No. 07-4342-CV CONSOLIDATED WITH NO. 07-4360-CV
United States Court of Appeals
for the Second Circuit
GREEN MOUNTAIN CHRYSLER PLYMOUTH DODGE JEEP; GREEN MOUNTAIN FORD
MERCURY; JOE TORNABENE’S GMC; ALLIANCE OF AUTOMOBILE
MANUFACTURERS; DAIMLERCHRYSLER CORPORATION;
AND GENERAL MOTORS CORPORATION,
PLAINTIFFS-APPELLANTS,
ASSOCIATION OF INTERNATIONAL AUTOMOBILE MANUFACTURERS,
PLAINTIFF-APPELLANT,
v.
GEORGE CROMBIE, SECRETARY OF THE VERMONT AGENCY OF NATURAL RESOURCES;
JEFFREY WENNBERG, COMMISSIONER OF THE VERMONT DEPARTMENT OF ENVIRONMENTAL
CONSERVATION; AND RICHARD VALENTINETTI, DIRECTOR OF THE AIR POLLUTION CONTROL
DIVISION OF THE VERMONT DEPARTMENT OF ENVIRONMENTAL CONSERVATION,
DEFENDANTS-APPELLEES,
CONSERVATION LAW FOUNDATION; ENVIRONMENTAL DEFENSE; NATURAL
RESOURCES DEFENSE COUNCIL; SIERRA CLUB; VERMONT PUBLIC INTEREST
RESEARCH GROUP; STATE OF NEW YORK; AND DENISE M. SHEEHAN, IN HER OFFICIAL
CAPACITY AS COMMISSIONER OF ENVIRONMENTAL CONSERVATION OF THE STATE OF NEW YORK,
DEFENDANTS-INTERVENORS-APPELLEES.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF VERMONT
THE HON. WILLIAM J. SESSIONS, III, PRESIDING DISTRICT COURT CASE NO. 02:05-CV-302
BRIEF OF AMICUS CURIAE NATIONAL AUTOMOBILE DEALERS
ASSOCIATION (NADA) SUPPORTING PLAINTIFFS-APPELLANTS
AND URGING REVERSAL
ANDREW D. KOBLENZ JONATHAN S. MASSEY, P.C.
DOUGLAS I. GREENHAUS 7504 Oldchester Road
National Automobile Dealers Association Bethesda, MD 20817
8400 Westpark Drive ph. (301) 915-0990
McLean, VA 22102 fax (301) 915-0991
Dated: March 21, 2008
i
CORPORATE DISCLOSURE STATEMENT
Pursuant to Federal Rule of Appellate Procedure 26.1, Amicus Curiae
National Automobile Dealers Association (NADA) hereby states that it is a
not-for-profit trade association, that it has no corporate parent company, and
that it does not issue stock.
Respectfully submitted.
ANDREW D. KOBLENZ JONATHAN S. MASSEY, P.C.
DOUGLAS I. GREENHAUS 7504 Oldchester Road
National Automobile Dealers Bethesda, MD 20817
Association ph. (301) 915-0990
8400 Westpark Drive fax (301) 915-0991
McLean, VA 22102
Dated: March 21, 2008
i
TABLE OF CONTENTS
CORPORATE DISCLOSURE STATEMENT ........................................................ i
TABLE OF AUTHORITIES .................................................................................. iv
BRIEF OF AMICUS CURIAE NATIONAL AUTOMOBILE
DEALERS ASSOCIATION SUPPORTING PLAINTIFFS-
APPELLANTS AND URGING REVERSAL .............................................. 1
STATEMENT OF CONSENT ................................................................................ 1
STATEMENT OF INTEREST ................................................................................ 1
INTRODUCTION AND SUMMARY OF ARGUMENT ...................................... 2
ARGUMENT ........................................................................................................... 6
I. ANY REGULATION THAT DOES NOT RESPECT
CONSUMER CHOICES WILL FAIL AND WILL
DISRUPT NATIONAL MOTOR VEHICLE
MARKETS. ......................................................................................... 6
A. The Regulation Must Respect Market Choices. ....................... 6
B. The Vermont GHG Rule Threatens To Destroy
National Uniformity In Regulation Of Motor
Vehicle Fuel Economy. ............................................................. 9
II. THE DISTRICT IMPROPERLY RE-BALANCED THE
FACTORS CONSIDERED BY NHTSA UNDER EPCA.
