# Jurisdictional Statement — Dana Corp. v. California

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Jurisdictional Statement
- **Published:** January 1, 1980
- **Citation:** 449 U.S. 1028

## Text

; Supreme Court, U. S.
80-176 FILED
Pesach. ; AUG 61980

Supreme Court of the United'States’ ©

October Term, 1980

DANA CORPORATION and THE ECHLIN MANUFACTURING
Co.,
Appellants,
VS.
STATE OF CALIFORNIA and LEGISLATURE OF THE STATE OF
CALIFORNIA, et al.,
Appellees.

APPEAL FROM JUDGMENT OF THE COURT OF APPEAL
OF THE STATE OF CALIFORNIA.

JURISDICTIONAL STATEMENT.

PAUL, HASTINGS, JANOFSKY & WALKER,

DENNIS H. VAUGHN,
DONALD A. DAUCHER,
DONALD L. Morrow,
STEVEN C. KENNINGER,

555 South Flower Street, 22nd Floor,
Los Angeles, Calif. 90071.
(213) 489-4000.
Attorneys for Appellant,
Dana Corporation.
MUNGER, TOLLES & RICKERSHAUSER,
DENNIS C. BROWN,

612 South Flower Street, 5th Floor,
Los Angeles, Calif. 90016,
(213) 683-9100.

Attorneys for Appellant,
The Echlin Manufacturing Company.

Parker & Son, Inc., Law Printers. Los Angeles. Phone 724-6622

IN THE

Supreme Court of the United States

October Term, 1980

DANA CORPORATION and THE ECHLIN MANUFACTURING
o.-.
Appellants,
VAY

STATE OF CALIFORNIA and LEGISLATURE OF THE STATE OF
CALIFORNIA, et al.,

Appellees.

APPEAL FROM JUDGMENT OF THE COURT OF APPFAL
OF THE STATE OF CALIFORNIA.

JURISDICTIONAL STATEMENT.

Questions Presented.

1) Whether as a matter of law the Appellees could ab-
rogate without consequence their contracts with the Appel-
lants by enacting legislation allegedly under the police
power?

2) Whether the Appellants’ contracts with the Appellees
were invalid ab initio as an impermissible restraint on the
police power of the State of California?

3) Whether the Appellants’ complaints state a cause of
action against the Appellees for taking of property for which
the Fifth Amendment requires compensation.

4) Whether the determination by the California Court
of Appeal that the California Tort Claims Act immunizes
Appellees from suit by Appellants herein for violation of
Appellants’ constitutional rights runs contrary to the Su-
premacy Clause of the United States Constitution.

TABLE OF CONTENTS

Page
III UI ini das cree a sees keiepiee eens i
SR I dog owe eA oe hk os ven ee Smee ae aie l
Po ec ie a ks WT es eee bee aes Ks l
Constitutional Provisions Involved ................ 2
Statutory Provisions Involved ................0008- 2
NS OE Si oo ka os heli d bid te a oe eden 3
How Federal Question Is Presented........... Temes ae
Reasons for Granting the Writ................006. 10

A. The Court of Appeal’s Holding That the Alleged
Contracts Could, as a Matter of Law, Be Abro-
gated Without Consequence in the Exercise of the
Appellees Police Power Ignores Decisions of
This Court Applying the Contract Clause of the

United States Constitution ................. 10
B. The Contracts Between Appellees and Appellants
Were Not Invalid Ab Initio ................ 15

C. The Court of Appeal’s Holding That Appellees
Cannot Be Held Liable for a Taking of Property in
This Case Raises a Novel Question of Law
Specifically Left Unanswered by This Court Last
POU eae ete eS eats: Te 18

D. The California Tort Claims Act of 1963 Cannot
Deny Appellants a Remedy for Constitutional
Violations. To Allow the Clearly Erroneous
Court of Appeal Ruling to Stand Would Impair
the Constitutional Rights of All Who Deal With
the State of California .........c0eccseens 19
1. The California Tort Claims Act Cannot Im-

munize the Appellees From the Require-

iV

ments of the Fifth Amendment to the United
i ee ee 20

2. The California Tort Claims Act Cannot Im-
munize Appellees From Claims Alleging the
Impairment of a Contract to Violation of the
CEE CI a kee a pewerakeats 22

SIN cere oe ae ew eee os oe 23

INDEX TO APPENDICES
Minute Order of the Superior Court of California, County

ee I i iiedc rks coun ees App. p. 1
Opinion of the Court of Appeal of the State of California
PA LVESO SCOTS AER kNs cee Ree oe Rese es 2
Denial of Appellant’s Petition for Hearing by California
Supreme Court Dated May 8, 1980.............. 6
ee te I 0 pyc 64s oo oe cece shaw wanaes 7
I ics ad sala oa'y ba one Cee A Ne ok 12
Air Resources Act, ch. 670, 1974 Cal. Legis. Serv. ,
ae Sa SC ERIE EDCURE A ERA Oe ak 12
a SRA rele etn Rares tect Sats gr eae 15
Air Resources Act, ch. 957, 1975 Cal. Legis. Serv.
ay hae Feb gate + hohe Nk eee eA 15
The California Tort Claims Act, Cal. Claims and Actions
Ce Sees Weeiay MEO So ccieeuweta cheese ees. 19
Dana’s Third Amended Complaint ................ 20
Echlin’s First Amended Complaint ................ 39
Notice of Appeal to the Court of Appeal, Second Appel-
late District, State of California................. 58

Notice of Appeal to the Supreme Court of the State of
California, Dated August 1, 1980 ............... 62

Page

TABLE OF AUTHORITIES CITED

Cases Page

Agins v. City of Tiburon, .... U.S. ...., 100 S.Ct. 2138
CD ares beer wins a eee oe ate a
Allied Structural Steel Co. v. Spannous, 438 U.S. 234,
57 L.Ed.2d 727, reh. denied 439 U.S. 886, 58
i & Ff Berea, on, &@, 85,
Applby v. Buffalo, 221 U.S. 524, 55 L.Ed. 838 (1911)
Chicago B & O.R. Co. v. Illinois ex rel. Grimwood, 200
OB. TEN, FO GB Fe ET 0 0b se ces nbawenes
Dale v. City of Mountain View, 55 Cal. App.3d 101, 127
CL: Dee CRD a. 6 habs dance oy swceeumeses
E & E Hauling, Inc. v. Forest Preserve Dist., etc., 613
GAG Gre CH ts BOOED nc idsewedneyveecuas 13,
El Paso v. Simmons, 379 U.S. 497, 13 L.Ed.2d 446, reh.
denied 380 U.S. 926, 13 L.Ed.3d 813 (1965) .....
N.A.C.C.P. v. Thompson, 357 F.2d 831 (Sth Cir. 1966)
~ RB reer errs err
Sanfilippo v. County of Santa Cruz, 415 F.Supp. 1340
ET Rs SOON 6 vio cok oe Kos eaene acne
United States Trust Co. v. New Jersey, 431 U.S. 1, 52

L.Ed.2d 92 (1977).... 10, 11, 12, 13, 14, 15, 16,
Constitution

United States Constitution, Art. 1, Sec. 10 .........

United States Constitution, Art. 6, cl. 2.......... Y 4

United States Constitution, Fifth Amendment .......

diac ot Se ee i. 2. 9 OO ae ae

United States Constitution, Fourteenth Amendment .. .
Statutes

Air Resources Act of 1967, Ch. 1507, Sec. 8 (1971)
COSA OEY.: ROOD s.: be eens etoscchawans ae

18

14

22
20

vi

California Government Code, Sec. 814 (West) .
California Government Code, Sec. 818.2 (West)
California Government Code, Sec. 821 (West) .

California Health and Safety Code, Sec. 39177.1 ....

California Vehicle Code, Sec. 4602 (West) ....
United States Code, Title 28, Sec. 1257(2) ....

Appellants' respectfully pray that this Court grant this
Appeal to review the judgment and opinion of the Court of
Appeal of the State of California,’ which affirmed the Su-
perior Court’s dismissal of the Appellants’ complaints with-
out leave to amend.* Appellants sought review of this judg-
ment and opinion in the Supreme Court of the State of
California. Hearing was denied.

OPINIONS BELOW.

The unreported Minute Order of the Superior Court of
California, County of Los Angeles entered December 6,
1977 appears in the appendix at 1.

The reported opinion of the Court of Appeal of the State
of California, Second Appellate District, Division Four,
filed March 13, 1980 appears in the appendix at 2.

The California Supreme Court denied the Appellants’
Petition for Hearing on May 8, 1980 without opinion. The
notice of that denial appears in the appendix at 6.

JURISDICTION.

The Appellants invoke this Court’s jurisdiction under 28
U.S.C. Sec. 1257(2). The judgment and opinion of the
Court of Appeal affirming the dismissal of Appellants’ com-
plaints with prejudice was entered on March 13, 1980. On

‘Appellants were plaintiffs and appellants below. They are: Dana
Corporation (hereinafter *‘Dana’’) and The Echlin Manufacturing Com-
pany (hereinafter ‘‘Echlin’’). The Appellees include the defendants and
appellees below. They are the State of California and the Legislature
of the State of California. In addition, the Appellees include Contig-
nition Company and Combustion Sciences, Inc., who were plaintiffs
and appellants below. However, where the word Appelices is used in
this jurisdictional statement it refers only to the State of California and
the Legislature of the State of California.

California Court of Appeal, Second Appeliate District, Division
Four (per Kingsley, Acting P.J.) (hereinafter ‘‘Court of Appeal’’).

‘Superior Court of Los Angeles County (Hon. Jack T. Ryburn,
Judge).

nan

May 8, 1980, the California Supreme Court denied the
Appellants’ petition for hearing. This jurisdictional state-
ment is filed within 90 days of that denial. Notice of Appeal
was filed in the California Court of Appeal and in the Cal-
ifornia Supreme Court on August 1, 1980. Copies of those
notices appear in the appendix at 58 and 62.

CONSTITUTIONAL PROVISIONS INVOLVED.

Article 1, Sec. 10 of the United States Constitution pro-
vides in pertinent part that ‘‘No state shall . . . pass any
. . . Law impairing the Obligation of Contracts . . .”’

Article 6, cl. 2 of the United States Constitution provides
in pertinent part that ‘‘This Constitution, . . . shall be the
supreme Law of the Land; and the Judges in every State
shall be bound thereby, any Thing in the Constitution or
Laws of any State to the Contrary notwithstanding.”’

The Fifth Amendment to the United States Constitution
provides in pertinent part that *‘No person shall be...
deprived of life, liberty, or property without due process
of law; nor shall private property be taken for public use,
without just compensation.”’

STATUTORY PROVISIONS INVOLVED.

The Air Resources Act, Ch. 1507, 1971 Cal.Legis.Serv.
3205-06 (amending the Air Resources Act of 1967, Cal.
Health and Safety Code $39177.1 and Cal. Vehicles Code
$4602 (West)) and the repealing amendments pertinent to

this action are set out in full in the appendix at 7, 12 and
15.

The relevant sections of the California Tort Claims Act
of 1963 (Cal. Government Code §$§814, 818.2, and 821
(West)) are set out in full in the appendix at 19.

—.

STATEMENT OF THE CASE.

This Appeal results from the affirmance by the Court of
Appeal of an order sustaining demurrers to Appellants’ com-
plaints without leave to amend. Therefore, the courts of
California accepted as true the facts alleged in Appellants’
complaints unless ‘‘contrary to law or to a fact of which a
court may take judicial notice.’’ Agins v. City of Tiburon,
... U.S. ...., 100 S.Ct. 2138, 2141 n.6 (1980) citing Dale
v. City of Mountain View, 55 Cal.App.3d 101, 105, 127
Cal.Rptr. 520, 522 (1976). No other facts are before the .
court for its consideration.

The Complaints stated:

In the late 1960's, there occurred an air pollution crisis
in California. Greatly contributing to this crisis was the
emission of oxides of nitrogen (hereinafter ‘‘NOx’’) from
motor vehicles manufactured in the particular model years
1966-1970. Appendix (hereinafter *‘A’’) at 21-22 and 39-
41.* From 1968 until 1971, demand grew from various
sources, including the Appellees, for action to reduce NOx
emissions from 1966-1970 vehicles. (A at 22 and 41). How-
ever, devices to control such NOx emissions were not com-
mercially available. (A at 22 and 44).

Reacting to the crisis, the Appellees, through the State
of California Air Resources Board (hereinafter ‘‘ARB’’),
consulted with potential manufacturers, including the Ap-
pellants, to determine whether they would develop and make
available devices to reduce NOx emissions for 1966-1970
automobiles. The Legislature was informed by the ARB that

“Certain citations to the appendix will be followed by two sets of
page numbers. The first corresponds to the page in the Appendix at
which this allegation is set forth in Dana’s Third Amended Complaint.
The second corresponds to the page in the Appendix at which this
allegation is set forth in Echlin’s First Amended Complaint.

Pak ise

the manufacturers would undertake such a project if and
only if the law were changed to require the installation of
such devices on all 1966 to 1970 automobiles in California.
(A at 23 and 41-42).

