Petition for Writ of Certiorari — City of New York v. Metropolitan Taxicab Board of Trade

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No. 10 10-618 = 5. 4 2010

[IN ‘THE OF THE CLERK

Supreme Court of the United States

CIr’y OF NEW YORK, et al.,

Petitioners,

Mis PROPOLITAN TAXICAB BOARD OF TRADI, etal,

Respondents

ON Peririon FoR A Writ or CERTIORARL TO THE UNITED

STATES Court OF APPEALS FOR TIDE SECOND CIRCUIT

PETITION FOR A WREP OF CERPIORARI

Of Counsel Michtanny A. CArpozo

Corporation Counsel of the

Francis I. Caputo City of New York

susan Paulson [LQRONARD J. KOERNER"

Adam Stolorow 100 Church Street

New York, New York 10007

(212) 788-1010 or 1862

lkoerner(@law.nyc. prov

November 5, 2010 * Counsel of Record

Counsel for Petitioners

22624 cr

COUNSEL PRESS

(SOO) 274-4321 © (800) 459-6859

QUESTION PRESENTED

sy making the Energy Policy and Conservation Act

the only statutory mechanism for establishing fuel

economy standards, did Congress intend to preempt

state and local governments from adopting incentive

programs to promote the purchase of fuel-efficient

vehicles?

LIST OF PARTIES

In the United States Court of Appeals the plaintiffs

appellees were the Metropolitan Taxicab Board of Trade;

Midtown Car Leasing Corp.; Bath Cab Corp.; Ronart

Leasing Corp., Geid Cab Corp.; Linden Maintenance

Corp., and Ann Taxi Inc. The defendants-appellants

were the City of New York, Michael R. Bloomberg, in

his official capacity as Mayor of the City of New York;

the New York City Taxicab and Limousine Commission

(“TLC”); Matthew W. Daus, in his official capacity as

Commissioner, Chair, and Chief Executive Officer of the

TLC; Peter Schenkman, in his official capacity as

Assistant Commissioner for Safety and Emissions of the

TLC; and Andrew Salkin, in his official capacity as First

Deputy Commissioner of the TLC.

fli

TABLE OF CONTENTS

QUESTION PRESENTED ..

LIST OF PARTIES ..

TABLE OF CONTENTS

TABLED OF APPENDICSS .

TABLE OF CITED AUTHORITIES

OPEN GUI SIGEAIW isd beau dean e eae

BASIS FOR JURISDICTION

STATUTORY AND REGULATORY

PROVISIONS INVOLVED ..

STATEMENT OF THE CASE

A. Regulatory Framework .

1. The City of New York’s Taxicab

HOIUIBCOOUE 3 ook nk os beac ores

The energy Policy and Conservation

|, eae ae ee PA URE ne BA, seh oi

8. Proceedings Below ..

REASONS FOR GRANTING THI

PETITION

Pave

ilk

lahle of Contents

Page

A. The Court of Appeals’ Preemption

Analysis Is Incorrect and Is Inconsistent

with the Preemption Jurisprudence of this

Pee rp errs ben ete ere eee ere 3

1. The Court of Appeals Failed to

Properly Kxamine Congressional

Intent as a Guide to the EKPCA

Preemption Provision’s Reach ...... 10

2. This Court’s Preemption

Jurisprudence Required the Court of

Appeals to Determine Whether the

City’s Rules Create a Preempted

rn en Aye lo

8. This Court’s Review Is Needed Because the

Court of Appeals’ Decision Frustrates

Congressional Intent and Prevents States and

Municipalities from Promoting the Use of

Clean, Fuel-Efficient Vehicles .......... 20

1. Congress Has Long Encouraged

State and Local Incentive Programs

for Fuel-Efficient Vehicles ......... 21

2. The Court of Appeals’ Ruling

Recklessly Places Hundreds of Fuel-

Efficient Vehicle Incentives at Risk .. 24

Cee AR eh ene eh eke eee eee 31

TABLE OF APPENDICES

APPENDIX A— OPINION OF THE UNITED

STATES COURT OF APPEALS FOR THE

SECOND CIRCUIT

beat ERP ae Ae. | | la

APPENDIX B — OPINION OF THE UNITED

STATES DISTRICT COURT FOR THE

SOUTHERN DISTRICT OF NEW YORK

PEAR E? GUTTERS Oey BOOP occ tcccncsescess l4da

TABLE OF CITEDAUTHORITIES

Page

CASES

Altria Group, Inc. v. Good,

US. , 1295S. Ct. 588 (2008) ........... 10, 11

Associated Builders & Contractors v.

Mich. Dep't of Labor & Econ. Growth,

543 F.3d 275 (6th Cir. 2008) ............... 16, 19

Ass'n of Taxicab Operators, USA v.

City of Dallas,

No. 3:10-CV-769-K (N. Dist. Tex.

ee elgg eau 545 sala 06 Ke Ke vs 30

Bates v. Dow Agrosciences LLC,

eR 11

Buck v. California,

Re Pe WP OROED chs cc cseveccendusevwass 11

Cal. Div. of Labor Standards Enforcement v.

Dillingham Constr, N. A., Ine.,

Qik Ro 2a) | passim

Central Valley Chrysler—Jeep, Ine. v.

Goldstone,

o29 kL Supp. 2d 1151 (.D. Cal. 2007) ....... 29

Cipollone v. Liggett Group, Inc.,

Ewa P Oe, CE CEOS) 6. ccc ccc ccesvevecece 11,13

Koelhoff v. Egelhoff,

2k Dy) 14,18

Vil

Cited Authorities

Page

Engine Mfrs. Ass'n v.

S. Coast Air Quality Mgmt. Dist.,

ORL UF oe Oe CED ca cc cewsstecssouucadbapas 1]

FDA v. Brown & Williamson Tobacco Corp.,

ee as RE CD 6 0.5.00 045000 k 5505550 sees 15, 28

Golden Gate Rest. Ass'n v.

City & County of San Francisco,

546 F.3d 639 (9th Cir. 2008) ............... 16, 19

Green Alliance Taxi Cab Ass'n v.

