NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R.1:36-3.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-0585-16T3 A-0586-16T3
DAVID L. FELIX and LUIS M. FELIX,
Plaintiffs-Respondents,
v.
VOLKSWAGEN GROUP OF AMERICA, INC.,
Defendant-Appellant,
and
JACK DANIELS VOLKSWAGEN,
Defendant. ______________________________________
EDUARDO DEANG,
Plaintiff-Respondent,
JACK DANIELS VOLKSWAGEN, Defendant. ______________________________________________
Argued May 23, 2017 – Decided July 17, 2017
Before Judges Messano, Espinosa and Suter.
On appeal from the Superior Court of New Jersey, Law Division, Union County, Docket No. L-0053-16, and Bergen County, Docket No. L- 0389-16.
Judson O. Littleton (Sullivan & Cromwell, LLP) of the District of Columbia bar, admitted pro hac vice, argued the cause for appellant (Chase, Kurshan, Herzfeld & Rubin, P.C., and Mr. Littleton, attorneys; Jeffrey L. Chase, on the briefs).
Michael D. Power argued the cause for respondents (Power & Associates, PC, attorneys; Mr. Power, on the briefs).
PER CURIAM
We granted leave to appeal in these two cases and consolidated
the appeals because they present a common question of law. In
A-0585-16, defendant Volkswagen Group of America, Inc. (VW),
appeals from Judge Camille M. Kenny's order denying VW's motion
to dismiss the complaint filed by plaintiffs David L. and Luis M.
Felix; in A-0586-16, VW appeals from Judge Charles E. Powers'
order denying its motion to dismiss the complaint of plaintiff
Eduardo Deang. In both complaints, plaintiffs alleged VW
misrepresented its vehicles' high performance capabilities while
asserting each vehicle fully complied with federal emissions
2 A-0585-16T3 standards set by the Environmental Protection Agency (EPA). Both
complaints included causes of action for common law fraud and
violations of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -184 (the
CFA), and the Magnuson-Moss Warranty Federal Trade Commission
Improvement Act, 15 U.S.C.A. §§ 2301 to 2312 (the MMWA), and breach
of other implied warranties.
Before filing answers, VW moved to dismiss the complaints,
arguing they were expressly or impliedly preempted by provisions
of the Clean Air Act (the CAA), 42 U.S.C.A. §§ 7401 to 7671q. In
particular, VW cited 42 U.S.C.A. 7543(a), which provides in
pertinent part: "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." (Emphasis added). Judges Kenny
and Powers concluded the CAA did not preempt plaintiffs' state law
actions. We agree and affirm.1
1 In the Law Division, VW moved for relief on grounds other than preemption, and it sought to compel arbitration of plaintiffs' claims. The motion judges denied those requests. Judge Kenny's order in the Felix matter generally denied VW's motion, but VW's motion for leave to appeal only sought our review on federal preemption grounds. VW did not seek leave to appeal from those portions of Judge Powers' order in the Deang lawsuit that specifically denied relief on other grounds.
3 A-0585-16T3 I.
For purposes of our review, the allegations in plaintiffs'
complaints are treated "as uncontradicted[,] . . . accord[ed]
. . . all legitimate inferences . . . [and] accept[ed] . . . as
fact." Banco Popular N. Am. v. Gandi, 184 N.J. 161, 166 (2005).
The Felix plaintiffs purchased a 2014 Volkswagen Passat with 2.0-
liter diesel engine, and Deang purchased a 2010 Audi Q7 with a
3.0-liter diesel engine. VW marketed both vehicles as "Good Clean
Diesel Fun," because they "deliver[ed] performance" while "being
environmentally friendly," and the company represented "the
performance of the vehicle . . . [was] achieved and achievable
while complying with all vehicle emissions statutes, standards and
regulations of the United States."
In reality, VW had installed "defeat devices" on the vehicles.
