DocketNumber: MDL No. 2672 CRB (JSC)
Citation Numbers: 310 F. Supp. 3d 1030
Judges: Breyer
Filed Date: 4/16/2018
Status: Precedential
Modified Date: 7/25/2022
In approximately 585,000 new vehicles that it sold in the United States, Volkswagen *1032installed software that caused the vehicles' emission controls to perform one way during emissions testing, and another (less effective) way during normal driving conditions. The software constituted a "defeat device," and Volkswagen violated the Clean Air Act and EPA regulations by installing it. See
Certain states and counties have asserted that Volkswagen's defeat device also violated state and local laws that prohibit tampering with vehicle emission controls. Last year, the Court considered Volkswagen's motion to dismiss one of these actions, which was a case filed by the State of Wyoming. The Court held that, because the only alleged conduct by Volkswagen that could have violated the State's tampering law took place during vehicle manufacturing, the State's tampering claim was preempted by the Clean Air Act. See In re Volkswagen "Clean Diesel" Mktg., Sales Practices, & Prod. Liab. Litig. ("Wyoming "),
Two counties-Hillsborough County, Florida and Salt Lake County, Utah-have filed tampering claims against Volkswagen that are similar to Wyoming's, except the Counties also allege that Volkswagen modified its defeat device to operate more effectively, and perhaps even added new defeat devices, through software updates during vehicle maintenance and post-sale recalls. The central question addressed in this Order is whether these new allegations save the Counties' tampering claims from preemption.
Hillsborough County has also named Robert Bosch LLC as a defendant, and Salt Lake County has also filed three additional state law claims against Volkswagen. The Court will also consider whether the tampering claim against Bosch and Salt Lake's additional claims are preempted.
I
Volkswagen's defeat device is able to detect whether the vehicles in which it is installed are undergoing emissions testing, or being driven normally on the road. During emissions testing, the device causes the vehicles' emission controls to perform in a mode that satisfies EPA's emission standards. When the vehicles are on the road, the device reduces the effectiveness of the emission controls, causing the vehicles to emit nitrogen oxides (NOx) at levels that are sometimes 40 times higher than EPA's standards. (Hillsborough Compl. ¶¶ 2-3; Salt Lake Compl. ¶¶ 4-5, 39-41.)
Volkswagen installed its defeat device in 2.0-liter and 3.0-liter TDI diesel engine vehicles, covering eight model years (model years 2009 through 2016) and a variety of model types-including Volkswagen's Jetta, Beetle, Golf and Passat models, Audi's A3, A6 and A8 models, and the Porsche Cayenne. (Audi and Porsche are subsidiaries of Volkswagen.) For each model year, Volkswagen misrepresented to EPA that these vehicles complied with the agency's emission standards. (Hillsborough Compl. ¶¶ 1-7, 36-37, 44; Salt Lake Compl. ¶¶ 2-5.)
After independent, on-road testing in 2014 called Volkswagen's representations into question, EPA began an investigation.
*1033Throughout 2014 and the first half of 2015, Volkswagen employees responded to EPA's inquiries by offering software and hardware fixes, without revealing the underlying reason for the discrepancies. (Hillsborough Compl. ¶¶ 82-86.) By the second half of 2015, however, it became clear that the fixes had not worked; and with EPA threatening not to certify model-year 2016 vehicles for sale in the United States, Volkswagen finally explained, in the fall of 2015, that certain of its vehicles used defeat device software. EPA subsequently issued Notices of Violation of the Clean Air Act, and Volkswagen admitted publicly that it had deliberately cheated on emissions tests. (Id. ¶¶ 90-94, 102.)
The United States, on behalf of EPA, responded by filing civil and criminal actions against Volkswagen for violations of the Clean Air Act. The criminal charges included conspiracy to defraud the United States by making false statements in submissions to EPA, in violation of
As part of Volkswagen's plea agreement, the company agreed to a Statement of Facts that it stipulated was "true and correct" and that it agreed to "neither contest the admissibility of, nor contradict, ... in any proceeding." (Plea Agreement § 1.E.) Therein Volkswagen admitted to, among other things, making certain modifications to its defeat device in or around April 2013. The Counties acknowledge in their joint opposition brief that their post-sale software change allegations are based on these admissions. The Counties have also attached a copy of the Statement of Facts to their joint opposition to Defendants' motions to dismiss. (See Dkt. No. 4640-1.) For simplicity, the Court cites to the Statement of Facts throughout this order in discussing the software change allegations, and addresses any additional or conflicting allegations from the Counties' complaints where necessary.
