Environment & Energy Report

VW Faces Revived Diesel-Cheat Suits by Florida, Utah Counties

June 1, 2020, 8:32 PM

Volkswagen Group of America and related companies face revived suits from Florida and Utah counties alleging that cars’ diesel-cheat mechanisms violated state and local pollution control laws, because the Clean Air Act preempts only some of the claims, the Ninth Circuit said.

Volkswagen settled the Environmental Protection Agency’s criminal and civil actions for more than $20 billion but didn’t obtain a release of liability from state and local governments, the court said.

Hillsborough County, Fla., and Salt Lake County, Utah, can’t sue the automaker for installing cheat devices that concealed harmful emissions from new diesel cars, but the jurisdictions may sue based on post-sale software updates, the U.S. Court of Appeals for the Ninth Circuit said Monday.

The Clean Air Act expressly preempts the counties’ claims that Volkswagen violated state and local law by installing devices on the cars during manufacture that could defeat emissions testing, the court said.

The federal law precludes local governments from enforcing “any standard relating to the control of emissions from new motor vehicles,” the court said.

But once a new motor vehicle is sold, the express preemption clause no longer applies, the appeals court said.

Instead, the Clean Air Act preserves state and local governments’ authority over used motor vehicles, it said.

The text and structure of the Clean Air Act don’t indicate that Congress intended to prohibit states from enforcing anti-tampering laws in this context, it said.

Nor is there any showing that allowing local enforcement would frustrate federal pollution control goals, it said.

“We are mindful that our conclusion may result in staggering liability for Volkswagen,” the court said. “But this result is due to conduct that could not have been anticipated by Congress: Volkswagen’s intentional tampering with post-sale vehicles to increase air pollution.”

“We assume that this conduct will be as rare as it is unprecedented,” the court said.

Judge Sandra S. Ikuta wrote the opinion, joined by Judges Richard C. Tallman and N. Randy Smith.

Stris & Maher LLP and others represented the plaintiffs. Sullivan & Cromwell LLP represented Volkswagen and Audi of America. Alston & Bird LLP represented Porsche Cars North America.

The case is In re Volkswagen Clean Diesel Mktg., Sales, Practices & Prods. Liab. Litig., 9th Cir., No. 18-15937, 6/1/20.

To contact the reporter on this story: Julie Steinberg in Washington at jsteinberg@bloomberglaw.com

To contact the editor responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com

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