This computer software allowed the cars to meet emissions standards
during testing, but, during the vehicle's normal operation, the
software interfered with emission controls, resulting in actual
emissions that exceeded EPA standards. In fall 2015, the EPA
issued formal Notices of Violation of the CAA to VW. Plaintiffs'
complaints cited VW's public acknowledgement of its actions and
alleged any repairs to "fix" the problem would result "in a
profound loss of vehicle performance" and "value."
4 A-0585-16T3 Although not alleged in plaintiffs' complaints, we provide
some additional information, which was known to the motion judges,
is part of the appellate record and is largely undisputed. In
January 2016, the Department of Justice filed suit on behalf of
the EPA against VW in federal district court in the Northern
District of California. Ultimately, that litigation resulted in
a class action settlement approved by the court, which retained
jurisdiction "to enforce, administer and ensure compliance" with
the settlement. In re: Volkswagen "Clean Diesel" Mktg., Sales
Practices, & Prods. Liab. Litig., No. 15-MD-2672-CRB (JSC), 2016
U.S. Dist. LEXIS 14837 (N.D. Cal., Oct. 25, 2016) (2.0-liter
settlement), and 2017 U.S. Dist. LEXIS 76091 (N.D. Cal., May 17,
2017) (3.0-liter settlement). The attorneys advised us at oral
argument that plaintiffs have opted out of the settlement.
II.
Because the sole issue presented — whether the CAA preempts
plaintiffs' state-court actions — requires an interpretation of
federal law, our review is de novo. In re Reglan Litig., 226 N.J.
315, 327-28 (2016), cert. denied, U.S. , 137 S. Ct. 1434, 197
L. Ed. 2d 648 (2017); see also St. Peter's Univ. Hosp. v. N.J.
Bldg. Laborers Statewide Welfare Fund, 431 N.J. Super. 446, 462
(App. Div.) ("[T]he question of preemption is a legal issue that
we review de novo."), certif. denied, 216 N.J. 366 (2013).
5 A-0585-16T3 "The doctrine of federal preemption finds its source in the
Supremacy Clause of the United States Constitution. . . . A state
law that conflicts with a federal statute is naturally preempted."
Reglan Litig., supra, 226 N.J. at 328 (citing Crosby v. Nat'l
Foreign Trade Council, 530 U.S. 363, 372, 120 S. Ct. 2288, 2294,
147 L. Ed. 2d 352, 361 (2000)). "When Congress legislates in a
field where states have traditionally exercised their historic
police powers, the preemption inquiry begins with the assumption
that Congress did not intend to supersede a state statute unless
that was [Congress's] clear and manifest purpose." Ibid.
(alteration in original) (internal quotation marks omitted)
(quoting Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S. Ct.
2240, 2250, 135 L. Ed. 2d 700, 715 (1996)) (internal quotation
marks omitted). "Accordingly, '[t]he purpose of Congress is the
ultimate touchstone' of pre-emption analysis." Cipollone v.
Liggett Grp., Inc., 505 U.S. 504, 516, 112 S. Ct. 2608, 2617, 120
L. Ed. 2d 407, 422 (1992) (alteration in original) (quoting Malone
v. White Motor Corp., 435 U.S. 497, 504, 98 S. Ct. 1185, 1190, 55
L. Ed. 2d 443, 450 (1978)).
"Pre-emption may be either expressed or implied." Gade v.
Nat'l Solid Wastes Mgmt. Ass'n, 505 U.S. 88, 98, 112 S. Ct. 2374,
2383, 120 L. Ed. 2d 73, 84 (1992). "Express preemption is
determined from an examination of the explicit language used by
6 A-0585-16T3 Congress." Gonzalez v. Ideal Tile Importing Co., 184 N.J. 415,
419 (2005) (citing Jones v. Rath Packing Co., 430 U.S. 519, 525,
97 S. Ct. 1305, 1309, 51 L. Ed. 2d 604, 613 (1977)), cert. denied,
546 U.S. 1092, 126 S. Ct. 1042, 163 L. Ed. 2d 857 (2006). "A
federal enactment expressly preempts state law if it contains
language so requiring." Bruesewitz v. Wyeth Inc., 561 F.3d 233,
239 (3d Cir. 2009), aff'd sub nom. Bruesewitz v. Wyeth L.L.C., 562
U.S. 223, 131 S. Ct. 1068, 179 L. Ed. 2d 1 (2011).
