Environmental Protection Commission of Hillsborough County, Florida v. Mercedes-Benz USA, LLC

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

TAMPA DIVISION

ENVIRONMENTAL PROTECTION

COMMISSION OF HILLSBOROUGH

COUNTY, FLORIDA,

Plaintiff,

v. Case No. 8:20-cv-2238-VMC-JSS

MERCEDES-BENZ USA, LLC,

DAIMLER AKTIENGESELLSCHAFT,

ROBERT BOSCH, LLC,

and ROBERT BOSCH GMBH,

Defendants.

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ORDER

This matter is before the Court on consideration of

Defendants Daimler Aktiengesellschaft and Mercedes-Benz USA,

LLC’s (“the Mercedes Defendants’”) Motion to Dismiss

Plaintiff’s Third Amended Complaint (Doc. # 122), filed on

January 20, 2022. Plaintiff Environmental Protection

Commission of Hillsborough County, Florida responded on

February 10, 2022. (Doc. # 135). The Mercedes Defendants

replied on March 4, 2022. (Doc. # 144). The Motion is granted

to the extent set forth herein.

I. Background

The Commission, a unit of Hillsborough County’s

government responsible for providing and maintaining

standards of atmospheric purity, initiated this action on

September 24, 2020. (Doc. # 1). The Commission then filed a

third amended complaint on December 16, 2021, seeking

monetary penalties and injunctive relief for violations of

the Commission’s anti-tampering ordinance, EPC Rule Chapter

1-8, “Mobile Source.” (Doc. # 116).

According to the third amended complaint, all Defendants

engaged in a conspiracy to create and install “defeat device”

software in new Mercedes diesel vehicles to reduce the

effectiveness of the vehicles’ emission control systems when

not in an emissions-testing environment. (Id. at 1-4).

The Commission’s claims are not, however, based on the

creation of these defeat devices and their installation in

new Mercedes vehicles pre-sale. Rather, the Commission “is

only asserting claims relating to post-sale activities of the

Defendants.” (Id. at 4). Specifically, the Commission bases

its claim in part on “every post-sale update that does not

remove the workaround” — the defeat device — from the relevant

Mercedes vehicles. (Id. at 29).

The Defendants also allegedly “violated EPC Rule Section

1-8.05(1) . . . by tampering with the emission control systems

of Affected Vehicles registered in Hillsborough County, and

manufacturing and installing post-sale software updates in

Affected Vehicles registered in Hillsborough County.” (Id. at

44). “Because Mercedes represents and maintains that their

engines require steady service to remain operative, numerous

post-sale updates to the emissions control systems, created

through collaboration amongst all of the Defendants, have

been implemented and installed throughout the United States,

Florida, and Hillsborough County.” (Id. at 27-28). “It is

industry standard for manufacturers, including Mercedes, to

make such post-sale software updates available to their

dealerships via web-based computer programs.” (Id. at 28).

Mercedes allegedly “sometimes issue[s] such post-sale

software changes via over-the-air updates.” (Id.).

Additionally, the Commission also alleges that the

“Defendants’ conduct in tampering post-sale with the emission

control systems of Affected Vehicles registered in

Hillsborough County, through a program of newly created field

fixes and recall campaigns, violates EPC Rule Chapter 1-8.”

(Id. at 44-45).

The Mercedes Defendants now seek dismissal of the claims

against them based on preemption, failure to state a claim,

and other arguments. (Doc. # 122). The Motion is fully briefed

(Doc. ## 135, 144), and ripe for review.

