Petition for Writ of Certiorari — SC Testing Technology, Inc. v. Maine Department of Environmental Protection

Supreme Court brief1997

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961563 4PR 21997

No. O6fGE OF THE CLERK

In The

Supreme Court of the United States

October Term, 1996

SC TESTING TECHNOLOGY, INC., et ai.,

Petitioners,

MAINE DEPARTMENT OF ENVIRONMENTAL

PROTECTION, et al.,

Respondents.

Petition For Writ Of Certiorari

To The Maine Supreme Judicial Court

PETITION FOR CERTIORARI

DanieL AMORY

Counsel of Record

DRUMMOND WoopsuM

& MaAcMAHOoN

245 Commercial Street

Post Office Box 9781

Portland, ME 04104-5081

(207) 772-1941

April 1, 1997

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED

Whether the doctrine of preemption precludes the

State of Maine from asserting the repeal of an emissions

testing program as a defense in a contract action, when

the program was at the time of the repeal included in the

State Implementation Plan submitted by the State which

had been approved by the Environmental Protection

Agency under the Clean Air Act?

LIST OF PARTIES

Petitioners are SC Testing Technology, Inc. and its

parent, Systems Control, Inc. SC Testing Technology has

no subsidiaries and no other parent corporations. Sys-

tems Control, Inc. has no parent, and its only non-wholly

owned subsidiaries are Tejas Testing Technology One,

L.C. and Tejas Testing Technology Two, L.C., both Texas

limited liability companies.

The other respondents are the State of Maine; the

Maine Department of the Secretary of State, Bureau of

Motor Vehicles; Edward O. Sullivan, individually and as

commissioner of the Maine Department of Environmental

Protection; and Gregory G. Hanscom, individually and as

director of the Maine Bureau of Motor Vehicles.

ili

TABLE OF CONTENTS

Page

RPRPPETY WRUTO TINO. oo. eee c ccc sccscccccnn, i

Pept SOP BUTPRORIT IND ooo ccc cic se ccccccccennsn. iv

EON a fa ee ey ee 1

I ers Ss yo oo i ae l

REGULATORY STATUTORY AND CONSTITU-

TIONAL PROVISIONS INVOLVED .............. 2

UN SS Fes oe cee os eS. 4

REASONS FOR GRANTING THE WRIT ........... 9

I. THE DECISION BELOW SQUARELY CON-

FLICTS WITH DECISIONS OF THIS COURT

AND FEDERAL COURTS OF APPEALS, AND

WITH THE EXPRESS PREEMPTION PROVI-

SIONS OF THE CLEAN AIR ACT............. 10

Il. THERE IS NO ADEQUATE INDEPENDENT

STATE GROUND SUPPORTING THE DECISION

(aS RESIS ae aan 15

MIN ee ce 16

APPENDIX A (ME SUP CT OPINION)............. A-1 |

APPENDIX B (ORDER DENYING MOTION FOR

PEAT)... .. 56s c ooo sc aces, B-1

APPENDIX C (SUPERIOR CT OPINION)........... C-1

APPENDIX D (STATUTES AND REGULATIONS)... D-1

TABLE OF AUTHORITIES

Page

CASES

Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504

3 2} FRR an Ineo Tr pa repnen eriomee yee Tse cere eye 16

Barnett Bank of Marion County, N.A. v. Nelson, ___

RP Esy ics RA ee AE MAE hk ARD Ae eee enue 12

Caterpillar, Inc. v. Williams, 482 U.S. 386 (1987) ...... 14

County of Riverside v. McLaughlin, 500 U.S. 44

2 tb Bebanarie ty Gears Bema ata Dayne rae pape 9? ek NR, bps 13

Exxon Corp. v. Hunt, €75 US. 355 (3966)... cc cise 13

International Paper Co. v. Ouellette, 479 U.S. 481

bo 2d Pg erro umE Der ey sear te mr ay ee 12, 14

Jones v. Rath Packing Co., 430 U.S. 519 (1977)........ 12

Maryland v. Louisiana, 451 U.S. 725 (1981) ........... 15

McCarthy v. Thomas, 27 F.3d 1363 (9th Cir. 1994)..... 11

McCulloch v. Maryland, 17 U.S. 316 (1819) ........... 16

Natural Resources Defense Council v. EPA, 22 F.3d

Size Sank: SAE See hi eee Cab desiaeesc 11

Rose v. Arkansas State Police, 479 U.S. 1 (1986)....... 13

Three Affiliated Tribes of Fort Berthold Reservation v.

Wold Engineering, 476 U.S. 877 (1986) ............. 13

Train v. Natural Resources Defense Council, Inc., 421

Rdg WAR COMER CG heh dik encores eek bebe e Riba ekeees 11

United States v. Ford Motor Co., 814 F.2d 1099 (6th

Cir.), cert. denied, 464 U.S. 822 (1987).............- 11

TABLE OF AUTHORITIES —- Continued

Page

United States v. Winstar, __ U.S. __, 116 S.Ct. 2432

ROI oes ooo obs edhe kha ee ee 14, 15

United States Trust Co. of New York v. New Jersey,

BOA Wis 0. ESOT FD i kaa Obs eh ee 14

CONSTITUTION

Ria RTE wate FES bh ok Eee ck ee eee 3

STATUTES

29-A M.R.S.A. § 403, repealed by P.L. 1995, ch. 49,

§ 1 and P.L. 1995, ch. 50, § 1 (effective April 28,

LOPO Ee cea CERES ESET REUSE DEKE ees 4s 4&5

38 M.R.S.A. ch.28, repealed by P.L. 1995, ch. 49, § 2

and P.L. 1995, ch. 50, § 2 (effective April 28,

POPOE 6 FCS RAL Ed LOE ROE ep he ee d Ci canto a

PO AMPs BO De UMP ea ion oes. dbe cadena’ pe kk okwake 2

36 MLE A. & ZAGAT AY (9995) 66s cv ea ei 12

FO Me Phe TE OE LADS) onc a con ideneedesnkces wae

FOTO Fit Ses CU WE Se kkk bab ch eke 3, 4

DERM Fa Pe Ske OO oc bids Cobo ke Eva SO bee 3, 4

Se ces BD: Rear SES i cds aoc ncnadecdcce oes 1

Gk ALA. & FRO) CEG shi ips cb eine icsenvent 2, 11

OS. Sis FOR a TO OD 0b se ieee kA Raa eas eka bas 13

Si VSL_A. & FAO] (IGN oo ie iene ibcecsssihs. 4

BE Tica d. Bis Be PRR FE ia 0 54 hs vai as Cees » ae A &

Sl VLA, © TO CR) os ois shake esacwias 4, 12

TABLE OF AUTHORITIES - Continued

Page

SS UDCA. | FOU) CI00EF co cccccscicssusecevensees 12

DS Reeds, B FORE COMI sic cdae sac tsserncecensnces) 14

SE USA.AK. | FOOGGE) CHIME. one cies tennesncte na 4, 14

OTHER AUTHORITIES

OP LL BH SE. CEP eels nav vea sv saccelenteabanens 2, i2

We Kees, BS ROR LEDGE own n i vk panwavwdieenre sans 4, 6

7F Fem. JOVGS (MOV. J, IDPH)... cc ccs ssecevnasers 3, 4, 6

a A A! 2. a ena Dery MPN en Akay Se 9

Memorandum from John Calcagni, Director, Air

Quality Management Division, E.P.A., to

Regional Air Program Directors, “Processing of

State Implementation Plan (SIP) Submittals,”

SUE Fe ROU tA 5h kad hbedes UROLRawe eae eS Eee 11

Novick, Steven & Mellon, Law of Environmental

rrabectide, & TT GRa CHOFG oes create coke oekkcs 11

PETITION FOR CERTIORARI

SC Testing Technology, Inc. and Systems Controls,

Inc. respectfully petition for a writ of certiorari to review

the judgment of the Maine Supreme Judicial Court in this

case.

OPINIONS BELOW

The opinion of the Maine Supreme Judicial Court is

reported at 688 A.2d 421 (Me. 1996). The opinion of the

Maine Superior Court is unreported.’

JURISDICTION

The Supreme Judicial Court entered its judgment on

December 30, 1996. Petitioner filed a timely motion for

reconsideration on January 9, 1997, which was denied by

order dated January 22, 1997. The jurisdiction of this

Court is invoked under 28 U.S.C.A. § 1257.

' The opinion of the Supreme Judicial Court of Maine is set

forth in Appendix A, the order of the Supreme Judicial Court

denying the Motion for Reconsideration in Appendix B, the

opinion of the Superior Court in Appendix C, and the Maine

statutes establishing and repealing the Motor Vehicle Testing

Program, as well as other lengthy statutory and regulatory

material, in Appendix D.

REGULATORY, STATUTORY AND

CONSTITUTIONAL PROVISIONS INVOLVED

42 U.S.C.A. § 7407(a) requires each state to submit a

State Implementation Plan (“SIP”) to comply with federal

clean air standards:

Each State shall . . . submit[] an implementation

plan for such State which will specify the man-

ner in which national primary and secondary

ambient air quality standards will be achieved |

and maintained within . . . such State.

42 U.S.C.A. § 7416 expressly preempts state action

inconsistent with a federally-approved SIP:

{I]f an emission standard or limitation is in

effect under an applicable implementation plan

. Such state or political subdivision may not

adopt or enforce any emission standard or lim-

itation which is less stringent than the standard

or limitation under such plan. . . .

40 C.FRR. § 51.105 restricts the ability of a state to

amend its SIP without prior EPA approval:

Revisions of a plan, or any portion thereof, will

not be considered part of an applicable plan

until such revisions have been approved by the

Administrator in accordance with this Part.

8 eS eee

Chapter 28 of Title 38, Maine Revised Statutes Anno-

tated (“M.R.S.A.”) and 29-A M.R.S.A. § 403 established a

mandatory Motor Vehicle Emissions Inspection Program.

Section 2402 of Title 38 provided for mandatory motor

vehicle inspections:

After July 1, 1994, each motor vehicle registered

in any area designated by the Federal Govern-

ment under 40 Code of Federal Regulations,

iain

Part 81 as nonattainment for ozone and classi-

fied as a moderate or more severe attainment

area must be inspected biennially for air pollu-

tion emissions as provided in this chapter. .

Section 2404 of Title 38, M.R.S.A., required the com-

missioner of the Maine Department of Environmental

Protection to contract with a private firm to implement

the program:

2. Contract for services. The zommissioner

shall contract with a private e ity for the

design, construction, equipping, establishment,

maintenance and operation of public emission

inspection stations and related services and

functions.