On the other hand,
[t]here are two forms of implied preemption — field preemption and conflict preemption. Field preemption applies where the scheme of federal regulation is so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it. Conflict preemption applies where compliance with both federal and state regulations is a physical impossibility, or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress . . . .
[Reglan Litig., supra, 226 N.J. at 328-29 (citations omitted).]
VW argues the CAA both expressly and impliedly preempted
plaintiffs' claims.
Consideration of VW's preemption argument requires some
review of Title II of the CAA, 42 U.S.C.A. §§ 7521 to 7554, which
governs vehicle emissions and fuel standards. Title II requires
the EPA to test all new motor vehicles and engines and issue
7 A-0585-16T3 certificates of compliance, see 42 U.S.C.A. § 7525(a)(2); 40 C.F.R.
§§ 86.094-21 to -30 (2015) (regulating the certification process),
before a vehicle is introduced into commerce. 42 U.S.C.A. §
7522(a)(1). The CAA "provides a mechanism for the recall of
engines when the EPA finds previously certified engines do not
conform to emissions standards." Navistar, Inc. v. Jackson, 840
F. Supp. 2d 357, 359 (D.D.C. 2012); see also 42 U.S.C.A. §
7541(c)(1); 40 C.F.R. §§ 85.1801 to 1808 (2014). Title II also
requires a manufacturer to warrant that engines of new vehicles
are "designed, built, and equipped so as to conform at the time
of sale with the applicable regulations . . . , and . . . [are]
free from defects in materials and workmanship which cause such
vehicle or engine to fail to conform with applicable regulations
for its useful life." 42 U.S.C.A. § 7541(a)(1).
As noted, § 7543(a) prohibits any State or political
subdivision from "adopt[ing] or attempt[ing] to enforce any
standard relating to the control of emissions from new motor
vehicles or new motor vehicle engines subject to this part."
(Emphasis added). Congress enacted this section to ensure that
"vehicle manufacturers not be subject to 50 sets of requirements
relating to emissions controls which would unduly burden
interstate commerce." Jackson v GMC, 770 F. Supp. 2d 570, 577
(S.D.N.Y. 2011) (quoting H.R. Rep. No. 95-294, 95th Cong. (1977),
8 A-0585-16T3 as reprinted in 1977 U.S.C.C.A.N. 1077, 1388), aff’d sub nom.,
Butnick v. GMC, 472 F. App'x 80 (2d Cir. 2012). However, Title
II also contains a savings clause which provides "[n]othing in
this part shall preclude or deny to any State or political
subdivision thereof the right otherwise to control, regulate, or
restrict the use, operation, or movement of registered or licensed
motor vehicles." 42 U.S.C.A. § 7543(d).2
A.
VW argues Congress expressly preempted the field by
prohibiting any State action to enforce a "standard relating to
the control of emissions." 42 U.S.C.A. 7543(a). It argues the
Supreme Court has recognized that "relating to," as used in other
federal statutes, suggests "a broad pre-emptive purpose." Morales
v. Trans World Airlines, Inc., 504 U.S. 374, 383, 112 S. Ct. 2031,
2037, 119 L. Ed. 2d 157, 167 (1992). VW contends that plaintiffs'
2 The CAA also permits private citizen suits: "Nothing in this section shall restrict any right which any person (or class of persons) may have under any statute or common law to seek enforcement of any emission standard or limitation or to seek any other relief (including relief against the Administrator or a State agency)." 42 U.S.C.A. § 7604(e)(1). Plaintiffs make no specific argument regarding the effect of this provision on our analysis. Moreover, at least one federal court has specifically held that regarding "moving sources" of emissions, "although the citizen suit provisions of § [7604] do not preempt . . . state common law tort claims, the language of § [7543(a)] does so expressly." Jackson, supra, 770 F. Supp. 2d at 578.
9 A-0585-16T3 complaints are, in reality, attempts to enforce EPA's emission
standards, because to succeed, plaintiffs must prove VW's vehicles
exceeded those standards. We disagree.