II. Legal Standard

On a motion to dismiss pursuant to Rule 12(b)(6), this

Court accepts as true all the allegations in the complaint

and construes them in the light most favorable to the

plaintiff. Jackson v. Bellsouth Telecomms., 372 F.3d 1250,

1262 (11th Cir. 2004). Further, the Court favors the plaintiff

with all reasonable inferences from the allegations in the

complaint. Stephens v. Dep’t of Health & Human Servs., 901

F.2d 1571, 1573 (11th Cir. 1990). But,

[w]hile a complaint attacked by a Rule 12(b)(6)

motion to dismiss does not need detailed factual

allegations, a plaintiff’s obligation to provide

the grounds of his entitlement to relief requires

more than labels and conclusions, and a formulaic

recitation of the elements of a cause of action

will not do. Factual allegations must be enough to

raise a right to relief above the speculative

level.

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal

citations omitted). Courts are not “bound to accept as true

a legal conclusion couched as a factual allegation.” Papasan

v. Allain, 478 U.S. 265, 286 (1986). The Court must limit its

consideration to well-pleaded factual allegations, documents

central to or referenced in the complaint, and matters

judicially noticed. La Grasta v. First Union Sec., Inc., 358

F.3d 840, 845 (11th Cir. 2004).

Additionally, “[a] plaintiff is ‘not required to negate

an affirmative defense in [its] complaint.’ Thus,

‘[g]enerally, the existence of an affirmative defense will

not support a motion to dismiss.’” Twin City Fire Ins. Co. v.

Hartman, Simons & Wood, LLP, 609 F. App’x 972, 976 (11th Cir.

2015) (citations omitted).

III. Analysis

The Mercedes Defendants raise multiple arguments for

dismissal. The Court addresses them in turn.

A. Preemption

First, the Mercedes Defendants argue that the

Commission’s claims are preempted by the Clean Air Act

(“CAA”).

The Court rejects this argument and, instead, follows

the reasoning of the Ninth Circuit in In re Volkswagen “Clean

Diesel” Mktg., Sales Pracs., & Prod. Liab. Litig., 959 F.3d

1201 (9th Cir. 2020), cert. denied sub nom. Volkswagen Grp.

of Am., Inc. v. Env’t Prot. Comm’n of Hillsborough Cnty., 142

S. Ct. 521 (2021) — another emissions case brought by the

Commission and other county governments. The Ninth Circuit

held that the CAA neither expressly nor impliedly preempts

claims related to post-sale tampering with emission control

systems. Id.; see also State ex rel. Yost v. Volkswagen

Aktiengesellschaft, 165 Ohio St. 3d 213, 218 (Ohio 2021)

(holding that the post-sale anti-tampering provision of

Ohio’s Air Pollution Control Act was neither expressly nor

impliedly preempted by the Clean Air Act), cert. denied sub

nom. Volkswagen Aktiengesellschaft v. Ohio, 142 S. Ct. 515

(2021).

1. Express Preemption

The CAA “expressly preempts certain state and local laws

regulating emissions from new motor vehicles.” In re

Volkswagen “Clean Diesel” Mktg., Sales Pracs., & Prod. Liab.

Litig., 959 F.3d at 1215. Section 209(a) of the CAA provides:

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.

No State shall require certification, inspection,

or any other approval relating to the control of

emissions from any new motor vehicle or new motor

vehicle engine as condition precedent to the

initial retail sale, titling (if any), or

registration of such motor vehicle, motor vehicle

engine, or equipment.

42 U.S.C. § 7543(a). “A ‘new motor vehicle’ is ‘a motor

vehicle the equitable or legal title to which has never been

transferred to an ultimate purchaser,’ § 7550(3), in other

words, a pre-sale vehicle.” In re Volkswagen “Clean Diesel”

Mktg., Sales Pracs., & Prod. Liab. Litig., 959 F.3d at 1215.

“In light of this definition, [Section] 209(a) precludes

state or local governments from imposing any restriction that

has the purpose of enforcing emission characteristics for

pre-sale, motor vehicles.” Id. at 1216. “After a new motor

vehicle is sold ‘to an ultimate purchaser,’ 42 U.S.C. §

7550(3), the express preemption clause no longer applies.

Instead, the CAA preserves state and local governments’

authority over post-sale motor vehicles.” Id. at 1216.

