American Auto. Mfrs. Ass'n v. Massachusetts Dept. of Environmental Protection

• Decision Date: 08 May 1998
• Docket Number: No. 98-1036,98-1036
• Citation: 163 F.3d 74
• Parties: , 29 Envtl. L. Rep. 20,378 AMERICAN AUTOMOBILE MANUFACTURERS ASSOCIATION, et al., Plaintiffs, Appellees, v. MASSACHUSETTS DEPARTMENT OF ENVIRONMENTAL PROTECTION, Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 74

163 F.3d 74

47 ERC 1929, 29 Envtl. L. Rep. 20,378

AMERICAN AUTOMOBILE MANUFACTURERS ASSOCIATION, et al Plaintiffs, Appellees, v. MASSACHUSETTS DEPARTMENT OF ENVIRONMENTAL PROTECTION Defendant, Appellant.

No. 98-1036.

United States Court of Appeals First Circuit.

Heard May 8, 1998.

Decided Dec. 29, 1998.

William L. Pardee, Assistant Attorney General, Environmental Protection Division, with whom Scott Harshbarger, Attorney General of Massachusetts and James R. Milkey, Assistant Attorney General, Environmental Protection Division, were on brief, for appellant.

Dennis C. Vacco, Attorney General of the State of New York, Peter H. Schiff, Deputy Solicitor General, Lisa M. Burianek, Assistant Attorney General, Section Chief and James M. Tierney, Assistant Attorney General, on brief for the State of New York, amicus curiae.

Edward W. Warren, with whom Stuart A.C. Drake, Gary E. Marchant, Jeffrey Bossert Clark, Kirkland & Ellis, Robert F. Sylvia, Eric F. Eisenberg, Hinckley, Allen & Snyder, Phillip D. Brady, V. Mark Slywynsky, Charles H. Lockwood and John T. Whatley were on brief, for appellees.

Before TORRUELLA, Chief Judge, CYR, Senior Circuit Judge, and STAHL, Circuit Judge.

TORRUELLA, Chief Judge.

Defendant-appellant Commissioner of the Massachusetts Department of Environmental Protection ("MDEP") appeals from the district court's entry of summary judgment in favor of plaintiffs-appellees American Automobile Manufacturers Association, Association of International Automobile Manufacturers, Inc., and Massachusetts State Automobile Dealers Association, Inc. (collectively, "the Automakers"). In this appeal, the second in this case, ¹ we face the question whether § 209(a) of the Clean Air Act ("CAA"), 42 U.S.C. § 7543, preempts Mass. Regs.Code tit. 310, § 7.40(12), which requires automakers to manufacture a certain number of zero-emission electric vehicles ("ZEVs") powered by "advanced" batteries for sale in Massachusetts prior to the 2003 model year.

I. Background

The district court's decision does an admirable job of surveying the facts. See American Auto. Mfrs. Ass'n v. Commissioner, Massachusetts Dep't of Envtl. Protection, 998 F.Supp. 10, 12-16 (D.Mass.1997) ("AAMA III "). We therefore present only a summary of the relevant facts, and refer readers desiring greater detail to the district court's decision. ²

A. Statutory background

Section 209(a) of the CAA prohibits states from "adopt[ing] or attempt[ing] to enforce any standard relating to the control of emissions from new motor vehicles or new motor vehicle engines." 42 U.S.C. § 7543(a). The federal government thus has complete and exclusive authority to regulate motor vehicle emissions, and any state regulation of this area is expressly preempted.

However, as an exception to this broad preemption mandate, the CAA permits California, alone among the states, to formulate and adopt its own emissions control standards as long as these meet certain prerequisites. In particular, the CAA requires the U.S. Environmental Protection Agency to grant a waiver from preemption to California's vehicle emission standards if California determines that its standards will be no less protective of the public health than the federal standards. Still, California's discretion in making that determination is not unfettered, for the EPA is not required to grant the waiver if it finds that California's determination was arbitrary or capricious, or that conditions in California are not so compelling and extraordinary as to make the standards necessary. See 42 U.S.C. § 7543(b) (codifying Section 209(b) of the CAA). ³ This exception was limited to California partly because it is the largest single market for automobiles in the United States, and partly in recognition that California already had a regulatory framework for the control of emissions in place by the time that the CAA became law. See Motor Vehicle Mfrs. Ass'n v. New York State Dep't of Envtl. Cons., 17 F.3d 521, 525 (2d Cir.1994) ("MVMA III ").