............................................................................................................ 11
A. EPCA Makes Fuel Economy An Exclusively
Federal Concern. ..................................................................... 11
B. The Vermont GHG Regulation Upsets The
Balance Struck By NHTSA. ................................................... 14
ii
C. The District Court’s Analysis of the Economic
Impact of the Regulation Was Legally Flawed. ..................... 17
1. The Regulation Threatens To Disrupt The
Supply of New Vehicles On Which Dealers
Depend. ......................................................................... 17
2. The District Court’s Approach Was
Improper. ...................................................................... 20
3. The District Court’s Own Finding of
Economic Hardship Demonstrated Conflict
Preemption. ................................................................... 25
CONCLUSION ...................................................................................................... 28
CERTIFICATE OF COMPLIANCE ..................................................................... 29
ANTI-VIRUS CERTIFICATION FORM ............................................................... 30
CERTIFICATE OF SERVICE .............................................................................. 31
iii
TABLE OF AUTHORITIES
CASES:
Arnett v. Kennedy,
416 U.S. 134 (1974) ........................................................................................ 3
Center for Auto Safety v. National Highway Traffic Safety Admin.,
793 F.2d 1322 (D.C. Cir. 1986) .................................................................... 12
Competitive Enter. Inst. v. NHTSA,
901 F.2d 107 (D.C. Cir. 1990) ................................................................ 12, 13
Geier v. Am. Honda Motor Co.,
529 U.S. 861 (2000) ........................................................................................ 9
Marsh v. Oregon Natural Resources Council,
490 U.S. 360 (1989) ...................................................................................... 21
Massachusetts v. E.P.A.,
127 S.Ct. 1438 (2007) ............................................................................. 21, 22
Mistretta v. U.S.,
488 U.S. 361 (1989) ................................................................................ 14-15
Pub. Citizen v. NHTSA,
848 F.2d 256 (D.C. Cir. 1988) .................................................... 14, 20-21, 26
iv
CODES, RULES AND REGULATIONS:
1975 U.S.C.C.A.N. 1762 ......................................................................................... 12
49 U.S.C. §§ 32901 et seq. ........................................................................................ 2
49 U.S.C. § 32902(f) .......................................................................................... 11-12
49 U.S.C. § 32919 .................................................................................................... 12
Federal Rule of Appellate Procedure 26.1.................................................................. i
Federal Rule of Appellate Procedure 29(a) ............................................................... 1
12-031-001 Vt. Code R. 5-1101(f) .......................................................................... 10
50 Fed. Reg. 40528, 40546 (1985) .......................................................................... 13
68 Fed. Reg. 52922, 52925 (Sept. 8, 2003) ............................................................. 17
70 Fed. Reg. 51414, 51457 (Aug. 30, 2005) ..................................................... 16, 17
71 Fed. Reg. 17,566 ........................................................................................... 15, 26
71 Fed. Reg. 17,580 ................................................................................................. 23
71 Fed. Reg. 17,631 ................................................................................................. 27
71 Fed. Reg. 17,632-33 ............................................................................................ 28
71 Fed. Reg. 17,669 (April 6, 2006) .................................................................. 15, 16
71 Fed. Reg. 17,668 ................................................................................................. 16
S. Rep. No. 94-179, 25 (1975) ................................................................................... 9
S. Rep. No. 94-516 at 154, 1975 U.S.C.C.A.N. at 1996 ................................... 12, 22
v
BRIEF OF AMICUS CURIAE NATIONAL AUTOMOBILE
DEALERS ASSOCIATION SUPPORTING PLAINTIFFS-
APPELLANTS AND URGING REVERSAL
STATEMENT OF CONSENT
Pursuant to Federal Rule of Appellate Procedure 29(a), the National
Automobile Dealers Association (NADA) respectfully submits this brief
amicus curiae with the consent of Plaintiffs-Appellants. Defendants-
Appellees and Defendants-Intervenors-Appellees have stated that they do
not oppose the filing of this brief.
STATEMENT OF INTEREST
NADA represents 20,000 franchised automobile and truck dealers
who sell new and used motor vehicles and engage in service, repair and parts
sales. Together they employ more than 1.3 million people nationwide, yet a
significant number are small businesses as defined by the Small Business
Administration.
NADA’s nationwide perspective will allow it to provide useful
assistance to this Court regarding the important questions presented.
NADA has a vital interest in these consolidated appeals because the District
Court’s ruling with respect to Vermont’s greenhouse gas “(“GHG”)
regulation could have a severe economic impact on automobile dealers
across the United States.
1
INTRODUCTION AND SUMMARY OF ARGUMENT
The District Court erred by failing to enforce the express preemption
provision of the Energy Policy and Conservation Act of 1975 (“EPCA”), as
amended, 49 U.S.C. §§ 32901 et seq. The District Court should have
recognized that EPCA makes the regulation of motor vehicle fuel economy
an exclusively federal responsibility. Congress has assigned the National
Highway Traffic Safety Administration (“NHTSA”) the duty of
promulgating national fuel economy standards, and the Vermont GHG
regulation improperly interferes with the federal scheme.
1. NADA strongly supports the views of Plaintiffs-Appellants on
ripeness and urges this Court to resolve the question of federal preemption
regardless of EPA’s denial of California’s waiver request under the Clean
Air Act. The shadow cast by the potential for the Vermont GHG regulation
has tangible effects on dealers and automakers nationwide. A Vermont auto
dealer testified in the District Court that the mere prospect of the GHG
regulation injures dealers by reducing the value of their franchises. 1 Such
1
4/12/07 Tr. 110 (“It puts a cloud over what the future could be.
Hence, it’s going to affect the value of the business.”) (testimony of Ronald
Carpenter, owner of Green Mountain Chrysler-Plymouth-Dodge and Green
Mountain Ford Mercury); 4/12/07 Tr. 120 (“Right now it is affecting the
value of the business and it's affecting the environment. I mean, you know,
you are going to have people that are going to be interested in buying
dealerships -- not going to be interested in buying dealerships in Vermont.
2
economic hardship demonstrates that this controversy remains ripe. After
all, “the value of a sword of Damocles is that it hangs -- not that it drops.”
Arnett v. Kennedy, 416 U.S. 134, 231 (1974) (Marshall, J., dissenting).
2. The Vermont GHG regulation, as well as the District Court’s
decision upholding it, ignores critical issues of consumer choice and market
realities. Many consumers seek vehicles with improved fuel economy, and
manufacturers and dealers have every incentive to meet that demand.
Dealerships recognize the increasing importance of fuel economy as a
purchase consideration, recognize the critical need to enhance energy
security, and recognize the increasing level of concern with respect to CO2
and other GHG emissions. Consequently, NADA is fully engaged in efforts
to assist dealerships with improving the energy efficiency of their facilities
and operations and educating customers on how to maximize the fuel
efficiency of the vehicles they operate.
But more than any other retail sector, new motor vehicle sales reflect
our consumer-driven economy. There are wide variations in consumer
preferences, which translate into different vehicle mixes in different states.