King County,

No. C08-1048RAJ, 2010 U.S. Dist. LEXIS

72409 (W.D. Wash. June 29, 2010) ........... 30

Green Mountain Chrysler Plymouth Dodge

Jeep v. Crombie,

508 F. Supp. 2d 295 (D. Vt. 2007) ........... 5, 29

Massachusetts v. EPA,

ee hes re GED vk 04k veo CAA eee Ee Sees 24

Medtronic v. Lohr,

eee Us OE LPO is 50 so eae eas ben saan 1]

Metro. Taxicab Bd. of Trade v

City of New York,

O8-ev-7837 (PAC), 2008 U.S. Dist. LEXIS

94021 (S.D.N.Y. Oet. 31, 2008) (MTBOT /)

Peer Tere ere e eT Cee e TT eee TEST oT eee oe.

vill

Cited Authorities

Page

Metro. Taxicab Bd. of Trade v.

City of New York,

615 F.3d 152 (2d Cir. 2010) (MTBOT J1)

EP y eI he rr re Tere er ree 3, 12, 15, 30

N.Y. State Conference of Blue Cross &

Blue Shield Plans v. Travelers Ins. Co.,

BIS UB. GES CIGGS) . cc cc sve wceses 13-14, 16, 17

New State Ice Co. v. Liebmann,

ee Di CRED obec cer ce cacvcsenscrence 29

Ophir v. City of Boston,

647 F. Supp. 2d 86 (D. Mass. 2009) .......... 30

Ophir v. City of Boston,

No. 09-ev-10467 (D. Mass. Feb. 25, 2010) .... 30

Reiail Indus. Leaders Ass'n v. Fielder,

475 F.3d 180 (4th Cir. 2007) ............... 16, 18

Rice v. Santa Fe Elevator Corp.,

Ge Oe st re 12

Travelers Indem. Co. v. Bailey,

_US._, 1208. Ct. 2195 (008)... nec nces 17

Wyeth v. Levine,

-_. Ue. -., 128 GS. CA. 1187 Oe)... cc ess 9,11

Cited Authorities

Page

STATUTES

Oe EG, 6 LOL) 2 coe c caeseveureeters teen 13

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Bhs Some it) +) weer 22

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28 US.C. FIGHKDMG) .rsccevvcveccecesnsasunn 22

BS UB. OS TGA) oc cccc esse cevces cess sane 13

iF SO Bh... Serr rr esr) 21

42 U.B.C. § 1ISZBMeKZNC) 20 eccvcdcvsccucenn 21

49 U.S.C. § 1S0MaN1) nn cccvcvcnevccuceseen 13

SOUS... SSO cc ccccvccsccevisevesst ene 1,5

49 13.0. OS G2GOUAKG) ..ccccesedesers eee i)

49 U.C. $§ SZG01L-SZ01P os cece cnuvscuuees 12

Cited Authorities

Page

A 5

ese ED gcc ccc cc ececceccceocececs 5

ee cc nee eee seeeuees 1, 29

ee Oe EI, ccc acwcuceenecececs 6, 12,13

Consumer Assistance to Recycle and Save

program “CARS”, Pub. L. 111-32, Title XIII,

123 Stat. 1909; Pub. L. 111-47, 128 Stat.

Ne ee ewes b dese 8 23

Energy Policy Act of 1992, Pub. L. No. 102-486,

gc edecedecbvesece 2]

Safe, Accountable, Flexible, Efficient

Transportation Equity Act: A Legacy for

Users “SAFETEA-LU”, Pub. L. No. 109-59,

Pe PUM CMEIED . ccc ccc cctsecvuseces 22

MIE. TREY. TAT. © BO-CELG 2c ccc ccc ccccccccces 26

Ariz. Rev. Stat. § 28-5801 ....... ccc ccc cc eces 27

Ariz. Rev. Stat. § 28-5805 ..........cccccccees 27

Caen, WIE, SUES BILD cccc ccc ccc ccceseveces 26

Co.o. Rev. Stat. § 89-22-516 ......... cc wwe wee 25

ited Authoriti

Albuquerque, N.M. Code of Ordinance

§ 8-5-1-5 26

A pen, Colo. Mun. Code § 24.24 26, 27

Dallas, Tex. City Code § 45-7.2.1(a) 27

Kerndale, Mich. Code of Ordinances § 18-90 26

Huntington, N.Y. Town Code § TC3-6 27

Huntington, N.Y. Town Code § TC3-21 27

N.Y. City Admin. Code § 19-535 27

».F. Mun. Code, Police Code § 1135.2 27

San Antonio, Tex. Code of Ordinance 19-226 Zi

PROPOSED LEGISLATION

H.B. 1654, 2010 Leg., Reg. Se (Haw. 2009) Zo

H.B. 2180, 6lst Leg., Reg. Se (Wash. 2009) is

H.B. 2668, 96th Gen. Assemb.. Ist S«

(Til. 2009) 25

H.B. 2726, 2010 Leg... Reg. Se (Haw. 2010 25

H.B. 2813, 186th Gen. Ct., Reg. Se

(Mass. 2009) OF

XIil

Cited Authorities

Page

HJ" 1956, 86th Sess. (Minn. 2009) ............ 27

5.B. 1920, 186th Gen. Ct., Reg. Sess.

SG SEE os 05599 80a aaa ew bh eee ta ered es 26

5.B. 295, 2010 Leg., Reg. Sess. (Haw. 2009) .... = 26

OTHER CITED AUTHORITIES

36 Fla. Admin. Weekly 2393 (May 21, 2010) .... 26

U.S. Dep’t of Energy Alternative Fuels &

Advanced Vehicle Data Center: Data, Analysis

& Trends, Vehicles, http://www.afde.energy.

gov/afde/data/vehicles. htm] (last visited

Nov. Z, Z010) ...... Dreke aeaee ere eet cae

U.S. Dep’t of Energy, Hybrid Taxis Give Fuel

Economy a Lift, DOE/GO-102009-2776

(April 2009), available at http://www.afdc.

energy.gov/afde/pdfs/45148.pdf. 2.2... ... 28

H.R. Rep. No. 94-340 (1975), as reprinted

in 1975 U.S.C.C.A.N. 1762 ....... | 5

H.R. Rep. No. 102-474(1) (1992), as

reprinted in 1992 U.S.C.C.A.N. 1954 2]

