Court News Ohio
Court News Ohio
Court News Ohio

State Can Pursue Volkswagen for Emission-Control Tampering Scandal

Image of the blue and white V W logo of Volkswagen

Today's Ohio Supreme Court decision allows the state to pursue claims on a portion of the estimated 14,000 vehicles sold or leased in the state in 2016.

Image of the blue and white V W logo of Volkswagen

Today's Ohio Supreme Court decision allows the state to pursue claims on a portion of the estimated 14,000 vehicles sold or leased in the state in 2016.

Although Volkswagen agreed to a federal settlement over its manipulation of emissions-control systems, federal law does not prevent Ohio from invoking state law to sue the carmaker for tampering with the systems, the Ohio Supreme Court ruled today.

A divided Supreme Court ruled the federal Clean Air Act does not preempt Ohio from invoking its anti-tampering law when it comes to efforts Volkswagen made to defeat pollution control standards. The decision allows the state to pursue claims on a portion of the estimated 14,000 vehicles sold or leased in the state identified in 2016.

Writing for the Court majority, Justice Patrick F. Fischer stated the federal government, through the U.S. Environmental Protection Agency, has exclusive authority to sanction Volkswagen for any emission violations from new vehicles and new engines, but the federal law does not exclude state oversight after a vehicle or engine is sold.

Justice Fischer noted that Ohio’s law, R.C. 3704.16(C)(3), does not create or adopt any emission-control standards and only applies to tampering that takes place after a vehicle has been sold or rented.

Justices R. Patrick DeWine and Melody J. Stewart joined Justice Fischer’s opinion. Fifth District Court of Appeals Judge Patricia A. Delaney, sitting for Justice Jennifer Brunner, also joined Justice Fischer’s opinion.

Chief Justice Maureen O’Connor and Justice Sharon L. Kennedy concurred in judgment only.

In a dissenting opinion, Justice Michael P. Donnelly noted Ohio already received $75 million as part of a nationwide settlement with Volkswagen and today’s ruling allows the state attorney general to pursue up to $1 trillion in fines from the carmaker for the same federally governed misconduct. He wrote the federal law preempts state and local lawsuits that threaten to bankrupt automakers over violations that the U.S. EPA has already sanctioned because those suits interfere with U.S. EPA’s ability to reach settlements that bring polluters into compliance with the Clean Air Act.

‘Defeat Devices’ Detected
Around 2009, the Volkswagen line of vehicles sold in the United States were fitted with software that allowed the vehicles to perform better than they otherwise would have on federal emissions tests for excess pollutants. The software, sometimes called “defeat devices,” would identify when a Volkswagen, or another line of its vehicles such as an Audi or Porsche, was being tested by regulators for compliance with emission standards. Once the defeat device detected an emissions test, the software would trigger the vehicle to reduce its emissions to an acceptable level. Under non-test conditions – such as when driven by owners -- the vehicle would revert to emitting pollutants well above federal limits.

In the midst of the scheme, Volkswagen learned the emission-control software was causing certain performance issues with its vehicles, and the company updated the software to fix the problem while continuing to skirt the federal emission standards. Around 2013, it installed updated software for vehicles to sell in the United States. Without telling customers about the defeat device, the carmaker used a voluntary recall program to update the old software when owners brought in vehicles for routine maintenance.

The U.S. EPA eventually uncovered the scheme, and Volkswagen agreed to pay a $2.8 billion penalty in connection with its wrongdoing and took other measures to resolve customer disputes.

State Seeks Sanctions
In 2016, the Ohio attorney general sued Volkswagen, alleging the company violated Ohio’s Air Pollution Control Act. Volkswagen requested that the Franklin County Common Pleas Court dismiss the case, claiming the federal Clean Air Act, 42 U.S.C. 7401 et seq., preempted state law and prevented the state from suing the manufacturer for air pollution violations. The trial court agreed with Volkswagen.

The attorney general appealed to the Tenth District Court of Appeals, noting the distinction between new and used vehicles. The Tenth District agreed with the attorney general that the state law applies to vehicles that were tampered with after Volkswagen sold them.

Volkswagen appealed to the Supreme Court, which agreed to hear the case.