As relevant here, Volkswagen has admitted that it modified its defeat device in order to remedy hardware failures that developed in certain of its 2.0-liter TDI
*1034diesel engine vehicles in or around 2012. (SOF ¶ 47.) The company hypothesized that the failures were the result of a glitch with the defeat device, whereby the vehicles were staying in testing or "dyno" mode even when driven on the road, which was placing increased stress on the vehicles' exhaust systems. (Id. ) To solve the problem, the company developed a "steering wheel angle recognition" feature, which "interacted with the [defeat device] by enabling the vehicles to detect whether [they] were being tested on a dynamometer (where the steering wheel is not turned), or being driven on the road." (Id. ¶ 49.) After a Volkswagen supervisor authorized activation of this feature, in or around April 2013, Volkswagen employees "installed the new software function in new 2.0 Liter Subject Vehicles being sold in the United States, and later installed it in existing 2.0 Liter Subject Vehicles through software updates during maintenance." (Id. ¶ 50.) Volkswagen also modified these vehicles so that they would start in "street mode," and then shift to "dyno mode" when the defeat device recognized that the vehicles were undergoing emissions testing. (Id. )
Deviating from Volkswagen's plea agreement somewhat, Hillsborough alleges that Volkswagen not only modified its defeat device, but also installed "[a]t least two new defeat devices ... through post-sale recalls." (Hillsborough Compl. ¶ 88.) Yet Hillsborough describes these "new" defeat devices in a manner that mirrors the defeat device modifications described in Volkswagen's plea agreement. (See
The Hillsborough Environmental Protection Commission (EPC) and the State of Utah have both adopted vehicle tampering laws. These laws generally prohibit anyone from removing or rendering inoperable a vehicle's emission control system. See EPC Rule 1-8.05(1), (6); Utah Admin. Code R307-201-4. The Counties allege that Defendants violated these laws (1) by manufacturing the defeat device and installing it in vehicles that were ultimately registered in the Counties; and (2) by modifying the defeat device in vehicles that were in use within the Counties. (Hillsborough Compl. ¶¶ 143-44; Salt Lake Compl. ¶ 55.) A violation of either Hillsborough's or Salt Lake's tampering law is punishable by a civil penalty of up to $5,000 per offense, with each day that a violation occurs constituting a separate offense. See Hillsborough EPC Enabling Act, Fla. Laws 84-446 § 17(2) (as amended by Fla. Laws 87-495 (2005) );
Salt Lake's complaint also includes three claims in addition to its tampering claim. These additional claims are for common law fraud, violation of Utah's Pattern of Unlawful Activity Act,
II
Before considering the preemption questions, the Court first addresses Defendants'
*1035statutory arguments-that their conduct does not come within the terms of the Counties' tampering rules. The parties have not cited to any judicial decision in which these rules have been interpreted, or any legislative history with respect to the rules. The Court therefore looks only to the text of the rules.
A
Salt Lake County alleges that Volkswagen violated the following rule in the Utah Administrative Code. The Court has added italics to the terms and phrases at issue.
Any person owning or operating any motor vehicle or motor vehicle engine registered or principally operated in the State of Utah on which is installed or incorporated a system or device for the control of crankcase emissions or exhaust emissions in compliance with the Federal motor vehicle rules , shall maintain the system or device in operable condition and shall use it at all times that the motor vehicle or motor vehicle engine is operated. No person shall remove or make inoperable the system or device or any part thereof, except for the purpose of installing another system or device, or part thereof, which is equally or more effective in reducing emissions from the vehicle to the atmosphere.
Utah Admin. Code R307-201-4 (emphasis added).
