A federal court heard motions for summary judgment in challenge to first-in-nation rule requiring warehouses to adopt clean technologies.
On April 17, 2023, a US federal judge heard arguments in a lawsuit challenging the South Coast Air Quality Management District (SCAQMD or the District) adoption of Rule 2305 and will now decide whether to grant summary judgment to the plaintiffs and vacate the rule.
Rule 2305 is the Warehouse Indirect Source Rule (ISR) — Warehouse Actions and Investments to Reduce Emissions (WAIRE) Program. As described in this June 2021 blog post, the WAIRE Program applies to certain warehouses in the South Coast Air Basin and imposes a compliance obligation based on the number of truck visits to that warehouse per year. Warehouse operators can meet that obligation by taking any number of emissions-reducing actions, either from the “WAIRE Menu” or through a custom plan approved by the District.
As detailed in this November 2021 Client Alert, plaintiff, the California Trucking Association (CTA), filed a complaint in the US District Court for the Central District of California on August 5, 2021, alleging that Rule 2305 is preempted by federal law, is not authorized by state law, and is an unlawful tax. Airlines for America (A4A), a trade group representing US commercial airlines, intervened as a plaintiff in opposition to Rule 2305. On the defendant’s side, the State of California through the Attorney General, the California Air Resources Board (CARB), and a group of environmental non-governmental organizations (NGOs) intervened in defense of Rule 2305. The District filed an answer to CTA’s complaint on October 7, 2021, asserting that CTA lacks standing and that its claims are not ripe or are otherwise improper or barred.[1]
Motions for summary judgment were filed by plaintiff CTA on October 28, 2022, and by plaintiff-intervenor A4A on November 14, 2022. Both motions focus on the claim that Rule 2305 is preempted by federal law.
Plaintiff California Trucking Association’s Motion for Summary Judgment
CTA seeks summary judgment on its claim that Rule 2305 is preempted by the federal Clean Air Act (CAA). CAA Section 209(a) prohibits any state or political subdivision from adopting or enforcing “any standard relating to the control of emissions from new motor vehicles or new motor vehicle engines subject to this part.”[2] CTA argues that it is “settled law that a regulation establishing a purchase mandate is a standard regulating the emissions of new motor vehicles” and thus preempted by Section 209(a).[3] CTA asserts that the intent and effect of Rule 2305 is a de factopurchase mandate because it compels purchasing decisions based on the emissions characteristics of new vehicles. It asserts that Rule 2305 grants incentives such that purchasing zero emissions (ZE) or near-zero emissions (NZE) vehicles is the only real option to comply with Rule 2305. Therefore, according to CTA, no material facts are in dispute that would allow a reasonable inference that Rule 2305 is not a de facto purchase mandate, and the Rule is preempted by the CAA as a matter of law.
CTA says the Rule is not saved by the other, non-ZE/NZE compliance options on the WAIRE Menu because they present only a false choice. According to CTA, the only economically conceivable way of complying with Rule 2305 is to either directly purchase or require contractors to purchase new ZE or NZE vehicles. To illustrate the point, CTA calculates that warehouse operators that elect to continue operating with only non-Rule-compliant trucks will face an average of $1.7 million in costs attributable to the Rule, while a similarly situated warehouse owner that either directly purchases ZE or NZE trucks, or forces contractors to purchase new ZE or NZE trucks, would pay between $184,000 and $540,000.[4]
CTA likewise claims that the District cannot escape the preemptive effect of the CAA by styling Rule 2305 as an ISR under the State Implementation Plan (SIP). CTA argues that Congress’ intent in allowing states to include ISRs in their SIP was to provide for programs that prevent new or modified indirect sources from attracting mobile sources of air pollution. According to CTA, however, Rule 2305 is not authorized as an ISR because it applies to existing and non-modified warehouses. CTA says that even a proper ISR would be preempted by CAA Section 209(a) when the effect of the ISR is a vehicle purchase mandate.
Airlines for America’s Motion for Summary Judgment
Plaintiff-intervenor A4A seeks summary judgment on its claims that Rule 2305 is preempted by both the CAA and the Airline Deregulation Act of 1978. A4A’s motion includes by reference the CAA arguments made in CTA’s motion, and adds additional points, including that Rule 2305 unlawfully forces its members to utilize trucks that meet District standards rather than federal standards in violation of the principle of cooperative federalism underlying the CAA.
A4A’s motion primarily discusses the federal Aviation Deregulation Act (ADA), which prohibits state or local “regulation of the prices, routes, or services of carriers that are ‘transporting property by aircraft or by motor vehicle.’”[5] A4A asserts that the ADA preemption extends to regulations like Rule 2305 that indirectly affect air carrier prices, routes, or services because the ADA contemplates air carrier trucks as part of the “unified whole” system of transportation of property by air carriers. Because the Rule’s obligations are based on the frequency of truck trips and the size and cargo capacity of trucks, A4A maintains that the Rule regulates the means, methods, and frequency of air carrier trucking operations and that the only logical way to read the Rule’s requirements are as a “local regulatory mandate preempted by the ADA.”[6]
Summary judgment is appropriate, according to A4A, because there is no material dispute that the Rule has a material impact on, and thus relates as a matter of law to, air carrier services, routes, and costs — the three triggers for ADA preemption. Rule 2305 is an economic regulation, according to A4A, that will increase cost margins for air carrier transportation services, and hence affect the prices charged for services. Regarding routes, A4A says the Rule will force air carriers to “revise the existing system of vehicles, warehouses, and locations they employ, and restructure their transportation routes” because its members’ warehouses were not sited with electric charging infrastructure in mind.[7] Services will also be affected, A4A argues, because the Rule forces adoption of ZE/NZE trucks when the market otherwise would not, resulting in forced changes in the business practices and volume of vehicle operations of its members.