H.R. Rep. No. 109-203 (2005) . .. 22

Cited Authorities

Page

California Center for Sustainable Energy,

http://energycenter.org/index.php/incentive-

programs/clean-vehicle-rebate-project

(inet visited Mov. 2. BOT) coos exc cso ews een 26

os BORD. DEO. DOHk CARO o5 54 le eb wins ewer 12

5S. Rep. No. 94-516 (1975) (Conf. Rep.), as

reprinted in 1975 U.S.C.C.A.N. 1956 ........ 5

U.S. Dep't of Energy Alternative Fuels &

Advanced Vehicle Data Center: Federal &

States Incentives & Laws, http://www.afdc.

energy.ov/afdc/laws/

(last visited Nov. 2, 2010) .................. 25

U.S. EPA # 430-R-10-006, 2010 U.S. Greenhouse

Gas Inventory Report, 3-12 (2010), available

at http://www.epa.gov/climatechange/emissions/

USHIVENLOTYTOPOFU. NUM .. ww. ccc cece scans 24

RULES AND REGULATIONS

Zo ©.F.R. $ 630.112(a)........ ee ee ean aes 22

Be se PEs ok ek ta aaa eee 5

.F RR. S SOL ZIONS) nw. ccc wk een sasesn Hf

FLA. ADMIN. CopE ANN. 14-100.004 ............ 27

lowA ApMIN. Cove r. 701-40.67(422) ........... 25

Cited Authorities

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De Bebe Sa ye. | ae . 2

SE FE Re ee Bo OS er 3

Be Perch Ba Oe LIED cis kc oe be cee es 3

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OPINION BELOW

The decision of the Second Circuit Court of Appeals

is reported at 615 F.8d 152 (2d Cir. 2010) and is reprinted

in the Appendix (“App.”) at la-l8a. The district court’s

decision 1s reported at 633 F. Supp. 2d &3 (S.D.N_Y.

2009), and is reprinted at App. 14a-65a.

BASIS FOR JURISDICTION

The Second Circuit Court of Appeals rendered its

decision on July 27, 2010. This Court’s jurisdiction is

invoked under 28 U.S.C. § 1254(1) (2010).

STATUTORY AND REGULATORY

PROVISIONS INVOLVED

49 U.S.C. § 32919 (2010) (nergy Poliey and

Conservation Act (SR POA"))

(a) General. When an average fuel economy

standard prescribed under this chapter [49

USCS §§ 32901 et seq.] is in effect, a State

or a political subdivision of a State may not

adopt or enforce a law or regulation related

to fuel economy standards or average fue!

economy standards for automobiles

covered by an average fuel economy

standard under this chapter [49 USCS §&§

32901 et seq.).

35 Rules of the City of New York § 1-78(a)(8) (2009)

(ii) Kor a vehicle that is hacked up pursuant

to. section 3-03 of this title, excluding

section 3-03(¢c)(10) of this title [i-e.,

excluding hybrid electric and clean diesel

vehicles], the Standard Lease Cap shall be

adjusted downward by $4 per shift ($28 per

week) beginning on May 1, 2009, by $8 per

shift ($56 per week) beginning on May 1,

2010, and by $12 per shift ($84 per week)

beginning on May 1, 2011.

STATEMENT OF THE CASE

A. Regulatory Framework.

This litigation concerns the City of New York’s

proper exercise of its police powers to amend its taxicab

lease rate regulations to promote the purchase of clean,

fuel-efficient taxicabs.

1. The City of New York’s Taxicab Regulations.

The City of New York (“the City”) extensively

regulated the operation of taxicabs for decades prior to

the passage of the I} PCA in 1975. New York City taxicab

regulations have long restricted vehicle choices and

equipment, with a consequent impact on the overall fuel

economy of taxi fleets. In addition, the City has also long

regulated the economic relationship between taxicab

fleet owners and drivers, including the lease rates that

fleet owners may charge for the use of their vehicles.

In December 2007, the City enacted rules that

required new taxicabs, except those that are wheelchair

accessible, put in service beginning on October 1, 2008,

to achieve at least 25 City miles per gallon, and those

put in service beginning October 1, 2009, to achieve at

least 30 City miles per gallon (“25/30 MPG Rules”). 35

Rules of the City of New York (“R.C.N.Y.”) § 3.03(¢)(10)-

(11) (repealed 2009). The only vehicles that met the 25/

30 MPG Rules contained hybrid or clean-diesel engines.

The Metropolitan Taxicab Board of Trade (““MTBOT”)

successfully challenged the 25/30 MPG Rules in district

court and the rules were enjoined. See Metro. Taxicab

Bd. of Trade v. City of New York, 08-ev-7837 (PAC), 2008

U.S. Dist. LEXIS 94021 (S.D.N.Y. Oct. 31, 2008)

(MTBOT 1). The City responded by rescinding the 25/

30 MPG Rules. Joint Appendix (“JA”) at 502, Metro.

Taxicab Bd. of Trade v. City of New York, 615 F.3d 152

(2d Cir. 2010) (No. 09-2901) (MTBOT 1).

On March 26, 2009, the City enacted new

regulations, 35 R.C.N.Y. § 1-78(a)(3) (the “Lease Cap

Rules” or “Rules”), to create incentives for the purehasc

of hybrid electric and clean diesel taxicabs. The Rules

permit owners of medallions used for hybrid electric

taxicabs and clean diesel taxicabs to charge $3.00 per

12-hour shift more than the maximum allowable

standard lease rates and limit owners of non-hybrid

taxicabs, after a phase-in period of two years, to

charging $12.00 per shift less than the maximum

allowable lease rate, while leaving the lease rates for

accessible vehicles unchanged. See 385 R.C.N-Y. § 1-78(a).

The $3.00 per shift upward lease cap adjustment

represents the additional cost to owners to purchase

and modify a hybrid vehicle (compared to a non-hybrid

vehicle), spread out over the three year life of the

vehicle. See JA505. The $12.00 per shift downward lease

cap adjustment represents an estimated $15.00 per shift

average difference in fuel costs between a non-hybrid

and a hybrid vehicle ($15.00 offset from the $3.00 upward

adjustment results in a $12.00 downward adjustment).