Volkswagen argues that its conduct, as alleged, does not come within the terms of this tampering rule for three reasons. First, Volkswagen contends that the rule prohibits tampering only by those "owning or operating" a motor vehicle, not manufacturers. This argument is based on the first sentence of the rule: "Any person owning or operating any motor vehicle ... on which is installed or incorporated a system or device for the control of ... emissions ... shall maintain the system or device in operable condition...." If Salt Lake's tampering claim was based on that portion of the rule, Volkswagen's argument would have merit, as the "owning or operating" modifier of "any person" can reasonably be read to limit the rule's coverage to end users of motor vehicles, not vehicle manufacturers. Salt Lake's claim, though, is based on the second sentence of the rule, not the first. And unlike the first sentence, the second does not include the "owning or operating" modifier, but instead applies to any person that removes or makes inoperable an emission control system or device. See
Volkswagen next focuses on the language "remov[ing] or mak[ing] inoperative" in the second sentence of Salt Lake's tampering rule. It suggests that "the word 'remove' most naturally connotes extracting a pre-existing emission control device from a used car, and 'mak[ing] inoperative' contemplates a transformation from an operative emissions control system to an inoperative one." (Dkt. No. 4583 at 26.) It then contends that the allegations do not *1036support that it performed either of these actions.
Salt Lake is relying on the "mak[ing] inoperative" prong, not the "remov[ing]" prong of the rule. For example, Salt Lake alleges that, due to post-sale software changes, "the affected vehicles' emission control systems were made inoperable most of the time the vehicles were being operated in Salt Lake County." (Salt Lake Compl. ¶ 42.) This conduct clearly comes within the reach of the "mak[ing] inoperative" prong: the allegations just quoted specifically refer to making the emission control systems inoperable. Salt Lake also alleges that, before the software changes, Volkswagen's defeat device could detect when emissions testing was complete, and "would respond by relaxing emissions controls to permit higher levels of emissions of NOx and other pollutants." (Id. ¶ 4.) Arguably, "relaxing" emission controls is not the same as making emission controls "inoperative," as inoperative suggests that the controls were not functioning, while "relaxing" suggests that the controls were functioning less effectively. Under the circumstances alleged here, however, this is a distinction without a difference. Salt Lake alleges that Volkswagen's defeat device reduced the effectiveness of emission controls in such a manner that the vehicles in which it was installed went from complying with EPA's emission standards to emitting as much as 40 times the level of NOx permitted by those standards. (See
Finally, Volkswagen points to the following language in Salt Lake's rule: "on which is installed or incorporated a system or device for the control of ... exhaust emissions in compliance with the Federal motor vehicle rules." Volkswagen contends that this clause indicates that Salt Lake's tampering rule "does not apply to the original installation or updating of a noncompliant system, as Salt Lake alleges here." (Dkt. No. 4583 at 26 (emphasis added).) That is, Volkswagen suggests that because Salt Lake alleges that Volkswagen installed the defeat device in its vehicles during manufacturing, the vehicles never had compliant emission control systems, and therefore could not be tampered with under Salt Lake's rule.
The Court does not agree with this interpretation. Salt Lake alleges that Volkswagen installed emission controls in the affected vehicles that, during emissions testing, were able to satisfy EPA's standards. The defeat device then rendered the vehicles' otherwise compliant emission controls noncompliant when the vehicles were driven on the road. The defeat device, then, "ma[d]e inoperable [a] system or device" that was "installed or incorporated ... for the control of ... exhaust emissions in compliance with the Federal motor vehicle rules." Utah Admin. Code R307-201-4.
Volkswagen's alleged conduct comes within the terms of Salt Lake's tampering rule.
B
Volkswagen and Bosch also contend that their conduct does not come within the bounds of the tampering rules invoked by Hillsborough County. Hillsborough relies *1037on two mobile source rules, which read as follows:
No person shall tamper, cause, or allow the tampering of the emission control system of any motor vehicle.
EPC Rule 1-8.05(1).
No person shall manufacture, install, sell or advertise for sale, devices to defeat or render inoperable any component of a motor vehicle's emission control system....
EPC Rule 1-8.05(6). As used in these rules, "tampering" is defined as "the intentional inactivation, disconnection, removal or other modification of a component or components of the emission control system." EPC Rule 1-8.03(2)(h). An "emission control system" in turn is defined in part as "the devices and mechanisms installed as original equipment at the time of manufacture ... for the purpose of reducing or aiding in the control of emissions." EPC Rule 1-8.03(2)(b).
