Rocky Mountain Farmers Union v. Corey

Decision Date15 June 2017
Docket NumberLead Case: 1:09-cv-2234-LJO-BAM Consolidated with member case: 1:10-cv-163-LJO-BAM.
Citation258 F.Supp.3d 1134
Parties ROCKY MOUNTAIN FARMERS UNION, et al., Plaintiffs, v. Richard W. COREY, in his official capacity as Executive Officer of the California Air Resources Board, et al., Defendants.
CourtU.S. District Court — Eastern District of California

John P. Kinsey, Timothy Jones, Wanger Jones Helsley PC, Fresno, CA, John C. O'Quinn, PHV, Stuart A. C. Drake, PHV, Kirkland and Ellis LLP, Charles H. Knauss, PHV, Daniel E. Lipton, PHV, Howard R. Rubin, PHV, Robert T. Smith, PHV, Katten Muchin Rosenman LLP, Paul J. Zidlicky, PHV, Roger R. Martella, PHV, Sidley Austin LLP, Washington, DC, Shannon Suzanne Broome, Katten Muchin Rosenman LLP, Oakland, CA, Marie L. Fiala, Sidley Austin LLP, San Francisco, CA, for Plaintiffs.

Gavin Geraghty McCabe, Myung J. Park, California Dept. of Justice, Office of Attorney General, Jonathan Wiener, California Department of Justice, San Francisco, CA, Mark William Poole, California Department of Justice, Margaret Elaine Meckenstock, Office of the Attorney General, Oakland, CA, Noah Golden–Krasner, DOJ Office of the Attorney General, Los Angeles, CA, for Defendants.

MEMORANDUM DECISION AND ORDER RE DEFENDANTS' MOTIONS TO DISMISS
Lawrence J. O'Neill, UNITED STATES CHIEF DISTRICT JUDGE
I. INTRODUCTION

Two sets of Plaintiffs, the "RMFU Plaintiffs"2 and the "AFPM Plaintiffs,"3 challenge the constitutionality of California's Low Carbon Fuel Standard ("LCFS"), Cal. Code Regs. Tit. 17, §§ 75480–90. Defendants4 move to dismiss all four claims in the RMFU Plaintiffs' Third Amended Complaint ("TAC"), Doc. 374. Doc. 378. Defendants move for judgment on the pleadings on the AFPM Plaintiffs' claims in their Second Amended Complaint ("SAC"), Doc. 373, concerning the now-repealed version of the LCFS, and move to dismiss the remaining claims against the currently operative LCFS. Doc. 380–1.

The Court took the matter under submission on the papers pursuant to Local Rule 230(g). Doc. 388. For the following reasons, the Court GRANTS IN PART and DENIES IN PART Defendants' motions.

II. FACTUAL AND PROCEDURAL BACKGROUND

This case concerns Plaintiffs' years-long and complex challenge to the LCFS.5 After the Ninth Circuit remanded the case to this Court in 2014, see Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070 (9th Cir. 2013) (" RMFU"), the Court granted in part and denied in part the AFPM Plaintiffs' motion to amend the complaint. Rocky Mountain Farmers Union v. Goldstene, No. 1:09-cv-2234-LJO-BAM, 2014 WL 7004725, at *1 (E.D. Cal. Dec. 11, 2014) (" RMFU Amendment"). In August 2015, the Court granted in part and denied in part Defendants' motion to dismiss certain of the AFPM Plaintiffs' claims. See Am. Fuels & Petrochemicals Mfrs. Ass'n v. Corey, No. 1:09-cv-2234-LJO-BAM, 2015 WL 5096279, at *1 (E.D. Cal. Aug. 28, 2015) (" MTD Order"). In June 2016, the Court granted Plaintiffs' second motion to amend their pleadings. See Rocky Mountain Farmers Union v. Corey, No. 1:09-cv-2234-LJO-BAM, 2016 WL 3277018 (E.D. Cal. June 15, 2016) (" RMFU Amendment II"). The Court incorporates by reference the summary of the extensive procedural history of this consolidated action contained in RMFU Amendment, 2014 WL 7004725, at *1–8, and the MTD Order, 2015 WL 5096279, at *1–5. Only an abbreviated recitation of the complex factual and procedural background follows; the Court discusses the relevant aspects of the facts and prior proceedings in more detail in its analysis below.

The California Air Resources Board ("CARB") promulgated and adopted the LCFS6 in 2009 and 2010. TAC ¶ 37. The regulation went into effect in 2011 ("the Original LCFS"), and CARB amended it in 2012 ("the 2012 LCFS"). SAC ¶ 75. CARB repealed the LCFS in 2015 after the California Court of Appeal held that CARB made errors when adopting it. See POET, LLC v. Cal. Air. Res. Bd., 218 Cal.App. 4th 681, 160 Cal.Rptr.3d 69 (2013) ; see alsoDoc. 379–1, Ex. A. CARB adopted a new LCFS in 2015 ("the 2015 LCFS"), which went into effect in 2016, and remains the operative version of the regulation. SeeDoc. 379–1, Ex. A, at 1–6.