Throughout the United States, many dealerships today now sell more vans,
sport utility vehicles (“SUVs”), and pick-up trucks than passenger cars.
They'll go to a state where they don't have these regulations.”) (Carpenter
testimony).
3
Long-term purchasing trends have favored larger and more powerful light
trucks consistent with the capability, performance, utility, and durability
they offer and American motorists demand. There is also increasing demand
for sport wagons and “cross-overs” that offer truck-like towing, all-wheel
drive-trains, and car-like suspensions.
Any regulatory approach that fails to allow dealers and manufacturers
to respond to consumer choices would be devastating for the industry and
consumers alike. Indeed, any governmental requirement ultimately will fail
if it does not respect the needs and preferences of consumers, and the ability
of market mechanisms to meet those needs. If the Vermont GHG regulation
produces a vehicle mix that consumers reject, they will either will retain
older vehicles with lower fuel efficiencies (rather than buy newer vehicles
that do not meet their needs and desires) or travel out-of-state to purchase
vehicles in jurisdictions not governed by GHG regulations. These
alternatives are inefficient and would negate the claimed benefits of the
GHG regulation.
3. The District Court also erred by second-guessing NHTSA and
effectively re-balancing the factors assigned by Congress for the agency to
consider. Indeed, far from giving NHTSA’s analysis proper weight, the
District Court never even mentioned it.
4
Critical among the factors assigned to NHTSA is the criterion of
“economic practicability.” The Vermont GHG regulation would require
vehicle manufacturers to meet fleet average emission requirements for
passenger cars and small light trucks and for larger light trucks on a phased-
in schedule starting in 2009 and extending through 2016. Since model year
2010 begins in calendar year 2009, model year 2011 in calendar year 2010,
and so on, adequate lead time for compliance is critical. Yet the Vermont
GHG regulation, like the California rule on which it is based, does not
provide sufficient lead time for motor vehicle manufacturers to comply
with the increased fuel economy standards.
The regulation will result in constraints on motor vehicle product
availability and therefore will inflict significant economic damage on
dealers. Manufacturers may be forced to reduce the delivery of certain
models during any given model year or even to stop selling certain models in
states governed by the GHG regulation. Indeed, there was ample evidence
in this case that the regulation could ultimately force some manufacturers to
stop selling in those states altogether. Restrictions in supply would be
devastating for dealerships and their employees, whose livelihoods
depend on a timely availability of motor vehicles necessary to meet expected
consumer demand.
5
The Vermont GHG regulation will also lead to significant increases in
motor vehicle prices and cause dealers further economic hardship. The
District Court acknowledged that the California GHG regulation on which
the Vermont rule is based will lead to price increases of $1,500.00 per
vehicle and will depress sales by almost 5%. Such adverse impacts will
trigger layoffs in dealer workforces and may help to drive some dealerships
out of business. Dealers already face difficult economic conditions and are
experiencing a wave of consolidations. In the past two years, the number of
dealerships in the U.S. has dropped by 439 – nearly 2%. The Vermont GHG
regulations will accelerate this trend and result in additional losses of local
jobs and businesses.
ARGUMENT
I. ANY REGULATION THAT DOES NOT RESPECT
CONSUMER CHOICES WILL FAIL AND WILL DISRUPT
NATIONAL MOTOR VEHICLE MARKETS.
A. The Regulation Must Respect Market Choices.
The District Court upheld the Vermont GHG regulation in part on the
ground that it would deliver consumers what they wanted in terms of fuel
economy and gasoline savings. 508 F. Supp.2d at 390. The Court
speculated that “it is possible-even likely-that economic models do not fully
capture the motivations of today's customers. . . . [T]his may be the first time
6
in history where consumers are choosing their cars on the basis of a desire to
do good.” Id. at 387. “[I]t is possible that consumer preferences and
competition to meet them, rather than regulation, will drive manufacturers
toward more fuel-efficient vehicles, or even smaller vehicles.” Id. at 366.
To be sure, many consumers do want improved fuel economy, and
manufacturers and dealers have every incentive to meet that demand.
Consumers largely dictate the performance and features of the vehicles
marketed to them, and the level of vehicle emissions directly reflects
consumer-driven product trends and demands, up-to-date manufacturer
production plans, and the practicality and feasibility of implementing new
technologies.
Thus, maximum feasible fuel economy levels are essentially a
function of consumer demand. Manufacturers and dealers have responded to
that demand. Motor vehicle fuel efficiency has risen dramatically since the
mid-1980s. For example, the largest SUV sold today has the same fuel
economy as a mid-1970s small car, yet emits one-tenth the pollution and
provides important safety improvements as well as drivability, performance,
and convenience features.
But if the District Court were right that fuel economy is the overriding
concern of new vehicle purchasers, the industry would already have
7
responded to that demand. The fact is that consumers have a host of
preferences, and for many fuel economy still ranks below such purchase
considerations as capacity, convenience, utility, performance, durability, and
price. In 2006, for the fifth year in a row, pickup trucks, minivans, vans, and
SUVs outsold passenger cars nationwide. 2 In Vermont, 59% of new car
registrations were light trucks, and only 41% passenger cars. 3 Many
consumers in Vermont purchase vehicles based on their drivability in winter
weather. Businesses, such as farmers and contractors, purchase light trucks
for utility and durability. Families often choose vans and SUVs. Four- and
all-wheel drive options are popular for off-road commercial and recreational
use and for on-road handling benefits. Moreover, even at today’s fuel
prices, consumers who view fuel economy as an important purchase
criterion are hard pressed to make the case for buying a more fuel efficient
vehicle if the up-front capital costs associated with doing so cannot be
recouped in short order.