The federal Environmental Protection Agency condi-

tionally approved a revision to the State’s SIP incorporat-

ing the Motor Vehicle Inspection Program by final action

published in 59 F.R. 55045 (Nov. 3, 1994):

In this action, EPA is conditionally approving a

revision to the Maine Department of Environ-

mental Protection (DEP) State Implementation

Plan (SIP) for Inspection and Maintenance (I/

RSS

Maine P.L. 1995, c. 49 and P.L. 1995, ch. 50, repealed

Chapter 28 of Title 38, M.R.S.A. and 29-A M.R.S.A. § 403,

the Motor Vehicle Inspection Program.

Article VI of the United States Constitution provides

that “This Constitution, and the Laws of the United States

... Shall be the supreme Law of the Land; and the Judges

‘n every State shall be bound thereby, any Thing in the

Constitution or Laws of any State to the Contrary not-

withstanding.”

Other statutes and regulations implicated are set out

in Appendix D because of their length. They include the

following:

42 U.S.C.A. § 7602(k)

42 U.S.C.A. § 7604(e)

42 U.S.C.A. § 7410(k)(4)

Environmental Protection Agency, Final Rule —

Approval and Promulgation of Air Quality

Implementation Plans; Maine; Enhanced Inspec-

tion and Maintenance in Androscoggin, Cum-

berland, Kennebec, Knox, Lincoln, Sagadahoc,

and York Counties, 59 E.R. 55045 (Nov. 3, 1994)

40 C.F.R. § 52.1019 (1995)

Chapter 28 of Title 38, M.R.S.A., repealed by P.L.

1995, c. 49, § 2 and P.L. 1995, ch. 50, § 2 (full

text).

29-A M.R.S.A. § 403

Maine P.L. 1995, c. 49 and PL. 1995, ch. 50

STATEMENT

The State of Maine enacted Chapter 28 of Title 38,

M.R.S.A. (the “MVEIP Law”) in 1992 to comply with the

requirements of the Clean Air Act.2 App. A-1. Section

2404 of the MVEIP Law, App. D-8, required the Maine

Department of Environmental Protection (“MDEP”) and

the State to privatize the program through a contract with

a private entity with a term of not less than five years.

The statute required that the contractor design, construct,

equip, maintain and operate public emissions inspection

Stations that would implement the program. Id.

On February 4, 1994, Petitioner Systems Control, Inc.3

entered into a contract with MDEP and the State to

design, build and operate seven emission testing facili-

ties. R.I, 27-99, 144.4 The contract had a term of 7 years

and 3 months, commencing July 1, 1994, and had an

anticipated value of $43 million. R.II, 465. Petitioners

invested over $13.5 million in the project and fully per-

formed their obligations. Id.; R.II, 43-45.

On July 21, 1994, the MDEP sent the federal Environ-

mental Protection Agency (“EPA”) a document entitled

“Revisions to the State Implementation Plan for the Con-

trol of Ozone Air Pollution - the State of Maine Imple-

mentation Plan for Inspection/Maintenance” (the

“Revised SIP”). R.II, 427-454. The Revised SIP committed

* The full text of the MVEIP Law is found at App. D-3 to

D-11. The MVEIP Law was supplemented by 29-A M.R.S.A.

§ 403, as amended in 1993, to add a mandatory registration

enforcement mechanism to comply with EPA regulations. App.

D-11.

3 Systems Control, Inc. later assigned the contract to SC

Testing Technology, Inc., its wholly owned subsidiary.

4 We cite the record before the Supreme Judicial Court as

wd Ts

the State to establish and maintain the Motor Vehicle

Inspection Program, and attached as appendices the

MVEIP Law and the contract with Systems Control. R.II,

429-430. MDEP’s cover letter said that the inspection

program was “required pursuant to the Clean Air Act

Amendments of 1990.” R.II, 427. The Revised SIP was

conditionally approved by EPA on November 3, 1994. 59

F.R. 55045, App. D-2. EPA’s identification of Maine’s SIP

in the Code of Federal Regulations incorporated the

MVEIP Law by reference. 40 C.F.R. § 52.1019, App. D-3.

The program proved unpopular, and a state senator

requested the Maine Attorney General to advise the legis-

lature on the consequences of repealing the MVEIP Law.

On August 9, 1994, the Maine Attorney General replied

that repeal of the MVEIP would violate the Clean Air Act

and result in federally imposed sanctions. R.II, 467.

On April 27, 1995, the Maine Legislature repealed the

MVEIP Law.° The fiscal note to the repealing legislation

states that the repeal “may result in . . . federal sanctions

for noncompliance with the Clean Air Act Amendments

of 1990.” R.III, 86.

The State and MDEP treated the repeal as terminat-

ing the contract, and Petitioners were forced out of busi-

ness. Petitioners brought this action to recover damages

under their contract in a complaint which alleged that the

repeal was “contrary to the requirements of the federal

> The repeal occurred before any failure of the State to

comply with the conditions imposed by EPA in the conditional

approval.

Clean Air Act Amendments of 1990 [and] constituted a

violation of federal law.” Complaint, { 44, R.I, 15. In their

answer Respondents claimed that the repeal excused

their breach because Petitioners assumed the risk of

repeal, either under the contract or as a matter of state

procurement law, R.I, 138, and that Petitioners “lack

standing to assert that any action of any Defendant was

contrary to the Clean Air Act Amendments of 1990,

or... constituted violations of federal law,” R.I, 137; and

counterclaimed for a declaratory judgment. In their reply

to the counterclaim, Petitioners asserted as an affirmative

defense that “[t]he suspension and repeal of the MVEIP

Law .. . violated the State’s State Implementation Plan

and applicable federal law.” Reply, Aff. Defense 16, R.1,

354.

Petitioners moved to strike Respondents’ affirmative

defense of assumption of risk, and for summary judg-

ment as to liability, on the ground that the repeal of the

MVEIP Law violated the State’s obligations under its SIP

and the Clean Air Act. Petitioners contended that the

repeal was void because it was expressly preempted

under 42 U.S.C.A. § 7416 and because it conflicted with

federal law; and, since the repeal was void, any allocation

of the risk of repeal was moot and could not afford a

defense to Petitioners’ contract claim. Plaintiffs’ Mem-

orandum in Support of Motion for Partial Summary Judg-

ment on Liability and to Strike Affirmative Defenses, and

In Opposition to Defendants’ Motion for Judgment on the

Pleadings, at 31-39.

ee,

The Superior Court granted summary judgment to

Defendants. The trial court® found that “the doctrine of

federal preemption [did not] apply,” App. C-9, and stated

that:

[Systems Control] places significant focus on a

claim that federal laws preempt and prevent the

State’s action repealing the Emissions Testing

Program. However, the preemption position, if

it were sound, in no way supports the damages

award SCI is seeking. At best, it would support

a mandate to the State to take additional steps to

clean up air pollution if that pollution were

found to exceed federally acceptable levels.”

App C-8.

On appeal to the Maine Law Court, Petitioners

asserted the following issue:

Did the Superior Court err in finding that the

Supremacy Clause and the doctrine of preemp-

tion do not preclude Defendants’ assertion of

the repeal of the MVEIP Law as a defense?

® We refer to the Superior Court as the “trial court” and,

following local practice, to the Supreme Judicial Court as the

“Law Court.”

? Contrary to the trial court’s opinion, Petitioners seek

damages under the common law of contract, not preemption.

Petitioners invoke the doctrine of preemption to strike

affirmative defenses, not for affirmative relief.

Brief of Appellants at 18, Statement of Issues, J 5.8 Peti-

tioners’ appellate brief contained extensive analysis of

both express and conflict preemption. Id. at 49-64.

The Law Court affirmed the decision below on the

ground that the contract and state procurement law allo-

cated the risk of repeal to Petitioners, and that the repeal

therefore barred Petitioners’ claim. The Law Court noted

that the emissions testing program “was part of a plan to

comply with the federal Clean Air Act,” App. A-1, but

did not address the preemption issue. Petitioners filed a

Motion for Reconsideration, again asserting preemption;

that motion was denied. App. B-1.

REASONS FOR GRANTING THE WRIT

By repealing the MVEIP Law, the State clearly vio-

lated both its EPA-approved SIP, which has the force of

federal law, and the express preemption provisions of the

Clean Air Act. The Maine Legislature acted with express

recognition, upon advice of the Maine Attorney General,

that the repeal would put the State in violation of the

Clean Air Act. Allowing the State to assert the repeal as a

defense to Petitioners’ contract claim would permit the

State to benefit from its own knowingly illegal action,

and would give effect to a statute which is void under the

Supremacy Clause.

® Under Maine practice, the issues presented for review on

appeal are stated in the appellant’s brief; there is no separate

designation of error or issues on appeal. See M.R.Civ.P.

75A(a)(3).

The constitutional infirmity of the ruling below is

plain under this Court’s decisions. This Court has

expressly recognized the vital role played by SIP’s in

achieving the Congressional goal of improving air quality

nationwide. That goal is thwarted by the Law Court's

refusal to recognize the EPA-approved SIP as having the

force of federal law. The decision below should also be

reviewed because of the Law Court's apparent unwilling-

ness to recognize, much less apply, controlling federal

principles in a case involving substantial claims against

the State. Given the nationwide trend towards privatized

governmental programs, there is also a national interest

in a determination by this Court of the extent to which a

state can repeal a program mandated under federal law

and then assert that repeal as a defense to a claim under

the contract implementing the program.

I. THE DECISION BELOW SQUARELY CONFLICTS

WITH DECISIONS OF THIS COURT AND FED-

ERAL COURTS OF APPEALS, AND WITH THE

EXPRESS PREEMPTION PROVISIONS OF THE

CLEAN AIR ACT.

Assuming that the Law Court even considered the

preemption issue that was directly presented to it, its

ruling was necessarily based on one of two theories:

either (1) the repeal was not subject to express or conflict

preemption, or (2) Petitioners lacked standing to assert

preemption to strike Respondent’s affirmative defenses.

No matter which of these theories underlay its decision,

the Law Court’s ruling conflicts with clear and control-

ling federal precedent and statutory authority.

EPA-approved SIP’s have the force of federal law,

Train v. Natural Resources Defense Council, Inc., 421 U.S. 60

(1975); United States v. Ford Motor Co., 814 F.2d 1099 (6th

Cir.), cert. denied 484 U.S. 822 (1987), and are the tools

chosen by Congress in the Clean Air Act to implement

the national goal of improved air quality. Train, 421 U.S.

at 65-67; see 42 U.S.C.A. § 7407(a).9 The Revised SIP, when

approved by the EPA, committed the State to implement

the Motor Vehicle Inspection Program as a matter of

federal law.!° The termination of the program and repeal

? “The SIP provisions of the Clean Air Act play two critical

roles. First, they bridge a gap between air quality standards and

enforcement. Clean air became not just a goal, but an

enforceable mandate. Second, the SIP process created new state-

federal institutional machinery; the cumbersome, but powerful

‘partnership’ held together with shared responsibilities and

resources, and motivated by statutory deadlines and public

accountability.” Novick, Stever & Mellon, Law of Environmental

Protection, § 11.02[2] (1995).