As a result, in November, 1971, the Appellees enacted
legislation (hereinafter the *‘NOx legislation’’) which re-
quired most 1966-1970 motor vehicles (hereinafter ‘‘Subject
Vehicles’’) to be equipped with an ARB accredited NOx
device not later than February 1973. (A at 23-24 and 42-
43). This legislation constituted an offer to Appellants that
if they would undertake to design, obtain accreditation for
and manufacture sufficient numbers of NOx devices, then
the Appellees would require the mandatory installation of
such devices on the Subject Vehicles. (A at 32-33 and 51-
52). In order to assure rapid installation of NOx devices,
the Appellees enacted the NOx legislation as an urgency
Statute, stating:

‘‘This act is an urgency statute necessary for the
immediate preservation of the public peace, health or
safety within the meaning of Article 1V of the Con-
stitution and shall go into immediate effect. The facts
constituting necessity are:

Presently required emission control devices for mo-
tor vehicles of 1966 through 1970 models do not elim-
inate enough of the oxides of nitrogen to insure the
health and safety of the majority of California citizens.
It is now technically feasible to produce devices which
will significantly reduce these dangerous substances.
To insure that such devices are installed on most of
such passenger vehicles within the shortest time pos-
sible, it is necessary to immediately begin programs
for testing and approving such devices. Immediate pas-
sage of this act will also give manufacturers additional
time to develop such devices.’’ Ch. 1507, §8 (1971).

a ee

The NOx legislation vested the ARB with the authority
to accredit and certify for installation on Subject Vehicles
NOx devices and, while it set no absolute standard for
reduction of NOx to be achieved by an accreditable device,
it authorized the ARB to set such standards and to establish
a mandatory installation schedule. (A at 24 and 42-43). In
other words the ARB became a compliance officer, charged
with responsibility for determining whether and when man-
ufacturers had complied with the terms of the Legislature’s
offer.

Despite the urgency of the NOx legislation, by March
31, 1972, no company had yet submitted a device for ac-
creditation. (A at 26 and 44-45). The ARB then wrote a
letter to the manufacturers, including Appellants, which
stated in part:

‘*Gentlemen:

The Air Resources Board, at its meeting on April 19,
1972, at Sacramento, will take up the status of NOx
control devices for 1966-70 light-duty vehicles.

This subject has been discussed by the Board and the
staff with members of the industry for some time. The
Board and staff were led to believe that devices would
be available if the State chose to require their instal-
lation.

The legislature was likewise informed, and as a result
passed SB 578, which requires installation of NOx
devices on 1966-70 light-duty vehicles by January
1973. The bill was signed by the Governor on Novem-
ber 16, 1971 and on November 17 the Board adopted
a test procedure for accreditation.

We understand several companies have undertaken
testing, but no application has yet been filed with the
Board. The Board wishes to find out why there are no
applications and what alternatives exist to comply with

oo

the law and will call upon your representative at the

April 19th meeting to give a brief statement for your

company on the subject.’’ (A at 26 and 44-45)
Appellants accepted Appellees’ offer by designing, obtain-
ing accreditation for and manufacturing the NOx devices.
Both Appellants invested millions of dollars in the design
and manufacture of smog devices at the express request of
the State. The NOx devices submitted by the Appellants
were accredited in August 1972. (A at 27 and 45-46).

The ARB decided that the Appellants would not be able
to produce enough devices, or to establish distribution sys-
tems and train device installers in time to meet the February,
1973, installation deadline provided for in the NOx legis-
lation. Acting under a provision of the NOx legislation
which allowed delay ‘*for extraordinarv and compelling rea-
sons,’’ the ARB suspended the requirement that all vehicles
have the devices installed by early 1973 and began working
on a new schedule. (A at 27-28 and 46). The Appellants
were told by the ARB that an installation schedule would
be adopted if Appellants provided more information re-
garding production, distribution, and installation training
and if Appellants committed themselves to produce the NOx
devices within the time specified in the installation schedule.
(A at 28 and 46). Appellants provided the information and
agreed to produce sufficient devices for all subject 1966-70
vehicles in California. Whereupon the ARB adopted a
schedule providing for mandatory installation of NOx de-
vices on all Subject Vehicles by May, 1974. (A at 28 and
35).

On December 19, 1973, at the request of the Governor
of California the ARB adopted a resolution delaying the
installation deadline. However, in compliance with a writ
of mandamus from the California Supreme Court, the ARB
vacated the resolution to delay mandatory installation and

at, Om

adopted an installation deadline of June 30, 1975. (A at 29
and 47-48).

By January 1, 1974, Dana and Echlin had invested ap-
proximately $10 million and $5 million, respectively, in the
implementation of the NOx program at the inducement of
the legislation and the express request of the ARB acting
pursuant to the legislation. The cost to the Appellants in-
cluded, among other things, the research and development
of the devices and of the installation program, the manu-
facture of a large inventory of NOx devices on an expedited |
basis to meet the requirements of the installation schedules
established by the ARB, training seminars for 11,700 Class-
A mechanics, and the establishment of field offices through-
out California to secure the smooth operation of the instal-
lation program. (A at 30-32 and 48-51).

On September 5, 1974 and again on April 23, 1975, the
Appellees amended the Air Resources Act, (A at 29 and 48)
(hereinafter ‘‘repeal legislation’’). The amendments re-
pealed the provisions which required the mandatory instal-
lation of the NOx devices on all subject vehicles and reduced
to an insignificant number the motor vehicles upon which
the NOx device was required to be installed. By enacting
the repeal legislation the State rescinded its promise to these
appellants to require the installation of NOx devices on all
subject vehicles and rendered the Appellants’ large inven-
tory of NOx devices valueless.

HOW FEDERAL QUESTION IS PRESENTED.

The Appellants initiated this suit in the Surerior Court
of Los Angeles County for breach of contract, for taking
of property without just compensation, and on three other
grounds not discussed in this Appeal.

The complaint of Appellants challenged the validity of
the repeal legislation as an impairment of the contractual

a

duties which the State had imposed upon itself in entering
into contracts with Appellants and a taking of property with-
out compensation.

The Appellees demurred to the complaints filed by Ap-
pellants on identical grounds. Appellees argued that the
State of California was totally free to abrogate any contract
with Appellanis, without consequence, if the abrogation
occurred in the form of legislation which the State contended
was passed in the exercise of its police power; that any
contract which limited the police power of the State was
‘‘void ab initio’’; and that the repeal of those portions of
the NOx legislation making device installation mandatory
was not a taking for which any compensation was required.

The Superior Court dismissed all five causes of action
alleged by the Appellants without leave to amend.

The Appellants appealed to the California Court of Appeal
asserting that they alleged facts sufficient to state a claim
under all five theories. The Appellants argued that the al-
leged contracts could not, as a matter of law, be abrogated
without consequence in the alleged exercise of the State’s
police power and were not void ab initio. Appellants also
pointed out, as they had in the Superior Court that even the
exercise of the State’s police power may be constrained by
the Contract Clause of the United States Constitution. Ap-
pellants also argued that the facts alleged were sufficient
to constitute a cause of action for the taking of Appellants’
property without compensation.

The Court of Appeal affirmed the Superior Court’s order
dismissing the Appellants’ complaints with prejudice on two
separate grounds. First, the Court of Appeal held that the
Appellees were immune from any suit seeking a remedy for
impairment of contract resulting from legislation assertedly
passed in the exercise of the State’s police power. The Court

— ‘on

of Appeal also held that the California Tort Claims Act of
1963 immunized the Appellees from suit under any of the
alleged theories.

Appellants herein petitioned for a hearing before the Cal-
ifornia Supreme Court, again raising the issues that are now
before this Court. The Appellants argued that the Court of
Appeal misconstrued the nature of the case, ignored the
Contract Clause and the Fifth Amendment of the United
States Constitution, and unconstitutionally expanded the
California Tort Claims Act to deny Appellants a remedy for
the violation of Appellants’ constitutional rights by Appel-
lees. The Supreme Court of Cali:ornia denied Appellants’
Petition for Hearing on May 8, 1980.

—10—

REASONS FOR GRANTING THE WRIT.

The Court of Appeal for the State of California disposed
of this case with two broad theories, both of which presume
to provide Appellees with absolute immunity, as a matter
of law from the constitutional claims asserted by the Ap-
pellants. The Court of Appeal held that ‘‘the state is not
liable for the effect of legislation enacted under the police
power for what the Legislature believes is a public pur-
pose.”’ (A-4). Second, the Court of Appeal found that re-
gardless of the claims alleged by the Appellants, the Cali-
fornia Tort Claims Act of 1963 provides the Appellees with
‘‘an express governmental immunity.’’ As will be discussed
below, both alleged statements of law are incorrect because
they ignore the Contract Clause and the Fifth Amendment
of the United States Constitution and directly conflict with
this Court’s interpretation of these provisions.

A. The Court of Appeal’s Holding That the Alleged
Contracts Could, as a Matter of Law, Be Abrogated
Without Consequence in the Exercise of the Ap-
pellees Police Power Ignores Decisions of This Court
Applying the Contract Clause of the United States
Constitution.

The Court of Appeal’s opinion incorrectly concludes that
even if valid contracts existed between the Appellants and
Appetlees, the Appellees can not be held liable for any
remedy for impairing such contracts if that abrogation was
a result of the exercise of the police power of the State. This
Court has made it clear that ‘‘the power of a state to modify
or affect the obligation of contract is not without limit.’
El Paso v. Simmons, 379 U.S. 497, 509, 13 L.Ed.2nd 446,
reh. denied 380 U.S. 926, 13 L.Ed.2d 813 (1965). This is
so even in the exercise of the state’s police powers. See
United States Trust Co. v. New Jersey, 431 U.S. 1, 52

pee, yee

L.Ed.2d 92 (1977); Allied Structural Steel Co. v. Spannaus,
438 U.S. 234, 57 L.Ed.2d 727, reh. denied 439 U.S. 886,
58 L.Ed.2d 201 (1978).

In United States Trust Co. v. New Jersey, 431 U.S. 1,
52 L.Ed.2d 92 (1977), this Court addressed the relationship
between a state’s police powers and its contractual obli-
gations. The States of New York and New Jersey had passed
legislation which restricted the uses which the Port Authority
(a separate governmental entity) could make of its assets.
That legislation was passed for the purpose of inducing |
investors to purchase Port Authority Bonds by making the
investment appear more secure. The legislation, in effect,
promised prospective bondholders of the Port Authority that
as long as any of the bonds remained outstanding, the Port
Authority could not use pledged revenues or reserves for
other than permitted purposes. In 1974 New York and New
Jersey determined that the Port Authority could not operate
efficiently under this restriction. Therefore, in the exercise
of their police power both States repealed the legislation.
Bondholders sued to challenge this repeal as an unconsti-
tutional impairment of contract.

‘After a trial, the Superior Court ruled that the stat-
utory repeal was a reasonable exercise of New Jersey’s
police power,’’ and therefore did not violate the im-
pairment of contracts clauses of either the United States
or New Jersey constitutions. 431 U.S. at 3. (Emphasis
added. )

This Court reversed. In so doing, this Court ruled that
the assertion that the repeal of the legislation was an exercise
of the police power of the State was not sufficient to insulate
that action from the effects of the Contract Clause of the
Constitution:

The trial court concluded that repeal of the 1962 cov-
enant was a valid exercise of New Jersey’s police power

tt

—

because repeal served important public interests in
mass transportation, energy couservation, and envi-
ronmental protection. (Citation omitted.) Yet the Con-
tract Clause limits otherwise legitimate exercises of
state legislative authority, and the existence of an im-
portant public interest is not always sufficient to over-
come that limitation. 431 U.S. at 21. (Emphasis
added. )

This Court stated that an impairment of a contract is
constitutional only if it is ‘‘reasonable and necessary to serve
an important public purpose.’’ 431 U.S. at 25. In applying
this standard to contracts to which the State is a party, this
Court emphasized that *‘complete deference to a legislative
assessment of reasonableness and necessity is not appro-
priate because the State’s self-interest is at stake.’’ 431 U.S.
at 26.

In Allied Structural Steel Co. v. Spannous, 438 U.S. 234,
57 L.Ed.2d 727, reh denied 439 U.S. 886, 58 L.Ed.2d 201
(1978), this Court reiterated that the Contract Clause limits
the power of the state to abridge existing contracts, even
when the state relies upon its police power:

‘If the Contract Clause is to retain any meaning at
all, however, it must be understood to impose some
limits upon the power of a State to abridge existing
contractual relationships, even in the exercise of its
otherwise legitimate police power. The existence and
nature of those limits were clearly indicated in a series
of cases in this Court arising from the efforts of the
States to deal with the unprecedented emergencies
brought on by the severe economic depression of the
early 1930’s.’’ 438 U.S. at 242.

Allied Structural Steel involved a state’s unconstitutional
impairment of a private contract through the exercise of its
police powers. In order to evaluate the state’s interference
with a private contract, this Court made a detailed factual

inquiry of the trial court record to determine the circum-
stances under which the statute had been passed, the scope
and purpose of the statute and its effect upon those whose
conduct it sought to prescribe. 438 U.S. at 244-51. No such
inquiry was required or allowed in this case, despite the fact
that this Court in both the United States Trust Co., supra
at 22-23 and 25-26, and in Allied Structural Steel Co. v.
Spannaus, supra at 244, noted that ‘‘impairments of a
State's own contracts would face more stringent examina-
tion under the Contract Clause than would laws regulating
contractual relationships between private parties.’’ 438
U.S. at 244.