In 1977, a second, limited exception to section 209(a)'s preemption mandate was created when Congress enacted section 177 of the CAA, which allows other states to copy California standards for which a waiver has been provided under section 209(b). Section 177 reads as follows:

Notwithstanding [§ 209(a)'s preemption provision], any State ... may adopt and enforce for any model year standards relating to control of emissions from new motor vehicles or ... engines and take such other actions as are referred to in [§ 209(a) ] of this title respecting such vehicles if--

(1) such standards are identical to the California standards for which a waiver has been granted for such model year, and

(2) California and such State adopt such standards at least two years before commencement of such model year....

42 U.S.C. § 7507. In 1990, section 177 was amended by adding the following language:

[n]othing in this section [section 177] ... shall be construed as authorizing any such State to ... take any action of any kind to create, or have the effect of creating, a motor vehicle or ... engine different than a motor vehicle or ... engine certified in California under California standards (a "third vehicle") or otherwise create such a "third vehicle."

42 U.S.C. § 7507. Thus, although it broadens the choices available to other states by permitting them to adopt California instead of federal standards, section 177 nevertheless preserves California's special status as the only state that is empowered to formulate and develop alternatives to the federal emissions-control standards for motor vehicles. Both the statutory language and the legislative history suggest that section 177 was the result of a compromise between the competing interests of the states and the automakers, giving states greater flexibility in dealing with the control of emissions without overburdening automakers with too many separate emissions-control standards. See MVMA III, 17 F.3d at 527.

B. Factual background

In 1990, the California Air Resources Board ("CARB") adopted the Low Emission Vehicle ("LEV") program. CARB's LEV program classifies new vehicles into four different low emission categories: Transitional Low Emission Vehicles ("TLEV"), Low Emission Vehicles ("LEV"), Ultra Low Emission Vehicles ("ULEV"), and Zero Emission Vehicles ("ZEV"). The program forces the seven largest automakers to sell and lease low emission vehicles by requiring them to meet a Non-methane organic gases ("NMOG") Fleet Average standard. This standard allowed each automaker to sell or lease any combination of the four types of low emission vehicles, so long as the total emission of NMOGs by that automaker's fleet of vehicles meets the standard for NMOG emissions for that model year. ⁴

Furthermore, each automaker may meet its NMOG standard by the use of credits, either earning them by surpassing the standard for a given year, or purchasing them from another manufacturer. However, before the LEV program was amended in 1996, the one restriction on the automaker's choice of vehicle mix was that ZEVs had to comprise two percent of all vehicles sold or leased by each manufacturer in California each year for model years 1998-2000, five percent for model years 2001-2002, and ten percent for model year 2003. The EPA granted California a waiver of preemption for its LEV plan on January 7, 1993, and both Massachusetts and New York copied the LEV program pursuant to section 177. See Mass. Regs.Code tit. 310, § 7.40(12); N.Y. Comp.Codes R. & Regs. tit. 6, § 218-3.1.

In March 1996, CARB amended the LEV program by eliminating the ZEV sales quotas for the 1998-2000 and 2000-2002 model years, leaving in place, however, the ten percent sales requirement for model year 2003. The Automakers state that CARB eliminated the ZEV requirement from the LEV program because technological and commercial considerations made it substantially difficult for automakers to comply with the requirement prior to the year 2001. MDEP vehemently disagrees with this version of events, for reasons explained below. In any case, CARB then submitted the amended LEV program, now without a pre-2003 ZEV requirement, to the EPA for confirmation that it remained within the 1992 waiver. To date, the EPA has not made a determination.

It would seem that the Automakers would not be required to sell any ZEVs in California before the 2003 model year. However, later in 1996, CARB entered into private Memoranda of Agreement ("MOAs") with each of the seven largest automakers, pursuant to which the automakers committed themselves to fund research on advanced battery technologies, and, more importantly, to supply a certain number of ZEVs to California urban markets for the 1998-2000 model years. The MOAs also provide that if the automakers were to fail to comply with their obligations, CARB could seek liquidated damages from the automakers, and could also reinstate the regulations that established the ZEV sales requirement. ⁵ CARB, in turn, committed itself "to facilitate purchases in state fleets, to work with the Department of Insurance and with banks to facilitate coverage and financing issues, to work on battery disposal and recycling, and to provide charging stations for the public and contractors." AAMA III, 998 F.Supp. at 14. No specific remedies were provided to the Automakers in case the state failed to comply with its side of the bargain.

Both CARB and the Automakers contended that the MOAs were legally-enforceable contracts under California law, as opposed to regulations. Consistently with that characterization, CARB declined to hold public hearings on the content of the MOAs, or to submit them to the California Office of Administrative Law (as all California regulations must be). In addition, CARB did not make formal findings--nor did it seek confirmation from the EPA--as to whether the MOAs fell within the scope of the 1992 waiver.

After CARB and the Automakers...