Any GHG regulation that fails to respect market choices will fail.
Consumers will simply hold on to their old vehicles, resulting in a net
decrease in fuel economy, as well as higher levels of pollutants and reduced
2
www.autochoice.org.
3
Id.
8
vehicle safety. Alternatively, consumers might choose to travel outside
Vermont to states not governed by the GHG regulation in order to purchase
new vehicles.
Such out-of-state sales entail needless additional costs and create
inefficiencies. Local customers should be served by local dealers. They
should not be required to travel potentially great distances in order to find
the vehicle they want. The disruptive effects of the Vermont GHG
regulation confirm the need for national regulation of fuel economy.
B. The Vermont GHG Rule Threatens To Destroy National
Uniformity In Regulation Of Motor Vehicle Fuel Economy.
Congress established national uniform fuel economy standards “[i]n
order to avoid any manufacturer being required to comply with differing
State and local regulations with respect to automobile or light-duty truck fuel
economy.” S. Rep. No. 94-179, 25 (1975). The federal CAFE program
administered by NHTSA is nationwide. For example, a manufacturer need
not comply with the current 27.5 mpg standard for passenger cars in every
state in which it sells cars, so long as its nationwide fleet achieves that
standard.
The Vermont GHG regulation defeats the important national interest
in uniform regulation of motor vehicle fuel economy. Cf. Geier v. Am.
Honda Motor Co., 529 U.S. 861, 871 (2000) (preemption provision in
9
National Traffic & Motor Vehicle Safety Act reflected desire to set uniform
federal safety standards).
Unlike the federal CAFE program, the Vermont GHG regulation
would impose fuel economy requirements at the state level. The rule
requires calculation of fleet average emissions based on “all new vehicles
delivered for sale or lease in Vermont in any model-year.” 12-031-001 Vt.
Code R. 5-1101(f) (emphasis added). Manufacturers would be required to
meet the fuel economy standards in the Vermont market, with no possibility
of offsetting vehicles sold in other states. Such a task is daunting. Not only
is the Vermont market small, but consumers there have expressed a strong
preference for winter weather handling and other driving features in addition
to fuel economy. As noted above, sales of light trucks in Vermont exceed
those of passenger cars.
The state-by-state nature of GHG regulations increases the burdens on
dealers and manufacturers and heightens the danger of product restrictions.
For example, dealers accustomed to freely trading new cars across state lines
for sale in different markets will be faced with a new and burdensome
regulatory regime. Sales of certain vehicle models could well be restricted
by the GHG regulation.
10
Hence, the District Court’s judgment creates the very real possibility
of a Balkanized market. The prospect of a patchwork of different
requirements is inefficient and will create economic distortions – whether in
the form of customers traveling across state lines to buy new vehicles,
manufacturers curtailing supply in the Vermont market, or Vermont dealers
prevented from trading cars with their counterparts in other states.
Automobile dealers have an important interest in national uniformity.
The District Court committed legal error by failing to hold that EPCA makes
the regulation of motor vehicle fuel economy an exclusively federal
responsibility.
II. THE DISTRICT IMPROPERLY RE-BALANCED THE
FACTORS CONSIDERED BY NHTSA UNDER EPCA.
A. EPCA Makes Fuel Economy An Exclusively Federal
Concern.
Under EPCA, the regulation of motor vehicle fuel economy is an
exclusively federal responsibility. EPCA charges NHTSA with the duty to
promulgate national fuel economy standards by balancing several factors:
“When deciding maximum feasible average fuel economy under this section,
the Secretary of Transportation shall consider technological feasibility,
economic practicability, the effect of other motor vehicle standards of the
Government on fuel economy, and the need of the United States to conserve
11
energy.” 49 U.S.C. § 32902(f). Congress protected this federal scheme
from state interference by preempting any state law or regulation “related to
fuel economy standards or average fuel economy standards.” Id. at § 32919.
The EPCA Senate Conference Report stressed the need for NHTSA to
focus on the economic impact of fuel economy rules:
[T]he Secretary must weigh the benefits to the nation of a
higher average fuel economy standard against the difficulties of
individual automobile manufacturers. Such difficulties,
however, should be given appropriate weight in setting the
standard in light of the small number of domestic automobile
manufacturers that currently exist, and the possible implications
for the national economy and for reduced competition
association with a severe strain on any manufacturer.
S. Rep. No. 94-516 at 154, 1975 U.S.C.C.A.N. at 1996. Congress was also
concerned that fuel economy standards avoid either “imposing impossible
burdens or unduly limiting consumer choice as to capacity and performance
of motor vehicles.” H. Rep. No. 94-340, 87 (1975), 1975 U.S.C.C.A.N.
1762.
“Congress did not prescribe a precise formula by which NHTSA
should determine the maximally-feasible fuel economy standard, but instead
gave it broad guidelines within which to exercise its discretion.”
Competitive Enter. Inst. v. NHTSA, 901 F.2d 107, 121 (D.C. Cir. 1990); see
also Center for Auto Safety v. National Highway Traffic Safety Admin., 793
F.2d 1322, 1338 (D.C. Cir. 1986) (“the fuel economy standards delegated to
12
NHTSA are to be the product of balancing the benefits of higher fuel
economy levels against the difficulties individual manufacturers would face
in achieving those levels”).