Defendants contend that EPC Rule 1-8.05(1) applies only to the modification of "pre-existing emission control systems." (Dkt. Nos. 4583 at 27; 4584 at 7-8.) Similarly, Defendants contend that EPC 1-8.05(6) prohibits only the manufacture or installation of a device "to defeat or render inoperable" a part of an existing "emission control system," i.e., one that was already "installed as original equipment at the time of manufacture." (Dkt. No. 4583 at 27.) Defendants then assert that their conduct, as alleged by Hillsborough, does not come within these provisions, because Hillsborough alleges that they installed a defeat device in the affected vehicles at the same time that they installed the emission control system. They therefore assert that they did not modify or render inoperable a pre-existing "emission control system" as required to violate Hillsborough's tampering rules.
This argument is essentially the same as the third argument addressed above with respect to Salt Lake's tampering rule. For the same reasons, it is unpersuasive. As alleged, Defendants equipped the affected vehicles with emission controls that could-and did-meet EPA's emission standards during testing. Defendants also equipped the affected vehicles with a defeat device, which reduced the effectiveness of the vehicles' emission controls during normal on-road driving. Whether the defeat device was installed at the exact same time as the emission controls, or was installed sometime later during the manufacturing process, the defeat device reduced the effectiveness of the vehicles' emission controls during normal vehicle use and therefore "modified" and "render[ed] inoperable" certain "devices and mechanisms installed as original equipment at the time of manufacture ... for the purpose of reducing or aiding in the control of emissions." EPC Rules 1-8.03(2)(b), 1-8.05(1), (6). The same is true of the alleged post-sale software changes, which clearly took place after the original emission control systems were installed in the affected vehicles. (See SOF ¶¶ 47-51; see also Hillsborough Compl. ¶¶ 87-88; Salt Lake Compl. ¶ 42.) The Court accordingly concludes that Defendants' alleged conduct comes within the bounds of Hillsborough's tampering rules.
III
Turning to the preemption analysis, the Court starts on familiar ground. Like the Counties, Wyoming previously asserted that Volkswagen violated a local tampering law by manufacturing and installing a defeat device in its vehicles. The Court held that Wyoming's tampering claim was expressly preempted by Section 209(a) of the Clean Air Act.
Section 209(a) provides that
No State or any political subdivision thereof shall adopt or attempt to enforce *1038any 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 approval 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.
The Act defines "new motor vehicle" as "a motor vehicle the equitable or legal title to which has never been transferred to an ultimate purchaser."
These "standards" are the same types of rules that Congress requires EPA to enact and enforce in Title II of the Clean Air Act. Specifically, Congress has tasked EPA with setting emission limits for new vehicles introduced into commerce,
In Wyoming , this Court held that EPA's rule prohibiting the installation of defeat devices in new vehicles is a "standard relating to the control of emissions from new motor vehicles." Wyoming ,
The Court did not find Wyoming's in-use argument persuasive. Yes, the defeat device operated in vehicles within the State, but Volkswagen's conduct took place during manufacturing, when it installed the defeat device in its new vehicles. Wyoming, then, was attempting to regulate Volkswagen's conduct before its vehicles were sold to end users. And by doing so, the State was attempting to enforce a standard relating to the control of emissions from new motor vehicles. See Wyoming ,
IV
To the extent the Counties' tampering claims are based on the manufacture and installation of a defeat device in new vehicles that were later registered in the Counties, their claims are expressly preempted by Section 209(a) for the same reasons identified in Wyoming. Although the defeat device may operate in vehicles within the Counties, Defendants are alleged to have manufactured the device and installed it in these vehicles before the vehicles were sold to end users. To the extent the Counties seek to regulate that conduct, they are "attempt[ing] to enforce [a] standard relating to the control of emissions from new motor vehicles," which states and local governments cannot do under Section 209(a).
The alleged post-sale software changes to the affected vehicles requires a different analysis. The Counties allege that Defendants modified the defeat device in the affected vehicles during vehicle maintenance, or installed new defeat devices during post-sale recalls. In either case, this conduct affected vehicles that had already been sold to consumers and were in use within the Counties, not "new motor vehicles." The Counties' attempts to regulate Defendants' post-sale software changes are therefore not expressly preempted by Section 209(a).