10 The conditional nature of EPA’s approval did not impair

the enforceability of the Revised SIP. Prior to the 1990 Clean Air

Act Amendments, EPA interpreted the Clean Air Act to permit it

to conditionally approve portions of SIP’s, see McCarthy v.

Thomas, 27 F.3d 1363, 1369 (9th Cir. 1994), and those

conditionally approved portions became part of the state’s

enforceable SIP. Id. The 1990 Clean Air Act Amendments made

explicit EPA’s authority to issue conditional approvals, see 42

U.S.C.A. § 7410(k)(4), but did not undercut the enforceable

nature of conditionally approved portions of a SIP. See Natural

Resources Defense Council v. EPA, 22 F.3d 1125, 1133-35 (D.C. Cir.

1994). After the 1990 Amendments EPA continued to take the

position that conditionally approved SIP’s are enforceable.

Memorandum from John Calcagni, Director, Air Quality

Management Division, EPA, to Regional Air Program Directors,

“Processing of State Implementation Plan (SIP) Submittals,”

July 7, 1992, at 6 (“[O]ne of the main advantages of the

of the MVEIP Law “interfere[d] with the methods by

which the federal statute was designed to reach [its]

goal,” International Paper Co. v. Ouellette, 479 U.S. 481, 494

(1987); “stand[] as an obstacle to the accomplishment and

execution of the full purposes and objectives of Con-

gress,” Jones v. Rath Packing Co., 430 U.S. 519, 540-541

(1977); and “impair significantly” a Congressionally-

mandated program. Barnett Bank of Marion County, N.A. v.

Nelson, __ U.S. __, 116 S.Ct. 1103, 1109 (1996). The

statute effecting that repeal is therefore preempted and

void because it conflicts with federal law."

The repeal is also subject to express preemption. The

MVEIP Law required the MDEP to “specify maximum

emission levels for motor vehicles,” 38 M.R.S.A.

§ 2403(1)(A), App. D-6, and was an “emissions standard”

and “emissions limitation” for purposes of the Clean Air

Act. See 42 U.S.C.A. § 7602(k), App. D-1. The MVEIP Law

was part of the EPA-approved Revised SIP, and as such

was an “emission limitation . . . in effect under an appli-

cable implementation plan. .. . "12 The State of Maine was

conditional approval approach is to make the State

Submittal . . . federally enforceable. . . . Because the

conditionally approved submittal will become a part of the SIP,

the Region should be certain that the approval of the

commitment will not weaken the existing SIP.”) Since the State

had not prior to the appeal violated any of the conditions

imposed by EPA, the Revised SIP was in full force and effect as

of the repeal.

‘! The repeal also conflicts with federal law because it is an

impermissible attempt to modify an approved SIP without EPA

approval. See 40 C.F.R. § 51.105.

'2 “Applicable implementation plan” is defined in 42

U.S.C.A. § 7602(q) as “the portion (or portions) of the

therefore prohibited by the express preemption provi-

Sions of 42 U.S.C.A. § 7416 from “adoptl[ing] or

enforc[ing] any emission standard or limitation which is

less stringent than the standard or limitation under” the

MVEIP Law. The repeal of the MVEIP Law violated the

express provisions of § 7416 by entirely deleting the

State’s motor vehicle emission limitation in effect under

its Revised SIP: after the repeal the State permitted

unlimited vehicle emissions of pollutants, in contrast to

the strict limitations imposed under the MVEIP Law.

A state law is subject to express preemption “(w)hen

a federal statute unambiguously precludes certain types

of state legislation. ...” Exxon Corp. v. Hunt, 475 U.S. 355,

362 (1986). Section 7416 is a “federal statute [which]

unambiguously precludes” inconsistent state legislation,

and on its face precluded the repeal of the MVEIP Law

under the facts of this case. The repealing statute is

therefore void under the doctrine of express as well as

conflict preemption.

Nor does the doctrine of standing afford any justi-

fication for the decision below. Petitioners have clearly

suffered a distinct injury which is fairly traceable to the

challenged repeal. See County of Riverside v. McLaughlin,

500 U.S. 44, 51 (1991). Asa procedural matter, this Court

has repeatedly upheld the assertion of preemption to

strike affirmative defenses. See, e.g., Three Affiliated Tribes

of Fort Berthold Reservation v. Wold Engineering, 476 U.S.

877 (1986); Rose v. Arkansas State Police, 479 U.S. 1 (1986).13

implementation plan, or most recent revision thereof, which has

been approved under [42 U.S.C.A. § 7410].”

'S Petitioners’ defensive assertion of preemption does not

require compliance with the citizen’s action provisions of the

The application of these settled principles to the repeal-

ing legislation would appear obvious, or at least worthy of

comment. The governing federal law is so clear that the

State’s attorney general advised the legislature that the

repeal would violate the Clean Air Act, and the legislature

itself so recognized in a fiscal note to the repealer. Although

the Law Court recognized that the MVEIP Law was “part of

plan to comply with the federal Clean Air Act,” App. A-1, its

opinion did not address whether the repeal of the federally

mandated program violated federal law. The Law Court

studiously avoided discussing, much less applying, the doc-

trine of preemption.

The Law Court’s probable motivation for avoiding

these dispositive federal principles is clear: Maine’s high-

est court had no desire, in a time of fiscal difficulty, to

impose a multi-million dollar liability on the State. For

that very reason, however, the Law Court's ruling must

be subject to higher scrutiny, see United States Trust Co. of

New York v. New Jersey, 431 U.S. 1, 26-27 (1977); a State

court cannot protect the State’s fisc through the transpar-

ent device of ignoring controlling federal law, any more

than it can by permitting the State to repudiate its obliga-

tions generally.

This Court recently addressed the ability of a govern-

mental unit to assert the repeal of a statute as a defense to

a contract action in United States v. Winstar, __ US. ,

Clean Air Act, 42 U.S.C.A. § 7604. An assertion of preemption as

a defense does not create a federal claim. Caterpillar, Inc. v.

Williams, 482 U.S. 386, 393 (1987). In any event, § 7604(e), App.

D-1, includes a savings clause which would permit Petitioners’

assertion of preemption even if that section were otherwise

applicable. See International Paper Co. v. Ouellette, 479 U.S. 482,

497 (1987).

116 S.Ct. 2432 (1996). Although implicating the doctrine

of preemption, not unmistakability, thie petition, like

Winstar, deals with the nexus between a governmental

unit’s liability in contract and its right, as sovereign

within its sphere, to change or repeal laws. Governmental

units at every level are increasingly devolving public

programs to private contractors. Given the significant

number of federal programs administered by state and

local agencies and their use of privatizing contracts such

as the one at issue in this case, it is appropriate for this

Court to address the extent to which the repeal of author-

izing legislation affords a defense in contract when the

repeal conflicts with federal law.

Il. THERE IS NO ADEQUATE INDEPENDENT STATE

GROUND SUPPORTING THE DECISION BELOW.

The Law Court based its decision on state contract

and procurement law, holding that:

The contract between SCI and the DEP allocated

to SCI the risk of legislative repeal of the pro-

gram. Moreover, when a party enters into a con-

tract with a state agency, it does so with the

understanding that the Legislature may at some

future time take action that nullifies the subject

matter of the contract and, necessarily, the

respective performance obligations of the parties.

App. A-7. Under both of these alternate grounds, the

validity of the repeal is central to the Law Court’s hold-

ing. The contractual allocation of the risk of repeal is

moot if the repeal was not effective as a matter of federal

law, and the alleged absolute defense afforded the State

on repeal of authorizing legislation has no effect if the

repeal was void.

A preempted state statute is “void,” “without effect,”

and “invalid” as a matter of federal constitutional law.

McCulloch v. Maryland, 17 U.S. 316, 436 (1819); Maryland v.

Loutsiana, 451 U.S. 725, 746-747 (1981); Alessi v. Raybestos-

Manhattan, Inc., 451 U.S. 504, 522 (1981). The statute effec-

ting the repeal was therefore void, and cannot be asserted

as a defense to Petitioners’ contract claims. The state law

grounds for the Law Court’s holding are utterly depen-

dent upon the validity of the repeal as a matter of federal

law, and are no bar to this Court’s review of the federal

issues presented.

o—_—_—_-

CONCLUSION

The Law Court's decision is totally at odds with

established principles of federalism. The state court's rul-

ing undercuts the tool chosen by Congress to implement

an important federal program; flies in the face of the

express preemption provisions of the Clean Air Act; and

gives the State the benefit of its knowing violation of

federal law.

This Court should grant the petition to review these

important issues.

Respectfully submitted,

DaNnigEL AMORY

DRUMMOND WoopsuM

& MAacMaAHoNn

245 Commercial! Street

Post Office Box 9781

Portland, ME 04104-5081

(207) 772-1941

April 1, 1997

ee ee eee |

A-1

APPENDIX A

MAINE SUPREME Reporter of Decisions

JUDICIAL COURT Decision No. 7890

Law Docket No. Ken-96-179

SC TESTING TECHNOLOGY, INC., et ai.

DEPARTMENT OF ENVIRONMENTAL

PROTECTION et al.

Argued September 5, 1996

Decided December 30, 1996

Before WATHEN, C.]J., and ROBERTS, GLASSMAN,

CLIFFORD, RUDMAN, DANA, and LIPEZ, Jj.

ROBERTS, J.

SC Testing Technologies, Inc., along with its Maine

subsidiary, Systems Control, Inc. (collectively SCI),

appeals from a summary judgment entered in the Supe-

rior Court (Kennebec County, Alexander, J.) in favor of the

Department of Environmental Protection (DEP) on SCI’s

action for contract damages. SCI argues that the trial

court erred in granting a summary judgment because its

interpretation of the underlying contract was erroneous

and there exist genuine issues of material fact. We affirm

the judgment.

In 1991 the Legislature enacted the Motor Vehicle

Emissions Inspection Program. P.L. 1991, ch. 818, codified

as 38 M.R.S.A. §§ 2401-2408 (Supp. 1994). The program,

part of a plan to comply with the federal Clean Air Act

A-2

(CAA) Amendments of 1990, 42 U.S.C. §§ 7401-7671(q)

(1995), was intended to reduce ozone emissions in seven

counties: Androscoggin, Cumberland, Kennebec, Knox,

Lincoln, Sagadahoc, and York. The legislation authorized

the DEP to contract with a private entity to design, con-

struct, equip, establish, and maintain emission inspection

stations in each of the seven counties. The program was

fine-tuned in 1993 by the enactment of a regisiration-

based enforcement mechanism that required owners to

present proof of compliance prior to vehicle registration.

P.L. 1993, ch. 418, codified as 29-A M.R.S.A. § 403 (Supp.

1994). The program was to be financed entirely by the

imposition on vehicle owners of an inspection fee, a

portion of which would be retained by the private con-

tractor.

