(Reuters) - Volkswagen is fighting fiercely to limit additional liability for its emissions cheating scandal. On Tuesday, the company filed a brief in the litigation consolidated in San Francisco federal court, arguing that suits brought by 14 state attorneys general should remain in federal court instead of being transferred back to state courts where the AGs would be litigating with a home field advantage.
In January, the state AGs asked U.S. District Judge Charles Breyer of San Francisco to remand their suits to state court, where the cases were originally filed. (Volkswagen removed the AGs’ suits to federal court, then had them transferred to the multidistrict litigation before Judge Breyer.) The AGs filed two separate briefs, one on behalf of states that have adopted California’s emissions standards under a provision of the Clean Air Act and another for states with laws based on the federal standard.
The AGs’ briefs assert slightly different arguments but essentially contend that state officials suing to enforce only state laws ought to be allowed to do so in state court. According to the states, the U.S. Supreme Court has explicitly restricted federal court jurisdiction over state court suits, most notably in 2005’s Grable v. Darue and 2013’s Gunn v. Minton. Under the states’ reading of Grable and Gunn, their cases belong in state court because they arise under state law, not federal law; do not implicate disputes over federal law; and do not raise substantial federal questions. Keeping the cases in federal court, the state AGs said, would disrupt the balance between state and federal interests – just what the Supreme Court intended to prohibit in the Grable case.
Volkswagen’s new brief, as you would expect, argues precisely the opposite: Remanding the AG cases to state court, argued VW’s lawyers at Sullivan & Cromwell, is what would disrupt the balance of state and federal interests. Through its authority to regulate vehicle emissions, VW said, the federal government has an “extraordinarily strong … interest in setting standardized rules for new-vehicle emissions, to avoid the muddled thicket of regulation and enforcement that would result if each state unilaterally set and enforced its own standards.” Allowing the states to litigate in 14 different state courts rather than before Judge Breyer would “inject chaos into the congressionally-mandated national system for regulating new-vehicle emissions.”
But lest you think VW is only looking out for the interests of the Environmental Protection Agency, the brief also includes a very telling discussion of the other relief the states are seeking: money damages for each of the diesel vehicles equipped with devices designed to cheat emissions tests. VW’s view is that it has already agreed to pay a penalty for those defeat devices via its settlements with the EPA and the California Air Resources Board. It does not believe it should now face state AGs’ demands for “massive monetary penalties” on top of the billions of dollars it has pledged to federal and California officials.
“The states’ demands (are not) based on the sort of reasoned, detailed policy published by the EPA to guide its exercise of discretion in determining an appropriate penalty,” the VW brief said. “Put simply, the states are shooting from the hip.”
VW has some case law on its side, mostly involving state AG suits implicating federal regulations on pharmaceutical companies and healthcare providers. The state AGs point to more specific precedent from New Jersey federal district judge Jose Linares, who ruled last year that the New Jersey AG’s pollution and consumer suit against Volkswagen did not raise federal issues and belongs in state court. (The New Jersey case was remanded to state court before cases against VW were consolidated before Judge Breyer.)
The VW case is, of course, its own unique animal. But it’s worth paying attention to what Judge Breyer says about states’ rights to enforce their own anti-pollution and pro-consumer laws. The Trump administration has made clear its lack of enthusiasm for environmental regulation, which may well mean that state AGs assume the mantle of enforcing anti-pollution laws, suing under state provisions modeled on federal standards. The power to sue in state court is one I’m sure the AGs want to preserve.