Home » Case Summaries » 2007 » Engine Manufacturers Association v. South Coast Air Quality Management District

 
 

Engine Manufacturers Association v. South Coast Air Quality Management District

 

The Engine Manufacturers Association (EMA), a trade association representing manufacturers of diesel engines and diesel producers, contested a set of new vehicle regulations enacted by the South Coast Air Quality Management District (District).[1]These “Fleet Rules” required operators of certain public and private vehicle fleets-like street sweepers, garbage trucks, and airport shuttles-to use vehicles meeting specified emissions standards or containing specified alternative-fuel engines when adding to their fleets. The United States District Court for the Central District of California granted summary judgment for the District, ruling that neither section 209 nor section 177 of the Clean Air Act (CAA)[2]preempted the Fleet Rules because the rules only required fleet operators to buy new
vehicles conforming with existing California emissions standards and “did not compel manufacturers to meet new emissions standards.”[3]

This case was in the Ninth Circuit for the second time: the Ninth Circuit originally affirmed the district court’s grant of summary judgment in favor of the District, and EMA appealed to the United States Supreme Court. The Supreme Court reversed,[4]holding that section 209 may preempt some portions of the Fleet Rules but leaving it to the district court to determine whether the CAA actually preempted the Fleet Rules.[5]On remand, EMA brought a motion in the district court for an order implementing the Supreme Court’s decision, requesting the court to declare the Fleet Rules entirely preempted by sections 177 and 209(a) of the CAA.[6]The district court again granted summary judgment for the District, ruling that EMA had brought a facial challenge to the Fleet Rules and failed to prove that every application of the Rules was preempted. Specifically, the district court held the rules were not preempted as applied to state and local government entities because the rules regulated the conduct of the state and local entities in the market. On appeal (now for the second time), the Ninth Circuit affirmed the district court in part, reversed in part, and remanded the case for further proceedings.

In this second appeal to the Ninth Circuit, EMA alleged two errors:
1) the district court erred in holding that the rules were not preempted as applied to state and local agencies, and 2) the district court erred in declining to determine whether the CAA preempted other applications of the rules. The Ninth Circuit affirmed the district court’s holding that the rules were not preempted as applied to state and local entities, but reversed the district court’s dismissal of the case and remanded for the district court to determine which applications of the rules were preempted.

The Ninth Circuit first discussed whether the “market participant” doctrine applied to preemption under sections 177 and 209(a) of the CAA. The market participant doctrine “distinguishes between a state’s role as regulator . . . and its role as a market participant,” such that where the state acts as a market participant its actions are generally not deemed preempted by federal law.[7]The court noted that congressional intent is the starting point to preemption analysis and, therefore, it would look first to see if the CAA contained any indication of express or implied preemption. The legislative purpose of the CAA is to ensure that “the states . . . do their job in regulating air pollution effectively,”[8]and the CAA’s congressional findings indicate that reducing air pollution is primarily the responsibility of the states.[9]Moreover, the court determined that section 209(a) of the CAA contained no indication that Congress intended to prevent states from acquiring vehicles exceeding federal emissions standards. Also, the court determined that section 177 of the CAA is only a corollary of section 209, and does not expressly or impliedly preempt a state’s proprietary actions.[10]EMA conceded that the market participant doctrine applies to preemption under sections 177 and 209(a) of the CAA. However, amicus Los Angeles Taxi Industry (LATI) argued that the market participant doctrine did not apply to the CAA, and amicus American Automotive Leasing Association (AALA) argued that section 246 of the CAA preempted the Fleet Rules in their entirety.[11]The Ninth Circuit noted it generally does not consider issues raised only by amicus parties,[12]but it would consider the amici’s arguments here because the arguments went to the core issue of the scope and applicability of the market participant doctrine under the CAA.