Supreme Court Considered Exemption Rules
Justice Fischer explained the “supremacy clause” in the U.S. Constitution gives Congress the power to preempt state law. Congress either expressly preempts state law by including language in statutes indicating the intention to apply only federal law, or preemption is implied, which requires courts to determine congressional intent.

The majority opinion noted there are two general types of implied preemption. One is “field preemption,” where federal legislation and regulation is “so pervasive” that Congress left no room for states to supplement the law, or the federal role is so dominant that the federal system is assumed to preclude states from enacting laws on the same subject.

The second is “conflict preemption,” where state and federal laws on the same topic actually conflict, the opinion explained. Conflict preemption occurs when compliance with both federal and state law is impossible, or when state law “stands as an obstacle to the accomplishment and execution of the full purpose and objectives of Congress,” the Court noted.

Clean Air Act Preemption Provisions Examined
A provision of the federal Clean Air Act prevents state or local governments from adopting and enforcing any standard related to the control of emissions from new motor vehicles or motor engines. Volkswagen argued this provision prevents the states from “regulating anything relating to a vehicle’s emission-control systems in any way, including post-sale tampering by the manufacturer,” the opinion stated.

The Court majority noted that Congress limited the scope of its preemption to only new vehicles and motors, and included definitions in the law to make it clear “new” meant before the first purchase was made by someone “for the purpose other than resale.” Taken together, the law indicates that after the vehicle or motor is sold, the express-preemption clause no longer applies, the Court stated.

Ohio’s law states that no person shall knowingly tamper with the emissions-control system on a motor vehicle “after sale, lease, or rental” of the vehicle. The Court rejected the company’s argument that the federal law expressly preempted Ohio from enforcing its anti-tampering law.

The company also maintained the Clean Air Act implied that state law on emission controls is preempted because R.C. 3704.16(C)(3) stands as an obstacle to the federal government’s ability to ensure compliance with vehicle-emission standards. The state law also interferes with the U.S. EPA’s ability to bring and resolve enforcement actions, Volkswagen maintained.

The majority opinion noted that the Ohio law is not an obstacle with compliance because R.C. 3704.16(C)(3) states there is no violation for tampering when actions are “taken for the purpose of repair or replacement of the emission control system” when the purpose is to bring the system into compliance with federal law.

“The bottom line here is that as long as Volkswagen complies with, rather than circumvents, federal law it will have nothing to worry about in Ohio regarding actions brought under R.C. 3704.16(C)(3),” the opinion stated. “By definition, under these circumstances, there is no conflict between the relevant federal and state statutes or any obstacle to Congress’s objectives.”

The Court also noted that because the company may incur penalties under both federal and state law, it does not mean the state law is an obstacle to the federal government’s ability to enforce the Clean Air Act.

The case was remanded to Franklin County Common Pleas Court for further proceedings.

State’s Lawsuit an Obstacle to Enforcement of Federal Law, Dissent Maintained
In his dissent, Justice Donnelly noted the U.S. EPA carefully crafted a multi-billion-dollar penalty for Volkswagen’s nationwide pre- and post-sale tampering “that balanced financial and environmental factors.” He maintained the state attorney general’s decision to seek an additional judgment that could total more than $1 trillion for the exact same post-sale tampering in Ohio “involves nothing more than the attorney general’s disagreement” with the federal penalty.

The power to impose civil penalties is the EPA’s “central enforcement mechanism,” the dissenting opinion noted, and if state and local governments threaten to add additional penalties for the same federally-governed misconduct, it compromises the federal government’s ability to craft settlements. Additional state sanctions could cause a manufacturer to declare bankruptcy and not pay the penalties, or have the wider effect of “wiping out a large swath of jobs” in the U.S. auto industry, the opinion stated.

Justice Donnelly wrote that if state and local governments can sue the carmaker based on admissions made when settling civil suits with the EPA, the manufacturers will be deterred from making admissions, which will reduce EPA’s ability to receive the cooperation of manufacturers in enforcing pollution laws. The opinion maintained that courts in Alabama, Minnesota, and Tennessee have concluded that anti-tampering laws in those states conflicted with the Clean Air Act, and Ohio should follow their course.

2020-0092. State ex rel. Yost v. Volkswagen Aktiengesellschaft, Slip Opinion No. 2021-Ohio-2121.

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