The Seventh Circuit in E & E Hauling, Inc. v. Forest
Preserve Dist., etc., 613 F.2d 675 (7th Cir. 1980), looked
to the above cited Supreme court cases in setting forth the
proper analysis a trial court should use to determine whether
a state’s impairment of its own contractual obligations is
permissible. In E & E Hauling, the plaintiff alleged that a
contract entered into by it and a county forest preserve
district was impaired as a result of the promulgation and
enforcement of certain ordinances subsequently passed by
the district. After holding that the complaint stated a cause
of action, the Court of Appeals set forth the following guide-
lines for the trial court to consider on remand with respect
to whether the asserted impairment violated the contract
clause:

‘*Not all impairments of contractual obligations are
unconstitutional. (Citation omitted.) Instead a court
‘must attempt to reconcile the strictures of the Contract
Clause with the ‘‘essential attributes of sovereign
power’’. . . necessarily reserved by the States to safe-
guard the welfare of their citizens.’ United States Trust,
431 U.S. at 21,97S.Ct. at 1517, Citing Home Building
& Loan Association v. Blaisdell, 290 U.S. 398, 435,

ae = eee

54 S.Ct. 231, 78 L.Ed. 413 (1934). A state does re-
serve broad power to adopt regulations to protect the
public without being concerned with upseiting con-
tractual obligations. This power, however, is not un-
limited. A substantial impairment will be found un-
constitutional when it is shown that the legislation was
not reasonable and necessary to meet an important so-
cial problem. Allied Structural Steel, 438 U.S. at 242-
44, 98 S.Ct. 2716. (Citations omitted). In addition,
the severity of the impairment ‘measures the height of
the hurdle the state legislation must clear.’ Allied Struc-
tural Steel, 438 U.S. at 245, 98 S.Ct. at 2723. Thus,
on remand we direct the district court, in considering
whether the contract clause has been violated, to bal-
ance the District’s interest in its ordinance with the
degree of impairment of the plaintiff's contractual ex-
pectations.’’ Jd. at 681. (Footnote omitted.)

The analysis engaged in by this Court in Allied Structural
Steel and United States Trust Co. shows that a state’s claim
that its abrogation of a contract was a proper and justifiable
exercise of legitimate police power is an affirmative defense
to be proven by the state at trial. This Court has laid down
standards in these cases which the state must meet in order
to establish that its exercise of the police power, did not
violate the Contract Clause. In both Allied Structural Steel
and United States Trust Co., the states failed to meet that
burden at trial. The Seventh circuit in E & E Hauling
recognized the limitations placed on a state’s exercise of its
police powers by the Contract Clause and remanded the case
to the district court for a factual determination as to whether
the exercise of the police power was reasonable and_nec-
essary to meet an important social problem.

In the case at bar, the Court of Appeal found that as a
matter of law the State is not liable forthe effect of any
legislation ‘‘enacted under the police power for what the

|,

legislature believes is a public purpose.’’ (A at 4) At the
pleading stages, without a trial to determine the reason-
ableness of the Appellees’ asserted exercise of its police
powers, the Court of Appeal found that the repeal of the
NOx legislation did not violate the Contract Clause of the
Constitution. This conflicts with express rulings of this
Court.

B. The Contracts Between Appellees and Appellants
Were Not Invalid Ab Initio.

Appellees argued below that any agreements or contracts
that were formed between the State and these Appellants
to require the installation of NOx devices on vehicles in
California would be invalid, ab initio, as an attempt to
restrict future exercise the police power of the State of
California. In so arguing, the Appellees cited United States
Trust Co. for the proposition that, ‘‘the police power and
the power of eminent domain were among those that could
not be ‘contracted away’.’’. . .’’ 7d. at 431 U.S. at 23-24.

However, United States Trust Co. does not support that
view. The legislation which was attacked in that case, the
repeal of a prior law restricting the use of funds by the Port
Authority, was an exercise of the police power of the States
of New York and New Jersey. This Court determined that
the contract which the states had entered into, by the passage
of the original legislation, did restrict and constrain those
States’ police power to pass the repeal legislation.

In United States Trust Co., this Court did cite earlier
decisions dealing with the reserved-powers doctrine, which
required *‘a determination of the States’ power to create
irrevocable contract rights in the first place, rather than an
inquiry into the purpose or reasonableness of the subsequent
impairment.’’ /d. at 431 U.S. at 23 This Court then said,

em Ee

‘‘In deciding whether a state’s contract was invalid,
ab initio, under the reserved-powers doctrine, earlier
decisions relied on distinctions among the various pow-
ers of the state. Thus, the police power and the power
of eminent domain were among those that could not
be ‘contracted away,’ but the State could bind itself
in the future exercise of the taxing and spending pow-
ers.’’ Id. at 23-24.
However, this Court expressly avoided affirming the valid-
ity of those distinctions. It stated,
‘*Such formalistic distinctions perhaps cannot be dis-
positive... .’’ Jd. at 431 U.S. at 24.

The argument of Appellees below was that this formalistic
distinction is dispositive of these Appellants’ rights without
regard to the facts or circumstances of the contractual re-
lationship.

The contract in this case is very much like the contract
in the United States Trust Co. case.

In United States Trust Co., the states sought the public
marketability of Port Authority bonds, while the Appellees
sought a solution to the air pollution crisis. In United States
Trust Co., the states took action to insure an adequate trans-
portation system between new Jersey and New York, while
the Appellees took action to insure healthful air quality. The
states in United States Trust Co. enacted legislation forcing
the Port Authority to retain security for the outstanding
bonds while the Appellees enacted legislation forcing citi-
zens to buy the pollution control devices. The enactment
of the legislation in United States Trust Co. was intended
to encourage investment in Port Authority Bonds (431 U.S.
at 17-18) while the enactment of the NOx legislation was
intended to encourage investment in the design and man-
ufacture of NOx devices. (A at 30-31 and 48-49). The states
realized their objective by controlling the conduct of the

—\

Port Authority for the benefit of the bondholders while the
Appellees realized their objective by prescribing the conduct
of the citizens of the State for the benefit of Petitioners, as
well as for the citizens themselves.

Instead of enacting the 1962 covenant, New Jersey and
New York could have guaranteed payment of intevest and
principal on the bonds. Such a guarantee would clearly have
been an enforceable financial contract. Similarly, the Ap-
pellees could have contracted with Petitioners to purchase
the NOx devices, with the Appellants intending to distribute
and install the devices through their own authorized dealers.
Such a financial agreement would have been as enforceable
as the guarantee agreement postulated above. The point is
that there are many ways to accomplish the same objective.
If, as here and in United States Trust Co., the subject matter
of the contract centers around a financial obligation, the
method which the State has chosen to accomplish its ob-
jective should not affect the enforceability of the obligation
which is the basis for the agreement.

These Appellants invested approximately $15,000,000
in a smog prevention program, at the express request of the
State of California. They were induced to do so by a promise
from the State that the Appellants would receive an eco-
nomic return. Appellants ask this Court to determine that
the *‘formalistic distinction’ recognized but not affirmed
in United States Trust Co. may not be applied to deny them
any remedy for the losses which they have suffered.

For example, in this case, the application of the Contract
Clause to this case does not necessarily mean that the alleged
exercise of the police power by the State in passing the
repeal legislation need be invalidated. Appellants have
sought compensation for only the amounts they expended
in performing their commitments under the contract. Ap-
pellants have not demanded that the State adhere to a con-

tract that surrenders an essential attribute of its sovereignty.
The granting of a less severe remedy may resolve the ap-
parent friction between the Contract Clause and the reserved-
powers doctrine.

C. The Court of Appeal’s Holding That Appellees Can-
not Be Held Liable for a Taking of Property in This
Case Raises a Novel Question of Law Specifically
Left Unanswered By This Court Last Term.

The Court of Appeal found that Appellees could not be
held liable ‘‘for the effect of legislation enacted under the
police power.”’ (A-4). As applied to the takings claim
asserted by the Appellants, this ‘‘basic rule’’ apparently
reflects the application by the court of the doctrine that
damages are not available in California for takings that result
from inverse condemnations. In Agins v. City of Tiburon,
woe US. 2... , 100 S.Ct. 2138 (1980), this Court specifically
left unanswered the question whether the State of California
could limit the remedies available for an inverse condem-
nation that constitutes a taking to mandamus and declaratory
judgment: ‘‘The State Supreme Court determined that the
Appellants could not recover damages for inverse condem-
nation even if the zoning ordinances constituted a taking.
The court stated that only mandamus and declaratory judg-
ment are remedies available to such a landowner. Because
no taking has occurred, we need not consider whether a
State may limit the remedies available to a person whose
land has been taken without just compensation.’’ /d. at
2142-43. The immediate case provides a particularly good
forum for this Court to decide this issue.

Appellants seek compensation from Appellees for the
alleged taking of their property pursuant to an inverse con-
demnation. As a result of Appellees’ alleged exercise of
their police powers in amending the NOx legislation, Ap-

—

pellants have been denied any substantial or reasonable use
for the NOx devices and technology and have lost the con-
tractual rights whereby Appellees would require all owners
of the Subject Vehicles to install NOx devices. Appellants
seek damages for this taking by Appellees because no other
remedy can provide just compensation to the Appellants.
Repeal of the amendments to the NOx legislation will not
serve to restore to the Appellants the value of the property
taken. The contract between the Appellants and Appellees
required the rapid installation of smog devices on cars built -
in the years 1966 to 1970. In 1974, there were hundreds
of thousands of these cars on the road; in 1980, there are
certainly fewer. By the time this case is resolved, there may
well be no such cars remaining. Because of the temporal
nature of the value of Appellants’ property, Appellants can-
not be justly compensated by any remedy except damages.
To allow the State of California to limit relief available for
an inverse condemnation that constitutes a taking in this
case would leave Appellants without any effective remedy
for such a taking.

D. The California Tort Claims Act of 1963 Cannot
Deny Appellants a Remedy for Constitutional Vi-
olations. To Allow the Clearly Erroneous Court of
Appeal Ruling to Stand Would Impair the Consti-
tutional Rights of All Who Deal With the State of
California.

The Court of Appeal held that despite the claims asserted
by the Appellants *‘the case at bench falls squarely within
an express governmental immunity”’ found in the California

i

Torts Claims Act of 1963.° By resting its decision on the
California immunity statutes the Court of Appeal denied the
Appellants any remedy for the alleged violation of their
rights under the United States Constitution. The Court of
Appeal’s holding must be interpreted to state that even if
Appellees took Appellants’ property without just compen-
sation and even if the Appellees impaired their contracts
with Appellants in violation of the Contract Clause, the
California Tort Claims Act immunizes the Appellees from
the dictates of the United States Constitution and denies the
Appellants any remedy for the alleged violations of their
constitutional rights.

1. The California Tort Claims Act Cannot Immunize the Appel-
lees from the Requirements of the Fifth Amendment to the
United States Constitution.

The Fifth and Fourteenth Amendments to the United
States Constitution prohibit a state from taking property for
public use without just compensation. See, e.g., Chicago,
B. & Q.R. Co. v. Illinois ex rel Grimwood, 200 U.S. 561,
50 L.Ed. 596 (1906); Appleby v. Buffalo, 221 U.S. 524,
55 L.Ed. 838 (1911). Appellants claim that Appellees took
their property without just compensation in violation of the
Fifth Amendment. The Court of Appeal held, however, that
the Appellees were immune from liability for the alleged

‘The Court of Appeal stated:

*‘No matter under what ingenious theory put forth, the case at
bench falls squarely within an express governmental immunity.
Sections 818.2 and 821 of the Government Code read as Gov-
ernment Code read as follows:

A public entity is not liable for an injury caused by adopting
or failing to adopt an enactment or by failing to enforce any law.

A public employee is not liable for an injury caused by his
adoption of or failure to adopt an enactment or by his failure to
enforce an enactment.”’

Those sections control the case at bench.’ (A-5).

a: 5

taking under the California Tort Claims Act and affirmed
the dismissal of Appellants’ complaints. In so doing the
Court held a state statute supreme to the Fifth Amendment.
This clearly contravenes the dictates of the Supremacy
Clause which provides that, ‘‘This Constitution, . . . shall
be the supreme Law of the Land; and the Judges in every
State shall be bound thereby, any Thing in the Constitution
or Laws of any State to the Contrary notwithstanding.’’
U.S. Const. art. 6, cl. 2.

A claim of immunity similar to that raised by the Ap-
pellees was faced and disposed of by the court in Sanfilippo
v. County of Santa Cruz, 415 F.Supp. 1340 (N.D. Cal.
1976). The court stated:

‘‘Defendants assert that under California law public
entities are immune from suits for monetary damages
growing out of public enactments or permit approval
procedures. While this may be true in many areas of
tort law, such an immunity doctrine does not apply
here. It is an elementary proposition that governmental
entities are not immune from actions brought under
constitutional provisions guaranteeing just compensa-
tion for public takings of private property. To hold,
as defendants assert, that all land use regulations are
by definition valid discretionary legislative acts would
be to ignore the constitutional requirement that takings
be accompanied by just compensation and to eliminate
actions for inverse condemnation. Irrespective whether
protection against inverse condemnation is afforded
under the California Constitution, California immunity
legislation could not limit the substantive rights of land-
owners under the Sth and 14th Amendments of the
United States Constitution.’’ /d. at 1343. (Footnote
omitted. )

Ea ae

Appellants implore this Court to reverse the Court of Ap-
peal’s holding that provides Appellees immunity from the
Appellants’ Fifth Amendment claim. The implications of
such a clearly erroneous holding are staggering.