In November 1992 the DEP began the process of

selecting a contractor by issuing a Request for Proposals

(RFP). In December 1992 the DEP held a proposer’s con-

ference, at which prospective contractors presented ques-

tions regarding specific aspects of the program and the

RFP. Questions were also submitted directly to the DEP,

which responded by providing written answers to all

prospective bidders.

The proposer’s conference and the submission of

written questions revealed that a concern among prospec-

tive contractors was the potential economic effect of a

legislative repeal of the program.! In February 1993 the

' For example, prospective contractors submitted the

following questions, which are followed by the State’s answers:

[Question:] How will the Department structure

compensation and or liquidated damages to the

Eee ee eT ae eT

A-3

DEP issued an amended RFP. Section 5.N of that docu-

ment, entitled “Replacement of the Contractor,” con-

cluded with the following language:

Note: In the event the Maine Legislature

repeals all or part of the program, the Depart-

ment and the State of Maine shall bear no

responsibility to compensate the Contractor.

Thereafter, SCI submitted a Proposal and was

awarded the contract the following April. Contract nego-

tiations between the DEP and SCI concluded with a final

agreement that became effective on February 4, 1994.

During the course of negotiations, the DEP repeatedly

refused to agree to contract terms that would have par-

tially compensated SCI for its investment in the event of

Contractor in the event of replacement prior to the

expiration of the Contract? Will the State discriminate

between a supplantation for the convenience of the

State, or repeal of the program and replacement

necessitated by Contractor default? In the case of

repeal or supplantation for the convenience ef the

State, will the State pay all Contractor costs and an

additional amount to compensate the Contractor for

inability to obtain a fair return on its investment?

[Answer:] The State of Maine cannot guarantee

compensation in the event of Contractor replacement

prior to the expiration of a contract.

[Question:] What kinds of protection can/will the

Administration provide contractually for the bidder

in the event the legislature reduces the program ...or

shortens it... or even cancels it?

[Answer:] None....

{Question:] Will ihe Administration offer “change in

law or regulation” protection?

[Answer:] No.

A-4

legislative repeal of the program. Specifically, the DEP

rejected contract language that would have compensated

SCI for its investment in the event of termination of the

contract for the State’s convenience. The DEP also

rejected proposed language that would have permitted

SCI to treat repeal of the program as a change in the

scope of the work of the contract, for which SCI could

seek compensation by way of a contractual amendment.

The substantive provisions of the contract between

SCI and the DEP were contained in an attached rider

referred to as Rider A. Much of Rider A’s language

closely tracked the amended RFP, and certain of its provi-

sions were explicitly incorporated by reference into the

contract. SCI’s proposal, approximately 1000 pages in

length, was explicitly incorporated by reference into

Rider A. Neither Rider A nor SCI’s proposal contains the

language of section 5.N of the amended RFP, allocating to

the contractor the economic risk of repeal of the program.

Section AA of Article I of Rider A dealt with poten-

tial conflicts between language contained in Rider A and

elsewhere. Section AA provided:

Conflicts. This Contract shall control in the

event of any confiict between the provisions

hereof and the provisions of either the RFP or

the Proposal. Furthermore, only as between the

RFP and the Proposal, the RFP shall control in

the event of any conflict between the provisions

of the RFP and the provisions of the Proposal.

In anticipation of the program’s July 1, 1994, start-up

date, SCI established inspection facilities in the seven

Maine counties. Motor vehicle inspections occurred as —

neat

A-5

scheduled during July and August of 1994, but imple-

mentation of the plan generated sharp public criticism. In

response, on September 1, 1994, the DEP and SCI signed a

memorandum of agreement suspending mandatory emis-

sions testing from that date until March 1, 1995. During

that period, testing would be strictly voluntary and the

inspection fee would be reduced.

On February 28, 1995, prior to the resumption of

mandatory emissions testing, the Legislature enacted P.L.

1995, ch. 6, which suspended registration-based enforce-

ment of the program from March 1 until May 1, 1995. The

program was permanently repealed effective April 26,

1995, through the enactment of P.L. 1995, chs. 49 and 50.

In May 1995 SCI filed a complaint against the DEP

alleging, inter alia, a breach of contract and a breach of the

implied duty of good faith and fair dealing. The court

entered a summary judgment in favor of the DEP, finding

that the contract allocated to SCI the entire risk of loss in

the event of repeal of the program.

SCI argues that the trial court erred in construing the

contract to place on SCI the entire risk of loss in the event

of legislative repeal of the program. On an appeal from a

summary judgment, we view the evidence in the light

most favorable to the party against whom the judgment

was entered to determine whether the record supports

the trial court’s conclusion that there is no genuine issue

of material fact and the moving party is entitled to a

judgment as a matter of law. Simpson v. Central Maine

Motors, Inc., 669 A.2d 1324, 1325-26 (1996).

A-6

The trial court found that the risk-of-repeal note con-

tained in section 5.N of the amended RFP was incorpo-

rated into the express agreement between SCI and the

DEP by means of Rider A’s conflicts clause, section AA of

Article I. The court determined that the conflicts clause

was unambiguous, and that its purpose was to incorpo-

rate into the contract those provisions of the amended

RFP that did not conflict with the provisions of Rider A.

Thus, because Rider A was silent as to the risk of loss in

the event of the repeal of the program, and because

nothing in Rider A conflicted with the allocation of risk

expressed in the risk-of-repeal note contained in section

5.N, that note was to be read as part of the contract. In

effect, the trial court concluded, the contract between SCI

and the DEP was composed of Rider A, those provisions

of the amended RFP that were not addressed in Rider A

and that did not conflict with it, and those parts of SCI’s

proposal that did not conflict with either.

“{[T]he paramount principle in the construction of

contracts is to give effect to the intention of the parties as

gathered from the language of the agreement viewed in

light of all the circumstances under which it was made.”

Lynch v. Ouellette, 670 A.2d 948, 949 (Me. 1996). When the

language of a contract is not ambiguous, the contract's

interpretation is a question of law for the court. FO.

Bailey Co. v. Ledgewood, Inc., 603 A.2d 466, 468 (Me. 1994).

We agree with the trial court that the conflicts clause

contained in Rider A expresses a clear intention on the

part of SCI and the DEP to incorporate into their agree-

ment those provisions of the amended RFP that were not

addressed in Rider A and that did not conflict with it.

Otherwise, the parties’ reference to the amended RFP in

A-7

the conflicts clause would be meaningless. In construing

a contract, we should avoid an interpretation that renders

meaningless any particular provision in the contract. Top

of the Track Assocs. v. Lewiston Raceways, Inc., 654 A.2d

1293 (Me. 1995). Thus, the risk-of-repeal note contained in

section 5.N of the amended RFP was incorporated in the

contract by the operation of the conflicts clause. This

interpretation of the contract gives effect to the unam-

biguous intention of the parties, as shown both by the

language of the conflicts clause and the circumstances

surrounding their agreement, that SCI would bear the

risk of loss in the event the Legislature repealed the

program.

The contract between SCI and the DEP allocated to

SCI the risk of legislative repeal of the program. More-

over, when a party enters into a contract with a state

agency, it does so with the understanding that the Legis-

lature may at some future time take action that nullifies

the subject matter of the contract and, necessarily, the

respective performance obligations of the parties. “The

Legislature of Maine may enact any law of any character

or on any subject, unless it is prohibited, either in express

terms or by necessary implication, by the Constitution of

the United States or the Constitution of this State.” League

of Women Voters v. Secretary of State, 683 A.2d 769, 771

(Me. 1996) (quoting Baxter v. Waterville Sewerage Dist., 146

Me. 211, 215, 79 A.2d 585, 588 (1951)).

In KHK Assocs. v. Department of Human Servs., 632

A.2d 138 (Me. 1993), KHK was awarded a contract to

iease a building to the Department of Human Services for

ten years. Relying on the lease, KHK constructed a build-

ing to the Department's specifications. During the first

A-8

year of the lease, the Legislature, in response to bud-

getary constraints, enacted legislation reducing the

appropriation for the KHK lease and requiring its renego-

tiation. The parties were unable to renegotiate suc-

cessfully and the Department terminated the lease,

whereupon KHK sued for a breach of the lease. The lease

provided that the State’s performance was “subject to

available budgetary appropriations.” In KHK Associates,

we recognized that although KHK and the State entered

into a contractual agreement, that agreement was none-

theless subject to the exercise of legislative power, which

could deprive the parties of the benefit of their contract.

Similarly, in the case at bar the agreement between SCI

and the DEP was always subject to the possibility that the

Legislature might exercise its power to repeal mandatory

emissions testing at any time, thus destroying the subject

matter of the agreement. Moreover, nowhere in the con-

tract does the State affirmatively undertake to maintain

the Program for any length of time.

SCI argues that the State made two affirmative repre-

sentations that the program would remain in place. First,

the law creating the program, which authorized the DEP

to enter into the contract with SCI, provided that

“[cJontracts must require the contractor to operate the

public emission inspection stations for a minimum of 5

years....” 38 M.R.S.A. § 2404(2) (Supp. 1994). Second, in

a memorandum dated October 1, 1993, in which the DEP

responded to the first draft contract presented by SCI, a

DEP negotiator stated that he could not “anticipate any

contingency causing [the DEP] to voluntarily terminate

the Contract except for Contractor’s default.”

A-9

SCI misapprehends the meaning of both of these

actions. With regard to the language in the statute, it

simply meant that any contractor selected by the DEP to

administer the program would have to agree to do so for

a minimum period of time sufficient to ensure program

continuity. The provision in no way guaranteed, nor

could it, that the legislation authorizing the program

would not be repealed by a subsequent legislature. The

Legislature may not enact a law that purports to bind a

future Legislature. See Opinion of the Justices, 673 A.2d

693, 695 (Me. 1996). With regard to the statement by the

DEP’s negotiator, it amounts to little more than an equiv-

ocal prediction about the future. In any event, the DEP

would be in no better position than the Legislature itself

to bind future Legislatures. Id.

The entry is:

Judgment affirmed.

A-10

All concurring. Attorneys for Defendants:

Attorneys for Plaintiffs: Peter J. DeTroy, Esq.

Daniel Amory, Esq. (Orally) (Orally)

Barbara Appleby, Esq. Christopher C. Taintor, Esq.

DRUMMOND WOODSUM NORMAN, HANSON

& MacMAHON & DeTROY

245 Commercial Street 415 Congress Street

P. O. Box 9781 P. O. Box 4600

Portland, Maine 04104-5081 Portland, Maine 04112-4600

Jeffrey A. Thaler, Esq.

(Orally)

Paul F. Macri, Esq.

BERMAN & SIMMONS,

P.A.

129 Lisbon Street

P. O. Box 961

Lewiston, Maine

04243-0961

LIPEZ, J., dissenting.