In arguing to the contrary, Defendants note that Wyoming also attempted to base its tampering claims in part on certain post-sale software changes, and the Court rejected that attempt. The Court did so on statutory grounds, however, not on the basis of preemption under Section 209(a). This was because Wyoming alleged that certain software changes by Volkswagen brought emissions down relative to the emissions allowed by the original defeat device. On that basis, the Court held that the changes "did not violate ... Wyoming's tampering provision ... because the updates did not 'render ineffective or inoperative' the emission control system." Wyoming ,
Defendants make one additional argument with respect to Section 209(a), asserting that the relation-back concept discussed in Allway Taxi, Inc. v. City of New York ,
That Section 209(a) does not expressly bar the Counties' attempts to regulate Defendants' post-sale software changes does not end the preemption analysis, however. This is because "neither an express pre-emption provision nor a saving clause 'bars the ordinary working of conflict pre-emption principles.' " Buckman Co. v. Pls.' Legal Comm. ,
A
The Counties allege that Volkswagen and Bosch made the post-sale software changes at issue on a model-wide basis in thousands of vehicles nationwide. As a consequence, the congressional objective that the Court must identify is how Congress *1041intended for model-wide tampering by vehicle manufacturers and parts suppliers to be regulated. The Counties view Section 209 of the Clean Air Act as answering that question: When vehicles are tampered with when they are new, they contend that Section 209(a) prohibits states and local governments from attempting to regulate that conduct; but when vehicles are tampered with when they are in use, they contend that Section 209(d) allows states and local governments to regulate that conduct, regardless of the magnitude of the tampering offense or the identity of the offender, without interfering with the federal regulatory scheme.
The Clean Air Act does not draw such a clear line. For one thing, the Act requires vehicles to meet EPA's emission standards during their "useful life."
EPA's primary role after vehicles are put in use is to ensure that entire classes or models of vehicles remain in compliance with the agency's emission standards. Similar to during the new vehicle certification process, EPA works with vehicle manufacturers to accomplish this. For example, pursuant to
While Congress has tasked EPA with enforcing useful life emission standards on a model-wide basis, other provisions in the Clean Air Act, and the Act's legislative history, reveal Congress' intent to have states and local governments enforce these standards by inspecting individual vehicles for compliance. Since Congress first adopted the modern vehicle emissions scheme, in 1967, it has intended that "States responsibility would be to assume responsibility for inspection of pollution control systems as an integral part of safety inspection programs...." S. Rep. 90-403, at 35 (1967). To encourage states to adopt such programs, Congress included a provision in the Air Quality Act of 1967 that authorizes EPA to "make grants to appropriate State air pollution control agencies in an amount up to two-thirds of the cost of developing meaningful uniform *1042motor vehicle emission device inspection and emission testing programs." Pub. L. 90-148, § 209,
As Congress has made further amendments to the Clean Air Act, and in particular as it responded to increasing emissions from vehicles in the 1970s and '80s, which resulted from the increasing use of vehicles throughout the nation, it has made some of these state inspection programs mandatory, at least for states with particularly high levels of certain pollutants. See Clean Air Act Amendments of 1977, Pub. L. 95-95 § 172(b) (11)(B),
By their nature, state inspection programs operate on an individual vehicle basis. This is clear from, among other things, the use of vehicle registration denial as a means of enforcement-which is a penalty that affects the owners of specific non-compliant vehicles. It is also clear from Section 207(h)(2) of the Clean Air Act. There, Congress has provided that "Nothing in [Section 209(a) ] shall be construed to prohibit a State from testing or requiring testing of, a motor vehicle after the date of sale of such vehicle to the ultimate purchaser...."
At times, the federal scheme reveals overlap between federal, state, and local enforcement authority of emission standards. As notable for present purposes, Congress has adopted a federal tampering provision, which prohibits "any person" from removing or rendering inoperative emission control devices either before or after the vehicles in which the devices are installed are sold to ultimate purchasers. See
The division of authority discussed above-with EPA enforcing useful life vehicle emission standards primarily on a model-wide basis, and at the manufacturer level, and states and local governments enforcing the same standards on an individual vehicle basis at the end-user level-is sensible, as it best utilizes the comparative advantages of EPA and the states and local governments. EPA, as a federal agency, is best positioned to enforce emission standards on a model-wide basis because model-wide emission problems will almost invariably affect vehicles in states and counties throughout the country. Further, when investigating model-wide emission issues, EPA can also rely on testing data it acquired from manufacturers during the new vehicle certification process, which it can utilize to understand how vehicle models are performing in use as compared to how they were performing during assembly-line testing. Likewise, because the new vehicle certification process requires EPA to work directly with vehicle manufacturers, the agency has preexisting relationships that it can rely on when addressing model-wide emission defects in used vehicles.