See JA507. The $12.00 adjustment has the effect of

placing 80 percent of the differential cost of fuel per shift

between hybrids and non-hybrids on vehicle owners who

lease out their vehicles (such as MTBOT), while also

helping to equalize total per shift driver expenses as

between drivers who lease hybrids and those who lease

non-hybrid vehicles. See JA505-06, 519.

The City enacted these new rules in order to correct

a structural problem with the standard vehicle lease

arrangement that artificially insulates fleet owners from

fuel costs and creates a disincentive for the purchase of

hybrid vehicles. The previous regulatory scheme had

for years required fleet owners to purchase large sedans

and, more recently to purchase only Ford Crown

Victorias. Even after the City permitted hybrid vehicles

as an alternative, the leasing rules insulated fleet

owners from the significant economic consequences of

their decisions to continue purchasing Crown Victorias

because drivers, rather than fleet owners, bear the cost

of fuel. The new rules were intended to address the

economic and environmental consequences that arose

out of the existing lease rate structure. In amending

the lease rates to differentiate between hybrid and non-

hybrid vehicles, the City restructured the allocation of

costs between taxicab fleet owners and taxicab drivers

so that drivers would not bear the costs of the fleet

owners’ vehicle purchase decisions and so that fleet

owners would have an incentive to purchase hybrid

vehicles. These Rules neither set fuel economy

standards nor interfere with federal regulation of the

average fuel economy of automobile manufacturers such

that they would fall within the scope of the preemption

provision in the EPCA.

2. The Energy Policy and Conservation Act.

Congress enacted the EPCA to address the energy

crisis resulting from the 1973 Mideast oil embargo. See

H.R. Rep. No. 94-340, at 1-3 (1975), as reprinted in 1975

U.S.C.C.A.N. 1762, 1763-65. The goals of the EPCA are

to improve motor vehicle efficiency and to “decrease

dependence on foreign [oil] imports, enhance national

security, achieve the efficient utilization of scarce

resources, and guarantee the availability of domestic

energy supplies at prices consumers can afford.” S. Rep.

No. 94-516, at 117 (1975) (Conf. Rep.), as reprinted in

1975 U.S.C.C.A.N. 1956, 1957; see also Green Mountain

Chrysler Plymouth Dodge Jeep v. Crombie, 508 F. Supp.

2d 295, 305-06 (D. Vt. 2007). The United States

Department of Transportation (“DOT”) is charged with

establisning federal fuel economy standards on a fleet-

wide basis. See 49 U.S.C. §§ 32902(a), 32902(c). These

average standards are known as “corporate average

fuel economy” or “CAFE” standards. The CAFE

standard is “a performance standard specifying a

minimum level of average fuel economy applicable to a

munufacturer in a model year.” /d. § 32901(a)(6). The

Secretary of Transportation has delegated

administration of the CAFE program to the National

Highway Transportation and Safety Administration

(“NHTSA”), an operating administration of DOT. See

49 C.ER. §§ 1.50(), 501.2(a)(8).

The E PCA contains an express preemption clause

preempting states and localities from adopting or

enforcing laws or regulations related to fuel economy

standards or average fuel economy standards. 49 U.S.C.

§ 32919(a). Pursuant to this preemption provision,

Congress made the setting of fuel economy standards

exclusively a federal concern. /d.

B. Proceedings Below.

In September 2008, Metropolitan Taxicab Board cf

Trade, et al. moved to enjoin the City’s 25/80 MPG Rules,

arguing that these rules were preempted by the EPCA

and the Clean Air Act (“CAA”). On October 31, 2008, the

District Court, Southern District of New York (Crotty,

U.S.D.J.) found that the EPCA preempted the 25/30

MPG Rules because the rules, by their own language,

clearly related to fuel economy standards by setting fuel

economy standards for taxicabs. See MTBOT J, 2008

U.S. Dist. LEXIS 94021, at *27-28. On March 26, 2009,

the City rescinded the 25/30 MPG Rules and enacted

the challenged Lease Cap Rules. JA502.

On April 17, 2009, MTBOT filed an amended

complaint in the district court alleging that the Lease

Cap Rules are preempted by the EPCA and the CAA

because the Rules are essentially a mandate to purchase

vehicles with a certain MPG or emissions rating. See

JA11. MTBOT also brought a motion for a preliminary

injunction to enjoin the City’s enforcement of the Rules.

See JA18-19.

The district court held oral argument on MTBOT’s

motion on May 7, 2009, and then held an evidentiary

hearing on May 20, 2009, to determine whether the

economic effect of the Lease Cap Rules on fleet owners

would force them to purchase hybrid vehicles. See JA12-

13. By Decision and Order, dated June 22, 2009, the

District Court, Southern District of New York (Crotty,

U.S.D.J.) found that the Lease Cap Rules are a de facto

mandate requiring the plaintiffs to purchase hybrid

vehicles and found such a mandate to be related to both

fuel economy standards and the reduction of vehicle

emissions, and thus sufficiently likely to be preempted

under the EPCA and the CAA so as to warrant a

preliminary injunction. App. 65a.

The United States Court of Appeals for the Second

Circuit affirmed. App. 18a. The Court of Appeals limited

its analysis of the scope of the EPCA’s express

preemption provision to the text of the statute. App.

8a-12a. The Court of Appeals explained that the “related

to” language in the preemption provision is expansive

and includes any law that contains a reference to the

preempted subject mater or makes the existence of the

preempted subject matter essential to the law’s

operation. App. 8a-9a. Applying this definition of

“related to,” the Court of Appeals concluded that the

Rules “relate to” fuel economy standards because, in

distinguishing between hybrid and non-hybrid vehicles,

the Lease Cap Rules, in effect, rely on fuel economy,

and on nothing else, as the criterion for determining

the applicable lease cap. App. 9a-lla. The Court held

that, because the Rules are based expressly on the fuel

economy of a leased vehicle, they are preempted by the

EPCA. App. 12a. The Court of Appeals did not reach

the question of whether the preemption provision of the

CAA would invalidate the City’s new rules. App. 12a.