Because I cannot find any language in the contract

between SCI and the DEP to support the Court’s inter-

pretation of the contract, I respectfully dissent. The Court

is correct that the risk of legislative repeal of the emis-

sions inspection program was a major point of contention

during the contract negotiations. Given the focus on this

point, the failure of the parties to finalize a contract that

clearly addressed this important issue is remarkable. Yet

that failure is unmistakable.

The first sentence of the “Conflicts” clause sets forth

a deceptively simple proposition: “This Contract shall

control in the event of any conflict between the provi-

sions hereof and the provisions of either the RFP or the

Proposal.” That language suggests that the “contract”

A-11

Provisions are distinct from two other documents, the

amended RFP and the Proposal, and in the event of a

conflict between the contract provisions and either the

amended RFP or the Proposal, the contract controls. In

reality, however, the Contract consists of Rider A, a sey-

enty-page document attached to a signature page. Far

from being a document distinct from either the amended

RFP or the Proposal, Rider A, and hence the contract,

includes:

1. The Proposal itself, specifically incorporated into

the contract by reference.

2. Nine sections of the amended RFP incorporated

by reference.

3. Other amended RFP provisions copied verbatim.

4. Modified amended RFP provisions.

There can be no conflict between the coniract and the

amended RFP or the Proposal because the contract is the

Proposal and selected portions of the amended RFP.

Moreover, there is no express language incorporating the

entire amended RFP into the contract by reference, and

hence no express incorporation of the repeal provision of

the amended RFP into the contract.

In the absence of express language of incorporation

relating to the amended RFP, the Court inappropriately

transforms the conflicts clause of Rider A into an incor-

poration clause by holding that “the Parties’ reference to

the amended RFP in the conflicts clause would be mean-

ingless” without the incorporation of the entire RFP into

the contract. The Court further concludes that “Rider A

expresses a clear intention on the part of SCI and the DEP

A-12

to incorporate into their agreement those provisions of

the amended RFP that were not addressed in Rider A and

that did not conflict with it.” Using a conflicts clause

intended to resolve conflicts between documents, the

Court cites the absence of conflict between documents to

achieve wholesale incorporation of amended RFP provi-

sions into the contract, including the repeal provision.

This interpretation strains logic and the language of the

contract.

I do not know what the parties intended by the

reference in the first sentence of the conflicts clause to the

amended RFP. SCI’s legal arguments on this issue are no

more persuasive than the State’s. There is an inescapable

ambiguity in that reference to the RFP which precludes

the entry of summary judgment for either party. “Where

there is an ambiguity in a written contract, and the record

does not completely eliminate the possibility of an issue

of n aterial fact concerning the intent of the parties, sum-

mary judgment is inappropriate.” Tondreau v. Sherwin-

Williams, 638 A.2d 728, 730 (Me. 1994).

The legal consequences of this ambiguity are not

avoided by the Court’s application of the unmistakability

doctrine. This doctrine, developed in federal case law,

recognizes a presumption that when a sovereign govern-

ment enters into a contract, it does not intend to limit its

ability to make its own performance impossible by means

of a future sovereign act. “[S]overeign power . . . governs

all contracts subject to the sovereign’s jurisdiction, and

will remain intact unless surrendered in unmistakable

terms.” Bowen v. Public Agencies Opposed to Social Security

Entrapment, 477 U.S. 41, 52 (1986) (quoting Merrion v.

Jicarilla Apache Tribe, 455 U.S. 130, 148 (1982)). The Court

BRM dina seo ata aeons

A-13

asserts Maine’s version of the doctrine in these terms:

“i . when a party enters into a contract with a state

agency, it does so with the understanding that the Legis-

lature may at some future time take action that nullifies

the subject matter of the contract and, necessarily, the

respective performance obligations of the parties.”

According to the Court, this understanding governed the

contract between SCI and the DEP because “nowhere in

the contract does the State affirmatively undertake to

maintain the Program for any length of time.”

The United States Supreme Court recently applied

the unmistakability doctrine in United States v. Winstar,

— US. __, 116 S. Ct. 2432 (1996). During the savings

and loan crisis of the 1980s, the Federal Home Loan Bank

Board sought to encourage healthy thrifts and outside

investors to take over ailing thrifts. As an inducement to

act, the board agreed to permit acquiring entities to use

certain accounting techniques in calculating capital

reserves, the minimum levels of which were mandated by

federal regulations. Subsequently, Congress enacted the

Financial Institutions Reform, Recovery, and Enforcement

Act, which forbade thrifts from using the above-men-

tioned accounting techniques. Three affected thrifts

brought suit for breach of contract. Although unable to

agree on an opinion, seven members of the Supreme

Court agreed that the United States was liable to the three

thrifts in damages, and four members concluded that

“application of the [unmistakability] doctrine .. . turns on

whether enforcement of the contractual obligation alleged

would block the exercise of a sovereign power of the

Government.” Id. at 2457 (Souter, J., plurality opinion).

Working from that principle, the plurality concluded that

A-14

the unmistakability doctrine should not bar government

liability on the contracts at issue because they could be

enforced without effectively limiting sovereign authority.

I agree with the position of the plurality in Winstar.

As in Winstar, the contractual obligations at issue in this

case could be enforced without limiting the State’s sover-

eign authority to act now or in the future. The Court’s

application of the unmistakability doctrine wrongly

equates the State’s need to protect its sovereign power to

act with its ability to abrogate contracts without exposure

to damage claims.

The Government took this position in Winstar, argu-

ing that any award of substantial damages against the

government for “breach of contract through a change in

the law ‘unquestionably carries the danger that needed

future regulatory action will be deterred,’ and thus

amounts to an infringement on sovereignty requiring an

‘unmistakable’ promise.” 116 S. Ct. at 2475 (quoting Brief

for Petitioner). As Justice Breyer noted in his concurring

opinion in Winstar:

[T]his rationale has no logical stopping

point... . It is difficult to see how the Court

could, in a principled fashion, apply the Gov-

ernment’s rule in this case without also making

it applicable to the ordinary contract case

...Which ... [is] properly governed by ordinary

principles of contract law. To draw the line — i.e.,

to apply a more stringent rule of contract inter-

pretation — based only on the amount of money

at stake, and therefore (in the Government's

terms) the degree to which future exercises of

sovereign authority may be deterred, seems

unsatisfactory.

A-15

116 S. Ct. at 2475. In his plurality opinion, Justice Souter

warned that broad application of the unmistakability doc-

trine could impair an important aspect of sovereignty:

Injecting the opportunity for unmistakability

litigation into every common contract action

would . . . produce the untoward result of com-

promising the Government's practical capacity

to make contracts, which we have held to be ‘of

the essence of sovereignty’ itself. From a practi-

cal standpoint, it would make an inroad on this

power, by expanding the Government's oppor-

tunities for contractual abrogation, with the cer-

tain result of undermining the Government's

credibility at the bargaining table and increasing

the cost of its engagements.

116 S. Ct. at 2459 (quoting United States v. Bekins, 304 U.S.

27, 51-52 (1938)). Absent special circumstances I do not

find present here, the State’s interests are best served by

subjecting it to the same principles of contract law appli-

cable to private parties. That application imposes no

undue burden. The State would simply have to rely on

the drafting of clear contract language, rather than legal

presumptions, to protect its interests.

I would vacate the summary judgment and remand

this matter to the Superior Court for inquiry by a fact-

finder into the intent of the parties on the risk of repeal.

B-1

APPENDIX B

STATE OF MAINE

SUPREME JUDICIAL Law Docket No.

COURT Ken-96-179

Sitting as the Decision No.

Law Court 7890

SC TESTING TECHNOLOGY, INC.

et al.

)

Plaintiffs / Appellants

v. ) ORDER

DEPARTMENT OF

)

ENVIRONMENTAL PROTECTION

et al.

Defendants / Appellees

Upon the motion of Appellants for reconsideration, it

is ORDERED that the motion be, and it hereby is

DENIED.

The mandate shall issue forthwith.

Date: January 22, 1997

For the Court

/s/ David G. Roberts

Justice, Supreme Judicial

Court

C-1

APPENDIX C

STATE OF MAINE SUPERIOR COURT

KENNEBEC, SS. CIVIL ACTION

DOCKET NO. CV-95-239

SC TESTING TECHNOLOGY,

INC., et als.,

Plaintiffs OPINION

AND ORDER

MAINE DEPARTMENT OF

ENVIRONMENTAL

PROTECTION, et als.,

Defendants

This matter is before the court for decision after

hearing on:

(a) The State’s and the Maine Department of Envi-

ronmental Protection’s (hereinafter “the State”) Motion

for Judgment on the Pleadings; and

(b) SC Testing Technology, Inc.’s and System Con-

trol, Inc.’s (hereinafter “SCI”) Motion for Partial Sum-

mary Judgment on the issue of liability.

Because the State’s Motion requires consideration of

matters beyond the face of the pleadings, the State’s

motion is also properly considered as a motion for sum-

mary judgment.

CASE HISTORY:

By this action, SCI is seeking money damages from

the State for termination of the Motor Vehicle Emissions

C-2

Inspection Program created by State law, contracted to

SCI to perform and terminated by State legislative action

approximately seven months after implementation had

begun.

The factual and legal history of the Motor Vehicle

Emissions Inspection Program is not subject to serious

dispute.

Based on measurements taken in the late 1980's, nine

Maine counties were found to exceed federal ozone stan-

dards of 12 parts per million. Those counties were desig-

nated as “nonattainment for ozone” by the U.S.

Environmental Protection Agency “(EPA)” under 42

U.S.C. § 7407(d) and 7511(a). Seven of these counties were

also classified as being “moderate nonattainment areas”

under 40 C.F.R. Part 81, § 81.320. Those counties were

Androscoggin, Cumberland, Kennebec, Knox, Lincoln,

Sagadahoc, and York Counties.

Under the Clean Air Act Amendments of 1990, 42

U.S.C. § 7401 et seq., the State was required to take steps

to control ozone air pollution in areas designated as

“nonattainment for ozone” under 42 U.S.C. § 7407(D) and

classified as “moderate nonattainment areas” under 42

U.S.C. § 7511(a).

In 1992, the Legislature enacted the Motor Vehicle

Emissions Inspection Law, 38 M.R.S.A. §§ 2401 et seq. (the

“MVEIP Law”) designed to bring the State into compli-

ance with the ozone standards and the Clean Air Act.

The MVEIP Law established a motor vehicle emis-

sions inspection program (the “MVEIP Program”) which

required mandatory motor vehicle emissions inspections

—e_e 2... Se

C-3

in the seven counties for most motor vehicles weighing

10,000 pounds or less except for certain vehicles

exempted under 38 M.R.S.A. § 2402.

The State developed a motor vehicle registration-

based enforcement mechanism to ensure that owners of

motor vehicles complied with the mandatory emissions

inspection provided in the MVEIP Program. As part of

this effort, the Legislature enacted 29-A M.RS.A. § 403

requiring owners of motor vehicles to present a certifica-

tion of compliance or waiver, as defined by 38 M.R.S.A.