2. The California Tort Claims Act Cannot Immunize Appellees
from Claims Alleging the Impairment of a Contract to Violation
of the Contract Clause.

The Court of Appeal also affirmed the dismissal with
prejudice of the Appellants’ contracts claim on the grounds
that the State enjoyed an absolute immunity under the Cal-
ifornia Torts Claims Act. In so doing, the court implicity
found that even if the alleged contracts existed and even if
the Appellees impaired the contracts in violation of the
Contract Clause of the United States Constitution, the Ap-
pellants nevertheless were not entitled to a remedy for the
violation of their const‘tutional rights. Just as with the Ap-
pellants’ Fifth Amendment claim, to hold that the State
Statute immunizes the Appellees from suit for the violation
of Appellants’ rights under the Contract Clause denies Ap-
pellants their constitutional rights and conflicts with the
Supremacy Clause. As stated by the Fifth Circuit in
N.A.C.C.P. v. Thompson, 357 F.2d 831 (Sth Cir. 1966),
cert. denied 385 U.S. 820, ‘‘any State law, which is in
conflict with the United States Constitution or a law enacted
by Congress in pursuance thereof, cannot be enforced. Nor
can a valid State law be applied in a way to thwart the
exercise of a right guaranteed by the Constitution and laws
enacted by Congress in pursuance thereof.’’ /d. at 833. The
Court in this case interpreted a State law so as to thwart the
Appellants’ attempt to vindicate their rights under the Con-
tract Clause of the United States Constitution. If this Court
fails to reverse this decision, the State of California as well

a, ee

as the other states will be free to violate constitutional rights
with immunity by enacting statutes such as the California
Tort Claims Act.

CONCLUSION.

For the foregoing reasons, Appellants pray this Court to
note probable jurisdiction of this Appeal.
Respectfully submitted,
PAUL, HASTINGS, JANOFSKY & WALKER,
DENNIS H. VAUGHN,
DONALD A. DAUCHER,

DONALD L. MorROw,
STEVEN C. KENNINGER,

Attorneys for Appellant,
Dana Corporation.
MUNGER, TOLLES &
RICKERSHAUSER,
DENNIS C. BROWN,
Attorneys for Appellant,
The Echlin Manufacturing Company.

eee
IN THE

Supreme Court of the United States

October Term, 1980

DANA CORPORATION and THE ECHLIN MANUFACTURING
Co.,
| Appellants,
AY
STATE OF CALIFORNIA and LEGISLATURE OF THE STATE OF
CALIFORNIA, ef al.,
Appellees.

APPENDIX.

APPEAL FROM JUDGMENT OF THE COURT OF APPEAL
OF THE STATE OF CALIFORNIA.

Minute Order of The Superior Court of California,
County of Los Angeles.

Superior Court of California, County of Los Angeles.
Dept. 82. |

Date: December 6, 1977.

Honorable: Jack T. Ryburn, Judge.

M. Simpson, Deputy Clerk.

Dana Corporation, etc., vs. State of California, et al. C
158 741.
NATURE OF PROCEEDINGS.

C175 498
C 176 787
C iftdta

In the matter heretofore submitted for decision on December
2. 1977, the Court now rules as follows:

Demurrer of defendants State of California, Edmund
G. Brown, Jr., as Governor of California, and the
California Legislature is sustained on grounds as set
forth below. No leave to amend.

The State has correctly set forth the legal doctrines
upon which its demurrers are based. The legislature
acted within its power, it cannot be estopped, the Air
Resources Board was not authorized to bind the State
to a contract, and any promise not to modify prior
legislation is void.

The facts alleged by plaintiffs upon which the ruling
on demurrer must be based, go beyond a business com-
mitting itself in reliance on the passage of legislation,
Plaintiffs allege legislation passed to abate a crisis and
amendments to that legislation to induce development
and production of NOx devices. They also allege co-
operation between plaintiffs and Air Resources Board
and accreditation of certain NOx devices manufactured
by the plaintiffs. Plaintiffs’ reliance cannot be disputed,

5

but despite a sympathetic approach, this Court has re-
luctantly concluded that plaintiffs have not and cannot
state a cause of action for their loss.
The argument that the loss should be spread among all
of the taxpayers of the state is one that can be made
to the Legislature, but is not a basis for overruling
defendants’ demurrers, nor is the fact that the Legis-
lature may find the business community much less
willing to cooperate under similar circumstances in the
future.
Counsel Joel Moskowitz is to give notice, and is to
prepare an order of dismissal pursuant to section 581(3)
of the Code of Civil Procedure.
A copy of this minute order is mailed to appearing
counsel.

Opinion of the Court of Appeal of the State of California.

In the Court of Appeal of the State of California. Second
Appellate District, Division Four.

Dana Corporation, et al., Plaintiffs and Appellants, v.
State of California, et al., Defendants and Respondents.

2 Civ. No. 55838, (Super. Ct. No. C-158, 741 Consol-
idated with Nos. C-176,787, C-175,498. C-177,272).

Filed: March 13, 1980.

APPEALS from judgments (orders of dismissal) of the
Superior Court, Los Angeles County, Jack T. Ryburn,
Judge. Affirmed.

Paul, Hastings, Janofsky & Walker, Dennis H. Vaughn,
Donald A. Daucher and Steven C. Kenninger for Plaintiff
and Appellant Dana Corporation.

Munger, Tolles & Rickerschauser and Dennis C. Brown
for Plaintiff and Appellant Echlin Manufacturing Company.

ee, aE

Egerman, Brown & Rosen and Philip M. Brown for Plain-
tiff and Appellant Contignitron Company.

No appearance for Plaintiff and Appellant Combustion
Schiences. [SIC]

George Deukemjian, Attorney General, R.H. Connett,
Assistant Attorney General, and Joel S. Moskowitz, Deputy
Attorneys General, for Defendants and Respondents.

Plaintiffs appeal from judgments (orders of dismissal)
entered after demurrers to their complaints were sustained
without leave to amend. We affirm.

In these consolidated actions, the plaintiffs seek damages
from the State of California and the Legislature, for repeal
of certain legislation. In essence, the complaints (third
amended complaint) allege the following:

In November 1971 the Legislature, as part of legislation
intended to alleviate the problem of air pollution caused by
automobiles, enacted an amendment to the Air Resources
Act (c. 1507, Laws of 1971), empowering the Air Resources
Board to adopt standards regulating the emission of oxides
of nitrogen (NOx) and requiring the installation of devices
designed to accomplish that end. There followed a long
period during which the board aggressively sought manu-
facturers (including these plaintiffs) to conduct the necessary
studies to permit the manufacture of controls, saleable at
a reasonable price. During that period, the board also
adopted and amended regulations setting standards for the
desired devices and, from time to time, extending the date
when compulsory installation of such devices would be re-
quired. Plaintiffs, in reliance on the statute, the regulations
and the importunities of the board, expended substantial
sums in designing the type of devices involved and, uti-
mately, secured approval of most of the devices so designed.
In 1974, the Legislature repealed the NOx legislation, ex-

bill pc

cept as to a minor number of motor vehicles. As a result,
the market for the devices designed by plaintiffs and ap-
proved by the Board ceased to exist, causing plaintiffs to
lose the monies expended by them on the NOx program.

Demurrers to the complaints were sustained without leave
to amend and this appeal followed. We affirm the dismis-
Sals.

Plaintiffs attempt to claim a right of recovery on various
theories. All of the claims run afoul of the basic rule that
the state is not liable for the effect of legislation enacted
under the police power for what the Legislature believes is
a public purpose. Plaintiffs here contend that the doctrine
is subject to exceptions, citing to us two cases: United States
Trust Co. of New York v. New Jersey (1977) 431 U.S. |
and Furey v. City of Sacramento (1979) 24 Cal.3d 862.
Neither case is in point here.

In United States Trust, bonds had been sold by an agency
of the state, under a statute which strictly limited the pur-
poses for which the capital and earnings could be used, thus
insuring to the bond holders a reasonable expectancy of
repayment. When the state attempted to broaden the per-
missible uses, the Supreme Court held that the statue under
which the bonds were issued was part of the bond contract
and could not be changed to the detriment of the bond
holders. No such contract appears here.

In Furey the city had collected money from a landowner
for the express purpose of constructing a sewage system
useful only if the area was to be zoned industrial. When the
city zoned the area for other uses, for which the sewer
system was not needed, the Supreme Court held that it was
obligated to refund the money paid for the, now useless,
sewer system. Again, the case is not in point; it is not
alleged, and could not be alleged, that the state has ever

aren, ‘oe

received any money from the plaintiffs, or that it has, in
effect, divered [SIC] plaintiffs’ money to an improper use.

All that plaintiffs have alleged, or could allege, is that
the Legislature, in 1971, thought that requiring NOx devices
on old cars was desirable and that. by 1974, the then Leg-
islature thought that such a requirement was not desirable.
A Legislature is not liable, nor is the state liable. for a
change in its perception of public interest. Many things once
thought desirable or even to be encouraged, are later thought
to be undesirable and to be discouraged. An investment
under the earlier legislation is not protected against a change
in the Legislature’s views of desirability.

No matter under what ingenious theory put forth, the case
at bench falls squarely within an express governmental im-
munity. Section 818.2 and 821 of the Government Code
read as follows:

‘*A public entity is not liable for an injury caused by
adopting or failing to adopt an enactment or by failing to
enforce any law.

‘*A public employee is not liable for an injury caused by
his adoption of or failure to adopt an enactment or by his
failure to enforce an enactment.”’

Those sections control the case at bench.

The judgments (orders of dismissal) are affirmed.

CERTIFIED FOR PUBLICATION.
Kingsley, Acting P.J.
We concur:
Jefferson (Bernard), J.*
Burke (Michael L.), J.*

*Assigned by the Chief Justice of California.
“Assigned by the Chief Justice of Calitornia.

ee

Denial of Appellant’s Petition for Hearing by California
Supreme Court Dated May 8, 1980.
Clerk’s Office, Supreme Court
4250 State Building
San Francisco, California 94102
I have this day filed Order May 8, 1980 Hearing Denied.
In re: 2 Civ. No. 55838 Dana Corporation, etc., et al.
vs. State of California etc.
Respectfully,
Clerk

a, aa

The NOx Legislation.
Air Pollution—Exhaust Emission Devices
Chapter 1507
Senate Bill No. 578

An act to add Sections 39107.6, 39177.1, 39177.2,
39177.3, and 39177.4 to the Health and Safety Code, and
to amend Section 4602 of the Vehicle Code, relating to air
pollution, and declaring the urgency thereof, to take effect
immediately.
The people of the State of California do enact as follows:

SEC. 1. Section 3% 107.6 is added to the Health and Safety
Code, to read: 39107.6.

Notwithstanding Section 39107, the board shall set stand-
ards for devices to significantly reduce the emission of ox-
ides of nitrogen from the exhaust of 1966 through 1970
model year motor vehicles, as determined by the board from
a representative sampling of such vehicles, which the board
has found to be necessary and technologically feasible to
carry out the purposes of this part.

In setting standards under this section, the primary con-
sideration shall be the greatest possible reduction of oxides
of nitrogen.

SEC. 2. Section 39177.1 is added to the Health and Safety
Code, to read:

39177.1.

(a) Whenever an exhaust emission control device meet-
ing the standards established by the board under Section
39107.6 is accredited pursuant to the provisions of this
article and is available for installation as determined by the
board, every 1966 through 1970 model year motor vehicle
having a manufacturer's gross vehicle weight rating of under
6,001 pounds, which is subject to registration in this state,
shall be equipped with such accredited exhaust emission

ants

control device in accordance with a schedule of installation
to be determined by regulation adopted by the board, in
consulation [sic] with the Department of the California
Highway Patrol and the Department of Motor Vehicles.

(b) Enforcement of the provisions of subdivision (a)
shall be as follows:

(1) Vehicle inspections shall be conducted pursuant to
Section 2814 of the Vehicle Code.

(2) Certificates of compliance shall be required upon
initial registration, and upon transfer of ownership and reg-
istration pursuant to Section 4000.1 of the Vehicle Code.

(3) Certificates of compliance shall be required upon
renewal of registration for the year 1973, pursuant to Section
4602 of the Vehicle Code.

(4) By such other authorized means as the board, the
Department of Motor Vehicles, and the Department of the
California Highway Patrol find practicable.

(c) After one or more devices are initially accredited,
no device shall be accredited which is less effective than
the one or ones initially accredited. Any subsequent accre-
ditation of a more effective device shall not affect the ac-
creditation of a previously accredited device.

SEC. 3. Section 39177.2 is added to the Health and Safety
Code, to read:

39177.2.

The provisions of Section 39177.1 shall not apply to any
motor vehicle which, on the effective date of this section,
is equipped with a device or devices which meet the re-
quirements of subdivision (c) of Section 39101.5, as de-
termined by the board, or which is exempted by the board
pursuant to Section 39177.

SEC. 4. Section 39177.3 is added to the Health and Safety
Code, to read:

EE Saas

39177.3.

In accrediting devices, pursuant to Section 39177.1, the
board shall, ni establishing tests and procedures, adopt
standards, including, but not limited to, the following:

(a) An accredited exhaust emission contro] device shall
not cost more than thirty-five dollars ($35), including the
cost of installation.

(b) An accredited exhaust emission control device shall
not require maintainence more than once each 12,000 miles,
and such maintenance shall not cost more than fifteen dollars
($15), including the cost of parts and labor.