NHTSA has administered the federal scheme with keen appreciation
for the impact of fuel economy rules on the motoring public and the supply
of motor vehicles. Thus, NHTSA exercised its authority to decrease CAFE
standards from the congressional benchmark of 27.5 mpg for passenger
automobiles for model year 1986, 1987, 1988 and 1989, based on large part
on economic concerns. See Competitive Enter. Inst., 901 F.2d at 124. For
example, for model year 1986, the NHTSA determined that the higher
standard set by the statute would not be “economically practicable” because
“any additional efforts by the manufacturers to increase their MY 1986
CAFE would largely be limited to attempts to change product mixes through
increased marketing efforts and/or product restrictions ... [which] could
result in significant adverse economic impacts and restrict consumer choice
to an unreasonable degree. 50 Fed. Reg. 40528, 40546 (1985). NHTSA
balanced this impact against the possible energy saving of the higher fuel
economy standard. It found the maximum yearly impact of the lower (26.0
mpg) standard on U.S. gasoline consumption to be 210 million gallons,
0.3% of annual U.S. gasoline consumption and 0.09% of annual U.S.
13
petroleum consumption. Id. That savings, the agency concluded, was not
commensurate with “potential sales losses to the industry in the hundreds of
thousands, job losses in the tens of thousands, or the unreasonable restriction
of consumer choices.” Id. The D.C. Circuit upheld the NHTSA’s
determination. Pub. Citizen v. NHTSA, 848 F.2d 256, 265 (D.C. Cir. 1988)
(R.B. Ginsburg, J.).
B. The Vermont GHG Regulation Upsets The Balance Struck
By NHTSA.
The Vermont GHG regulation interferes with the authority of NHTSA
to administer the fuel economy scheme established in EPCA. Both NHTSA
and EPA have concluded that state GHG regulations – which are not simply
the equivalent of fuel economy standards, but which in fact are fuel
economy standards – interfere with the federal role assigned to NHTSA.
The Vermont GHG regulation purports to re-balance the very same
factors considered by NHTSA. As the District Court noted, the California
Air Resources Board (“CARB”), in adopting the California rule copied by
Vermont, “examined virtually the same factors that NHTSA examines when
it sets a CAFE standard: technological feasibility and economic impact,
including cost to manufacturers, cost to consumers, and job loss, although its
economic analysis was limited to California.” 508 F. Supp.2d at 338. But
CARB is not a “junior-varsity” NHTSA, Mistretta v. U.S., 488 U.S. 361,
14
427 (1989) (Scalia, J., dissenting), and it is not entitled to second-guess
NHTSA’s determinations. The fact that CARB’s economic analysis was
limited to California – rather than considering job losses nationwide, or job
losses if every state were to adopt the California GHG regulation –
underscores the danger in allowing states to assume exclusively federal
responsibilities.
NHTSA has determined that, in mandating federal fuel economy
standards under EPCA, Congress expressly and impliedly preempted state
requirements limiting CO2 emissions. See NHTSA, Average Fuel Economy
Standards for Light Trucks Model Years 2008-2011, 71 Fed. Reg. 17,566,
17,669 (April 6, 2006). In particular, NHTSA has explained that state
regulation would disrupt the agency’s assigned role in balancing competing
factors in setting fuel economy standards:
It would be inconsistent with the statutory scheme, as
implemented by NHTSA, to allow another governmental entity
to make inconsistent judgments made about how quickly and
how much of that single pool of technology can and should be
required to be installed, consistent with the need to conserve
energy, technological feasibility, economic practicability,
employment, vehicle safety and other relevant concerns.”
Id. “The Vermont GHG regulation would interfere the careful balancing of
various statutory factors and other related considerations, as contemplated in
the conference report on EPCA, we must do in order to establish average
15
fuel economy standards at the maximum feasible level.” Average Fuel
Economy Standards for Light Trucks, 70 Fed. Reg. 51414, 51457 (Aug. 30,
2005). NHTSA has explained that it already sets fuel economy standards at
the maximum feasible level, consistent with competing statutory criteria, so
that any higher fuel economy rules mandated by a state would automatically
upset the federally assigned balance:
Congress expressly listed four analytical, decision guiding
factors in EPCA because fuel economy was not the only value
that Congress sought to protect and promote in the mandating
the setting of CAFE standards. Congress did not want improved
fuel economy to come at the price of adverse effects on sales,
jobs, and consumer choice. Further, in choosing the level of
future CAFE standards, NHTSA has traditionally considered
the potential impact on safety. In selecting the maximum
feasible level, NHTSA strives to set the standards as high as it
can without causing significant adverse consequences for the
manufacturers or consumers. Since NHTSA should not, as a
matter of sound public policy, and in fact may not as a matter of
law, set standards above the level it determines to be the
maximum feasible level, EPCA should not be interpreted as
permitting the States to do so. Indeed, NHTSA has concluded
that, under EPCA, States may not set actual or de facto fuel
economy standards at any level.
Light Trucks, 71 Fed. Reg. at 17,668. Therefore, “[a] state’s adoption and
enforcement of a CO2 standard for motor vehicles would infringe on
NHTSA's discretion to establish CAFE standards consistent with Congress'
guidance and threaten the goals that Congress directed NHTSA to achieve.”
Light Trucks, 71 Fed. Reg. at 17,669; see also NHTSA, Average Fuel
16
Economy Standards for Light Trucks, 70 Fed. Reg. 51414, 51457 (Aug. 30,
2005) (“A state law that seeks to reduce motor vehicle carbon dioxide
emissions is both expressly and impliedly preempted.”).
EPA has also recognized the primacy of NHTSA’s role: “Congress
has already created a detailed set of mandatory standards governing the fuel
economy of cars and light duty trucks, and has authorized DOT--not EPA--
to implement those standards.” EPA, Control of Emissions From New
Highway Vehicles and Engines, 68 Fed. Reg. 52922, 52925 (Sept. 8, 2003).
C. The District Court’s Analysis of the Economic Impact of the
Regulation Was Legally Flawed.
