States Can’t Sue Volkswagen Over Emissions Cheating

SAN FRANCISCO (CN) – A federal judge on Thursday dashed the hopes of states and local governments seeking to pile on more fines against Volkswagen for its emissions-cheating scandal.

Dismissing Wyoming’s lawsuit against Volkswagen, U.S. District Judge Charles Breyer found states can’t punish automakers for cheating emissions tests because only the Environmental Protection Agency wields such power.

“Because Volkswagen’s conduct took place during manufacturing, Congress determined that EPA, not the 50 states, was best situated to regulate it,” Breyer wrote in his 24-page ruling.

Volkswagen installed software that cheated emissions tests in nearly 600,000 “clean diesel” vehicles sold in the United States. It has paid more than $20 billion in U.S. penalties and civil settlements thus far, including a $2.8 billion criminal fine.

Seven states and Harris County, Texas, had filed amicus briefs opposing Volkswagen’s motion to dismiss Wyoming’s complaint.

Wyoming argued that it was not looking to enforce federal emission standards, but rather to hold Volkswagen accountable for violating two state laws that forbid concealing a defeat device or tampering with an anti-pollution device.

But Breyer found Section 209(a) of the Clean Air Act explicitly bars states from attempting to enforce “any standard relating to the control of emissions from new motor vehicles.”

States can regulate conduct that occurs after a car is manufactured and once it is licensed by the state or driven on its roads, the judge said. But allowing Wyoming to sue for conduct that occurred when vehicles were coming off the assembly line in Germany would create “an anarchic patchwork of federal and state regulatory programs” and “a multiplicity of redundant investigations and enforcement actions,” he wrote.

Breyer noted in his ruling that just because states cannot enforce federal emission standards, that doesn’t mean Volkswagen can evade responsibility for its deceptive conduct.

“As is readily apparent from this [multi-district litigation], Volkswagen has indeed been held responsible,” Breyer wrote, referring to more than $20 billion in fines and settlements paid out by the company.

Under prior settlements, Wyoming residents will receive more than $9 million in consumer relief and the state will get $8 million for environmental mitigation, according to Volkswagen’s motion to dismiss.

Wyoming was seeking penalties of up to $37,500 per vehicle per day, or $13.6 million per vehicle per year, a fine Volkswagen described as “Draconian” in its motion to dismiss.

Approximately 1,196 of the falsely marketed “clean diesel” vehicles were registered in Wyoming as of Nov. 1, 2015, according to Breyer’s ruling.

The judge said allowing states to usurp the EPA’s exclusive authority to regulate new-vehicle emission standards would place an undue burden on automakers because they’d have to comply with federal regulations “in the shadow of 50 states’ regimes.”

“Wyoming’s claims (and those of other states) threaten to interfere with interstate commerce, because they are predicated on conduct that occurred during the manufacture of hundreds of thousands of vehicles intended for distribution throughout the United States,” Breyer wrote. (Parentheses in original.)

In an emailed statement, Volkswagen said it was pleased with the judge’s decision, “which makes clear that the federal Clean Air Act bars Wyoming and other so-called non-177 states from seeking to bring environmental claims against Volkswagen” for the same issues it resolved with the EPA and 15 states that have adopted California’s stricter emissions standards under Section 177 of the Clean Air Act.

Volkswagen said it plans to seek dismissal of nine similar lawsuits filed by states and localities, “including filing dismissal motions against Illinois, Minnesota and Ohio today.”

Wyoming Attorney General Peter Michael did not immediately respond Thursday to a request for comment.

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