(c) An accredited exhaust control device shall equal or
exceed the performance criteria established by the board for
devices for new motor vehicles or, in the alternative, have
an expected useful life of at least 50,000 miles of operation.

(d) The manufacturer of an exhaust emission control
device accredited pursuant to this article shall include with
the sale of such device instructions setting forth what steps
the purchaser should take to maintain such device in proper
working condition, .

SEC. 5. Section 39177.4 is added to the Health and Safety
Code, to read: x
39177.4.

(a) Any manufacturer of a device required by Section
39177.1 shall, as a condition of accreditation of such device
by the board, agree that until there are two or more ac-
credited devices suitable for installation on motor vehicles
of the same classification, such classification to be deter-
mined by the board, the manufacturer shall, with respect
to his device for such classification of motor vehicles, either:
(1) agree to enter into such cross-licensing or other agree-
ments as the board determines are necessary to insure ad-
equate competition among manufacturers of such devices
to protect the public interest; or (2) agre > as a condition to

—10—

such accreditation that, if only one such device from one
manufacturer is made available for sale to the public, the
board shall, taking into consideration the cost of manufac-
turing the device and the manufacturer's suggested retail
price, and in order to protect the public interest, determine
the fair and reasonable retail price of such device and may
require, as a condition to continued accreditation of such
device, that the retail price of such device including in-
stallation, not exceed such price as determined by the board.
In either event, the retail price so determined by the board
for a device required by Section 39177.1 shall not be in
excess of thirty-five dollars ($35) per vehicle, installed.

(b) Accreditation may be revoked by the board after a
public hearing for which notice has been given to the ap-
plicant who obtained the accreditation, if the actual cost of
the device installed exceeds the cost, installed, estimated,
or agreed to by such applicant.

SEC. 6. Section 4602 of the Vehicle Code is amended
to read:
4602.

(a) Application for renewal of a vehicle registration ex-
piring on the 31st day of December shall be made by the
owner not later than midnight of the first Friday in February
succeeding the expiration date and shall be made by pre-
sentation of the registration card last issued for the vehicle
or by presentation of a potential registration card issued by
the department for use at the time of renewal and by payment
of the full annual fee for the vehicle as provided in this
code.

(b) The department shall require, upon 1973 renewal of
registration of any motor vehicle subject to Section 391771
of the Health and Safety Code, a valid certificate of com-
pliance from a licensed motor vehicle pollution control de-

vice installation and inspection station indicating that such
vehicle is properly equipped with a motor vehicle pollution
control device which is in proper operating condition and
which is of a type that has been accredited by the State Air
Resources Board pursuant to Section 39177.1 of the Health
and Safety Code. For extraordinary and compelling reasons
only, the State Air Resources Board may, by regulation,
afier a public hearing, defer or delete the requirement of
certificates of compliance required pursuant to this subdi-
vision. In such event, the board may adjust the schedule of
installation adopted pursuant to subdivision (a) of Section
39177.1 of the Health and Safety Code and shall immedi-
ately report to the Governor and the Legislature the actions
taken and the reasons therefor.

SEC. 7. The State Air Resources Board, the Department
of Motor Vehicles, and the Department of the California
Highway Patrol shall by all practicable means at their dis-
posal advise the motoring public of the provisions of this
act.

SEC. 8. [Urgency statute]

Approved and filed Nov. 12, 1971.

ae ae

REPEAL LEGISLATION.
Air Resources Act, ch. 670, 1974 Cal. Legis. Serv. 1872.

Motor Vehicles—Air Pollution
Chapter 670
Senate Bill No. 2471

An act to amend Section 39177.1 of the Health and Safety
Code, and to amend and repeal Section 4602, as amended
by Chapter 1507 of the Statutes of 1971, of, and to amend
Section 4602, as amended by Chapter 889 of the Statutes
of 1973, of, the Vehicle Code, relating to air pollution.

LEGISLATIVE COUNSEL’S DIGEST

Requires the installation of oxides of nitrogen exhaust
emission control devices on all 1966 through 1970 model
year motor vehicles having a manufacturer’s gross vehicle
weight rating of under 6,001 pounds, registered in any
county included, in whole or in part, within the South Coast
Air Basin, in accordance with a schedule of installation
adopted in July 1974 by the State Air Resources Board, and
on all such motor vehicles registered in the other counties
upon initial registration and upon transfer of ownership and
registration, rather than on all such vehicles subject to reg-
istration in the state, in accordance with such a schedule.

Makes related changes.

The people of the State of California do enact as follows:

SECTION |. Section 39177.1 of the Health and Safety
Code is amended to read: 39177.1

(a) Whenever an exhaust emission control device meet-
ing the standards established by the board under Section
39107.6 is accredited pursuant to the provisions of this
article and is available for installation as determined by the
board, every 1966 through 1970 model year motor vehicle
having a manufacturer’s gross vehicle weight rating of under

— i

6,001 pounds * * * shall be equipped with such an accredited
exhaust emission control device * * * as follows:

(/) If registered in any county included, in whole or in
part, within the South Coast Air Basin, as defined by the
board, in accordance with the schedule of installation
adopted by regulation by the board in July 1974.

(2) If registered in any other county, upon initial reg-
istration and upon transfer of ownership and registration.

(b) Enforcement of the provisions of subdivision (a)
shall be as follows:

(1) Vehicle inspections shall be conducted pursuant to
Section 2814 of the Vehicle Code.

(2) Certificates of compliance shall be required upon
initial registration, and upon transfer of ownership and reg-
istration pursuant to Section 4000.1 of the Vehicle Code.

(3) Certificates of compliance shall be required upon
renewal of registration for the year * * * /976, pursuant to
Section 4602 of the Vehicle Code, for such motor vehicles
registered in any county included, in whole or in part, within
the South Coast Air Basin, as defined by the board.

(4) By such other authorized means as the board, the
Department of Motor Vehicles, and the Department of the
California Highway Patrol find practicable.

(c) After one or more devices are initially accredited,
no device shall be accredited which ts less effective than
the one or ones initially accredited. Any subsequent accre-
ditation of a more effective device shall not affect the ac-
creditation of a previously accredited device.

SEC. 2. Section 4602, as amended by Chapter 1507 of
the Statutes of 1971, of the Vehicle Code is amended to
read:

4602.
* * * Application for renewal of a vehicle registra-

ot Y am

tion expiration on the 31st day of December shall be made
by the owner not later than midnight of the first Friday in
February succeeding the expiration date and shall be made
by presentation of the registration card last issued for the
vehicle or by presentation of a potential registration card
issued by the department for use at the time of renewal and
by payment of the full annual fee for the vehicle as provided
in this code.

* * * This section shall remain in effect only until
March 10, 1975, and as of that date is repealed.

SEC. 3. Section 4602, as amended by Chapter 889 of the
Statutes of 1973, of the Vehicle Code is amended to read:
4602.

* * * Application for renewal of a vehicle registra-
tion shall be made by the owner not later than midnight of
the expiration date, and shall be made by presentation of
the registration card last issued for the vehicle or by pre-
sentation of a potential registration card issued by the de-
partment for use at the time of renewal and by payment of
the full registration year fee for the vehicle as provided in
this code.

* * * This section shall become operative on March
10, 1975.

Approved and filed Sept. 5, 1974.

ae eae
&

REPEAL LEGISLATION,
Air Resources Act, ch. 957, 1975 Cal. Legis. Serv. 2474.
Air Pollution—Recodification

Chapter 957
Assembly Bill No. 1758

An act to amend Sections 9889.15, 9889.17, 9889.18,
and 9889.51 of the Business and Professions Code; to amend
Sections 4477, 6253, 11017, and 14808.5 of the Govern-
ment Code; to repeal Chapter 2 (commencing with Section
24198) and Chapter 2.5 (commencing with Section 24345)
of Division 20 of, to repeal Division 26 (commencing with
Section 39000), Division 27 (commencing with Section
39600), Division 28 (commencing with Section 39800), and
Division 30 (commencing with Section 40000) of, and to
add Division 26 (commencing with Section 39000), Divi-
sion 27 (commencing with Section 44500) and Division 28
(commencing with Section 46000) to, the Health and Safety
Code; to amend Section 201.5 and 10753 of the Revenue
and Taxation Code; to amend Sections 2814, 4000, 4000. 1,
4000.2, 4750, 9250.5, 11519, 24007, 24007.5, 27156. and
27156.1 of, and to amend and repeal Section 4602, as
amended by Section 2 of Chapter 670 of the Statutes of
1974, of, and to amend Section 4602, as amended by Sec-
tion 3 of Chapter 670 of the Statutes of 1974, of, the Vehicle
Code; and to repeal Section 3 of Chapter 1599 of the Statutes
of 1970, relating to air pollution.

LEGISLATIVE COUNSEL’S DIGEST

Existing law contains provisions regarding air pollution
and the authority, duties, and responsibilities of the State
Air Resources Board and local air pollution control districts.

This bill would repeal and reenact, with various substan-
tive changes, provisions regarding air pullution contained
in the Health and Satety Code, and make contorming

a,”

changes in the Health and Safety Code and in cross-
references in provisions in various other codes.

This bill provides that no appropriation is made nor any
obligation created for the reimbursement of any local agency
for any costs by it pursuant to the bill.

The people of the State of California do enact as follows:

Article 2. Certified Device Installation
43654.

Every 1966 through 1970 light duty motor vehicle, sub-
ject to registration in this state, shall be equipped with a
certified device to control its exhaust emission of oxides of
nitrogen upon initial registration and upon transfer of own-
ership and registration.

SEC. 22. Section 4000.1 of the Vehicle Code is amended
to read:
4000. |

(a) The department shall require, pursuant to law or reg-
ulation of the State Air Resources Board adopted pursuant
to Section * * * 43655 of the Health and Safety
Code, upon initial registration, and upon transfer of own-
ership and registration, of any motor vehicle subject
to * * * Part 5 (commencing with Section
* * * 43000) of * * * Division 26 of the Health
and Safety Code, a valid certificate of compliance from a
licensed motor vehicle pollution control device installation
and inspection station indicating that such vehicle is properly
equipped with a motor vehicle pollution control device or
devices which are in proper operating condition and which
are in compliance with the provisions of * * *~ Part
5 (commencing with Section * * * 43000)
of * * * Division 26 of the Health and Safety Code.

With respect to new vehicles having a gross vehicle
weight to 6,001 pounds or less, the department shall accept

a,

a statement completed pursuant to subdivision (b) of Section
24007 in lieu of the certificate of compliance.

The provisions of this section shall not apply to a transfer
of ownership and registration when the transferor is either
the parent, grandparent. child, or spouse of the transferee.
when a vehicle registered to a sole proprietorship is trans-
ferred to such proprietor as owner, or when the transfer is
between companies whose principal business is leasing ve-
hicles, if there is no change in the lessee or operator of the
vehicle.

(b) The State Air Resources Board * * * , un-
der * * * Part 5 (commencing with section
* * * 43000)of * * * Division 26 of the Health
and Safety Code, may exempt designated classifications of
motor vehicles from the provisions of subdivision (a) as
they deem necessary, and shall notify the department of
such action * * *,

SEC. 23. Section 4000.2 of the Vehicle Code is amended
to read:
4000.2.

The department shall require upon registration of a motor
vehicle subject to * * * Part 5 (commencing with
Section * * *43000)of * * * Division 26 of the
Health and Safety Code, previously registered outside this
State, a valid certificate of compliance from a licensed motor
vehicle pollution control device installation and inspection
station indicating that such vehicle is properly equipped with
a motor vehicle pollution control device or devices which
are In proper operating condition and which are in compli-
ance with the provisions of * * = * that part.

SEC. 24. Section 4602 of the Vehicle Code, as amended
by Section 2 of Chapter 670 of the Statutes of 1974, is
amended to read:

fee * Sie

4602.

Application for renewai of a vehicle registration expiring
on the 31st day of December shall be made by the owner
not later than midnight of the first Friday in February su-
ceeding the expiration date and shall be made by presen-
tation of the registration card last issued for the vehicle or
by presentation of a potential registration card issued by the
department for use at the time of renewal and by payment
of the full annual fee for the vehicle as provided in this
code.

This section shall remain in effect only until March 8,
1976, and as of that date is repealed.

|

The California Tort Claims Act, Cal. Claims and Actions
Code §§814, 818.2, 821.
$814. Effect upon liability based on contract or right to
relief other than money or damages. Nothing in this part
affects liability based on contract or the right to obtain relief
other than money or damages against a public entity or
public employee (Added Stats. 1963, c. 1681, p. 3267,
§ 1.)
§ 818.2 Adoption or failure to adopt or enforce enactment.
A public entity is not liable for an injury caused by adopting
or failing to adopt an enactment of by failing to enforce any
law. (Added Stats. 1963, c. 1681, p. 3268, § 1.)
§ 821. Adoption or failure to adopt or enforce enactment.
A public employee is not liable for an injury caused by his
adoption of or failure to adopt an enactment or by his failure
to enforce an enactment. (Added Stats. 1963, c. 1681, p.
3269, § 1.)

—20—

Dana’s Third Amended Complaint.

Superior Court of the State of California, for the County
of Los Angeles.

Dana Corporation, a corporation, Plaintiff, vs. State of
California, the Legislature of the State of California, and
Does I through XXV, Defendants. No. C 158 741.

Filed: Aug. 11, 1977.