States and local governments, in contrast, are in a better position than EPA to enforce emission standards at the individual user level. Although Congress could theoretically task EPA with overseeing nationwide vehicle inspection programs-with the agency running testing centers and requiring vehicle owners to have their vehicles checked on a regular basis-states and local governments can more efficiently do so because they already oversee vehicle registration and drivers' licensing, and can use state police power to aid enforcement. Indeed, when Congress first sought to motivate states to create vehicle inspection programs, it did so based on the belief that states would adopt such programs "as an integral part of safety inspection programs." S. Rep. 90-403, at 35 (1967).
This is not to say that there is no conceivable scenario, consistent with the Clean Air Act, in which states and local governments could regulate a vehicle manufacturer's compliance with emission standards. If, for example, a manufacturer were to tamper with a single in-use vehicle during vehicle maintenance, the Clean Air Act would not bar a state or local government from bringing a tampering claim against the manufacturer if the tampering occurred within its borders. In such a scenario, *1044the manufacturer is not acting on a model-wide basis, and therefore the enforcement advantages that EPA has over the states and local governments are not implicated. But when a manufacturer's actions affect vehicles model wide, the Clean Air Act manifests Congress' intent that EPA, not the states or local governments, will regulate that conduct.
B
The model-wide nature of the post-sale software changes alleged here makes them the type of conduct that Congress intended EPA to regulate. And indeed, EPA has regulated this conduct. EPA was instrumental in bringing Volkswagen's emissions fraud to light, as it began an investigation in 2014 to determine why on-road emissions from the affected vehicles significantly exceeded emissions during testing. (See Hillsborough Compl. ¶¶ 82-86; SOF ¶¶ 52-63.) And it was only after EPA threatened not to certify certain model-year 2016 vehicles that Volkswagen finally admitted that it had equipped the affected vehicles with a defeat device. (See Hillsborough Compl. ¶ 90; SOF ¶ 59.) EPA has also brought civil and criminal actions against Volkswagen based not only on the company's initial installation of a defeat device in its vehicles, but also as a result of the company's post-sale software changes. (See SOF ¶¶ 47-51 (detailing Volkswagen's defeat device modifications as part of the factual basis for the company's guilty plea); Volkswagen AG , No. 3:16-CV-00295, Dkt. No. 32-3, EPA Am. Civil Compl. ¶¶ 114-16, 195-97 (detailing Volkswagen's defeat device modifications as conduct that violated the Clean Air Act and EPA regulations).) These criminal and civil actions have resulted in Volkswagen paying penalties and remediation payments totaling $9.23 billion, which is in addition to a $10.033 billion funding pool Volkswagen agreed to establish to buy back its 2.0-liter TDI vehicles and to pay the owners and lessees of those vehicles restitution.
The model-wide nature of the post-sale software changes also distinguishes them from the type of conduct that Congress intended for states and local governments to regulate. State and local tampering laws are meant to be used as a tool by states and counties to regulate vehicles within their borders. If a mechanic removes or alters a vehicle's emission control system during routine maintenance, for example, states and counties are in the best position to penalize that conduct. But when the tampering at issue involves thousands of vehicles, and the changes are made through software updates instituted on a nationwide basis, EPA is in a better position to regulate that conduct, as it can rely on the tools Congress has given it to police vehicle manufacturers' compliance with emission standards before and after vehicles are put in use.
Due to technological advances, manufacturers today also have the ability to impact their vehicles well after sale to end users. Vehicles are increasingly computerized, and similar to the types of a remote updates that consumers may receive on their phones or computers, manufacturers may be able to modify software installed in vehicles just as easily. This is not the type of conduct that states and local governments are in the best position to regulate. Although it may be characterized as conduct that takes place at least in part within their borders, it is conduct on a much broader, national scale. And it is not conduct involving an individual consumer's vehicle; rather, it involves entire vehicle lines, makes, and models. This is the type of conduct that Congress intended EPA to regulate.