LATI argued the Ninth Circuit’s opinion in Hydrostorage, Inc. v. Northern California Boilermakers Local Joint Apprenticeship Committee[13]indicated the market participant doctrine is not applicable outside of the dormant commerce clause context. The court responded that its “dictum” in Hydrostorage was “not the product of ‘deep consideration,'”[14]and that, in any event, the Supreme Court’s opinion in Building & Construction Trades Council v. Associated Builders & Contractors(Boston Harbor)[15]abrogated the dictum. LATI countered by attempting to distinguish Boston Harbor because it concerned only implied preemption, but the court disagreed and stated that Boston Harbor did not distinguish between express and implied preemption. The Ninth Circuit concluded that under BostonHarbor, courts should not infer preemption absent a clear indication that Congress intended to regulate a state’s management of its property when pursuing proprietary interests.[16]

Amicus AALA argued that section 246 of the CAA preempted the Fleet Rules because section 246 states that “a fleet operator ‘shall’ have ‘the choice of clean-fuel vehicles and clean alternative fuels,'”[17]while the Rules require the use of such vehicles and fuels. The court responded by noting that the Rules, as applied to state and local entities, simply represented the state’s elective choice to use clean-fueled vehicles in its own fleets-a choice “entirely consistent” with section 246.[18]

Having determined that the market participant doctrine applies to preemption analysis under sections 177 and 209(a) of the CAA, the court turned to whether the doctrine actually prevented preemption of the Fleet Rules. EMA argued that the Rules were regulatory rather than proprietary action, and, therefore, not protected by the market participant doctrine.[19]To determine if the rules are proprietary, the court inquired whether they fit either of the two categories of state proprietary action established in Chamber of Commerce v. Lockyer.[20]In Lockyer, the Ninth Circuit held that state action is proprietary if 1) “it ‘essentially reflect[s] the [governmental] entity’s own interest in its efficient procurement of needed goods and services, as measured by comparison with the typical behavior of private parties in similar circumstances,'” or 2) if “the narrow scope of the challenged action defeat[s] an inference that its primary goal was to encourage a general policy rather than address a specific proprietary problem.”[21]The court noted that Lockyer posed its definitions of “proprietary” in the context of preemption under the National Labor Relations Act, while the present case concerned the CAA. The court cautioned that each legislative enactment will have its own legislative intent, but that in this case, the Fleet Rules as applied to state and local entities fell squarely under the first category announced in Lockyer, and declined to further refine the definition of “proprietary action.”[22]

The Ninth Circuit concluded that the portions of Fleet Rules directing state and local governments to “purchase, procure, lease, or contract for use of vehicles meeting specified air pollution criteria” represented direct state participation in the market.[23]EMA objected to the court’s conclusion on three grounds. First, EMA argued that the Fleet Rules are not concerned with “efficient procurement” within the meaning of Lockyer because they are designed to reduce air pollution.[24]The court criticized EMA’s reading of “efficient procurement,” holding that procurement is “efficient” if it furthers the state’s purposes. The court clarified that the state’s purposes need not be confined to saving money, and to hold otherwise would be to read the word “efficient” too narrowly.[25]Second, EMA argued that the Rules were not proprietary because they direct how subentities of the state were to spend money, rather than how the state spends its own money. The court noted this argument was “largely foreclosed” by Big Country Foods, Inc. v. Board of Education,[26]which rejected an analogous argument and identified “strong public policy arguments” supporting its position.[27]There is no reason why the market participant doctrine should not apply, the court reasoned, because the state directed the disposition of funds by its constituent parts. Third, EMA argued that the rules were regulatory because they are enforceable by criminal sanctions. The court summarily rejected this argument because EMA based the assertion on Lockyer, which the court noted is not applicable because it addressed a rule that was clearly regulatory. Also, there was no indication that the criminal sanctions are enforceable against state or local entities.

As a final argument for preemption, EMA argued that not preempting the rules “would seriously undermine the uniformity contemplated by § 209(a)” because government entity purchases make up a substantial portion of the market.”[28]The court rejected this argument, as there was no evidence in the record to support it and EMA did not provide any cases suggesting that a state’s great market power precludes application of the market participant doctrine.[29]Thus, the court concluded that the Fleet Rules, as applied to state and local entities, were not preempted by section 177 or 209(a) of the CAA. Turning finally to the application of the Fleet Rules to anyone other than a state or local entity, the court concluded that the district court should have determined what applications of the Rules the CAA does preempt. The court agreed with the district court that EMA brought a facial challenge to the rules, and opined that if the Rules had been single, unseverable provisions with multiple applications the district court’s ruling would have been sound. However, the court held that because each Rule contained multiple provisions, the district court should have determined in the first instance whether each was valid. The court noted that plaintiffs are not required to show that every provision in a multipart enactment is invalid,[30]and that a court reviewing a statute is to maintain the statute insofar as it is valid.[31]Therefore, the Ninth Circuit ordered the district court to determine on remand which provisions of the Fleet Rules were valid and which were facially invalid.