The AFPM Plaintiffs now bring claims against all three versions of the LCFS; the RMFU Plaintiffs bring claims against only the 2015 LCFS. As explained in more detail below, the LCFS regulates both ethanol and crude oil. The RMFU Plaintiffs challenge the LCFS's ethanol provisions whereas the AFPM Plaintiffs challenge its crude oil provisions.

The RMFU Plaintiffs' TAC contains four causes of action. TAC at 18–22. Claims one and two allege, respectively, that the LCFS is preempted by federal law on its face and as-applied to Plaintiff Growth Energy.7 TAC at 15–18. Specifically, the RMFU Plaintiffs assert the federal Renewable Fuel Standard ("RFS"), 42 U.S.C. § 7545(o)(2)(A)(i),8 of the Energy Independence and Security Act ("EISA") preempts the LCFS. Id.¶¶ 66–68. Claims three and four allege, respectively, that the LCFS "improperly regulates, discriminates against, and unduly burdens interstate commerce and so is invalid" on its face and as applied to Growth Energy. Id.at 18–22.

The AFPM Plaintiffs assert three causes of action in their SAC. The first and second allege that all three versions of the LCFS violate the Commerce Clause because they "impermissibly regulate conduct occurring wholly outside of California." SAC ¶¶ 96, 104; see also id.¶¶ 93, 101. The third cause of action asserts all three versions of the LCFS violate the Commerce Clause "by discriminating against transportation fuels produced in other States and other countries." Id.¶ 111. The AFPM Plaintiffs further assert "[t]he discrimination inherent in the Original LCFS, 2012 LCFS, and 2015 LCFS is designed to provide an unfair competitive advantage to local economic interests and to promote the use of California fuels in California," which "impose[s] significant burdens on Plaintiffs' members in connection with their conduct of interstate commerce." Id.¶¶ 113–14.

With respect to their Commerce Clause claims, both sets of Plaintiffs assert the ethanol provisions of the LCFS discriminate on their face, and in their purpose and effect. The RMFU Plaintiffs further assert the ethanol provisions fail under Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970).9

Thus, between both sets of Plaintiffs, they assert the following:

(1) The LCFS is preempted by federal law, namely, the RFS in the EISA, on its face and as applied to Growth Energy;
(2) The LCFS, in all three of its forms, is an impermissible extraterritorial regulation that violates the Commerce Clause; and
(3) The LCFS, in all three of its forms, violates the Commerce Clause
(a) on its face,
(b) in purpose and effect, and
(c) under Pike.

Defendants (1) move for judgment on the pleadings under Federal Rule 10 of Civil Procedure 12(c) as to Plaintiffs' claims concerning the Original LCFS on the ground they are moot, and (2) move to dismiss the remaining claims under Rule 12(b)(6) as barred by the law of the case, or for failure to state a claim (or both). Plaintiffs oppose in all respects.

III. STANDARDS OF DECISION
A. Rule 12(b)(6)

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) is a challenge to the sufficiency of the allegations set forth in the complaint. A 12(b)(6) dismissal is proper where there is either a "lack of a cognizable legal theory" or "the absence of sufficient facts alleged under a cognizable legal theory." Balisteri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). In considering a motion to dismiss for failure to state a claim, the court generally accepts as true the allegations in the complaint, construes the pleading in the light most favorable to the party opposing the motion, and resolves all doubts in the pleader's favor. Lazy Y. Ranch LTD v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008).

To survive a 12(b)(6) motion to dismiss, the plaintiff must, in accordance with Rule 8, allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the Plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a Plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions." Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (internal citations omitted). Thus, "bare assertions ... amount[ing] to nothing more than a 'formulaic recitation of the elements' ... are not entitled to be assumed true." Iqbal, 556 U.S. at 681, 129 S.Ct. 1937. "[T]o be entitled to the presumption of truth, allegations in a complaint ... must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). In practice, "a complaint ... must contain either direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory." Twombly, 550 U.S. at 562, 127 S.Ct. 1955.

B. Rule 12(c)

Federal Rule of Civil Procedure 12(c) permits a party to seek judgment on the pleadings "[a]fter the pleadings are closed—but early enough not to delay trial." "A motion for judgment on the pleadings should be granted where it appears the moving party is entitled to judgment as a matter of law." Geraci v. Homestreet Bank, 347 F.3d 749, 751 (9th Cir. 2003). A "judgment...

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