The Ninth Circuit rejected Volkswagen’s argument that

the Commission’s rules, including the same EPC Rule Section

1-8.05(1) at issue here, were preempted as applied to post-

sale vehicles:

We turn to Volkswagen’s argument that [Section]

209(a) also expressly preempts the Counties’ anti-

tampering rules as applied to post-sale vehicles.

It clearly does not. By its terms, [Section] 209(a)

preempts state and local regulations “relating to

the control of emissions from new motor vehicles.”

42 U.S.C. § 7543(a) (emphasis added). The provision

does not apply to post-sale vehicles.

Id. at 1218. For the same reason, the Court holds that express

preemption does not apply to the Commission’s claims here,

which are based on alleged post-sale tampering in the form of

software updates, field fixes, and recalls.

This is true even though the Commission bases its post-

sale tampering claim in part on what the Mercedes Defendants’

dub the “inaction theory” of tampering, under which the

Commission argues that post-sale software updates constituted

tampering because they failed to remove the original defeat

device. The Court does not agree that this inaction theory

would require car manufacturers to alter their design or

manufacture of new vehicles before sale. Because even under

the inaction theory the Commission bases its claims on

tampering with post-sale vehicles, the claims are not

expressly preempted.

2. Implied Preemption

“The Supreme Court has articulated two circumstances —

referred to as ‘field preemption’ and ‘conflict preemption’

— where Congress’s implicit intent to preempt state law clears

[the high threshold to find implied preemption]. First, ‘when

federal law occupies a “field” of regulation “so

comprehensively that it has left no room for supplementary

state legislation,”’ a court may infer that Congress intended

to preempt state law.” Id. at 1212 (citations omitted).

“Second, when a state law ‘actually conflicts with federal

law,’ either because ‘compliance with both state and federal

law is impossible,’ or because ‘the state law “stands as an

obstacle to the accomplishment and execution of the full

purposes and objectives of Congress,”’ a court may again

conclude that Congress implicitly intended to preempt state

law.” Id. (citations omitted).

Here, the Mercedes Defendants argue that the

Commission’s claims are impliedly preempted under obstacle

and impossibility preemption theories. (Doc. # 122 at 15).

Regarding obstacle preemption, in Volkswagen, the Ninth

Circuit rejected the argument that the Commission’s and other

counties’ tampering claims were impliedly preempted. That

court wrote:

The CAA’s preemption clause (§ 209(a)) and saving

clause (§ 209(d)) allocate authority between the

federal government and state governments as

follows: Section 209(a) gives the EPA exclusive

authority to establish standards for new vehicles,

42 U.S.C. § 7543(a), while § 209(d) preserves the

authority of state and local governments over post-

sale vehicles, 42 U.S.C. § 7543(d). The plain

language of § 209(d), providing that nothing in

Title II “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,” appears to give states substantial

authority to enforce standards related to post-sale

vehicles, including sanctioning tampering with

emission control systems.

In re Volkswagen “Clean Diesel” Mktg., Sales Pracs., & Prod.

Liab. Litig., 959 F.3d at 1219. Thus, “the CAA’s text and

structure, particularly in light of the presumption that

Congress does not impliedly preempt states’ historic police

powers, weigh against a conclusion that Congress intended to

preempt the Counties’ anti-tampering rules.” Id. at 1221.

Likewise, “[t]he regulation of air pollution from post-

sale vehicles does not involve a ‘uniquely federal’ area of

enforcement, because the basic division of responsibility in

Title II of the CAA reflects the cooperative federalism

principles that have long informed this nation’s air

pollution control laws.” Id. (citation omitted). The Ninth

Circuit also could not “discern a congressional intent, let

alone a ‘clear and manifest purpose of Congress,’ to give the

EPA exclusive authority over large-scale, post-sale tampering

by manufacturers, while giving state and local governments

concurrent authority only when the tampering is conducted on

a more casual, individual basis.” Id. at 1223. Thus, that

court correctly concluded that state and local authority “to

enforce anti-tampering rules on a model-wide basis” was not

preempted. Id.