Not only is EPA better positioned than the Counties to regulate Volkswagen's post-sale software changes, but if the *1045Counties were permitted to regulate this conduct, the size of the potential tampering penalties could significantly interfere with Congress' regulatory scheme. "The obligation to pay compensation can be, indeed is designed to be, a potent method of governing conduct and controlling policy." Cipollone v. Liggett Grp., Inc. ,
As relevant here, Congress has set specific penalties for vehicle tampering by manufacturers. See
Even if actual penalties are lower, if tampering claims like the Counties' are allowed to proceed, vehicle manufacturers could be subjected to up to 50 state and approximately 3,000 county regulatory actions based on uniform conduct that happened nationwide. The substantial nature of the potential penalties for the Counties' tampering claims, and the significant regulatory burden that would ensue if manufacturers were subject to tampering claims throughout the United States, further demonstrates the conflict that the Counties' claims create with federal policy. See Crosby ,
The same analysis applies to Hillsborough's tampering claim against Bosch. Hillsborough alleges that Bosch assisted Volkswagen in developing the defeat device that was ultimately used in hundreds of thousands of vehicles in the United States, and in implementing the post-sale software changes to these vehicles. EPA, not the states and counties, is in the best position to regulate this conduct, as the conduct allegedly affected vehicles on a model-wide basis. And although EPA has not filed an enforcement action against Bosch, it has the authority to do so under federal tampering laws. See
The Clean Air Act's savings clause, Section 209(d), does not alter any of the above analysis. That provision does not give states and local governments carte blanche to regulate any conduct that affects emissions from vehicles that are in use. Rather, the provision provides that "Nothing in this part shall preclude or deny to any State or political subdivision thereof the right otherwise to control, regulate, or restrict the use, operation, or movement of registered or licensed motor vehicles."
Bolstering this conclusion, the legislative history of Section 209(d) reveals that Congress' intent in enacting this saving clause was to ensure that states and local governments had authority to adopt transportation planning regulations, not to regulate vehicle manufacturers. In the Senate Report for the Air Quality Act of 1967, the Committee on Public Works noted the following with respect to Section 209(d):
This language is of particular importance. While there has been a great deal of concern expressed regarding control of new vehicles little attention has been paid to control of used vehicles, either their emissions or their use. It may be *1047that, in some areas, certain conditions at certain times will require control of movement of vehicles. Other areas may require alternative methods of transportation. Unfortunately some of these alternatives have been ignored and the onus of control has been placed solely on the automobile manufacturers.
It is clear that, if a pollution-free (or at least minimized) rapid transit system reduced commuter traffic there would be a corresponding decrease in automobile-related air pollution. And any significant advance in control of used vehicles would result in a corresponding reduction in air pollution. These are areas in which the States and local government can be most effective.
S. Rep. No. 90-403, at 34 (1967).
Section 209(d), then, was viewed as providing states and local governments with the authority to "control [the] movement of vehicles" so that they could "reduce[ ] commuter traffic" and thereby "decrease ... automobile-related air pollution."
Courts have "repeatedly 'declined to give broad effect to saving clauses where doing so would upset the careful regulatory scheme established by federal law.' " Geier ,
* * *
The Counties' tampering claims, based on post-sale software changes to the affected vehicles by Volkswagen and Bosch, are an attempt to enforce vehicle emission standards on a model-wide basis. Because Congress intended for only EPA to regulate such conduct, the Court concludes that these claims stand as an obstacle to Congress' purpose and are preempted by the Clean Air Act.
V
Salt Lake County's complaint includes three additional claims against Volkswagen. These claims are for common law fraud, violation of Utah's Pattern of Unlawful Activity Act, which is a state RICO statute, and common law nuisance. Volkswagen argues that each of these claims is preempted by the Clean Air Act. The Court agrees.
The decision in In re Office of Attorney General of State of New York ("Detroit Diesel "),
The state trial court held that the common law claims were preempted, and the appellate court affirmed.