§ 2401, at the time they registered their vehicles.

The Legislature required the State to enter into a

contract for a period of at least five years with a private

entity to provide for the design, construction, equipping,

establishment, maintenance and operation of public emis-

sions inspection stations to provide mandatory emissions

tests in the seven Moderate Nonattainment Counties, 38

M.R.S.A. § 2404.

The contractor was to issue certificates of compli-

ance, for purposes of 29-A M.R.S.A. § 403, for vehicles

that passed the emissions test. For vehicles that failed, the

contractor was to issue written inspection reports

describing the reasons for the rejection. The private con-

tractor was obligated to collect test fees established by

the State, to cover both its own costs and the State admin-

istrative costs, 38 M.R.S.A. § 2407.

Around November 23, 1992, DEP solicited proposals

for construction and implementation of an auto emissions

inspection program by issuing a Request for Proposals

(“RFP”).

C-4

The RFP was issued pursuant to Subchapter I-A of

Title 5 of the Maine Revised States, 5 M.R.S.A. § 1825-A et

seq., and the rules promulgated thereunder, which govern

the competitive bidding process for certain contracts

entered into by the State of Maine and its departments

and agencies.

The RFP provided in part:

The Department reserves the right to expropri-

ate or replace the Contractor in any and all

aspects of management or operation of the pro-

gram during the time an executed contract is in

force. Expropriation would result from the

repeal of all or the pertinent part of the statu-

tory or regulatory authority for the program or

fiscal funding.

On December 18, 1992, a proposers’ conference was

held and was attended by representatives of SCI. During

that conference someone asked if the language quoted

above meant that if the Maine Legislature repealed the

MVEIP Law, the contractor would receive no compensa-

tion. A representative of the DEP in attendance at the

conference responded that it meant exactly that.!

On February 5, 1993, DEP issued an amended RFP

which modified the provision quoted above to eliminate

any reference to expropriation, and added the following

“Note”:

} There may be dispute as to exactly what was said, but that

dispute is not material to resolution of this case. Anyone

attending the December, 1992 meeting was well on notice that

repeal possibilities were an issue.

C-5

Note: In the event the Maine Legislature

repeals all or part of the program, the Depart-

ment and the State of Maine shall bear no

responsibility to compensate the Contractor.

The amended RFP also included an Appendix D, entitled

“Response to Comments,” which addressed questions

and comments submitted by various firms that had an

expressed interest in bidding on the MVEIP contract.

Appendix D contained the following questions and

response:

103. Page 27, N. How will the Department

structure compensation and or liquidated dam-

ages to the Contractor in the event of replace-

ment prior to the expiration of the Contract?

Will the State discriminate between a supplanta-

tion for the convenience of the State, or repeal of

the program and a replacement necessitated by

Contractor default? In the case of repeal or sup-

plantation for the convenience of the State, will

the State pay all Contractor costs and an addi-

tional amount to compensate the Contractor for

inability to obtain a fair return on its invest-

ment? (D)

The State of Maine cannot guarantee compensa-

tion in the event of Contractor replacement

prior to the expiration of a contract.

On February 18, 1993, four proposals, including the

SCI proposal, were submitted in response to the amended

RFP.

A Contractor Selection Committee was established

and voted to award the MVEIP contract to SCI.

The award of the MVEIP contract to SCI was admin-

istratively appealed and was stayed pending the outcome

C-6

of the appeal. The award was ultimately affirmed by a

three-member committee impaneled by the Bureau of

General Services to hear the appeal. This decision was not

appealed to the Superior Court and therefore became

final.

The State and SCI then entered into detailed negotia-

tions over the specific terms of the contract. One of the

principal issues in the negotiations was the provision

surrounding the possibility of legislative repeal. The par-

ties are not in ag-eement as to what happened regarding

the repeal provision during these negotiations. However,

there is no dispute that on February 4, 1994, the contract

which is in the record was finally approved.

Under the contract, SCI established inspection facili-

ties for emissions testing in the seven counties and began

operations on July 1, 1994. SCI alleges that it has spent

over $13 million in preparing to implement its respon-

sibilities under the contract.

For July and August, 1994, the first two months that

SCI operated the MVEIP Program on behalf of the State,

the Bureau of Motor Vehicles mailed owner notices to the

owners of motor vehicles required to be tested during

those months.

While the MVEIP legislation had been enacted with-

out much public controversy, implementation generated

sharp public protests.

On September 1, 1994, SCI and the State executed a

Memorandum of Agreement which, among other things,

suspended the mandatory provisions of the MVEIP Pro-

gram for a six-month period, replaced it with a voluntary

C-7

testing program, and reduced the amount of testing fees

to be collected for each vehicle tested. During the six-

month period of suspension, SCI operated a voluntary

testing program and made certain changes to the MVEIP

Program in accordance with the Memorandum of Agree-

ment.

Mandatory testing was to resume on March 1, 1995.

On February 23, 1995, legislation was introduced to

suspend enforcement of the MVEIP Program from March

1, 1995 until May 1, 1995.

By letter dated February 27, 1995, SCI notified the

DEP and the State that SCI had not agreed to the pro-

posed suspension until May 1, 1995. SCI asserted that the

proposed legislation would constitute a breach of the

contract and a violation of SCI’s rights under both the

Maine and United States Constitutions.

On February 28, 1995, the Legislature enacted and the

Governor signed legislation suspending enforcement of

the MVEIP Program until May 1, 1995. P.L. 1995, c. 6.

On April 26, 1995, the Legislature enacted emergency

legislation repealing the MVEIP Law, which the Governor

signed into law on April 27, 1995. P.L. 1995, c. 49 & 50.

This action was filed on May 26, 1995.

DISCUSSION:

Based on this history, SCI claims entitlement to

recovery on theories of:

— breach of contract,

C-8

- equitable estoppel or breach of duty of good

faith and fair dealing,

- unconstitutional legislative impairment of

contract, and

- taking of property without constitutional

required process or payment.

A claim under 42 U.S.C. § 1983 is also presented.

In addition to damages, some of the SCI pleadings

seek an order from the court reinstating the program.

However, the focus of briefing and discussion at oral

argument indicate that this option is not being seriously

pursued.

The State’s pleadings assert a sovereign immunity

defense. However, at oral argument, counsel for the State

recognized that the MVEIP legislation authorizing the

contract waived sovereign immunity for purposes of the

contract. While, as counsel for the State indicated, there

may be a question as to whether sovereign immunity was

reimposed when the legislation was repealed, the court

will assume for purposes of this consideration that the

legislation authorizing the contract waived sovereign

immunity. Accordingly, the doctrine of contractual sover-

eign immunity, cf. Drake v. Smith, 390 A.2d 541 (Me. 1978),

will not be considered applicable to this dispute.

In their arguments, SCI places significant focus on a

claim that federal laws preempt and prevent the State’s

action repealing the Emissions Testing Program. How-

ever, the preemption position, if it were sound, in no way

supports the damages award SCI is seeking. At best, it

would support a mandate to the State to take additional

C-9

steps to clean up air pollution if that pollution were

found to exceed federally acceptable levels.

CONTRACT ISSUES:

Because neither the doctrine of sovereign immunity

nor the doctrine of federal preemption apply, this dispute

must be analyzed first and foremost under the law of

contracts.

Three separate documents constitute the contract

documents in this case:

(1) the request for proposals;

(2) SCI’s response to the request for proposals;

and

(3) the State contract.

The request for proposals included a clear and speci-

fic warning about the possibility of legislative repeal of

the Emissions Inspection Program. Section 5(N) of the

RFP stated: “In the event the Maine Legislature repeals

all or part of the program, the Department and the State

of Maine shall bear no responsibility to compensate the

contractor.”

Thus, all bidders responding to the RFP were put on

notice of this risk.

The SCI proposal responding to the RFP did not address

or disclaim the risk of legislative repeal provision.2

* The SCI proposal is a very large document. The court has

not closely reviewed every word of that proposal. However, at

C-10

After SCI became the successful bidder to develop

the Emissions Inspection Program, there is no dispute as

to material fact that representatives of SCI and the State

had significant discussions regarding the risk of repeal

provision. Those discussions were pursued in oral meet-

ings and by exchanges of draft contract proposals. While

there is some dispute as to the substance of the discus-

sions, resolution of those disputes is not necessary to

determination of this matter. There is no dispute that the

final contract itself did not include a specific “no State

responsibility if repealed” provision. However, the issue

of possible legislative repeal and resulting responsibility

was addressed in three ways:

1. The possibility of legislative repeal was acknowl-

edged in the “Changes in the Scope of Work” section,

section I(W), which indicated that: “If legislation is

enacted which repeals the MVEIP and the MVEIP is not

replaced, this section IW shall not apply.” That section of

the contract referenced procedures to be utilized in case

there was a major change in the scope of the work — short

of repeal - and the parties could not agree on equitable

arrangements. It is significant here only in that it consti-

tutes an acknowledgement, within the contract itself, of

the possibility of repeal.

2. The “Conflicts” section AA stated that: “This con-

tract shall control in the event of any conflict between the

provisions hereof and the provisions of either the RFP or

the proposal. Furthermore, only as between the RFP and

oral argument, in response to a question by the court, counsel

for SCI stated that there was nothing in the SCI proposal which

explicitly responded to the risk of repeal caution in section 5(N).

C-11

the proposal, the RFP shall control in the event of any

conflict between the provisions of the RFP and the provi-

sions of the proposal.”

This language is unambiguous. It says, in effect, that

if something is not addressed at all in the contract but is

addressed in the RFP in a way which does not conflict

with the contract, then the RFP provision is applicable.

The continuing applicability of section 5N of the RFP

through the Conflicts section avoids any concern that

section 5N was removed from the contract. Such a

removal creating a dramatic difference in the risks and

economics of the contract could have created a concern

that the contract would violate statutory prohibitions on

significant deviations between RFPs and resulting con-

tracts. 5 M.R.S.A. §§ 1819, 1825-B, 1825-D.

3. The contract contains an integration clause, sec-

tion BB, intended to preclude reference to oral discus-

sions and/or representations asserted to have occurred

during contract negotiations as somehow amending or

adding to the provisions of the contract and other docu-

ments referenced in the contract.

There is no dispute that the contract and the integra-

tion clause were entered into between sophisticated par-

ties, dealing at arm’s length and without one having a

significant power advantage over the other. The integra-

tion clause is fully effective to exclude claims that oral

discussions, outside the terms that appear on the face of

the contract documents, modify or amend those terms.

Accordingly, the differing views as to what may have

been said or done in the course of contract negotiations

are not material to resolution of this dispute. There are no

C-12

ambiguous terms justifying resort to oral communications

under the parole evidence rule.

On straight contract analysis, the court determines

the following:

1. The contract itself does not address the issue of

responsibility for risk of repeal.

2. The RFP is part of the contract documents gov-

erning the'parties conduct and relationships.