In Cipollone, supra, 505 U.S. at 523-24, 112 S. Ct. at 2621,
120 L. Ed. 2d at 427, the Court explained that consideration of
whether the plaintiff's state law claims were preempted by the
Cigarette Labeling and Advertising Act (the Labeling Act), 15
U.S.C.A. §§ 1331 to 1341, required examination of "the legal duty
that is the predicate" of the particular claim and whether it
falls within the scope of the preemption provision. Accordingly,
the Court analyzed each claim in light of the Labeling Act's
provision that expressly prohibited states from requiring a health
warning to appear on all cigarette advertisements and containers.
Id. at 514, 112 S. Ct. at 2616, 120 L. Ed. 2d at 421.
Although the plurality found certain claims were preempted,
the Court found two claims could go forward. First, the
plaintiff's breach of express warranty claim was not preempted
because "[a] manufacturer's liability for breach of an express
warranty derives from, and is measured by, the terms of that
warranty. . . . [T]he 'requirement[s]' imposed by an express
warranty claim are not 'imposed under State law,' but rather
imposed by the warrantor." Id. at 525, 112 S. Ct. at 2622, 120
L. Ed. 2d at 428 (second alteration in original) (emphasis in the
10 A-0585-16T3 original); see also Am. Airlines, Inc. v. Wolens, 513 U.S. 219,
228-29, 115 S. Ct. 817, 824, 130 L. Ed. 2d 715, 725-26 (1995)
(concluding the preemption provision of the Airline Deregulation
Act, 49 U.S.C.A. § 41713(b)(1), did not bar plaintiffs' breach of
contract claim because the "terms and conditions airlines offer
and passengers accept are privately ordered obligations and . . .
do not amount to a State's enact[ment] or enforce[ment] [of] any
law, rule, regulation, standard, or other provision having the
force and effect of law" (alterations in original) (internal
quotations and citation omitted)).
Second, the Court held the plaintiff's fraudulent
misrepresentation claim, based on allegedly false statements of
material fact made in advertisements, could proceed because the
claims were not predicated on duties regarding smoking and health,
which were presumptively preempted, but rather on a more general
duty not to deceive. Cipollone, supra, 505 U.S. at 528-29, 112
S. Ct. at 2623-24, 120 L. Ed. 2d at 430-31.
Similarly, in Altria Group, Inc. v. Good, 555 U.S. 70, 72-
73, 129 S. Ct. 538, 541-42, 172 L. Ed. 2d 398, 403-04 (2008), the
plaintiffs contended the defendant cigarette manufacturer
fraudulently marketed "light" cigarettes suggesting they were less
dangerous than regular cigarettes. The defendant invoked the
preemption clause prohibiting states from requiring additional
11 A-0585-16T3 statements relating to smoking and health. Ibid. The Court
concluded, as did the plurality in Cipollone, that the phrase in
the Labeling Act's preemption provision "'based on smoking and
health' fairly but narrowly construed does not encompass the more
general duty not to make fraudulent statements." Id. at 87, 129
S. Ct. at 549, 172 L. Ed. 2d at 412. As a result, the Court held
the Labeling Act's preemption provision did not preempt the
plaintiffs' state-law fraud claim. Ibid.
VW argues these cases are not persuasive because the language
of the CAA's preemption provision is broader and reflects
Congress's intent to foreclose plaintiffs' state actions.
However, in In re Caterpillar, Inc., No. 1:14-cv-3722, 2015 U.S.
Dist. LEXIS 98784, at *43 (D.N.J. July 29, 2015), the federal
district court cited Cipollone and Wolens in interpreting the
preemptive reach of § 7543(a) of the CAA.3 There, the class
action plaintiffs alleged their diesel engine vehicles with an
emissions control system designed to comply with EPA standards
were defective, causing the vehicles to experience repeated engine
3 We note that Rule 32.1(a) of the Federal Rules of Appellate Procedure does "not prohibit or restrict the citation of federal judicial opinions, orders, judgments, or other written dispositions that have been: (i) designated as 'unpublished,' 'not for publication,' 'non-precedential,' 'not precedent,' or the like; and (ii) issued on or after January 1, 2007."
