Volkswagen defeats IL's $1B lawsuit over emissions cheating; judge says fed law doesn't permit state action

By Scott Holland | Jun 8, 2018

Saying federal law does not allow the lawsuit to continue, a Cook County judge has dismissed a legal action, potentially worth $1 billion, the Illinois Attorney General’s office had brought against Volkswagen over technology designed to cheat emissions testing systems.

From the 2009 to 2016 model years, Volkswagen allegedly violated the Clean Air Act by marketing “clean diesel” engine cars that still function as high-performance automobiles. The company installed “defeat” devices to bypass fuel emissions controls only when being tested for compliance, because the system led to hardware failures as particulate matter clogged and broke filters. When being driven normally, nitrogen oxide emissions exceeded state and federal limits.

Further, according to Cook County Judge Kathleen M. Pantle’s June 5 opinion, Volkswagen “falsified their applications for Certificates of Conformity from the Environmental Protection Agency and executive orders from California Air Resource Board.”

In moving to dismiss Attorney General Lisa Madigan’s complaint, Volkswagen said Illinois’ claims are pre-empted by the federal Clean Air Act. Pantle noted that two years after establishing federal emissions regulations, Congress pre-empted states from adopting their own, although it did preserve states’ rights to enforce vehicle restrictions, such as carpool lanes, use limits in densely populated areas and controls on extended vehicle idling.

Robert Giuffra  

A key plank of Volkswagen’s argument is that it installed the defeat devices during vehicle assembly, arguing laws apply differently to illegal tampering after a car is purchased and registered in a given jurisdiction. Allowing states to bring litigation would open up redundant investigations and enforcement, which Pantle said federal supremacy rules are intended to subdue.

“The EPA has already investigated (Volkswagen) and negotiated civil consent decrees and a guilty plea, in which billions of dollars have been given to the states to mitigate the damage,” she wrote, detailing dismissals of similar litigation in several other states where judges determined the Clean Air Act took precedence.

Illinois also said Volkswagen violated the Illinois Pollution Control Board’s Mobile Source Regulations, but the carmaker again said the Clean Air Act pre-empts claims based on software updates or field fixes. Again citing precedent from other jurisdictions, Pantle parsed the distinction between the EPA enforcing emission standards on a model-wide basis and state and local governments enforcing standards on individual cars and their owners.

While Pantle did agree with Illinois that aftermarket software patches could be subject to state-level tampering litigation, she also noted it is essential to consider whether Congress intended its legislation to fully cover the material issue. And since Volkswagen’s conduct was spread across the entire model field to conceal design-level fraud, it can’t be compared to a mechanic or car owner making illegal tweaks to individual vehicles.

Further, as EPA emissions standards apply to vehicles not just at the time of manufacture, but during their “useful life,” the weight of federal regulations isn’t lifted after a vehicle is sold or put into use. The EPA has the power to recall vehicles if it can show widespread emissions failures across a model line and is empowered to inspect emissions testing records and observe vehicle manufacturing plants before and after end user sales.

Illinois had sought $50,000 civil penalties per violation, as well as $10,000 daily civil penalties over a period of multiple years. Factoring in allegations that Volkswagen sold more than 19,000 vehicles with the alleged defeat devices in Illinois, the company faced the possibility of at least $1 billion in damages.

Pantle dismissed both of Illinois’ counts with prejudice.

Responding to the decision, Volkswagen spokesperson Jeannine Ginivan released a statement, saying: “Volkswagen welcomes the Court’s decision to dismiss all claims brought by Illinois and will continue to seek the dismissal of similar state and local environmental claims as preempted by federal law."

Volkswagen still faces litigation in several states, with motions to dismiss pending in Missouri, Montana, New Mexico and Ohio.

Volkswagen’s defense team included a legal team led by attorneys Robert Giuffra and David Rein, of Sullivan & Cromwell LLP, of New York. Attorneys Sharon Nelles, Matthew Schwartz and Judd Littleton also served as counsel to Volkswagen.

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