Air Act.,
{5} In September 2017, the State filed an amended complaint seeking relief based on Volkswagen‘s emission-control-tampering scheme. Morе specifically, the State alleged Volkswagen tampered with the subject vehicles, certain 2009-2016 Volkswagen, Audi, and Porsche model-year vehicles with 2.0 or 3.0 liter diesel engines, to effectively disable their emission control systems. The State‘s first cause of action alleged Volkswagen tampered
{6} In October 2017, Volkswagen moved to dismiss the State‘s amended complaint pursuant to Civ.R. 12(B)(1) and 12(B)(6) on the grounds that the CAA preempted the State‘s claims. Volkswagen also again moved to dismiss the State‘s claims against defendants Volkswagen AG, Audi AG, and Porsche AG for lack of personal jurisdiction.
{7} On December 7, 2018, the trial court granted Volkswagen‘s motion to dismiss. As to Count I of the State‘s complaint, the court reasoned that this claim was based on Volkswagen‘s alleged misconduct before the subject vehicles were sold to end users, and therefore was expressly preempted by the CAA. As tо the State‘s two claims regarding Volkswagen‘s alleged misconduct occurring after the sale of the subject vehicles (Counts II and III), the court determined that such conduct was not expressly preempted by the CAA. However, the court concluded that Congress intended only the federal government to regulate model-wide tampering of vehicle emission control devices, and therefore the CAA preempted the State‘s claims based on Volkswagen‘s post-sale changes to those devices on the subject vehicles. Based on the trial court‘s disposition of the State‘s first three underlying tampering claims, it concluded that the State‘s civil conspiracy claim also must fail. Because the trial court concluded that the complaint must be dismissed pursuant to Civ.R. 12(B)(6), it declined to address Volkswagen‘s personal jurisdiction arguments.
{8} The State timely appeals.
{9} The State assigns the following error for our review:
The trial court erred as a matter of law when it found that federal conflict preemption barred the State of Ohio‘s claims against Volkswagen (Counts Two and Three) for tampering with emissions controls on registered or licensed cars during, and after, recall and maintenance activities in Ohio.
III. Discussion
{10} In the State‘s sole assignment of error, it alleges the trial court erred in finding that federal law preempted the State‘s post-sale vehicle emission control system tampering claims against Volkswagen. We agree.
{11} As outlined above, the State alleged Volkswagen violated Ohio law by installing software-based emission control defeat devices on the subject vehicles during manufacturing (Count I), and by tampering with the emission control systems after the sale of those vehicles (Counts II and III). The trial court concluded that, while Counts II and III were not barred by express preemption, they were barred by conflict preemption. Based on this disposition, the court concluded that the State‘s civil conspiracy claim (Count IV) also failed. In this appeal, the State concedes the trial court properly dismissed Count I based on federal preemption, but challenges the trial court‘s conclusion that federal preemption also barred Counts II and III.
{12} Whether federal law preempts state law is a question of law, and therefore we must apply a de novo standard of review without deference to the trial court‘s decision. Bailey v. Manor Care of Mayfield Hts., 8th Dist. No. 99798, 2013-Ohio-4927, ¶ 12. The doctrine of federal preemption arises from the Supremacy Clause of the United States Constitution, which provides that “the Laws of the United States * * * shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.”
{13} There are three ways federal law can preempt state law: (1) where federal law expressly preempts state law (express preemption); (2) where federal law has occupied the
{14} In determining whether federal law preempts state law, ” ‘[t]he purpose of Congress is the ultimate touchstone.’ ” Malone v. White Motor Corp., 435 U.S. 497, 504 (1978), quoting Retail Clerks Internatl. Assn. v. Schermerhorn, 375 U.S. 96, 103 (1963); see Riverside v. State, 190 Ohio App.3d 765, 2010-Ohio-5868, ¶ 22 (10th Dist.) (“The Supreme Court has framed preemption analysis as asking whether Congress intended to exercise its constitutionally delegated authority to set aside state laws.“). “Congress’ intent, of course, primarily is discerned from the language of the pre-emption statute and the ‘statutory framework’ surrounding it. * * * Also relevant, however, is the ‘structure and purpose of the statute as a whole,’ * * * as revealed not only in the text, but through the reviewing court‘s reasoned understanding of the way in which Congress intended the statute and its surrounding regulatory scheme to affect business, consumers, and the law.” (Internal citations omitted.) Medtronic, Inc. v. Lohr, 518 U.S. 470, 486 (1996).