12 A-0585-16T3 failures and shutdowns. Id. at *2-3. The plaintiffs further
claimed the defendant manufacturer knew of the defects. Id. at
*3.
Although the court found the "plain wording" of § 7543(a) to
be "specific and unambiguous," it also concluded the "provision
does not foreclose all state common law actions involving alleged
defects in engines manufactured and sold to comply with applicable
emissions standards." Id. at *30. Distinguishing the case before
it from others that interpreted section 7543(a), the court
concluded:
Plaintiffs' claims which seek enforcement of express and implied warranties for defects in the Engines' emissions systems, as well as those based on consumer fraud and negligent design, are hardly comparable to efforts by state and local governments to adopt or enforce emissions standards or to require additional certifications or inspections prior to sale.
[Id. at *34-35 (emphasis added).]
VW argues Caterpillar is distinguishable because the
plaintiffs' claims there sought damages for defective engines and
did not "relat[e] to the control of emissions." 42 U.S.C.A.
7543(a). It argues two other cases, Jackson, supra, 770 F. Supp.
2d at 570, and In re Detroit Diesel Corp. v. Attorney General of
New York, 709 N.Y.S.2d 1 (App. Div. 2000), are more persuasive.
13 A-0585-16T3 In Jackson, the plaintiffs alleged the manufacturers of
diesel buses violated the emissions standards set by the EPA and
negligently failed to warn them about the dangers of the diesel
engine exhaust fumes. Jackson, supra, 770 F. Supp. 2d at 572.
The Jackson court interpreted the phrase "relating to" in § 7543(a)
as reflecting an "expansive intent" and reasoned the CAA preempted
any "enforcement actions that have any 'connection with or
reference to' the control of emissions from motor vehicles." Id.
at 576-77 (quoting Morales, supra, 504 U.S. at 383-84, 112 S. Ct.
at 2037, 119 L. Ed. 2d at 167). Therefore, "a state common law
tort action that questions whether a defendant complied with
standards promulgated under the CAA is an example of a state
attempting to enforce the CAA, and is therefore subject to
preemption." Id. at 575.
In Detroit Diesel, supra, 709 N.Y.S.2d at 3, the court
considered whether the CAA preempted a suit brought by New York's
Attorney General against the manufacturer of heavy-diesel engines
equipped with a defeat devices in the context of the manufacturer's
motion to quash a subpoena duces tecum. The court concluded §
7543(a) was "intended to have a broad preemptive effect," id. at
7, such that "[s]tates are barred from providing their own
regulatory or judicial remedies for conduct prohibited or arguably
prohibited by Federal law," id. at 8. The court also determined
14 A-0585-16T3 any common law claims were preempted because they sought "to use
[New York's] common law to penalize the manufacturers for producing
engines which failed to comply with the Federal standards
promulgated pursuant to the CAA. In doing so, the Attorney General
[was] attempting to enforce those standards, and . . . he is
expressly preempted from pursuing those claims." Id. at 9.
We acknowledge that the plaintiffs' claims in Caterpillar
centered on defective engines that violated express and implied
warranties and failed "to perform as an engine at all."
Caterpillar, supra, at *33. Those claims are not precisely the
same as plaintiffs' claims in these cases. However, we find
Jackson, which alleged direct violations of EPA standards as a
predicate for claims of personal injuries, to be entirely
distinguishable. The Detroit Deisel court's overly expansive
reading of § 7543(a), combined with the thinly-veiled nature of
the Attorney General's enforcement action, limits the persuasive
power of that opinion.
Instead, we follow the more persuasive reasoning advanced by
courts in two other cases, Counts v. GM, L.L.C., No, 16-cv-12541,
2017 U.S. Dist. LEXIS 20277 (E.D. Mich. Feb. 14, 2017), and In re
Volkswagen "Clean Diesel" Litigation, 94 Va. Cir. 189 (Cir. Ct.