Nor did the Court address the arguments set forth in

the amicus brief filed by the United States.

REASONS FOR GRANTING THE PETITION

The Court of Appeals’ decision has devastating and

far-reaching effects on the ability of states and

municipalities to exercise their historic police powers to

promote the use of clean, fuel-efficient vehicles. The

Court of Appeals held that the EPCA preempts the

exercise of New York City’s police power regulation of

the taxicab industry whenever the regulations expressly

rely on a distinction between hybrid and non-hybrid

vehicles. By finding that, in the City’s taxicab lease rate

regulations, “‘hybrid’ is simply a proxy for ‘greater fuel

efficiency,” the Court of Appeals concluded that the

regulations are “related to” fuel economy standards and

are thus preempted by the EPCA. The decision places

at risk of preemption countless state and local laws that

provide incentives for the purchase and use of hybrid

and other fuel-efficient vehicles, incentives that do not

impinge on Congress’ intent to make the setting of fuel

economy standards exclusively a federal concern.

The environmental! and health benefits of “clean”

vehicle use are beyond debate. Moreover, Congress has

encouraged states to undertake their own conservation

programs to reduce energy consumption and has

specifically enacted laws supporting state and local

incentives promoting the purchase of hybrid or fuel-

efficient vehicles. Yet the decision of the Court of

Appeals now imperils such state and local efforts.

The Court of Appeals’ decision is wrong and fails to

follow established precedents of this Court. The EPCA

was intended to preempt state regulation of fuel

economy standards so that automobile manufacturers

would not be required to comply with myriad differing

standards. There is no evidence that Congress intended

preemption of local taxicab regulations that may

influence a fleet owner’s decision to purchase a certain

type of vehicle. The Court of Appeals’ overbroad reading

of the “related to” language in the EPCA preemption

provision ignores this Court’s practical interpretation

of this phrase and results in the erroneous displacement

of state law. Despite this Court’s attempts to clarify the

analysis of “related to” preemption language, the Court

of Appeals’ interpretation of the EPCA preemption

provision conflicts with the framework of analysis

employed by the Fourth, Sixth, and Ninth Circuit Courts

of Appeals and demonstrates confusion as to the

applicable standard, or a degree of non-adherence with

this Court’s jurisprudence that should not be tolerated

by this Court. Accordingly, this Court should grant

certiorari and reverse the erroneous decision of the

Court of Appeals.

A. The Court of Appeals’ Preemption Analysis Is

Incorrect and Is Inconsistent with the

Preemption Jurisprudence of this Court.

“The purpose of Congress is the ultimate

touchstone in every pre-emption case.” Wyeth v. Levine,

US. _, 129 S. Ct. 1187, 1194 (2009). “In all pre-

emption cases,” courts start with the assumption that

federal law cannot supersede historic state powers

“unless that was the clear and manifest purpose of

Congress.” Wyeth, 129 S. Ct. at 1194-95. To determine

whether Congress clearly and manifestly intended to

preempt state law, courts must consider the language,

structure, purpose and history of the relevant federal

statute. See, e.g., Altria Group, Inc. v. Good, — USS.

__, 1298. Ct. 538, 543 (2008).

1. The Court of Appeals Failed to Properly

Examine Congressional Intent as a Guide to

the EPCA Preemption Provision’s Reach.

In analyzing the scope of the preemption provision

in the EPCA, the Court of Appeals erred by failing to

consider the structure, purpose and history of the

statute in order to determine what Congress intended

the reach of the EPCA preemption provision to be. See

Altria, 129 S. Ct. at 543 (“If a federal law contains an

express pre-emption clause, it does not immediately end

the inquiry because the question of the substance and

scope of Congress’ displacement of state law still

remains.”). The Court of Appeals was required to

consider both the objectives of the EPCA and the nature

of the effect of the Lease Cap Rules on fuel economy

standards in order to determine whether the Rules are

“related to” fuel economy standards, as Congress

intended that phrase to be read in the EPCA. See Cal.

Div. of Labor Standards Enforcement v. Dillingham

Constr, N. A., Inc., 519 U.S. 316, 325 (1997) (to

determine whether state law has forbidden connection

to preempted subject matter, court looks to objectives

of federal statute as guide to scope of state law that

Congress understood would survive, as well as to nature

of effect of state law on preempted subject matter). By

examining only the text of the provision in question, the

Court of Appeals reached an overbroad interpretation

of “related to” that conflicts with this Court’s holdings

and violates the federalism safeguards that protect state

sovereignty.

This Court has repeatedly instructed that, in

interpreting a statutory provision that expressly

preempts state law, the analysis begins with the

presumption against preemption. See Altria, 129 S. Ct.

at 543; Bates v. Dow Agrosciences LLC, 544 U.S. 431,

449 (2005); Medtronic v. Lohr, 518 U.S. 470, 485 (1996);

Cipollone v. Liggett Group, Inc., 505 U.S. 504, 518 (1992)

(all decided on express preemption grounds). This

principle applies “[iJn all pre-emption cases, and

particularly in those in which Congress has ‘legislated .

.. in a field which the States have traditionally

occupied.” Wyeth, 129 S. Ct. at 1194 (citations omitted).

It applies to both the “‘question whether Congress

intended any pre-emption at all’ and to ‘questions

concerning the scope of intended invalidation of state

law.’” Engine Mfrs. Ass'n v. S. Coast Air Quality Mgmt.

Dist., 541 U.S. 246, 260-61 (2004) (Souter, J., dissenting)

(citing Medtronic, 518 U.S. at 485).

tiere, the feild ot regulation is taxicab services, a

traditionally local matter. See Buck v. California, 343

U.S. 99, 102 (1952) (operation of taxicabs is local

business, which Congress has left largely to the states).