{15} Additionally, a court reviewing possible preemption must consider federalism as part of that analysis. Federalism, which is “central to the constitutional design, adopts the principle that both the National and State Governments have elements of sovereignty the other is bound to respect.” Arizona v. United States, 567 U.S. 387, 398
{16} The dispute in this case centers on whether the State‘s post-sale motor vehicle emission control system tampering claims against Volkswagen were conflict preempted. There is no suggestion that it was impossible for Volkswagen to comply with both state and federal requirements; thus, our focus concerns whether Ohio law “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Ultimately, the issue is whether Congress demonstrated a clear and manifest intent that there is exclusive federal regulatory jurisdiction over manufacturer conduct relating to model-wide emission control system tampering of in-use motor vehicles.
{17} The CAA establishes a framework for the nationwide protection of air quality standards. While Title I of the CAA addressеs fixed sources of pollution, such as factories and power plants,
{18} The CAA contains an express preemption provision.
No State or any political subdivision thereof shall adopt or attempt to enforce any standard relating to the control of emissions from new motor vehicles or new motor vehicle engines subject to this part. No State shall require certification, inspection, or any other аpproval relating to the control of emissions from any new motor vehicle or new motor vehicle engine as condition precedent to the initial retail sale, titling (if any), or registration of such motor vehicle, motor vehicle engine, or equipment.
Thus, the CAA expressly precludes the states from enforcing “any standard relating to the control of emissions from” any “new motor vehicle,” which means “a motor vehicle the equitable or legal title to which has never been transferred to an ultimate purchaser.”
{20} The CAA also directs the federal EPA Administrator to “prescribe (and from time to time revise) in accordance with the provisions of this section, standards applicable to the emission of any air pollutant from any class or classes of new motor vehicles or new motor vehicle engines, which in his judgment cause, or contribute to, air pollution which may reasonably be anticipated tо endanger public health or welfare.”
{21} Like the CAA, Ohio‘s Air Pollution Control Act (“APCA“),
{22} Volkswagen generally argues that the CAA contemplates comprehensive federal regulation of manufacturers’ conduct relating to emission control systems on new and in-use motor vehicles, and limits state and local authority over emission control systems tampering to those involving individual motor vehicles. Volkswagen contends that duplicative enforcement by every state regarding nationwide post-sale tampering would undermine congressional intent as it relates to the assessment of penalties for CAA violations, and that an unduly burdensome patchwork of regulatory schemes impacting manufacturers’ conduct relating to emission control systems of in-use motor vehicles also would be contrary to congressional intent. We are unpersuaded.
{23} As set forth above, congressional intent that federal law supersede state law as to standards relating to new motor vehicle emission control systems is clearly expressed in
{24} Further, by suing Volkswagen for post-sale motor vehicle emission control system tampering, the State is exercising its traditional police power to protect air quality within its jurisdiction. To preclude such action, congressional intent to preempt must be clear and manifest. The CAA‘s Title II savings clause reflects congressional intent that the states maintain significant authority in regulating conduct affecting motor vehicle emissions. And the preemption of state action designed to curtail and discourage the type of in-use motor vehicle emission control system tampering alleged here would be contrary
{25} The trial court found that the use of the word “otherwise” in the savings clause indicates that state and local regulation of in-use motor vehicles is limited by the division of authority between the federal EPA and the states and local governments. We disagree. This statute provides that “nothing” in
{26} We also disagree with Volkswagen‘s contention that imposition of State penalties would disrupt the calibration of force reflected in the federal penalties. According to Volkswagen, the prospect of massive penalties under Ohio law against Volkswagen could be far more than the amount paid to the federal EPA, and that this circumstance demonstrates an undermining of the congressional calibratiоn of force as to emission control system tampering by vehicle manufacturers. Relatedly, Volkswagen asserts that the factors that must be considered in assessing federal penalties demonstrates congressional intent that the federal penalties constitute the exclusive penalties for vehicle emission systems tampering conduct.
{27} A manufacturer can be penalized up to $25,000 per violation of
{28} Furthermore, state law is not preempted simply because it imposes a penalty for prohibited conduct that is also prohibited and penalized under federal law. See Westfall v. United States, 274 U.S. 256, 258 (1927) (states may enact laws imposing penalties for conduct that federal law also prohibits); see also Silkwood v. Kerr-McGee Corp., 464 U.S. 238 (1984) (supporting same general principle). Here, the State seeks to impose penalties for violation of Ohio law, not federal law. The application of state law to supplement the total potential financial penalty faced by a manufacturer aligns with the purpose of reducing air pollution because it acts as an additional deterrent to misconduct.