1. Atall times mentioned herein Plaintiff DANA COR-
PORATION (hereinafter referred to as ‘“‘Dana’’) was and
now 1s a corporation organized and existing under the laws
of the State of Virginia, and authorized to do business in
the State of California.

2. Atall times mentioned herein Defendant STATE OF
CALIFORNIA (hereinafter referred to as the ‘‘State’’) was
and is a state of the United States of America.

3. At all times mentioned herein defendant LEGIS-
LATURE OF THE STATE OF CALIFORNIA (hereinafter
referred to as the ‘‘Legislature’’) was and now is a govern-
mental unit created by the California Constitution.

4. The true names and capacities, whether individual,
corporate, associate or otherwise, of Defendants named
herein as Does | through XXV are unknown to Plaintiff,
which therefore sues said Defendants by such fictitious
names. Plaintiff will amend this Complaint to show their
names and capacities when the same have been ascertained.
Hereinafter Defendants STATE, LEGISLATURE, and
DOES | through XXV will be collectively referred to as
*‘Defendants’’.

5. At all times mentioned herein, each defendant was
and now is an agent of each other and of every other de-
fendant herein, and as such agent was acting within the
course and scope of its employment at the time and times
herein alleged.

”

9 D comm

6. Inthe late 1960's, air pollution in California reached
crisis levels. A significant contributor to this crisis was the
emission of various pollutants from motor vehicles operating
in the state.

7. In response to this crisis, Defendants caused to be
enacted, in 1967, the Mulfold-Carrell Air Resources Act
(hereinafter referred to as the ‘‘Air Resources Act’’), Cal-
ifornia Health and Safety Code §§ 39000 et seg. This act
established the Air Resources Board (hereinafter referred
to as the ‘‘ARB’’).

8. In further response to this crisis. Defendants caused
to be enacted the Pure Air Act of 1968 (hereinafter ferred
[sic] to as the ‘‘Pure Air Act’’), which amended the Air
Resources Act to specifically require the reduction of pol-
lution from motor vehicles.

9. In passing the Pure Air Act, the Defendants found:

‘‘(a) That the emission of pollutants from motor
vehicles is the primary cause of air pollution in many
portions of the State.

(b) That the control and elimination of such pol-
Jutants is of prime importance for the protection and
preservation of the public health and well-being, and
for the prevention of irritation to the senses, interfer-
ence with visibility, and damage of vegetation and
property.

(c) That the State has a responsibility to establish
uniform procedures for compliance with standards
which control or eliminate such pollutants.

(d) That the California goal for pure air quality is
the achievement of an atmosphere with no significant
detectable adverse effect from motor vehicle air pol-
lution on health, welfare and the quality of life and
property by 1975.

(e) That vehicle emission standards applied to new
motor vehicles and to used motor vehicles equipped
with emission control devices are standards with which
all such vehicles shall comply subject to the approval,
accreditation, and certification provisions of this part.”
Ch. 764, $8 (1968) (Health and Satety Code, $3908 1).

10. The Pure Air Act required the ARB to accredit and
certify for installation on automobiles, devices which re-
duced the emissions of each of three particular pollutants
— carbon monoxide, hydrocarbons and oxides of nitrogen
— below certain specifically defined absolute standards.
Ch. 764, §8 (1968) (as amended, Health and Safety Code,
§39107).

11. During the period from 1968 until 1971, vehicles
manufactured in model years 1966 through 1970 (hereinafter
referred to as ‘‘1966-1970 vehicles’’) were particularly sig-
nificant polluters. Their factory installed pollution control
equipment did reduce the emission of carbon monoxide and
hydrocarbons, but caused a significant increase in the emis-
sion of oxides of nitrogen (hereinafter referred to as
‘*‘NOx’’), a primary component in the chemical reaction
which leads to photochemical smog.

12. During the period from 1968 until 1971, devices
to reduce NOx emissions (hereinafter referred to as ‘‘NOx
device|s]’’) suitable for installation on 1966-1970 vehicles
were not commercially available in California.

13. The Pure Air Act gave the ARB no authority to
vary its emission device standards or accredit a device which
reduced only NOx emissions.

14. During the period from 1968 until 1971, demand
grew from various sources, including the Defendants, for
action which would lead to the reduction of NOx emissions
from 1966-1970 vehicles.

ra. > tae

15. During the period from 1968 until 1971, the ARB
and its staff consulted potential manufacturers to determine
whether these manufacturers could develop, and make avail-
able, NOx devices for 1966-1970 vehicles.

16. The ARB was informed by potential manufacturers
that NOx devices would be developed, and made available,
if the law were changed to allow the accreditation of NOx
devices and to require the installation of accredited NOx
devices on all 1966-1970 automobiles in California.

17. The ARB requested such legislation and supported
its passage. In conformance with the ARB request, the Leg-
islature, in November, 1971, amended the Air Resources
Act, Ch. 1507 (1971) (said amendment is hereinafter re-
ferred to as the ‘‘NOx Legislation’’).

18. One purpose of the NOx Legislation was to en-
courage and induce the development, accreditation and pro-
duction of NOx devices by manufacturers by requiring the
installation of such devices as soon as they were available.
Its urgency section provided:

‘This act is an urgency statute necessary for the
immediate preservation of the public peace, health or
safety within the meaning of Article IV of the Con-
stitution and shall go into immediate effect. The facts
constituting necessity are:

Presently required emission control devices for mo-
tor vehicles of 1966 through 1970 models do not elim-
inate enough of the oxides of nitrogen to insure the
health and safety of the majority of California citizens.
It is now technically feasible to produce devices which
will significantly reduce these dangerous substances.
To insure that such devices are installed on most of
such passenger vehicles within the shortest time pos-
sible, it is necessary to immediately begin programs
for testing and approving such devices. Immediate pas-

pan, * ee

sage of this act will also give manufacturers additional
time to develop such devices.’* Ch. 1507, §8 (1971).
19. The NOx Legislation vested the ARB with the au-
thorty to accredit NOx devices for installation on 1966-1970
vehicles having a manufacturer’s gross vehicle weight rating
of under 6,00] pounds (hereinafter referred to as **Subject
.Vehicles’’). It further required every Subject Vehicle to be
equipped with an NOx device in accordance with a schedule
to be developed by the ARB. The NOx Legislation speci-
fically required that all Subject Vehicles be equipped with
a device upon renewal of registration in 1973, absent ex-
traordinary and compelling reasons.

20. The NOx Legislation set no absolute standards for
the reduction of NOx. Instead, it sought to encourage the
development of the best possible devices, given the con-
straints of urgency and of technological and economic fea-
sibility.

21. To accomplish this purpose, the ARB was author-
ized to determine the standard for NOx reduction necessary
for accreditation of an NOx device:

‘*Notwithstanding |Health and Safety Code] Section
39107, [which had set a specifically defined absolute
NOx standard, ] the board shall set standards for devices
to significantly reduce the emission of oxides of nitro-
gen from 1966 though 1970 model year vehicles, as
determined by the buard from a representative sampling
of such vehicles, which the board has found necessary
and technologically feasible to carry out the purposes
of this part.

In setting standards under this Section, the primary
consideration shall be the greatest possible reduction
of oxides of nitrogen.”’ Ch.1507, § 1 (1971).

ae, | eet

-

22. To further accomplish this purpose, the NOx Leg-
islation provided that no NOx device could be accredited
which was less effective than any already accredited.

23. For several months prior to the passage of the NOx
Legislation and in anticipation thereof, the ARB consulted
with potential manufacturers to develop procedures for eval-
uating NOx devices and to implement an NOx reduction
program.

24. At the ARB meeting on November 17, 1971, the
ARB adopted procedures for evaluating NOx devices. At .
the same meeting. the ARB, speaking through its Chairman,
noted the passage of the NOx Legislation and urged ‘‘the
auto industry to submit devices for approval at an early date
since many of the manufacturers indicated they would do
so if the law were changed.’’

25. Standards for the reduction of NOx emissions re-
quired for accreditation of NOx devices were not set at the
November 17 meeting because the ARB did not possess
sufficient information on the effectiveness of NOx devices
which would be technologically and economically feasible.
Thereafter, the ARB continued its solicitation of information
from manufacturers with regard to potential NOx devices.
In December, 1971, the ARB wrote various manufacturers
stating, “‘[bJefore setting standards for [NOx] devices, the
Board wishes to know the technological possibilities for
control systems within the price limit $35.’’ The ARB also
inquired whether the manufacturers had an NOx device to
offer and, if so, how efficient it would be in reducing NOx
emissions.

26. Dana and other manufacturers provided the ARB
with information concerning the availability and effective-
ness of NOx devices which they had begun to develop as
a result of the passage of the NOx Legislation. Using this

—26—

information, the ARB adopted standards for the accredita-
tion of NOx devices at the ARB meeting on February 16,
1972.

27. The standards for certification required that an NOx
device reduce NOx emissions from various classes of Sub-
ject Vehicles by a specified percentage rather than setting
an absolute standard of maximum allowable emissions. The
standards provided for certification of NOx devices which
would reduce actual NOx emissions by 20% to 30%.

28. On March 31, 1972, the ARB again solicited the
participation of manufacturers in the NOx emission reduc-
tion program It wrote to manufacturers:

‘*Gentlemen:

The Air Resources Board, as its meeting on April 19,
1972, at Sacramento, will take up the status of NOx
control devices for 1966-70 light-duty vehicles.

This subject has been discussed by the Board and the
staff with members of the industry for some time. The
Board and staff were led to believe that devices would
be available if the State chose to require their instal-
lation.

The legislature was likewise informed, and as a result
passed SB 578, which requires installation of NOx
devices on 1966-70 light-duty vehicles by January
1973. The bill was signed by the Governor on Novem-
ber 16, 1971 and on November 17 the Board adopted
a test procedure for accreditation.

We understand several companies have undertaken
testing, but no application has yet been filed with the
Board. The Board wishes to find out why there are no
applications and what alternatives exist to comply with
the law and will call upon your representative at the
April 19th meeting to give a brief statement for your
company on the subject.’

ay) 2 ae

29. At the ARB meeting on April 19, 1972, various
manufacturers, including Dana, informed the ARB that they
had devices which met the ARB standards and that the
manufacturers would soon submit their data and applica-
tions.

30. Dana submitted an NOx device to the ARB tor
accreditation on or about May I1, 1972, supplying the re-
quired test data and other supporting information, including
information relating to Dana’s financial condition and dis-
tribution capabilities. At the ARB meeting on August 23,
1972, Dana’s device was accredited by the ARB for all but
one engine size classification and accredited on August 15,
1973 for that remaining engine size. At the August 23, 1972
meeting an NOx device, manufactured by The Echlin Com-
pany (hereinafter referred to as ‘“‘Echlin’’) was accredited.
At the August 23, 1972 meeting, one ARB member ex-
pressly stated that the Board was ‘‘asking the companies
to embark on a massive program involving large sums of
money.”’

31. The ARB thereafter resolved, pursuant to its sta-
tutory responsibility, that ‘‘the installation of the Dana cor-
poration device shall become mandatory ... when the
Board finds that the device is available for installation.”
A similar resolution was passed with regard to the Echlin
NOx device.

32. Pursuant to this resolution the ARB sought to de-
velop a schedule for the required installation of NOx devices
on the Subject Vehicles. At the ARB meeting of August 23,
1972, Dana and Echlin were requested to submit detailed
information as soon as possible to the ARB on the time
required to produce sufficient NOx devices, train installers
and establish distribution channels.

33. At the ARB meeting on September 27, 1972, the
ARB decided that Dana and Echlin would not be able to
produce enough devices, or to establish distribution systems
and train device installers in time to make NOx devices

Cie...

available for all Subject Vehicles in February, 1973. There-
fore, the ARB suspended the requirement that all Subject
Vehicles be equipped with an NOx device by February,
1973, and established procedures for adopting a new sched-
ule.

34. The ARB thereafter requested further information
from Dana and Echlin concerning possible production, dis-
tribution and training schedules for the NOx devices. The
ARB informed Dana and Echlin that a schedule would be
adopted, requiring installation of NOx devices on the Sub-
ject Vehicles, if the manufacturers provided such infor-
mation and committed themselves to produce the NOx de-
vices within the specified times.

35. Onor prior to November 21, 1972, Dana and Echlin
agreed that they would produce and distribute sufficient
NOx devices and conduct the other necessary activities,
within a period necessary to meet a proposed installation
schedule developed jointly by the ARB staft, other State
officials and the manufacturers.

36. At the ARB meeting on November 21, 1972, the
ARB adopted an installation schedule similar to the one
proposed. The adopted installation schedule, a copy of
which is attached hereto as Exhibit **1’’ and incorporated
herein by reference, provided for the mandatory installation
of NOx devices on all Subject Vehicles by May, 1974.

37. The ARB recognized that the implementation of
this installation schedule would reduce NOx emissions in
California by an average of 138 tons per day, in 1974, and
by 180 tons per day, in 1975.

38. Relying upon this schedule for the mandatory in-
stallation of NOx devices, Dana produced and distributed
NOx devices, and trained device installers, in accordance
with its commitment to the ARB. A limited number of
devices were installed pursuant to the schedule.

= =

39. In June, 1973, the ARB repealed the installation
schedule. In October, 1973, the ARB adopted a new in-
stallation schedule. It provided among other things, that all
Subject Vehicles would be required to have an NOx device
installed on or before December |, 1974. A copy of this
schedule is attached hereto as Exhibit **2’’ and incorporated
herein by reference.