3. Section 5N of the RFP is clear that if there is a

repeal “the State of Maine shall bear no responsibility to

compensate the contractor.”

4. This provision of the RFP does not conflict with

any term of the contract.

5. Therefore, the RFP provision remains effective by

section AA, having put all bidders on notice, and remain-

ing as part of the contract documents, to exclude resort to

damages against the State should the legislation be

repealed.

Thus, on straight contract analysis, the State has no

responsibility to compensate SCI for repeal of the legisla-

tion.

There are some doctrines of law that have been

developed, however, to limit harsh impacts from terms of

contracts entered, even between sophisticated contracting

parties.

Top of the Track v. Lewiston Raceways, Inc., 654 A.2d

1293 (Me. 1995), involved a contract negotiated at arm’s

length between sophisticated business persons and with

wits

C-13

an integration clause. In Top of the Track, the Law Court

held that the law would still imply additional provisions

of the contract if the additional provisions were “abso-

lutely necessary” to performance of the contract. Top of

the Track addressed the situation where a restaurant con-

cessionaire contracted with a harness racing track to

build and operate a restaurant. The integrated contract

made no mention of continued operation of the race

track. However, the Law Court ruled that factfinder could

determine from extrinsic evidence whether such a condi-

tion was necessarily implied by the course of dealings of

the parties.

SCI argues that continuing effectiveness of the legis-

lation mandating the Emissions Inspection Program is a

similar implied condition of the contract. However, this

case has significant differences from Top of the Track. The

Top of the Track concessionaires had no explicit warning in

any proposal that the track might close and if the track

were closed, the track owners would not be responsible.

Further, the contracting documents themselves did not

recognize the possibility of closure of the track. These

differences distinguish this case from Top of the Track.

Here, SCI cannot claim surprise by the repeal. They

had explicit warning in the RFP. Second, in the terms of

the contract itself, SCI acknowledged the possibility and

consequent risk of repeal in the changes in the scope of

work section I(W). Further, the conflicts and integration

clauses here serve to continue the effectiveness of the RFP

warning to govern the terms of the contract.

In Top of the Track, the Law Court also cautioned that:

“The courts have long recognized an implied covenant in

C-14

contracts that neither party shall by its unilateral action

destroy or injure the right of the other party to receive the

fruits or benefits of the contract or render performance

impossible.” 654 A.2d at 1296.

That statement certainly provides a support for SCI’s

claim. However, this doctrine would not be applicable

where the unilateral action at issue was addressed and

subject to bargaining in the contracting process.

Accordingly, SCI is not entitled to relief on its con-

tract based claim.

EQUITABLE ESTOPPEL - GOOD FA'TH AND FAIR

DEALINGS:

As an alternative, SCI urges that the doctrine of

equitable estoppel or the obligation of good faith and fair

dealing should bar the State from the benefits of the no

responsibility clause. In asserting this as a grounds for a

damages claim, however, SCI has pointed to no case

where equitable estoppel has been used against a govern-

mental entity as a basis for recovery of damages.

The equitable estoppel cases cited in the briefs and

discussed at oral argument, that where successful against

a government entity, appear to be grouped in two catego-

ries:

(1) Cases where equitable estoppel operates to bar a

governmental entity from enforcing a legal or regulatory

requirement against a particular party; and

(2) Cases where equitable estoppel operates to bar

recovery of benefits or other property paid or turned over

to an individual in error.

C-15

Counsel has not pointed to, and the court’s research

has not disclosed, any case where the doctrine of equita-

ble estoppel was utilized to require a state to affirma-

tively pay out sums of money as damages.

There may be no dispute as to material fact that both

SCI and officials at the Department of Environmental

Protection who contracted with SCI were surprised by the

short duration of the program before legislative repeal.

However, it is difficult to conceive how an equitable

estoppel claim can be asserted against the State where

contracting parties were not affirmatively misled and

were warned about the risks of legislative repeal.

IMPAIRMENT OF CONTRACT:

SCI also contends that the State and United States

constitutional prohibitions on impairment of contracts are

violated by the legislative action here. However, the

impairment of contract clauses are inapplicable to this

case. An event and consequences recognized in the con-

tracting documents occurred. The parties’ obligations are

affected, but not unconstitutionally impaired by that

event. State legislation significantly impacting contracts

with the State by limiting funds or otherwise is a regular

attribute of the legislative process. It does not violate the

impairment of contracts prohibitions of the State and

Federal Constitutions.

TAKINGS:

SCI also claims that the repealed legislation was an

unconstitutional taking of their investment in the

C-16

emissions testing facilities and program. However, this is

not a classic takings case. The State has not removed,

destroyed or taken over SCI’s property without due pro-

cess and payment, as occurred in Michaud v. City of Ban-

gor, 159 Me. 491 (1963). Nor has State legislation so

seriously limited the uses of the real estate on which the

SCI facilities sit that the property has little or no eco-

nomic value. Cf. LaBay v. Town of Paris, 659 A.2d 263 (Me.

1995); Hall v. Board of Environmental Protection, 498 A.2d

260 (Me. 1985). The property on which the SCI facilities

sit remains available for whatever economic —- or uneco-

nomic — use SCI wants to put it to that is not inconsistent

with State and local land use requirements which are

unaffected by this legislation.

SCI’s real complaint is that the repealed legislation

has effectively taken away SCI’s expectation of a return

and potential profit on its investment. However, State or

local legislation may limit or significantly reduce returns

on investment and expected profits in business or uses of

real estate without offense to the Constitution. Cf. City of

Portland, et al. v. Fishermen’s Wharf Associates, II, 541 A.2d

160 (Me. 1988) (approving local legislation barring uses of

a development for its intended purpose which was

enacted after the development had received initial munic-

ipal approval and substantial sums had been spent in

support of the development);> City of Portland v. Jacobsky,

° The substantial sums lost were subject to separate

litigation in Fishermen's Wharf Associates, II v. Verrill & Dana, 645

A.2d 1133 (Me. 1994).

—S— a

C-17

496 A.2d 646 (Me. 1985) (approving local legislation bar-

ring sale and distribution of materials viewed as pornog-

raphic which businesses had acquired and on which they

anticipated return of investment and profits).

If “takings” theories support recovery against gov-

ernmental entities for legislative action limiting antici-

pated returns on investment and profits, many regulatory

activities could face significant damage claims. Takings

claims against governmental entities are viable only

where the governmental entity damages, destroys or

takes over tangible property or so limits the use of real

property that it has no economic use. No such takings

occurred in this case.

For this reason also, SCI presents no viable claim

under 42 U.S.C. § 1983. It still has its property. Its expec-

tation of return on investment and profits is not a “prop-

erty” which has been taken without due process of law or

in violation of equal protection principles or other consti-

tutional prohibitions to generate a claim under § 1983.

Certainly SCI may be able to generate strong policy

arguments about fairness and equity. They were invited

into the State — albeit with fair warning of the risks of

repeal — they undertook a substantial investment in facili-

ties to support the State’s air pollution program, and the

source of income for return on their investment was [sic]

been taken away by repeal of the legislation. However,

those equitable issues are properly addressed to policy-

makers in the executive and legislative branches. On the

legal issues properly addressed to this court, there is no

dispute as to material fact that SCI does not present a

claim upon which relief can be granted.

C-18

The State can change its mind about the commit-

ments it makes. As long as it gives fair warning that it

might change, and it will not be responsible if it does,

there is no liability for damages when the State does

change its mind.

Therefore, the court ORDERS and the entry shall be:

1. The State’s Motion for Judgment on the Plead-

ings, treated as a Motion for Summary Judgment, is

GRANTED.

2. SCI’s Motion for Partial Summary Judgment is

GRANTED against SCI.

3. Judgment for the State that SCI is not entitled to

relief in this action.

DATED: March 13, 1996 /s/ Donald G. Alexander

DONALD G.

ALEXANDER

JUSTICE, SUPERIOR

COURT

D-1

APPENDIX D

LAWS AND REGULATIONS

42 U.S.C. § 7602(k):

(k) The terms “emission limitation” and “emis-

sions standard” mean a requirement established

by the State or the Administrator which limits

the quantity, rate, or concentration of emissions

of air pollutants on a continuous basis, includ-

ing any requirement relating to the operation or

maintenance of a source to assure continuous

emission reduction, and any design, equipment,

work practice or operational standard promul-

gated under this chapter.

42 U.S.C. § 7604(e):

Nothing in this section shall restrict any right

which any person (or class of persons) may have

under any statute or common law to seek

enforcement of any emissions standard or lim-

itation or to seek any other relief (including

relief against the Administrator or a State

Agency. ...

42 U.S.C. § 7410(k)(4):

(4) Conditional Approval

The Administrator may approve a plan revision

based on a commitment of the State to adopt

specific enforceable measures by a date certain,

but not later than 1 year after the date of

approval of the plan revision. Any such condi-

tional approval shall be treated as a disapproval

if the State fails to comply with such commit-

ment.

D-2

Environmental Protection Agency, Final Rule -

Approval and Promulgation of Air Quality Implementa-

tion Plans; Maine; Enhanced Inspection and Mainte-

nance in Androscoggin, Cumberland, Kennebec, Knox,

Lincoln, Sagadahoc, and York Counties, 59 FR. 55045

(Nov. 3, 1994):

SUMMARY: In this action, EPA is conditionally

approving a revision to the Maine Department

of Environmental Protection (DEP) State Imple-

mentation Plan (SIP) for Inspection and Mainte-

nance (I/M). ...

SUPPLEMENTAL INFORMATION .. . The I/M

SIP includes Chapter 12 of an amended State

rule entitled “Motor Vehicle Emission Inspection

Program,” and additional supporting material

including authorizing legislation. . . . This SIP

revision will require vehicle owners to comply

with the Maine I/M program in the seven mode-

rate ozone nonattainment counties in Maine.

> + *

FINAL ACTION

EPA is conditionally approving the Maine

I/M program submitted by the State, on

November 1, 1993, May 26, 1994 and July 21,

1994.

Pursuant to section 110(k)(4) of the CAA,

EPA is conditionally approving Maine’s submis-

sion based on the commitments of the DEP... .

40 C.FR. § 52.1019 (Nov. 3, 1994):

Identification of Plan - conditional approval.

(a) The following plan revisions were sub-

mitted on the dates specified.

D-3

(1) On November 1, 1993 the Maine

Department of Environmental Protection sub-

mitted a revision to the State Implementation

Plan (SIP) for an enhanced Inspection and Main-

tenance (I/M) program in Androscoggin, Cum-

berland, Kennebec, Knox, Lincoln, Sagadahoc

and York counties. . . . On July 21, 1994, Maine

submitted a revised submission. In these sub-

missions, the State submitted adequate legal and

regulatory authority to establish and implement

an I/M program which meets the requirements

of the Clean Air Act by September 1, 1995.

(i) Incorporation by Reference.