The District Court’s preemption analysis failed to give due regard to
the federal scheme embodied in EPCA. Indeed, the District Court never
even acknowledged NHTSA’s determinations. Instead, the District Court,
like CARB, purported to step into NHTSA’s shoes. In rejecting the
Plaintiffs’ claim of conflict preemption, the District Court effectively re-
balanced the statutory criteria administered by NHTSA.
1. The Regulation Threatens To Disrupt The Supply of
New Vehicles On Which Dealers Depend.
The District Court noted evidence that the Vermont GHG regulation
will deprive consumers of their choice of vehicles and will force
manufacturers to restrict or abandon their product lines, but stated that it did
17
not find the evidence “convincing.” 508 F. Supp.2d at 359. Yet the court
acknowledged that experts on both sides agreed that a 12-year lead time is
ordinarily necessary to allow for manufacturer compliance. Id. at 369. No
major manufacturer testified that it could comply with the schedule of
compliance set by the GHG regulation, particularly for model year 2012
and thereafter. To the contrary, BMW, Ford, General Motors,
DaimlerChrysler, 4 Honda, Toyota, Nissan, and Volkswagen, have all
predicted product restrictions in states governed by GHG regulations.
For example, General Motors presented testimony in the District
Court that, even under a hypothetical “maximum technology scenario,”
meant to illustrate the more aggressive application of technology possible
without constraints such as timing and cost, the company would still be
unable to comply with the full schedule of fuel economy requirements, even
at a cost of over $6,000 per vehicle. 508 F. Supp.2d at 362. GM’s
alternative would be to remove product lines from Vermont and other states
governed by GHG regulations. GM projected that by the year 2011, it
would offer only six models in the passenger car/light truck (“PC/LDT1”)
category for sale in Vermont, and none by model year 2016. By the year
4
On August 3, 2007, Chrysler was sold to Cerberus Capital
Management of New York and is now known as Chrysler LLC.
18
2015, it would remove all heavier trucks (“LDT2”) for sale in Vermont. Id.
at 363.
DaimlerChrysler presented testimony that it would not be in
compliance with the regulation after 2009. Id. Ultimately, it would be
forced to convert ninety percent of its fleet to fuel economy-optimized
hybrid and diesel vehicles, drastic steps which would cost billions of dollars
and which still would not result in compliance in 2016 without product
restrictions. Id. Ford Motor Company presented evidence that it could
comply with the regulation through 2011 using technologies proposed by
CARB that it deemed available and appropriate, but that it would be out of
compliance beginning in 2012 and would face the need to restrict product
lines. Id.
If the regulation forces manufacturers to restrict or abandon model
lines, the Vermont GHG regulation will disrupt the continued availability of
new vehicles on which dealers depend. The impact on dealers will be
devastating. Moreover, even if manufacturers could comply, the Vermont
GHG regulation will lead a mix of vehicles that consumers will not want to
buy. Consumers have already made clear what their preferences are, and
dealers and manufacturers have responded. Any attempt to override market
choices will ultimately damage dealers
19
The net effect of the Vermont regulation will be to depress sales and
cause consumers to hold on to older, less-efficient vehicles longer than they
otherwise would. As a result, the Vermont GHG regulation will be self-
defeating, and its claimed environmental benefits negated.
2. The District Court’s Approach Was Improper.
The District Court dismissed these concerns, but its approach was
fundamentally flawed. The District Court relied on the testimony of a
defense expert, Mr. Duleep, who opined that the industry could generally
meet its compliance obligations at some undefined time in the future,
although he did not consider the feasibility of compliance for any specific
manufacturer. 508 F. Supp. 2d at 329-30. The Court’s reasoning was
erroneous.
First, the District Court overstepped its role and failed to recognize
NHTSA’s expertise and institutional primacy. Congress has delegated to
NHTSA, and not the judiciary, the task of balancing the competing factors
established by EPCA for setting fuel economy standards. “NHTSA's
interpretation of the statutory requirements, and in particular its
consideration of the likelihood of economic hardship within its assessment
of ‘economic practicability,’ must be accorded due weight.” Public Citizen
20
v. NHTSA, 848 F.2d 256, 264-65 (D.C. Cir. 1988). Instead, the District
Court gave NHTSA’s judgment no weight.
When issues “require[] a high level of technical expertise,” courts
must defer to “the informed discretion of the responsible federal agencies.”
Marsh v. Oregon Natural Resources Council, 490 U.S. 360, 377 (1989)
(internal quotation marks and citation omitted). The District Court
disregarded its own observation that “the legislative and executive branches
are better suited to make policy decisions and technological choices. These
bodies have greater access to experts and their expertise to assist them in
evaluating scientific theories, models and predictions.” 508 F.Supp.2d at
397.
In Massachusetts v. E.P.A., 127 S.Ct. 1438 (2007), the Supreme Court
held that the Clean Air Act authorizes the EPA to regulate greenhouse gas
emissions from new motor vehicles in the event that it forms a “judgment”
that such emissions contribute to climate change. But the Court did not
purport to second-guess EPA on technical or scientific matters, or to re-
balance factors expressly assigned by Congress to an expert administrative
agency. Instead, the Court stressed that “[t]he scope of our review of the
merits of the statutory issues is narrow.” Id. at 1459. It upheld EPA’s
prerogative “to exercise discretion within defined statutory limits,” id. at
21
1462, and cautioned that “we have neither the expertise nor the authority to
evaluate these policy judgments.” Id. at 1463.
The District Court’s next error was to focus on the motor vehicle
“industry” as a single, monolithic entity. The District Court eschewed a
manufacturer-by-manufacturer analysis of the economic feasibility of the
Vermont GHG regulation and instead adopted what it described as an
“analysis at the level of the industry as a whole.” 508 F. Supp.2d at 365.