The regulations at issue here regulate taxicab lease rates

and do not impose general requirements concerning fuel

economy for vehicles either sold or purchased in New

York City. The Rules change the existing schedule of

lease rates in order to remove disincentives for the

purchase of hybrid vehicles. The fact that the Lease Cap

Rules create incentives for the purchase of hybrid

vehicles does not convert the Rules into a preempted

regulation of fuel economy standards. Because the

regulation of taxicab services is a traditionally local

matter, the Court of Appeals’ analysis of the scope of

the EPCA preemption provision should have begun with

“the assumption that the historic police powers of the

States were not to be superseded by the Federal Act

unless that was the clear and manifest purpose of

Congress.” Rice v. Sania Fe Elevator Corp., 331 U.S.

218, 230 (1947).

In enacting the EPCA, the clear and manifest

purpose of Congress was to make the regulation of

motor vehicle fuel economy standards the exclusive

province of the federal government through

establishment of the federal CAFE program. See 49

U.S.C. §§ 32,901-32,919 (2010). Congress established

national uniformity as an important goal of the EPCA

because myriad different fuel economy standards would

impose a tremendous hardship on the automotive

industry. See 49 U.S.C. § 32919(a) (preempting any state

law or regulation related to fuel economy standards or

average fuel economy standards). The evil that

Congress sought to avoid was “any manufacturer being

required to comply with differing State and local

regulations with respect to automobile or light-duty

truck fuel economy.” S. Rep. No. 94-179, at 25 (1975)

(internal quotation marks omitted). Congress did not

enact the EPCA preemption provision in order to

prevent local regulators from establishing incentive

programs designed to encourage the purchase of

commercially available hybrid and clean diesel taxicabs.

“Neither before or since the enactment of the EPCA

has Congress sought to bring the taxicab industry under

federal regulatory control.” Brief for the United States

as Amicus Curiae at 11, MTBOT /1, 615 F.3d 152 (2d Cir.

2010) (No. 09-2901). Because Congress did not clearly

and manifestly express an intent to preempt local

taxicab regulations, the Court of Appeals erred in failing

to apply the presumption against preemption in this

ease. See Cipollone, 505 U.S. at 516-17 (using

presumption against preemption to support a narrow

interpretation of an express preemption provision).

Not only does the decision of the Court of Appeals

fail to apply the presumption against preemption to a

field of traditional state regulation, the decision conflicts

with this Court’s holdings that give a practical meaning

to the otherwise boundless “relate to” language found

in numerous express preemption provisions.’ The EPCA

language that preempts state laws “related to fuel

economy standards or average fuel economy standards,”

49 U.S.C. § 32919(a), on its face embodies the same

limitless breadth as that found in the Employee

Retirement Income Security Act (ERISA) that

preempts state laws “insofar as they ... relate to any

employee benefit plan,” 29 U.S.C. § 1144(a) (2010). But

this Court nas expiained in the context of ERISA that

the term “relate to” is “unhelpful” and “frustrating,”

requiring examination of the objectives of the federal

legislation. N.Y. State Conference of Blue Cross & Blue

Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656

(1995). Thus, notwithstanding its broad scope, the term

1. See, e.g., Federal Cigarette Labeling Act, 15 U.S.C. §

1334(a) (preempting statements relating to smoking and

health); Federal Food, Drug and Cosmetic Act, 21 U.S.C. §

360(k)(a) (Medical Device Amendments) (preempting

requirements relating to safety or effectiveness); Clean Air Act,

42 U.S.C. § 7543(a) (preempting standards relating to control

of emissions); Airline Deregulation Act, 49 U.S.C. § 1305(a)(1)

(preempting laws relating to air carriers’ rates, routes, or

services).

“relate to” cannot be taken “to extend to the furthest

stretch of its indeterminacy,” or else “for all practical

purposes pre-emption would never run its course.” Jd.

at 655; see also Dillingham, 519 U.S. at 335 (Sealia, J.,

concurring) (“{AJs many a curbstone philosopher has

observed, everything is related to everything else.”).

Faced with this broad language, the “pre-emption claims

[must] turn on Congress’ intent,” not the uncritically

literal application of “relate to.” Egelhoff v. Egelhoff,

532 U.S. 141, 147 (2001) (cautioning against an ‘uncritical

literalism’ that would make preemption turn on ‘infinite

connections’).

When it used the broad phrase “related to fuel

economy standards,” Congress cannot have intended

that the phrase be applied to preempt local taxicab

regulations promoting fuel-efficient vehicle use. The

regulation of taxicab services is an area that had been

the subject of pervasive local regulation for decades

prior to passage of the EPCA in 1975. So long as the

regulations do not set fuel economy standards and do

not interfere with federal regulation of the average fuel

economy of automobile manufacturers, there is no

preemption under the EPCA. Surely Congress could not

have intended to preempt every taxicab regulation that

affects a fleet owner’s vehicle purchase decisions, and,

consequently, the fuel economy of its taxi fleet.

In its amicus brief to the Court of Appeals filed on

behalf of DOT and the United States Environmental

Protection Agency, the United States stated that the

Lease Cap Rules are not likely to have a significant

impact on the overall federal regulation of the average

fuel economy of automobile manufacturers. Brief for the

United States as Amicus Curiae at 14, MTBOT J] (No.

09-2901). The United States explained that the Lease

Cap Rules would principally affect the cost

considerations that underlie vehicle purchasing

decisions made by taxicab fleet owners, a group that

controls approximately 35 percent of all taxicabs in New

York City: around 4,500 taxicabs, out of a total of just

over 13,000. /d. Even if the Lease Cap Rules led fleet

owners to purchase exclusively hybrid vehicles, because

fleet owners already purchase hybrid vehicles at a rate

of 28 percent, that would only be an increase of about

3,000 hybrid purchases. /d.

Federal laws passed subsequently to the EPCA

further demonstrate that Congress does not view the

EPCA’s preemptive reach as extending to state and local

incentive programs. Sce FDA v. Brown & Williamson

Tobacco Corp., 529 U.S. 120, 133 (2000) (noting that “the

meaning of one statute may be affected by other Acts,

particularly wnere Congress has spoken subsequently

and more specifically to the topic at hand” (citations

omitted)). Through the Energy Policy Act of 1992, the

2005 Safe, Accountable, Flexible, Efficient

Transportation Equity Act and the Consumer

Assistance to Recycle and Save program of 2009, each

discussed infra at 21-23, Congress has approved and

financially supported state and local measures to

promote the purchase of fuel-efficient vehicles. The

Court of Appeals erred in holding that the City violated

federal law by setting taxicab lease rates that

differentiate between hybrid and non-hybrid vehicles.