* * *

(B) The “Motor Vehicle Emission Inspec-

tion Program” regulation... .

Inspection Program, and Title 29, Section 102-C,

Motor Vehicle Inspection Requirements for Vehi-

cle Registration, which are state law citations

authorizing the above regulation. .

Chapter 28 of Title 38, M.R.S.A., repealed by P.L. 1995, c.

49, § 1 and P.L. 1995, ch. 50, § 1:

TITLE 38

(WATERS AND NAVIGATION)

Chapter 28 Motor Vehicle Emissions Inspection Pro-

gram

38 § 2401. Definitions

As used in this chapter, unless the context otherwise

indicates, the following terms have the following

meanings:

D-4

Certificate of compliance. “Certificate of compli-

ance” means a written document with a serial

number indicting that a motor vehicle complies

with rules adopted pursuant to this chapter.

Certificate of waiver. “Certificate of waiver”

means a written document with a serial number

that indicates the requirement of compliance with

rules adopted pursuant to this chapter has been

waived for a motor vehicle under section 2403.

Convenience public access. “Convenient public

access” means reasonable driving distance to a

public emission inspection station and reasonable

waiting time at a public emission inspection sta-

tion to have vehicle emissions tested.

REPEALED

Low-emission adjustment. “Low-emission

adjustment” means the repair or adjustment of

basic emission-related components or systems

such as spark plugs, air-cleaner filter, choke,

engine idle speed and engine timing.

Motor vehicle. “Motor vehicle” has the same

meaning as provided under Title 29, section 1,

subsection 7.

Public emission inspection station. “Public

emission inspection station” means a facility for

motor vehicle inspection operated under contract

with the department under section 2404.

38 § 2402. Inspection requirement

Requirement. After July 1, 1994, each motor vehi-

cle registered in any area designated by the Fed-

eral Government under 40 Code of Federal

Regulations, Part 81 as nonattainment for ozone

and classified as a moderate or more severe non-

attainment area must be inspected biennially for

D-5

air pollution emissions as provided in this chap-

ter and must meet the requirements to Title 29,

section 2502.

Location of inspection. The inspection must take

place at a public emission inspection station.

REPEALED

Exempt vehicles. The following motor vehicles

are exempt from the requirements of this section:

A. A motor vehicle manufactured before the

year 1968;

A motor vehicle having a gross vehicle

weight rating of more than 10,000 pounds;

A motor vehicle exempt from safety inspec-

tion or requiring only a partial safety inspec-

tion under Title 28, section 2506;

A motor vehicle with a model year less than

2 years prior to the current calendar year;

A motor vehicle registered as a street rod

[sic] as defined in Title 29, section 1, subsec-

tion 15-C-1;

A class of motor vehicles exempted by the

rules of the department because that class of

vehicle presents prohibitive inspection prob-

lems or is inappropriate for inspection;

A motor vehicle that obtains its power solely

by means other than gasoline, such as diesel

fuel, electricity and propane;

Motorcycles and mopeds as defined in Title

29, section 1 and autocycles as defined in the

D-6

motor vehicle inspection manual adopted by

the Department of Transportation; and

A motor vehicle that is driven fewer than

10,000 miles in a 24-month period, if the

owner of the vehicle complies with rules

establishing a method of administering and

verifying this exemption. The board shall

adopt such rules and shall consult with the

Secretary of State before adopting the rules if

the method to be established involves the

office of the Secretary of State.

Staggered inspection schedule. The board may

adopt by rule a mechanism to stagger biennial

inspections over the first 2 years of the Motor

Vehicle Emission Inspection Program.

38 § 2403. Motor vehicle Emission Inspection Pro-

gram

The Motor Vehicle Emission Inspection Program is

established within the department to test and inspect

motor vehicles that are subject to the requirements of

section 2402 for air pollution emissions.

Criteria and standards. The board, on or before

January 1, 1993, shall adopt rules establishing

standards and criteria governing the testing and

inspection of motor vehicles for air pollution

emissions and emissions equipment. The rules

must:

Specify maximum emission levels for motor

vehicles, based on the levels of emissions

necessary to achieve applicable federal and

state ambient air quality standards. The stan-

dards may be different for different model

years, sizes and types of motor vehicles;

D-7

B. Establish testing procedures and standards

for test equipment used for inspection and

on-road testing devices;

C. REPEALED

D. Establish standards and procedures for the

issuance and terms of certificates of compli-

ance and waiver.

Repairs. Repairs or adjustments necessary to

bring a vehicle into compliance with applicable

emission limitations are the responsibility of the

vehicle owner.

Certificate of waiver. A contractor operating a

public emission inspection station shall issue a

certificate of waiver for a vehicle that fails to pass

the designated emission standard upon an initial

inspection and after repair or adjustment again

fails to pass the emission inspection if:

A. A low emission adjustment is performed on

the vehicle; and

B. The cost or repairs performed on the vehicle

exceeds the repair cost limit as specified in

subsection 4.

Repair cost limit. The board shall establish by

rule a repair cost limit consistent with the

requirements of the federal Clean Air Act

Amendments of 1990, Public Law 101-549 and

federal regulation. In assessing the costs of

repairs and adjustments included in the repair

cost limit the following costs must be excluded:

A. Costs covered under warranty; and

B. Costs necessary to repair or replace any

emissions control system or mechanism that

ane eaienacaan aati aia

D-8

has been removed, dismantled or rendered

in violation of Title 29, section 2189.

39 § 2404. Public emission inspection stations; con-

tract

The Motor Vehicle Emission Inspection Program shall

make available public emission inspection stations.

1. Public emission inspection stations. The board

shall determine by rule performance standards

for the number, location and size of the public

emission inspection stations to provide conve-

nient public access.

2. Contract for services. The commissioner shall

contract with a private entity for the design, con-

struction, equipping, establishment, maintenance

and operation of public emission inspection sta-

tions and related services and functions. The con-

tractor and its officers and employees may not be

directly engaged in the business of selling, main-

taining or repairing motor vehicles or selling

motor vehicle replacement or repair parts, except

that the contractor may repair any motor vehicle

owned or operated by the contractor. The con-

tractor’s employees are not employees of the

State for any purpose. The contract must require

the contractor to operate the public emission

inspection stations for a minimum of 5 years and

may provide for equitable compensation from the

Motor Vehicle Emission Inspection Fund, estab-

lished by section 2408, subsection 1, for capital

costs and other appropriate expenditures to the

contractor, as determined by the commissioner.

3. Inspection. A public emission inspection station

shall inspect and reinspect motor vehicles in

accordance with rules adopted under this chap-

ter.

D-9

Issuance of certificate and reports. A public

emission inspection station shall issue a certifi-

cate of compliance for a motor vehicle that has

been inspected and determined to comply with

the rules adopted under this chapter. If a certifi-

cate of compliance is not issued, the public emis-

sion inspection station shall provide a written

inspection report describing the reasons for rejec-

tion and, when appropriate, the repairs recom-

mended to bring the vehicle into compliance with

the standards and criteria.

38 § 2405. Fleet emission inspection stations; license

REPEALED

38 § 2406. Prohibited acts

Wrongful certification. A person may not issue a

certificate of compliance for a motor vehicle that

has not been inspected in accordance with this

chapter or is not in compliance with the rules of

the department.

Wrongful waiver. A person may not issue a cer-

tificate of waiver for a motor vehicle that has not

been inspected in accordance with this chapter

and has not met the criteria of section 2403, sub-

section 3.

Falsification of certification. A person may not

falsely create, make, alter or complete a certifi-

cate of compliance or waiver.

Alteration. A person may not materially alter or

change any equipment or mechanism of a motor

vehicle that has been certified to comply with the

rules of the department so that the vehicle is no

longer in compliance with the rules.

False repair costs. A person or repair facility may

not misrepresent to a public emission inspection

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station or the commissioner the estimated or

actual repair costs or repairs needed to bring a

motor vehicle into compliance with the rules of

the department.

Penalty. In addition to any penalties under sec-

tion 349, subsection 2, any person who violates

this section is guilty of a Class D crime.

38 § 2407. Inspection fee

Amount. The board shall establish by rule an

inspection fee to cover the cost of the inspection

of a motor vehicle at a public emission inspection

station, the cost of services rendered as part of

the contract entered under section 2404, subsec-

tion 2 and the administrative costs of the depart-

ment. The inspection fee may not exceed $24 per

vehicle.

Payment. The fee must be paid for each motor

vehicle inspected at a public emission inspection

station at the time of inspection and is payable

whether the vehicles passes inspection or not.

Each vehicle that fails its initial inspection is enti-

tled to one free inspection.

Delinquency charge. Motor vehicles inspected

pursuant to this chapter after the expiration of

the motor vehicle safety inspection date are sub-

ject to a delinquency charge of $10 for each

month after the expiration, which must be col-

lected by the inspection contractor and remitted

to the commissioner. Revenue generated from the

collection of delinquency charges must be depos-

ited in the General Fund.

Inspection fee waived. The board shall establish,

by rule, an exemption from the inspection fee

under this section for those persons for whom, in

re eee ee See eee

D-11

its judgment, the fee poses an unreasonable eco-

nomic burden. In establishing the rule, the board

shall consult with the Maine Community Action

Association and other representatives of low-

income people. The Motor Vehicle Emission Fund

must absorb all costs associated with this waiver.

38 § 2408. Motor vehicle Emission Inspection Fund

1. Establishment. The Motor Vehicle Emission

Inspection Fund, referred to in this section as the

“fund,” is established as a nonlapsing fund. The

commissioner may use this fund only to pay the

costs of and to administer the Motor Vehicle

Emission Inspection Program and mobile source

emission-related activities of the department.

2. Revenue sources. The revenue from the follow-

ing sources must be deposited in the fund:

A. Money received by the commissioner in the

form of gifts, grants, reimbursement or

appropriations from any source intended to

be used for the purpose of the fund;

B. REPEALED

C. Interest attributable to investment of money

deposited in the fund; and

D. Proceeds of inspection fees.

29-A M.R.S.A. 403 (formerly 29 M.R.S.A. § 102-C):

1. Requirement. The owner of a motor vehicle

registered in any area designated by the Federal Gov-

ernment pursuant to 40 Code of Federal Regulations,

Part 81 as nonattainment for ozone and classified as a

moderate or a more severe nonattainment area must

present a certificate of compliance or waiver... . at

the time of registration.

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2. Suspension. If the owner of a motor vehicle

subject to the requirement of subsection 1 fails to

present a certificate of compliance or waiver, the

Secretary of State shall suspend the registration cer-

tificate and plates for that motor vehicle. . . .

P.L. 1995, c. 49, § 1 and PL. 1995, ch. 50, § 1

Sec. 1. 29-A MRSA § 03, as enacted by PL 1993, c. 683,

Pt. A, § 2 and affected by Pt. B, § 5, is repealed.

Sec. 2. 38 MRSA c. 28, as amended, is repealed.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.