Yet from the perspective of automobile dealers, such an approach makes
little sense. If Ford or Chevrolet product lines are restricted, a Ford or
Chevrolet dealer will gain little solace from the fact that other manufacturers
may be able to comply. Moreover, the District Court’s approach conflicts
with the statement in the EPCA Senate Report that fuel economy standards
must be set with appropriate consideration given to the difficulties of
individual manufacturers. S. Rep. No. 94-516 at 154, 1975 U.S.C.C.A.N. at
1996. As NHTSA has explained,
In response to this congressional direction, we have
traditionally given particular regard to the “least capable
manufacturer with a substantial share of the market.” The
agency must take particular care in considering the statutory
factors with regard to these manufacturers -- weighing their
asserted capabilities, product plans and economic conditions
against agency projections of their capabilities, the need for the
nation to conserve energy and the effect of other regulations
22
(including motor vehicle safety and emissions regulations) and
other public policy objectives.
Light Trucks, 71 Fed. Reg. at 17,580.
Moreover, many of the District Court’s factual findings undermined
its own conclusions and illustrated that the court should have refrained from
second-guessing NHTSA. For example, the District Court acknowledged
that:
• “There is no question that the GHG regulations present great
challenges to automakers.” 508 F. Supp.2d at 399.
• “No one can predict exactly when technologies will overcome the
challenges for which they are designed.” Id. at 383.
• “There are obstacles to introducing diesel engines, even clean
diesels, in the United States in European numbers, including regulatory
barriers and consumer preferences.” Id. at 371.
• “Major hurdles to widespread use of E85 are availability and cost.
There are currently no filling stations in Vermont offering E85, and only
three in California. . . . In the current market, retailers price ethanol at about
twenty to thirty cents less per gallon than gasoline, which is insufficient to
account for the energy difference between the fuels. The existing stations are
concentrated in the Midwest, where ethanol is produced, and its pricing does
23
not account for the costs of the transportation that would be necessary to sell
ethanol on either coast.” Id. at 374.
• The District Court insisted that alternative fuels would provide an
avenue for complying with the Vermont GHG regulation, but it relied on
aspirational statements from auto manufacturers that did not establish the
feasibility of alternative fuels. E.g., id. at 369-70 (“The Chairman and CEO
of General Motors, G. Richard Wagoner, recently testified to the House
Committee Regarding Climate Change and Energy Security that due to the
‘fact that we face an increasingly uncertain energy future on a global basis,’
it is necessary for the automobile industry to ‘develop alternative sources of
propulsion, based on diverse sources of energy.’”).
• The District Court cited research efforts that may (or may not) solve
the substantial barriers to alternative fuel use on a wide scale. Id. at 370
(“While availability and cost are major considerations with regard to the
feasibility of reliance on alternative fuels, partnerships between government
and industry are possible which may address those considerations.”).
The District Court should have deferred to NHTSA’s resolution of
these and other complex issues.
24
3. The District Court’s Own Finding of Economic
Hardship Demonstrated Conflict Preemption.
Even accepting, arguendo, the District Court’s findings, those
conclusions should have led the Court to find conflict preemption. The
Court determined that, “as costs to manufacturers rise due to the regulation's
requirements, costs to consumers will rise also, making it more difficult for
customers to purchase new cars.” 508 F. Supp.2d at 384. The Court
credited the state’s expert testimony that costs would be increased by
approximately $1,500 per vehicle and sales reduced by 4.7% in states with
GHG regulations. Id. at 384, 388-89. 5
Such a dramatic increase in prices will cause significant harm to
dealers. As a Vermont auto dealer testified in the District Court, increased
vehicle prices will have a significant impact on dealer sales. 4/11/07 Tr. 79
(“The price of the vehicles are very costly now. And if it went up a
thousand, two thousand, $3,000, it would greatly decrease our sales. . . . It's
a very crucial time in the automotive industry right now so any price
increase would definitely hurt.”) (testimony of Joseph Tornabene, owner of
Joe Tornabene’s GMC).
The District Court did not disagree. In fact, it noted evidence that the
regulation would cause the loss of “about 14,000 jobs.” 508 F. Supp.2d at
5
Even these predictions by CARB are severe underestimates.
25
389. The hardship will also extend to dealers, which already face difficult
economic conditions and are experiencing a wave of consolidations. The
number of dealerships in the U.S. has dropped by 439 in the past two years –
a reduction of nearly 2%. 6 The burdens associated with GHG regulations
will worsen this trend and will result in additional losses to dealers.
Job losses of that magnitude have led NHTSA to relax CAFE
requirements in the past – actions which the D.C. Circuit has upheld. Public
Citizen v. NHTSA, 848 F.2d at 264 (citing “job losses well into the tens of
thousands” as justification for NHTSA decision). In fact, NHTSA recently
relied on the industry’s economic health in setting the 2008-2011 model year
light-truck CAFE standards. See Light Trucks, 71 Fed. Reg. at 17,566 (“We
recognize that financial difficulties currently exist in the motor vehicle
industry and that a substantial number of job reductions have been
announced by large full-line manufacturers. Accordingly, we have carefully
balanced the costs of the rule with the benefits of conservation.”).
Nonetheless, the District Court brushed off employment losses on the
ground that automakers are already downsizing and reducing capacity. 508
F.Supp.2d at 389. (“the numbers of jobs that these automakers already plan
6
www.autonews.com/2007market data.
26
to eliminate dwarf the number of jobs that would be eliminated” due to the
regulation). The District Court did not even consider the harm to dealers.