The Court adopts the Ninth Circuit’s reasoning and

concludes that the Commission’s claims are not preempted

under the obstacle preemption doctrine. The Mercedes

Defendants’ attempts to distinguish the post-sale tampering

in Volkswagen and this case are unavailing. While the Mercedes

Defendants argue that the Volkswagen court intended only for

post-sale tampering claims involving “enhancements” to defeat

devices to escape preemption (rather than inaction-based

tampering or field fixes and recalls) (Doc. # 122 at 18), no

such limitation was announced by that court. Instead, the

Volkswagen ruling stands for the proposition that post-sale

tampering claims in general are not impliedly preempted and

is persuasive in its reasoning.

Nor is the Court persuaded by the Mercedes Defendants’

argument under the impossibility theory of preemption. They

argue that “it would be impossible for the Mercedes Defendants

to comply with both the Consent Decree [entered by them and

the EPA and the California Air Resources Board in United

States v. Daimler AG, No. 1:20-cv-02564 (D.D.C. Mar. 9, 2021)]

and [the Commission]’s ordinance.” (Doc. # 122 at 15). The

Court rejects this argument for multiple reasons. First, the

Mercedes Defendants have cited no case in which a consent

decree entered in a federal lawsuit was found to preempt a

state or local government’s rule or ordinance. Thus, the Court

is not convinced that the consent decree could support

obstacle preemption. Even if it did, the Court has only taken

judicial notice of the consent decree’s existence — not its

contents (Doc. # 143) — such that the Court cannot determine

whether the terms of the consent decree conflict with the

Commission’s anti-tampering rule at this time.

Finally, even crediting the Mercedes Defendants’

representations about the contents of the consent decree, the

Court is not convinced that it would be impossible for the

Mercedes Defendants to comply with both EPA regulations and

the Commission’s rule against post-sale tampering. See State

ex rel. Yost, 165 Ohio St. 3d at 220–21 (“[W]e reject

Volkswagen’s argument that the potential imposition of state-

law penalties under [Ohio’s Air Pollution Control Act] makes

it impossible for the federal EPA to administer its vehicle-

emissions program or interferes with the federal EPA’s

ability to resolve enforcement actions. First of all, it is

not impossible for a violator to pay federal penalties and

state-law penalties relating to the same conduct, so exposure

to liability at the state level does not necessarily frustrate

the purpose of the federal scheme.” (citations omitted)). As

the Commission argues, “[s]hould Defendants, pursuant to

their Consent Decree, craft and have approved a post-sale

update that cures the defect [in the emission control system],

which is assumedly the goal, that update would not fit the

definition of tampering” under the Commission’s rule. (Doc.

# 135 at 11).

The Commission’s post-sale tampering claims are not

preempted. Whether the post-sale tampering claims are

sufficiently pled is a different question.

B. Plausibility

The Mercedes Defendants also argue that the claims

against them should be dismissed under Rule 12(b)(6) because

the Commission has not stated plausible claims for violation

of EPC Rule Section 1-8.05(1). The Court agrees.

EPC Rule Section 1-8.05(1) provides: “No person shall

tamper, cause, or allow the tampering of the emission control

system of any motor vehicle.” EPC Rule § 1-8.05(1). Section

1-8.03(2)(h) defines “tampering” as “the intentional

inactivation, disconnection, removal or other modification of

a component or components of the emission control system

resulting in it being inoperable.” EPC Rule § 1-8.03(2)(h)

(emphasis added). Section 1-8.03(2)(c) defines “inoperable

emission control system” as “any emission control system or

component thereof whose operation or efficiency has been

circumvented, defeated, or deleteriously affected by improper

maintenance, improper up-keep, wear and tear, misfueling, or

tampering.” EPC Rule § 1-8.03(2)(c).