2016,) both of which involved manufacturers' installation of
defeat devices.
15 A-0585-16T3 In Counts, the court concluded that "to the extent
[p]laintiffs are suing GM for manufacturing a vehicle that emits
'more than a certain amount of [NOx or particulate emissions]' in
violation of EPA regulations or that is not equipped with properly
functioning and federally required 'emission-control technology,'
their claims [were] preempted by the CAA." Counts, supra, at *35
(second alteration in original). However, citing Caterpillar and
In re Volkswagen, the court concluded that the plaintiffs' claims
of fraud and misrepresentation were
not, as GM contends, contingent on proving that GM is in noncompliance with EPA emissions regulations. There can be no doubt that proving noncompliance would bolster Plaintiffs' claims, but Plaintiffs need not make that showing to prevail. Accordingly, Plaintiffs' claims are not preempted by the [CAA].
[Id. at *41.]
Similarly, in In re Volkswagen, supra, 94 Va. Cir. at 189-
90, the plaintiffs raised essentially the same claims about VW
vehicles as do plaintiffs in these two appeals. The court rejected
VW's preemption argument, reasoning,
On their face, Plaintiffs' fraud and [statutory consumer fraud] claims do not rely on emissions violations or enforcement to make out their claims. Instead Plaintiffs' claims rely upon allegedly false promises of compliance, efficiency, and new technology; or concealment of the fact that compliance testing was being circumvented. Although
16 A-0585-16T3 Plaintiffs reference the EPA violation notice in support of their allegations of falsehood and concealment, their claims ultimately rest on and seek remediation of injuries arising from misrepresentations and concealment of material facts made to (or hidden from) the Plaintiffs about the compliance, efficiency, and technology of their vehicles. This is distinguished from the claims in Jackson and Detroit Diesel, which sought to recover for injuries from the alleged noncompliance itself, or alleged fraud based on statements or representations made to federal regulators by manufacturers in procuring emissions compliance certificates.
Plaintiffs' lack of reliance on emissions standards is further revealed when one considers whether Plaintiffs even need to assert lack of compliance in raising their fraud and [statutory consumer fraud] claims. Plaintiffs point to advertising materials and news releases promising not only compliance with regulations, but also describing new technologies developed by [VW] and offering improved fuel economy. Plaintiffs also point to [VW]'s public statement that it had been "dishonest" to consumers in such advertising. As such, and although emissions compliance or lack thereof may be further proof of deceit, it is the deceit about compliance, rather than the need to enforce compliance, that is the gravamen of Plaintiffs' claims.
[Id. at 196-97.]
Similarly, in the cases before us, plaintiffs do not seek to
enforce an EPA emission standard or force the manufacturer to
adopt a different emission standard. It may well be that
plaintiffs will prove their vehicles failed to comply with EPA
emission standards, something VW has publicly acknowledged, but
17 A-0585-16T3 the gravamen of plaintiffs' complaint centers on VW's alleged
deceitful, fraudulent practices, and its alleged breach of a duty
not to mislead consumers. We conclude § 7543(a) does not expressly
preempt plaintiffs' causes of action.
We also conclude that the CAA does not impliedly preempt
plaintiffs' complaints. Implied preemption occurs either when
"the scheme of federal regulation is 'so pervasive as to make
reasonable the inference that Congress left no room for the States
to supplement it,'" or when "compliance with both federal and
state regulations is a physical impossibility." Gade, supra, 505
U.S. at 98, 112 S. Ct. at 2383, 120 L. Ed. 2d at 84 (citations
omitted).
We agree with the analysis of the Caterpillar court, i.e.,
that "the savings clause suggests that Congress did not intend to
occupy the entire field of motor vehicle regulation. Instead, the
[savings clause] explicitly contemplates continued state
involvement in the regulation of motor vehicles." Caterpillar,
supra, at *48. Furthermore, because plaintiffs' claims do not
hinge on compliance with EPA standards, there can be no direct
conflict with the federal regulatory scheme that requires
compliance with those standards. Id. at *51-53.
Affirmed.
18 A-0585-16T3