In sum, the Ninth Circuit affirmed the district court’s holding that the Fleet Rules were valid as applied to state and local entities, but remanded to the district court for determination of whether the CAA preempted other provisions of the rules.


[1] The District is a political subdivision of the State of California that manages air pollution in the South Coast Air Basin. The South Coast Air Basin encompasses the City of Los Angeles and surrounding areas, and is the only area in the United States classified as an “extreme nonattainment area” for ozone, as well as being one of only five areas designated as a “serious nonattainment area” for small particulate matter. Engine Mfrs. Ass’n v. S. Coast Air Quality Mgmt. Dist.(Engine Mfrs.), 498 F.3d 1031, 1035 (9th Cir. 2007).

[2] 42 U.S.C. §§ 7401-7671q (2000).

[3]Engine Mfrs., 498 F.3d at 1038.

[4] Engine Mfrs. Ass’n v. S. Coast Air Quality Mgmt. Dist., 541 U.S. 246, 259 (2004).

[5]Id. at 258-59.

[6]See 42 U.S.C. § 7507 (2000)(providing that other states may adopt the standards promulgated by California, but only if the other states’ standards are “identical” to California’s);id. § 7543(a) (“No State or any political subdivision thereof shall adopt or attempt to enforce any standard relating to the control of emissions from new motor vehicles or new motor vehicle engines subject to this part.”).

[7]Engine Mfrs.,498 F.3d at 1040; see, e.g., Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 809-10 (1976)(holding that Maryland did not violate the Commerce Clause by favoring in-state processors of scrap metal).

[8] Exxon Mobil Corp. v. U.S. Envtl. Prot. Agency, 217 F.3d 1246, 1255 (9th Cir. 2000)(emphasis omitted).

[9] 42 U.S.C. § 7401(a)(3) (2000).

[10]See id. § 7507.

[11]Engine Mfrs.. 498 F.3d at 1043-44.

[12]Swan v. Peterson,6 F.3d 1373, 1383 (9th Cir. 1993)(“Generally, we do not consider on appeal an issue raised only by an amicus.”).

[13] 891 F.2d 719 (9th Cir. 1989).

[14]Engine Mfrs., 498 F.3d at 1044(quoting Associated Gen. Contractors v. Metro. Water Dist.,159 F.3d 1178, 1184 (9th Cir. 1998).

[15] 50 U.S. 218 (1993).

[16]Id. at 231.

[17]Engine Mfrs., 498 F.3d at 1044(citing 42 U.S.C. § 7586(d) (2000)).

[18]Id.

[19]Id. at 1045.

[20] 463 F.3d 1076 (9th Cir. 2006).

[21]Id. at 1084(adopting the Fifth Circuit’s analysis in Cardinal Towing & Auto Repair, Inc. v. City of Bedford, 180 F.3d 686 (5th Cir. 1999)).

[22]Engine Mfrs., 498 F.3d at 1045.

[23]Id.

[24]Id. at 1046.

[25]Id. at 1047.

[26] 952 F.2d 1173 (9th Cir. 1992).

[27]Id. at 1180.

[28]Engine Mfrs., 498 F.3d at 1048.

[29]Cf. Reeves, Inc. v. Stake, 447 U.S. 429, 437 (1980)(holding that South Dakota, operating in its capacity as a cement seller, could legally discriminate by selling only to in-state users during a time of shortage).

[30] United States v. Salerno, 481 U.S. 739 (1987).

[31] Nat’l Collegiate Athletic Ass’n v. Miller, 10 F.3d 633, 640 (9th Cir. 1993).

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