The situation here is the same. Through its fraud, nuisance, and state RICO claims, Salt Lake County is attempting to penalize Volkswagen for its failure to comply with federal emission standards. Salt Lake's fraud claim, for instance, is based on the contention that Volkswagen misrepresented the amount of pollutants emitted by its vehicles, and concealed the use of a defeat device in its vehicles. (Salt Lake Compl. ¶¶ 58-65.) This is the same conduct underlying EPA's claims against Volkswagen for violations of the Clean Air Act. The same is true of Salt Lake's state RICO claim, which is based on a "pattern of unlawful activity" that includes alleged violations of Utah's tampering, fraud, deceptive business practices, and computer crime laws. (See id. ¶¶ 66-73.) Salt Lake does not offer any factual allegations to support this claim other than the allegations underlying Volkswagen's violations of the Clean Air Act. The state RICO claim accordingly "has its genesis in the manufacturers' ... violations of the Federal emissions standards, and liability would necessarily be based on the scope of those standards." Detroit Diesel ,
With respect to the fraud claim, it is worth noting that the facts here are distinguishable from those in several cases in which courts have recently held that fraud claims based on a vehicle manufacturer's use of a defeat device are not preempted by the Clean Air Act. See In re Chrysler-Dodge-Jeep Ecodiesel Mktg., Sales Practices, & Prod. Liab. Litig. ,
Like the Attorney General in Detroit Diesel , Salt Lake seeks to use its common law and state statutory claims to penalize Volkswagen for its model-wide noncompliance with EPA's emission standards. Because Congress intended for EPA to regulate such conduct, Salt Lake's claims would "unavoidably result in serious interference with the accomplishment and execution of the full purposes and objectives of Congress." Detroit Diesel ,
VI
Having concluded that the Counties' claims are preempted, the Court GRANTS Defendants' motions to dismiss the Counties' complaints. Finding that an amendment *1050of the complaints would be futile, the Court dismisses the complaints with prejudice.
IT IS SO ORDERED.
The Counties have also named Audi of America LLC and Porsche Cars North America, Inc. as defendants. (Hillsborough Compl. ¶¶ 16-17 & nn. 6-7; Salt Lake Compl. ¶¶ 28, 30.) Because the parties have not made Audi or Porsche specific arguments in their briefing on the motions to dismiss, and because Audi and Porsche are subsidiaries of the Volkswagen Group, the Court uses the umbrella term "Volkswagen" to refer to all defendants other than Bosch LLC.
Volkswagen AG, a German corporation, is the entity that was charged and pled guilty in the federal criminal case, whereas Volkswagen Group of America, Inc., a Volkswagen AG subsidiary, is the defendant in this case. This distinction is not material for purposes of this Order, as the Counties allege that both Volkswagen entities engaged in the conduct at issue.
Hillsborough has attached a copy of the EPC Enabling Act and the EPC's tampering rules to its complaint. (See Dkt. Nos. 4457-1, -2.)
The exception is California: Congress has allowed California to set its own vehicle emission standards, and allows other states to adopt California's standards. See
Counsel for Volkswagen has represented that 28 counties in Texas, and at least 8 states have asserted tampering claims against the company that are based on its post-sale software modifications. (See Dkt. No. 4715 at 7 (Feb. 1, 2018 Hr'g Tr.); Dkt. No. 4887 (Notice of Recent Decisions).) The Counties have not contested these representations.
The penalties sought by the Counties would also be above and beyond the remediation that consumers in the Counties have already received by way of the consumer class action settlements, and beyond the payments that the Counties' home states-Florida and Utah-have or are expected to receive as beneficiaries to Volkswagen's emissions mitigation trust. As beneficiaries, Florida is expected to receive approximately $166 million, and Utah is expected to receive approximately $35 million. (Dkt. Nos. 2103-1 at 207; 3228-1 at 164.)
The Counties' tampering claims also threaten to interfere with the injunctive relief obtained by EPA. At the time of the consent decrees, EPA and Volkswagen acknowledged that there were "no practical engineering solutions that would, without negative impact to vehicle functions and unacceptable delay," bring the majority of the affected vehicles into compliance with existing emission standards. (Dkt. Nos. 2103-1 at 5 ¶ 2; 3228-1 at 5 ¶ 2.) Yet to "avoid undue waste and potential environmental harm that would be associated with removing" the affected vehicles from service, EPA agreed to allow Volkswagen to offer emissions modifications to the owners and lessees of the affected vehicles if the modifications "would substantially reduce NOx emissions." (Dkt. Nos. 2103-1 at 6 ¶ 4; 3228-1 at 7 ¶ 4.) This approach reflected the type of careful balancing that is required in responding to a nationwide environmental problem like the one at issue here. But the Counties may jeopardize this balance by asserting that vehicles with EPA-approved modifications continue to violate their tampering rules because the modifications do not bring the vehicles into compliance with the originally certified emission standards. This threat of inconsistent sanctions further demonstrates the conflict between the Counties' tampering claims and federal policy.