Oppositions to the Motions
The District, along with defendant-intervenors CARB and the state, opposed the motions for summary judgment in a joint opposition filed December 23, 2022. The environmental NGO defendant-intervenors filed a joint opposition on December 28, 2022. Both groups (Defendants) made substantively similar arguments.
The Defendants focus on the standard that they say the plaintiffs must meet for their facial challenge to Rule 2305 to succeed on summary judgment: a showing that no set of circumstances exists under which the Rule is not preempted when construing all facts and reasonable inferences in favor of the Rule’s validity. Defendants say that both plaintiffs’ motions rely on the assertion that Rule 2305 effectively forces warehouse operators to either purchase or require their contractors to purchase ZE/NZE trucks. But summary judgment is not appropriate, Defendants argue, because they have presented genuinely disputed facts that allow the reasonable inference that the Rule is not a de facto vehicle purchase mandate. The NGOs further assert that summary judgment is inappropriate because the plaintiffs must prove, but have not, that not a single warehouse operator would choose any compliance option that does not involve ZE or NZE trucks.
The Clean Air Act does not preempt Rule 2305
The Defendants argue that Rule 2305 is not a de factovehicle purchase mandate that would be preempted by CAA Section 209(a). Defendants say that the WAIRE Menu provides real flexibility in complying with the Rule, supported by the District’s preliminary compliance data showing that warehouse operators are in fact selecting numerous compliance options from the WAIRE Menu, only some of which involve ZE or NZE trucks. According to the District, each warehouse operator — based on its warehouse type, business model, and other regulatory requirements — has numerous and varying considerations when choosing which WAIRE Menu items to pursue. Further, Defendants argue that controlling precedent from the US Court of Appeals for the Ninth Circuit rejects the idea that the Rule mandates ZE or NZE truck purchases, because a warehouse is “‘not required to choose the less expensive, more efficient option’ simply because there is an economic incentive to do so.”[8]
The Defendants say the Rule is a valid ISR that regulates warehouse emissions, not vehicle emissions, and is outside the scope of CAA preemption. In the Defendants’ view, regulation of indirect sources — facilities that indirectly generate pollution by attracting motor vehicles — does not require federal authorization under the CAA because it is an exercise of the state’s police power. They argue that the CAA does not grant authority to regulate indirect sources, but recognizes that authority as within the police powers of the state which thus cannot be limited to regulate only new or modified indirect sources by the CAA.
The Airline Deregulation Act does not preempt Rule 2305
The Defendants say that ADA preemption requires a significant impact on an air carrier’s prices, routes, and services while the Rule will, at most, have a peripheral and insignificant effect. The District says that its “evidence shows that compliance costs are expected to be limited to between 0.5 and 3.2% of warehouse operators’ annual operating costs.”[9] Even if all costs are passed on to end customers, the District says the price increase of transported goods would be 0.05% to 0.3% at the highest. The NGOs claim that to find ADA preemption reaches Rule 2305 would mean to interpret the ADA as barring “any regulation that relates to the airline industry, regardless of how indirect or remote the effect.”[10]
Further, the Defendants argue, because the warehouse operators have choices on how to comply, the Rule will only impact carrier routes if operators choose compliance options with that effect. Even if the Rule compelled use of ZE or NZE trucks, the District argues that route changes to accommodate charging infrastructure are minor and akin to rest-break laws that have been upheld in the face of a similar preemption challenge. The Defendants also argue that because the Rule regulates emissions and not air carrier services, any effect on services is too far removed and insignificant to be preempted.
CTA and A4A Reply to Opposition
In their reply briefs, both CTA and A4A push back on the summary judgment standard the Defendants articulated, arguing that the courts disfavor the “no set of circumstances” standard and generally do not apply it to facial challenges outside of the criminal law context. Even so, the plaintiffs argue that the Rule’s application does not change just because it provides compliance options, because the Rule’s impact will always effectuate an emissions standard that restrains the use of conventional vehicles, and will always affect air carriers’ services, routes, and prices. Responding to the District’s argument that the Rule is a valid ISR outside the scope of CAA preemption, the plaintiffs say an ISR is only authorized to regulate emissions when the regulation is site-based (whereas Rule 2305 is vehicle-based) and that even a valid ISR would be preempted by CAA Section 209(a) when it, like the Rule, is a vehicle emissions standard. Responding to the Defendants’ argument that the effects on carriers’ services, routes, and prices are too remote, A4A says that US Supreme Court precedent recognizes broad preemption under the ADA, including when a law’s effects are indirect.
Latham & Watkins will closely follow the outcome of the plaintiffs’ motions for summary judgment.
Endnotes
[1] Case No.: 2:21-cv-6341.
[2] CAA § 209(a), codified at 42 U.S.C. § 753(a).
[3] CTA’s Motion for Summary Judgment at p. 22.
[4] Id. at pp. 20-21.
[5] Id. at p. 1 (quoting the ADA at 49 U.S.C. § 41713(b)(4)(A)).
[6] Id. at p. 19.
[7] Id. at p. 17.
[8] District’s Opposition at p. 33, quoting Building Industry Association of Washington v. Washington State Building Code Council, 683 F.3d 1144, 1145 (9th Cir. 2012).
[9] District’s Opposition at p. 68.
[10] NGO Opposition at p. 24.