40. On November 16, 1973, the Governor of the State
requested the ARB to reconsider the installation schedule
because of an apparent energy shortage. He then filled an
existing vacancy on the ARB and replaced three members
_ of the ARB. On December 19, 1973, the newly constituted
ARB adopted a Resolution delaying for at least one year
the required installation of NOx devices on the Subject
Vehicles.

41. On June 27, 1974 the Supreme Court of California,
in an action brought by Dana, Echlin, and the Clean Air
Constituency, issued a writ of mandamus directing the ARB
to vacate its Resolution of December 19, 1973, on the
ground that the NOx Legislation required the ARB to adopt
and implement a schedule for the mandatory installation of
NOx devices.

42. In July 1974, the ARB again adopted a schedule
for mandatory installation of NOx devices on all Subject
Vehicles. A copy of this schedule is attached hereto as
Exhibit ‘*3°’ and incorporated herein by reference.

43. On September 5, 1974, and again on April 23,
1975, defendants caused to be enacted certain amendments
to the Air Resources Act, which repealed the provisions of
the NOx Legislation requiring the rapid installation of NOx
devices on all Subject Vehicles, and reduced, to an insig-
nificant number, the number of motor vehicles upon which
the NOx device was required to be installed.

—30—

FIRST CAUSE OF ACTION
(Breach of Contract)

44. Dana realleges and incorporates by reference herein
all the allegations of paragraphs | through 43 above as
though fully set forth at length.

45. Inthe course of and through the events, statements,
and actions described in paragraph 5 through 43 above, as
well as through other events, statements and acts, Defend-
ants entered into a course of conduct designed to induce and
encourage Dana to design and obtain accreditation for, and
to induce, encoyrage and require Dana to manufacture and
maintain an inventory of NOx emission control devices. It
was the plan and requirement of Defendants that Dana de-
velop NOx devices and manufacture and maintain an in-
ventory of NOx devices before the NOx devices were first
required to be installed on the Subject Vehicles. In pursu-
ance of the aforesaid course of conduct, Defandants did,
among other things, the following:

(a) Recruited, requested and encouraged Dana to
design and submit an NOx device for accreditation;

(b) Based the accreditation of Dana’s NOx device,
in part, on a commitment by Dana that it could, and
would, manufacture and maintain a large inventory of
the NOx devices prior to the time installation of said
devices was to be required, and on an investigation of
Dana's financial ability to do so;

(c) Required Dana to manufacture and maintain a
large inventory of NOx devices and to develop and
carry out comprehensive training and distribution plans
prior to the time installation of the devices was to be
required;

(d) Represented and deliberately led Dana to be-
lieve that if Dana obtained accreditation for an NOx
device and manufactured a large inventory, Defendants
would require rapid installation of NOx devices on all

a

Subject Vehicles;

(e) Delayed installation schedules previously es-
tablished, and on each such instance required plaintiff
to manufacture and maintain an even larger inventory
of NOx devices prior to the time installation of the
devices was to be required.

46. Dana, in reliance on the representations, promises,
actions and aforesaid course of conduct of Defendants, was
induced and encouraged to and did design, obtain ac-
creditation for, manufacture and maintain an inventory of
NOx devices, expending in the process, considerable time,
effort and money. In carrying out these actions, Dana,
among other things:

(a) Assigned large numbers of professional per-
sonnel to this development and testing work;

(b) Conducted, and caused to be conducted, nu-
merous costly tests on various automobiles;

(c) Manufactured a stock of the NOx devices suf-
ficient for such testing and for submission to the ARB
under its required procedures;

(d) Submitted to the ARB an application for ac-
creditation in accord with ARB requirements for the
control of NOx emissions in 1966-1970 vehicles, with
the required test data and other supporting information,
and in connection therewith, undertook certain affirm-
ative commitments, including those required by the
Statute;

(e) Held numerous meetings with ARB personnel
in the connection with the accreditation procedure;

(f) Having obtained accreditation on August 23,
1972, commenced planning for the manufacture, mar-
keting, and installation of the devices, in cooperation
and consultation with the ARB, its staff and other state
officials;

(g) Established a sales and service group in Cali-
fornia of up to 12 men in connection with the program

mee, ae

for distribution and installation of NOx devices;

(h) Allocated 19,000 square feet of Dana’s man-
ufacturing facility in Pueblo, Colorado for the purposes
of stock accumulation, assembly and storage of the
Dana NOx device:

(i) Hired 23 assemblers and material handlers and
two supervisory personnel;

(j) Began full production on an expedited basis by
January, 1973, in order to develop the inventory of
NOx devices necessary to meet the requirements of the
installation schedule;

(k) Developed a formal audio visual training pro-
gram for Class A mechanics in the State of California
based upon the recommendations of ARB staff;

(1) Conducted numerous seminars for Class A
mechanics in the State of California between January
5, 1973 and June |, 1973, training in excess of 10,000
Class A mechanics and associated automobile service
people;

(m) Established a sales and customer service office
within the State of California and engaged in a news-
paper and radio campaign to disseminate information
concerning both the Dana NOx device and the NOx
device program for 1966-70 vehicles;

(n) Worked closely with the staff of the ARB and
others in monitoring the installations on Subject Ve-
hicles in the field during February and March of 1973
to resolve any possible problems as quickly as possible:

(o) Invested by January 1, 1974, in excess of
$10,000,000 in the implementation of the Dana NOx
device program as described above.

47. Defendants expressly requested Dana to design,
obtain accreditation for, manufacture and maintain an in-
ventory of NOx devices before the NOx devices were first
required to be installed on the Subject Vehicles.

|

48. In conjunction with this request, Defendants prom-
ised Dana that Defendants would require that each Subject
Vehicle be equipped with an accredited NOx device in a
short period of time.

49. Dana, in reliance on aforesaid course of conduct
of Defendants, and in expectation that each Subject Vehicle
would be required to be equipped with an accredited NOx
device in a short time and in expectation that Dana would
be compensated for its services, expended considerable
time, effort and money in the design, obtaining accreditation
for, manufacture and maintenance of an inventory of NOx
devices.

50. It was the intent of the Defendants and Dana and
the principal inducement for Dana’s expending the aforesaid
time, money and effort that Defendants would require and
continue to require each Subject Vehicle be equipped with
an accredited NOx device once such devices were accredited
and made available for installation.

51. Defendants materially and substantially breached
the agreement stated above by the repeal of the NOx Leg-
islation in such a manner as to reduce to an insignificant
number the motor vehicles on which the NOx device was
required to be installed without compensating Dana for the
time, effort and money it had expended in designing, ob-
taining accreditation for, manufacturing and maintaining an
inventory of the NOx devices.

52. As a direct and proximate result of said breach,
Dana has been damaged in an amount not less than $13,-
000,000. The exact amount of such damage will be dem-
onstrated by proof at trial.

53. With respect to the acts of Defendants in causing
to be enacted on April 23, 1975 certain amendments to
California Health and Safety Code Section 39177.1, plain-

ian Bie

tiff has complied with the claim requirements of Govern-
ment Code Section 900 er seq. by filing with the State Board
of control a claim for damages, and said claim was denied
on April 20, 1976.
SECOND CAUSE OF ACTION
(Estoppel in Pais)

54. Dana realleges and incorporates by reference herein
all the allegations of paragraphs 1-43, 45, 46 and 53 above
as though fully set forth at length.

55. Defendants knew or should have known that as a
result of the aforesaid course of conduct entered into by
them, Dana would be induced and encouraged to, and would
in fact, design, obtain accreditation for, manufacture and
maintain an inventory of NOx devices before the NOx de-
vices were first required to be installed on the Subject Ve-
hicles.

56. As aresult of the aforesaid course of conduct, Dana
was made to believe and did believe that the carrying out
of the schedule mandating rapid installation of NOx devices
on all Subject Vehicles was certain of accomplishment once
Dana had designed, obtained accreditation for, manufac-
tured and maintained an inventory of such devices.

57. Atno time prior to the expenditure of large amounts
of time, effort and money by Dana was there any reason
for Dana to believe that the State would abandon the re-
quirement of rapid installation of NOx devices on all Subject
Vehicles.

58. Acting solely upon the understanding that rapid in-
stallation of NOx devices on all Subject Vehicles would be
required, Dana did each and every one of the acts described
above. But for said understanding, Dana would not have
so acted.

ue a

-

59. By the actions and the aforesaid courses of conduct
carried out by Defendants, they were estopped to repeal the
NOx Legislation in such a manner as to reduce to an insig-
nificant number the motor vehicles on which the NOx device
was to be installed without compensating Dana for the time.
effort and money it expended in designing, obtaining ac-
creditation for, manufacturing and maintaining an inventory
of the NOx devices.

60. Asa result of the foregoing actions by defendants,
Dana has been damaged in an amount not less than $13,-
000,000. The exact amount of such damage will be dem-
onstrated by proof at trial.

THIRD CAUSE OF ACTION
(Promissory Estoppel)

61. Dana realleges and incorporates by reference herein
all the allegations of paragraphs 1-43, 45, 46 and 53 above
as though fully set forth at length herein.

62. Defendants, in making the aforesaid representa-
tions, and promises, did so with the knowledge that Dana
would reasonably be induced to rely upon Defendants’ rep-
resentations and promises in that Dana would expend con-
siderable time effort and money in designing, obtaining
accreditation for, manufacturing and maintaining an inven-
tory of NOx devices.

63. Dana in reasonble reliance upon Defendents’ rep-
resentations and promises was induced to expend consid-
erable time, effort and money in designing, obtaining ac-
creditation for, manufacturing and maintaining an inventory
of NOx devices, and but for Defendants’ representations
and promises to Dana, Dana would not have so acted.

64. Dana, in reasonably relying upon Defendants’ rep-
resentations and promises has suffered a substantial detri-
ment in that Dana has been damaged in an amount not less

Se ee

than $13,000,000. The exact amount of such damage will
be demonstrated by proof at trial.

FOURTH CAUSE OF ACTION

(Taking and Damaging of Property

Without Compensation)
65. Dana realleges and incorporates by reference herein

all of the allegations in paragraphs !-43, 45-51 and 53 above
as though fully set forth at length.

66. As aresult of the foregoing actions by Defendants,
the uses to which Dana’s property can be put have been
restricted to such an extent that Dana has been denied any
substantial or reasonable use of its property.

67. As a further result of the foregoing actions by De-
fendants, the rights of Dana under its agreement with De-
fendants have been restricted and foreclosed to such an
extent that Dana has been denied any substantial or reason-
able benefit of its bargain.

68. Thus said property and contract rights have been
taken without compensation and their value has been di-
minished and damaged by an amount not less than $13,-
000,000. The exact amount of such damage will be dem-
onstrated by proof at trial.

69. Dana has not been compensated by the Defendants
or any of them for the taking and damaging of its property
and contract rights as aforesaid.

FIFTH CAUSE OF ACTION
(Quasi Contract — Implied in Law)

70. Plaintiff realleges and incorporates by reference
herein all of the allegations of paragraphs 1-43, 45, 46 and
53 above as though fully set forth at length.

i

71. Defendants, in causing to be enacted the Air Re-
sources Act and the NOx Legislation, and in carrying out
the aforesaid course of conduct, expressly intended to in-
duce, encourage and require Plaintiff to design, obtain ac-
creditation for, manufacture and maintain an inventory of
NOx devices.

72. Plaintiff, in reliance on the actions and aforesaid
course of conduct of Defendants, and in expectation of being
compensated for its services, expended considerable time,
effort and money in designing, obtaining accreditation for,
manufacturing and maintaining an inventory of NOx de-
vices.

73. As a result of these services being rendered by
Plaintiff, Defendants have been unjustly enriched by an as
yet undetermined sum. When the exact amount of this sum
is ascertained, Plaintiff will seek leave of this Court to
amend its complaint and insert the correct figure.

74. Plaintiff has not been reimbursed for these services
it performed at Defendant’s request.

WHEREFORE, Dana prays judgment against Defend-
ants, and each of them, jointly and severally with respect
to each cause of action as follows:

1. The sum of $13,000,000 or such damages as may
be shown at the time of trial;

2. For interest as provided by law;
3. For reasonable attorneys’ fees and costs of suit in
connection with the prosecution of this action: and

a ee

4. For such other and further relief as may be just and
proper.
DATED: August 11, 1977.
PAUL, HASTINGS, JANOFSKY & WALKER
By /s/ Donald A. Daucher
Donald A. Daucher
Attorneys for Plaintiff
DANA CORPORATION

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Echlin’s First Amended Complaint.

Superior Court of the State of California, for the County
of Los Angeles.

The Echlin Manufacturing Company, a corporation,
Plaintiff, vs. State of California, the Legislature of the State
of California, and Does | through XXV, Defendants. No.
176787.

Filed: Aug. 2, 1977.

1. Atall times mentioned herein Plaintiff THE ECHLIN
MANUFACTURING COMPANY (hereinafter referred to
as ‘‘ECHLIN’’) was and now is a corporation organized
and existing under the laws of the State of Connecticut, and
authorized to do business in the State of California.

2. Atall times mentioned herein Defendant STATE OF
CALIFORNIA (hereinafter referred to as the ‘“‘STATE’’)
was and is a state of the United States of America.