Where the Lease Cap Rules are not proved to have a

significant impact on the overall federal regulation of

average fuel economy, it was not Congress’ clear and

manifest intention to capture such rules within the

Kk} PCA preemption provision’s reach. This Court should

grant certiorari to correct this erroneous analysis of

preemption under the EPCA.

2. This Court’s Preemption Jurisprudence

Required the Court of Appeals to Determine

Whether the City’s Rules Create a Preempted

Mandate.

In order to determine the limits of “related to”

language in express preemption provisions, this Court

has examined whether the challenged state law has a

“forbidden connection” to the preempted subject

matter. Dillingham, 519 U.S. at 325. This forbidden

connection is identified by looking at both the objectives

of the federal law at issue as well as the nature of the

effects of the state law. Jd. In conducting this analysis,

this Court has drawn a clear distinction between state

laws that act as incentives and those that are actual or

de facto mandates. Dillingham, 519 U.S. at 334;

Travelers, 514 U.S. at 658-59. The Fourth, Sixth, and

Ninth Circuit Courts of Appeals have all followed this

framework of analysis. See Retail Indus. Leaders Ass'n

v. Fielder, 475 F.3d 180 (4th Cir. 2007); Associated

Builders & Contractors v. Mich. Dep't of Labor & Econ.

Growth, 543 F.3d 275 (6th Cir. 2008); Golden Gate Rest.

Ass’n v. City & County of San Francisco, 546 F.3d 639

(9th Cir. 2008) (discussed infra at 18-19). The Second

Cireuit Court of Appeals did not. As a result, the Court

of Appeals’ decision in this case conflicts with the

decisions of these other courts of appeals and results in

exactly the type of overbroad reading of a “related to”

preemption provision that this Court cautions against.

See Travelers Indem. Co. v. Bailey, U.S.__, 12958. Ct.

2195, 2204 (2009) (“There is, of course, a cutoff at some

point, where the connection . . . would be thin to the

point of absurd.”).

In Travelers, this Court held that a state regulation

requiring hospitals to collect surcharges from patients

covered by a commercial insurer but not from patients

insured by a Blue Cross/Blue Shield (“the Blues”) plan

was not preempted because it did not “relate to”

employee benefit plans within the meaning of ERISA.

This Court found that “[a]lthough there is no evidence

that the surcharges will drive every health insurance

consumer to the Blues, they do make the Blues more

attractive (or less unattractive) as insurance alternatives

and thus have an indirect economic effect on choices

made by insurance buyers, including ERISA plans.”

Travelers, 514 U.S. at 659. This Court explained that

for the surcharge, which essentially acted as an incentive

for consumers to contract with the Blues, to be

preempted by ERISA, it would have to force all health

insurance consumers to do so. /d. at 664.

Similarly, in Dillingham this Court held that a

California law allowing those contractors participating

in state-certified apprentice programs to pay

apprentices lower wages was not preempted by ERISA,

even though it created indirect incentives for ERISA

plans to obtain state certifications. Relying on T'ravelers,

this Court found that California’s law did not have a

forbidden connection with or “relate to” ERISA plans

where it “alters the incentives, but does not dictate the

choices facing ERISA plans.” Dillingham, 519 U.S. at

334. This Court explained that “it has not been

demonstrated here that the added inducement created

by the wage break available on state public works

projects is tantamount to a compulsion upon

apprenticeship programs.” /d. at 333.

In E'gelhoff, this Court struck down a Washington

State law that directed a choice of beneficiary that

conflicted with the choice provided in an ERISA plan.

To determine whether the state law was related to an

ERISA plan, this Court followed the framework of

analysis set forth in Dillingham and examined both the

objectives of the ERISA statute, as well as the nature

of the effect of the state law on ERISA plans. Egelhoff,

532 U.S. at 147. Applying this analysis, this Court held

that a state or local law has an impermissible connection

with ERISA plans where it “binds ERISA plan

administrators to a particular choice of rules for

determining beneficiary status[,] ... rather than

[allowing administrators to pay the benefits] to those

identified in the plan documents.” /d.

Following this framework of analysis, the Fourth,

Sixth and Ninth Circuit Courts of Appeals recognized

that the interpretation of “related to” in a preemption

provision required them to determine whether the

challenged laws mandated, or effectively mandated,

something within the area that Congress intended to

exclusively control. In Retail Indus. Leaders Ass’n v.

Fielder, the Fourth Circuit held that a Maryland law was

preempted by ERISA because it left employers with “no

reasonable choices” except to change how they structure

their employee benefit plans. 475 F.3d at 190-97 (state

law has impermissible connection with an ERISA plan

if it directly regulates or effectively mandates some

element of the ERISA plan). In Associated Builders &

Contractors v. Michigan Department of Labor &

EFconomic Growth, the Sixth Cireuit held that a

Michigan law was not preempted by ERISA because it

did not mandate something within the scope of issues

that ERISA prohibits the states from regulating. 543

F.3d at 280-85 (noting that compulsion is a necessary

condition for ERISA preemption). In Golden Gate

Restaurant Ass’n v. City & County of San Francisco,

the Ninth Circuit held that ERISA does not preempt a

San Francisco ordinance where the ordinance offers

employers “a meaningful alternative” that allows them

to preserve the existing structure of their ERISA plans.

546 F.3d at 654-60 (upholding local ordinance because it

does not require any employer to adopt an FE RISA plan

or other health plan, nor require any employer to

provide specific benefits through an existing ERISA

plan or other health plan). In contrast, here the Court

of Appeals found that “the district court’s conelusian

imat the {Lease Cap Rules] effected a mandate is

irrelevant to our analysis.” App. 12a. While the district

court’s conclusion that the Rules effectively mandate

the purchase of hybrid vehicles is incorrect, the Court

of Appeals should have reached this issue in order to

determine whether the challenged Rules are preempted

by the EPCA.