The District Court thereby inverted the proper analysis: rather than
using economic weakness in the industry as a reason to refrain from raising
fuel economy standards, consistent with NHTSA’s practice, the Court used
the industry’s economic difficulties as a reason to force the loss of an
additional (at minimum) 14,000 jobs, plus further economic hardship for
dealers.
The District Court justified its decision to upset the balance struck by
NHTSA on the ground that the higher fuel economy standards mandated by
the Vermont GHG regulation would save consumers gas. 508 F. Supp.2d at
385 (“Even assuming, however, that prices for new cars do rise . . . ,
increased prices will be offset by increased fuel savings. The regulation will
reduce the operating cost of a vehicle over its lifetime, resulting in a net
financial gain to consumers.”).
Of course, NHTSA, too, considers fuel savings as a factor in setting
CAFE standards, in a manner that is more rigorous than the District Court’s
analysis. See Light Trucks, 71 Fed. Reg. at 17,631. Moreover, NHTSA also
considers the so-called “rebound” effect – the tendency of consumers to
respond to better fuel economy by increasing the number of miles driven, id.
27
at 17,632-33 – which would have the effect of nullifying at least a portion of
the environmental benefits claimed by Vermont.
In short, the District Court’s preemption analysis simply underscored
the degree to which it purported to re-balance the fuel economy factors
already considered by NHTSA.
CONCLUSION
The District Court’s judgment should be reversed.
Respectfully submitted.
ANDREW D. KOBLENZ JONATHAN S. MASSEY, P.C.
DOUGLAS I. GREENHAUS 7504 Oldchester Road
National Automobile Dealers Bethesda, MD 20817
Association ph. (301) 915-0990
8400 Westpark Drive fax (301) 915-0991
McLean, VA 22102
Dated: March 21, 2008
28
CERTIFICATE OF COMPLIANCE
Pursuant to Federal Rule of Appellate Procedure 32(a)(7)(C), I hereby
certify that the text of this brief was prepared in Times New Roman 14 point
font, and according to Microsoft Word’s word count feature, consists of
5,762 words, excluding its tables of contents and authorities and certificates
of compliance and service.
Jonathan S. Massey
29
ANTI-VIRUS CERTIFICATION FORM
Pursuant to 2d Cir. LR 32(a)(1)(E), I hereby certify that the PDF
version of the Amicus Brief has been scanned for viruses. Symantec Norton
Antivirus, version 10.0.0.359 has been run on the PDF file containing the
electronic version of the foregoing Amicus Brief that was submitted in this
case as an email attachment to briefs@ca2.uscourts.gov and no viruses were
detected.
Jonathan S. Massey
30
CERTIFICATE OF SERVICE
I certify that on this 21st day of March 2008, two copies of the
foregoing Brief Of Amicus Curiae The National Automobile Dealers
Association were served by email and also by first-class mail, postage pre-
paid, on each party separately represented.
Stuart A. C. Drake Kathleen M. Sullivan
Andrew B. Clubok Sanford L. Weisburst
Jeffrey Bossert Clark William B. Adams
Susan E. Engel QUINN EMANUEL URQUHART
Michael E. Scoville OLIVER & HEDGES, LLP
KIRKLAND & ELLIS LLP 51 Madison Avenue,
655 Fifteenth Street, NW 22nd Flr.
Washington, DC 20005 New York, NY 10010
(202) 879-5000 (212) 849-7000
Counsel for Plaintiffs-Appellants Counsel for Plaintiffs-Appellants
Robert B. Hemley Raymond B. Ludwiszewski
Mathew B. Byrne Charles H. Haake
GRAVEL AND SHEA Stacie B. Fletcher
76 St. Paul Street GIBSON, DUNN & CRUTCHER LLP
Burlington, VT 05402-0369 1050 Connecticut Avenue, N.W.
(802) 658-0220 Washington, D.C. 20036
Counsel for Plaintiffs-Appellants (202) 955-8500
Counsel for Plaintiffs-Appellants
Scot L. Kline R. Jeffrey Behm
Kevin O. Leske Sheehy Furlong & Behm, P.C.
Office of the Attorney General, 30 Main Street, P.O. Box 66
State of Vermont Burlington, VT 05402-0066
109 State St. (802) 864-9891
Montpelier , VT 05609-1001 Counsel for Plaintiffs-Appellants
(802) 828-3171
Counsel for Defendants-Appellees and
Defendants-Intervenors-Appellees
Matthew F. Pawa, Esq.
H. Thomas Byron Esq. Law Offices of Matthew F. Pawa, P.C.
U.S. Department of Justice 1280 Centre Street, Suite 230
950 Pennsylvania Avenue, N.W. Newton Centre, MA 02459
Washington , DC , 20530
Counsel for the United States
31
Christopher M. Killian, Esq. Melissa A. Hoffer, Esq.
Conservation Law Foundation Conservation Law Foundation
Vermont Advocacy Center 27 North Main Street
15 East State Street, Suite 4 Concord, NH 03301
Montpelier, Vermont 05602
Stephen F. Hinchman, Esq. David Bookbinder, Esq.
Conservation Law Foundation Sierra Club
14 Main Street 408 C Street, NE
PMB#38 Washington, DC 20002
Brunswick, ME 04011
David D. Doniger, Esq. James T.B. Tripp, Esq.
Natural Resource Defense Council Environmental Defense
1200 New York Avenue, NW 257 Park Avenue South, 17th Floor
Suite 400 New York, NY 10010
Washington, DC 20005
Andrew G. Frank, Esq. Robert G. Cain, Esq.
New York State Office of the Attorney Paul Frank & Collins PC
General 1 Church Street
Environmental Protection Bureau P.O. Box 1307
120 Broadway, 26th Floor Burlington, VT 05402-1307
New York, NY 10271
Dated: March 21, 2008
Jonathan S. Massey
32