First, the Mercedes Defendants attack what they dub the

“inaction theory” — that is, the Commission’s theory that any

post-sale updates to Mercedes vehicles that do not remove the

original defeat devices constitute post-sale tampering. In

the third amended complaint, the Commission alleges that

“every post-sale update that does not remove the workaround,”

by which the Commission refers to the original defeat device,

is “illegal.” (Doc. # 116 at 29). In its response, the

Commission confirms that it is — at least in part — proceeding

under this inaction theory: “Each post-sale update that fails

to remove or otherwise disable the improper programming of

the defeat device is post-sale tampering.” (Doc. # 135 at

15).

As the Mercedes Defendants persuasively argue, “[b]y

relying on a theory of mere inaction — that failure to

‘remove’ an alleged defeat device is tampering — [the

Commission] expressly eschews any requirement to show an

intentional affirmative act or resulting causation” and fails

to show that an emission control system was rendered

“inoperable” “by virtue of post-sale updates.” (Doc. # 122 at

23-24).

The Court agrees that software updates that merely fail

to remove the original defeat device from Mercedes vehicles

do not plausibly violate EPC Rule Section 1-8.05(1). These

updates are not “tampering” as defined by the rule because

they do not cause the emissions control system to be

inoperable. Rather, the original pre-sale defeat devices — on

which the Commission has not and cannot base its claims —

have rendered the emissions control system inoperable and the

later software update has no effect on that system. Thus,

Count I is dismissed with prejudice to the extent it is based

on software updates that simply do not remove the original

defeat device.

The Mercedes Defendants also highlight the limited

nature of the other allegations that do not rely on the

inaction theory. The third amended complaint states that

Defendants committed tampering by “manufacturing and

installing post-sale software updates,” including through

“field fixes and recall campaigns.” (Doc. # 116 at 44). No

information is provided about when any recalls or field fixes

occurred for vehicles registered in Hillsborough County. Nor

are there allegations about how the field fixes, recalls, or

post-sale software updates tampered with the vehicles’

emission control systems, such as by rendering a system even

less functional than it had been with the original defeat

device. The Mercedes Defendants are correct that these

allegations are insufficiently detailed to state a plausible

claim.

However, the Court is not persuaded that amendment would

be futile as to the allegations not based on the inaction

theory. The Commission could plead greater detail about the

software updates, field fixes, and recalls on which its claims

rely. And the Court is not convinced at this juncture that

the Commission’s claims are barred by the statute of

limitations, given that the dates of the relevant post-sale

software updates, field fixes, and recalls are not alleged.

See United States ex rel. Hunt v. Cochise Consultancy, Inc.,

887 F.3d 1081, 1085 (11th Cir. 2018) (“A dismissal for failure

to state a claim on statute of limitations grounds is

appropriate ‘only if it is apparent from the face of the

complaint that the claim is time-barred.’” (citation

omitted)), aff’d, 139 S. Ct. 1507 (2019).

The Commission may file a fourth amended complaint to

address the identified deficiencies in its tampering

allegations, which underlie both Counts I and II. Because

amendment is necessary, the Court need not address the

Mercedes Defendants’ other arguments at this time.

Accordingly, it is hereby

ORDERED, ADJUDGED, and DECREED:

(1) Defendants Daimler Aktiengesellschaft and Mercedes-Benz

USA, LLC’s Motion to Dismiss Plaintiff’s Third Amended

Complaint (Doc. # 122) is GRANTED to the extent stated

herein.

(2) If Plaintiff Environmental Protection Commission of

Hillsborough County, Florida wishes to amend, the fourth

amended complaint is due within fourteen days of this

Order.

DONE and ORDERED in Chambers in Tampa, Florida, this

18th day of April, 2022.

VIR TA M. HERNANDEZ*COVINGTON

UNITED STATES DISTRICT JUDGE

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