3. At all times mentioned herein Defendant LEGIS-
LATURE OF THE STATE OF CALIFORNIA (hereinafter
referred to as the ‘“‘LEGISLATURE’’) was and now is a
governmental unit created by the California Constitution.

4. The true names and capacities, whether individual,
corporate, associate or otherwise, of Defendants named
herein as Does I through XXV are unknown to Plaintiff,
which therefore sues said Defendants by such fictitious
names. Plaintiff will amend this Complaint to show their
names and capacities when the same have been ascertained.
Hereinafter Defendants STATE, LEGISLATURE, and
DOES | through XXV will be collectively referred to as
‘*Defendants’’.

5. Inthe late 1960's, air pollution in California reached
crisis levels. A significant contributor to this crisis was the
emission of various pollutants from motor vehicles operating
in the state.

—

6. In response to this crisis, Defendants caused to be
enacted, in 1967, the Mulford-Carrell Air Resources Act
(hereinafter referred to as the **‘Air Resources Act’’), Cal-
ifornia Health and Safety Code §§ 39000 et seg. This act
established the Air Resources Board (hereinafter referred
to as the *‘ARB’’).

7. In further response to this crisis, Defendants caused
to be enacted the Pure Air Act of 1968 (hereinafter referred
to as the **Pure Air Act’’), which amended the Air Re-
sources Act to specifically require the reduction of pollution
from motor vehicles.

8. In passing the Pure Air Act, the Defendants found:

‘*(a) That the emission of pollutants from motor
vehicles is the primary cause of air pollution in many
portions of the State.

(b) That the control and elimination of such pol-
lutants is of prime importance for the protection and
preservation of the public health and well-being, and
for the prevention of irritation to the senses, interfer-
ence with visibility, and damage of vegetation and
property.

(c) That the State has a responsibility to establish
uniform procedures for compliance with standards
which control or eliminate such pollutants.

(d) That the California goal for pure air quality is
the achievement of an atmosphere with no significant
detectable adverse effect from motor vehicle air pol-
lution on health, welfare and the quality of life and
property by 1975.

(e) That vehicle emission standards applied to new
motor vehicles and to used motor vehicles equipped
with emission control devices are standards with which
all such vehicles shail comply subject to the approval,
accreditation, and certification provisions of this part.’’
Ch. 764, §8 (1968) (Health and Safety Code, $3908 1).

onc scaee

9. The Pure Air Act required the ARB to accredit and
certify for installation on automobiles, devices which re-
duced the emissions of each of three particular pollutants
— carbon monoxide, hydrocarbons and oxides of nitrogen
— below certain specifically defined absolute standards.
Ch. 764, $8 (1968) (as amended, Health and Safety Code,
§39107).

10. During the period from 1968 until 1971, vehicles
manufactured in model years 1966 through 1970 (hereinafter
referred to as ‘*1966-1970 vehicles’’) were particularly sig-
nificant polluters. Their factory installed pollution control
equipment did reduce the emission of carbon monoxide and
hydrocarbons, but caused a significant increase in the emis-
sion of oxides of nitrogen (hereinafter referred to as
‘*NOx’’), a primary component in the chemical reaction
which leads to photochemical smog.

11. During the period from 1968 until 1971, devices
to reduce NOx emissions (hereinafter referred to as *‘NOx
device|s]’’) suitable for installation on 1966-1970 vehicles
were not commercially available in California.

12. The Pure Air Act gave the ARB no authority to
vary its emission device standards or accredit a device which
reduced only NOx emissions.

13. During the period from 1968 until 1971, demand
grew from various sources, including the Defendants, for
action which would lead to the reduction of NOx emissions
from 1966-1970 vehicles.

14. During the period from 1968 until 1971 the ARB
and its staff consulted potential manufacturers to determine
whether these manufacturers could develop, and make avail-
able, NOx devices for 1966-1970 vehicles.

15. The ARB was informed by potential manufacturers
that NOx devices would be developed, and made available,
if the law were changed to allow the accreditation of NOx

|,

devices and to require the installation of accredited NOx
devices on all 1966-1970 automobiles in California.

16. The ARB requested such legislation and supported
its passage. In conformance with the ARB request, the Leg-
islature, in November, 1971. amended the Air Resources
Act, Ch. 1507 (1971) (said amendment is hereinafter re-
ferred to as the ‘*NOx Legislation’’).

17. One purpose of the NOx Legislation was to en-
courage and induce the development, accreditation and pro-
duction of NOx devices by manufacturers by requiring the
installation of such devices as soon as they were available.
Its urgency section provided:

‘‘This act is an urgency statute necessary for the
immediate preservation of the public peace, health or
safety within the meaning of Article IV of the Con-
stitution and shall go into immediate effect. The facts
constituting necessity are:

Presently required emission control devices for mo-
tor vehicles of 1966 through 1970 models do not elim-
inate enough of the oxides of nitrogen to insure the
health and safety of the majority of California citizens.
It is now technically feasible to produce devices which
will significantly reduce these dangerous substances.
To insure that such devices are installed on most of
such passenger vehicles within the shortest time pos-
sible, it is necessary to immediately begin programs
for testing and approving such devices. Immediate pas-
sage of this act will also give manufacturers additional
time to develop such devices.’’ Ch. 1507, §8 (1971).

18. The NOx Legislation vested the ARB with the au-
thority to accredit NOx devices for installation on 1966-
1970 vehicles having a manufacturer’s gross vehicle weight
rating of under 6,001 pounds (hereinafter referred to as
**Subject Vehicles’’). It further required every Subject Ve-
hicle to be equipped with an NOx device in accordance with

ae ee

a schedule to be developed by the ARB. The NOx Legis-
lation specifically required that all Subject Vehicles be
equipped with a device upon renewal of registration in 1973,
absent extraordinary and compelling reasons.

19. The NOx Legislation set no absolute standards for
the reduction of NOx. Instead, it sought to encourage the
development of the best possible devices, given the con-
straints of urgency and of technological and economic fea-
sibility.

20. To accomplish this purpose, the ARB was author-
ized to determine the standard for NOx reduction necessary
for accreditation of an NOx device:

‘‘Notwithstanding |Health and Safety Code] Section
39107, [which had set a specifically defined absolute
NOx standard, ] the board shall set standards for devices
to significantly reduce the emission of oxides of nitro-
gen from 1966 through 1970 mode! year vehicles, as
determined by the board from a representative sampling
of such vehicles, which the board has found necessary
and technologically feasible to carry out the purposes
of this part.

In setting standards under this Section, the primary
consideration shall be the greatest possible reduction
of oxides of nitrogen.’’ Ch.1507, §1 (1971).

21. To further accomplish this purpose, the NOx Leg-
islation provided that no NOx device could be accredited
which was less effective than any already accredited.

22. For several months prior to the passage of the NOx
Legislation and in anticipation thereof, the ARB consulted
with potential manufactures to develop procedures for eval-
uating NOx devices and to implement an NOx reduction
program.

23. At the ARB meeting on November 17, 1971, the
ARB adopted procedures for evaluting NOx devices. At the

—44—

same meeting, the ARB, speaking through its Chairman,
noted the passage of the NOx Legislation and urged ‘‘the
auto industry to submit devices for approval at an early date
since many of the manufacturers indicated they would do
so if the law were changed.’’

24. Standards for the reduction of NOx emissions re-
quired for accreditation of NOx devices were not set at the
November 17 meeting because the ARB did not possess
sufficient information on the effectiveness of NOx devices
which would be technologically and economically feasible.
Thereafter, the ARB continued its solicitation of information
from manufacturers with regard to potential NOx devices.
In December, 1971, the ARB wrote various manufacturers
Stating, ‘“[bJefore setting standards for [NOx] devices, the
Board wishes to know the technological possivilities for
control systems within the price limit $35.’’ The ARB also
inquired whether the manufacturers had an NOx device to
offer and, if so, how efficient it would be in reducing NOx
emissions.

25. ECHLIN and other manufacturers provided the
ARB with information concerning the availability and ef-
fectiveness of NOx devices which they had begun to develop
as a result of the passage of the NOx Legislation. Using this
information, the ARB adopted standards for the accredita-
tion of NOx devices at the ARB meeting on February 16,
1972.

26. The standards for certification required that an NOx
device reduce NOx emissions from various classes of Sub-
ject Vehicles by a specified percentage rather than setting
an absolute standard of maximum allowable emissions. The
standards provided for certification of NOx devices which
would reduce actual NOx emissions by 20% to 30%.

27. On March 31, 1972, the ARB again solicited the
participation of manufacturers in the NOx emission reduc-
tion program. It wrote to manufacturers:

a ee

‘*Gentlemen:

The Air Resources Board, at its meeting on April 19,
1972, at Sacramento, will take up the status of NOx
control devices for 1966-70 light-duty vehicles.

This subject has been discussed by the Board and the
staff with members of the industry for some time. The
Board and staff were led to believe that devices would
be available if the State chose to require their instal-
lation.

The legislature was likewise informed, and as a result
passed SB 578, which requires installation of NOx
devices on 1966-70 light-duty vehicles by January
1973. The bill was signed by the Governor on Novem-
ber 16, 1971 and on November 17 the Board adopted
a test procedure for accreditation.

We understand several companies have undertaken
testing, but no application has yet been filed with the
Board. The Board wishes to find out why there are no
applications and what alternatives exist to comply with
the law and will call upon your representative at the
April 19th meeting to give a brief statement for your
company on the subject.’’

28. At the ARB meeting on April 19, 1972, various
manufacturers, including ECHLIN, informed the ARB that
they had devices which met the ARB standards and that the
manufacturers would soon submit their data and applica-
tions.

29. ECHLIN submitted an NOx device to the ARB for
accreditation on April 21, 1972, supplying the required test
data and other supporting information, including informa-
tion relating to ECHLIN’s financial condition and distri-
bution capabilities. At the ARB meeting on August 23,
1972, ECHLIN’s device was accredited by the ARB. At the
same meeting, an NOx device manufactured by the Dana
Corporation (hereinafter referred to as **‘ DANA’) was ac-
credited. At that meeting, one ARB member expressly stated

a

that the Board was ‘‘asking the companies to embark on a
massive program involving large sums of money.”’

30. The ARB thereafter resolved, pursuant to its sta-
tutory responsibility, that “‘the installation of the Echlin
corporation devices shall become mandatory . . . when the
Board finds that the device is available for installation.’’
A similar resolution was passed with regard to the DANA
NOx device.

31. Pursuant to this resolution the ARB sought to de-
velop a schedule for the required installation of NOx devices
on the Subject Vehicles. At the ARB meeting of August 23,
1972, ECHLIN and DANA were requested to submit de-
tailed information as soon as possible to the ARB on the
time required to produce sufficient Nox devices, train in-
stallers and establish distribution channels.

32. At the ARB meeting on September 27, 1972, the
ARB decided that ECHLIN and DANA would not be able
to produce enough devices, or to establish distribution sys-
tems and train device installers in time to make NOx devices
available for all Subject Vehicles by February, 1973. There-
fore, the ARB suspended the requirement that all Subject
Vehicles be equipped with an NOx device by February,
1973, and established procedures for adopting a new sched-
ule.

33. The ARB thereafter requested further information
from ECHLIN and DANA concerning possible production,
distribution and training schedules for the NOx devices. The
ARB informed ECHLIN and DANA that a schedule would
be adopted, requiring installation of NOx devices on the
Subject Vehicles, if the manufacturers provided such in-
formation and committed themselves to produce the NOx
devices within the specified times.

34. On or prior to November 21, 1972, ECHLIN and
DANA agreed that they would produce and distribute suf-

Bon? Oe

ficient NOx devices and conduct the other necessary activ-
ities, within a period necessary to meet a proposed instal-
lation schedule developed jointly by the ARB staff. other
State officials and the manufacturers.

35. At the ARB meeting on November 21. 1972. the
ARB adopted an installation schedule similar to the one
proposed. The adopted installation schedule, a copy of
which is attached hereto as Exhibit **1’’ and incorporated
herein by reference, provided for the mandatory installation
of NOx devices on all Subject Vehicles by May, 1974.

36. The ARB recognized that the implementation of
this installation schedule would reduce NOx emissions in
California by an average of 138 tons per day, in 1974, and
by 180 tons per day, in 1975.

37. Relying upon this schedule for the mandatory in-
stallation of NOx devices, ECHLIN produced and distrib-
uted NOx devices, and trained device installers, in accord-
ance with its commitment to the ARB. A limited number
of devices were installed pursuant to the schedule.

38. In June, 1973, the ARB repealed the installation
schedule. In October, 1973, the ARB adopted a new in-
stallation schedule. It provided among other things, that all
Subject Vehicles would be required to have an NOx device
installed on or before December |, 1974. A copy of this
schedule is attached hereto as Exhibit **2°* and incorporated
herein by reference.

39. On November 16, 1973, the Governor of the State
requested the ARB to reconsider the installation schedule
because of an apparent energy shortage. He then filled an
existing vacancy on the ARB and replaced three members
on the ARB. On December 19, 1973, the newly constituted
ARB adopted a Resolution delaying for at least one year

— =F

the required installation of NOx devices on the Subject
Vehicles.

40. Gn June 27, 1974, the Supreme Court of California,
in an action brought by ECHLIN, DANA, and the Clean
Air Constituency. issued a writ of mandamus directing the
ARB to vacate its Resolution of December 19, 1973, on the
ground that the NOx Legislation required the ARB to adopt
and implement a schedule for the

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_0198%3A1. Public record. Not legal advice.