{29} Based on our review of the CAA, we find no clear and manifest congressional purpose to preempt the State‘s in-use motor vehicle emission control system tampering claims. In reaching this conclusion, we are mindful of other courts reaching a contrary conclusion. In particular, Volkswagen relies heavily on the federal MDL court‘s conclusion that Congress intended for only the federal EPA to regulate post-sale motor vehicle emission control system tampering. In re Volkswagen “Clean Diesel” Marketing, Sales Practices, & Prods. Liability Litigation, 310 F.Supp.3d 1030 (N.D.Cal.2018) (“Counties“). Volkswagen also relies on appellate court decisions in Tennessee, Alabama, and Minnesota, wherein the courts, citing the Counties decision with approval, concluded that the CAA preempted post-sale motor vehicle emission control system tampering regulation by the states. State ex rel. Slatery v. Volkswagen Aktiengesellschaft, App. No. M2018-00791-COA-R9-CV, 2019 Tenn. App. LEXIS 125 (Mar. 13, 2019); State v. Volkswagen AG, No. 1170528, 2018 Ala. LEXIS 133 (Dec. 14, 2018); State v. Volkswagen Aktiengesellschaft, App. No. A18-0544, 2018 Minn. App. Unpub. LEXIS 995 (Dec. 3, 2018).
{30} Ohio courts are not bound by decisions of courts in other states, or even “rulings on federal statutory or constitutional law made by a federal court other than the United States Supreme Court,” but we are free to consider the persuasiveness of such decisions. State v. Burnett, 93 Ohio St.3d 419, 424 (2001); State v. Roberts, 137 Ohio St.3d 230, 2013-Ohio-4580, ¶ 33; State v. Chinn, 2d Dist. No. 16764, 1998 Ohio App. LEXIS 3857 (Aug. 21, 1998). Here, we are unpersuaded by the reasoning of the MDL court, and the
{31} The Counties court acknowledged the dual authority of the federal government and the states to prohibit in-use motor vehicle emission control systems tampering by individuals, but then discerned a differentiation between conduct of individuals and manufacturers to suрport its conclusion that only the federal government may take action against model-wide in-use motor vehicle emission control system tampering by a manufacturer. The Counties court reasoned that this distinction aligns with the division of authority in the enforcement of emission standards between the federal EPA and the states and the practical advantages the federal EPA has over the states in regulating model-wide emission issues that have a nationwide scope. Counties at 1043. We agree that it is clear that Congress intended the federal EPA to regulate model-wide emission control system tampering. And while we also agree there is a difference in scale between an individual that tampers with one motor vehicle and a manufacturer that tampers with thousands of vehicles on a nationwide scale, that difference does not, in and of itself, mean that there exists clear and manifest congressional intent to preempt state law regarding post-sale tampering conduct of manufacturers (but not non-manufacturers). Likewise, we are unconvinced that the CAA‘s provision authorizing the EPA to regulate motor vehicle emissions standards extending through their useful life,
{32} In support of its finding that Congress intended manufacturer tampering of emission control systems of in-use motor vehicles only to be regulated by the federal government, the Counties court emphasized the difficulties potentially faced by manufacturers in being subject to many different regulatory schemes relating to such conduct. While lessoning manufacturer burdens relating to updates or other changes to vehicles that are already in the stream of commerce may constitute a legitimate congressional concern, such a concern is reasonably diminished when that conduct involves tampering with the existing emission control systems to reduce their effectiveness. Conversely, preserving traditional state police power to protect the health of its residents, as it relates to the tampering of existing in-use motor vehicle emission control systems,
{33} Lastly, we note that, as an alternative argument in support of the trial court‘s judgment, Volkswagen argues the State‘s claims based on post-sale misconduct were expressly preempted by
{34} Because the trial court erred in granting Volkswagen‘s motion to dismiss, we sustain the State‘s sole assignment of error.
IV. Disposition
{35} Having sustained the State‘s sole assignment of error, we reverse the judgment of the Franklin County Court of Common Pleas and remand this matter to that court for further proceedings consistent with law and this decision.
Judgment reversed; cause remanded.
BROWN and BRUNNER, JJ., concur.