The Lease Cap Rules do not set fuel economy

standards, establish manufacturer requirements, or

create purchase requirements. They establish different

maximum lease rates for hybrid and non-hybrid vehicles

to provide incentives for reduced fuel usage and cleaner

taxis. The Court of Appeals erred in failing to determine

whether the Lease Cap Rules mandated, or effectively

mandated, something within the area that Congress

intended to exclusively control, 7.¢., the setting of fuel

economy standards. Where the Lease Cap Rules neither

mandate the purchase of hybrid vehicles nor require

fleet owners to purchase vehicles that meet certain

mileage standards, they lack the impermissible

connection to fuel economy standards that Congress

sought to preempt under the EPCA. This Court should

grant certiorari to clarify that laws or regulations that

do not bind the affected parties to any particular choice

do not function as a regulation of a preempted area of

law.

B. This Court’s Review Is Needed Because the Court

of Appeals’ Decision Frustrates Congressional

Intent and Prevents States and Municipalities

from Promoting the Use of Clean, Fuel-Efficient

Vehicles.

While the EPCA preempts the states from setting

their own fuel economy standards, Congress has since

passed laws encouraging and funding state and local

incentive programs that promote the purchase of fuel-

efficient vehicles such as hybrids. The Court of Appeals’

erroneous ruling, that the City’s lease rate incentive

for hybrid taxis is preempted regardless of whether it

functions as a de facto mandate, puts innumerable state

and local incentive programs at risk and runs directly

counter to congressional efforts to promote fuel-efficient

vehicle purchases. This Court’s immediate intervention

is required in order to prevent other state and local

governments from concluding that the EPCA preempts

them from enacting clean-vehicle incentive programs

and to prevent other federal courts from adopting the

Court of Appeals’ flawed approach.

1. Congress Has Long Encouraged State and

Local Incentive Programs for Fuel-Efficient

Vehicles.

Far from preempting state and local incentive

programs for the purchase of fuel-efficient vehicles,

Congress has actively legislated to encourage such

initiatives. The Energy Policy Act of 1992, the 2005 Safe,

Accountable, Flexible, Efficient Transportation Equity

Act: A Legacy for Users (““SAFETEA-LU”) and the

Consumer Assistance to Recycle and Save (“CARS”)

program of 2009 (commonly known as “Cash for

Clunkers”) all post-date the 1975 passage of the EPCA

and demonstrate congressional recognition and support

of state and local efforts in this area.

Like the EPCA, the purpose of the Energy Policy

Act of 1992, Pub. L. No. 102-486, 106 Stat. 2776 (codified

as amended in scattered titles of U.S.C.), is to reduce

dependence on foreign oil. See H.R. Rep. No. 102-474(1),

at 132-33 (1992), as reprinted in 1992 U.S.C.C.A.N. 1954,

1955-56. The Energy Policy Act included a provision that

invited state and local governments to design

comprehensive plans to accelerate the introduction and

use of alternative fueled vehicles, including hybrid

electric vehicles. 42 U.S.C. § 138235 (2010). Through this

provision, Congress offered federal financial assistance

for qualifying state and local programs, with the goal of

introducing substantial numbers of alternative fueled

vehicles into the national market. In addition to

federally-affiliated programs, the law also clearly

contemplated that some state and local incentive

programs would be undertaken outside the auspices of

the Energy Policy Act. See 42 U.S.C. § 13235(c)(2)(C)

(requiring the Secretary of Energy to include in his

annual report “a description of Federal, State, and local

programs undertaken in the various States, whether

pursuant to a State plan under this section or not, to

provide incentives for the introduction of alternative

fueled vehicles”) (emphasis added).

With SAFETEA-LU, Pub. L. No. 109-59, 119 Stat.

1144 (2005) (codified as amended in scattered sections

of 23 U.S.C.), Congress explicitly authorized those states

receiving federal highway funds to establish incentives

for the use of fuel-efficient vehicles in high occupancy

vehicle (“HOV”) lanes, regardless of whether the

vehicles otherwise meet the applicable occupancy

requirements for HOV lanes.’ See 23 U.S.C. § 166 (2010).

State regulations or laws adopted under this provision

would necessarily discriminate between vehicle models

based on the vehicles’ emissions characteristics or

relative fuel efficiency. Congress makes clear that the

states have the authority to determine whether to adopt

HOV lane incentives and to determine the specific

criteria upon which to base to the award of HOV lane

incentives. See 23 U.S.C. § 166(b)(5); see also H.R. Rep.

No. 109-208, at 852-53 (2005) (congressional intent is to

allow states “broad discretion” to set stricter criteria

for fuel economy when determining which vehicles qualify

for state HOV lane exceptions).

2. Most major highway projects in the United States are

predominantly funded with federal highway funds, and as a

condition of federal funding for a project, states must accept

and agree to comply with the applicable terms and conditions

set forth in title 23 of the United States Code relative to the

project. See 23 U.S.C. § 106(a)(2); 23 C.F. R. § 630,112(a). Where

HOV lanes are included in a project, such conditions include

requirements concerning HOV lane access and the use of HOV

lane access as an incentive for driving a low emission or energy-

efficient vehicle. See 23 U.S.C. § 166(a)(2), (b)(5).

More recently, the CARS program, Pub. L. 111-32,

Title XIII, 123 Stat. 1909; Pub. L. 111-47, 123 Stat. 1972

(2009), provided $3 billion in federal incentives for the

purchase of fuel-efficient vehicles. The program supplied

vouchers that vehicle owners could use to trade in older,

less fuel-efficient cars and trucks for newer models with

higher MPG ratings. Car owners remained eligible for

a voucher under CARS even if they also benefitted from

other existing types of incentives: “The availability or

use of a Federal, State, or local incentive or a State-

issued voucher for the purchase or lease of a new fuel-

efficient automobile shall not limit the value or issuance

of a voucher under the Program to any person otherwise

eligible to receive such a voucher.” CARS § 1302(c)(1)(E).

Thus, the law expressly acknowledged the existence of

state and local incentives for the purchase of fuel-

efficient vehicles, and ensured that federal incentives

would not displace such existing state and local efforts.

As these laws demonstrate, Congress has not

expressed a concern that incentives for commercially-

available fuel-efficient vehicles will upset national fuel

economy standards. Quite the opposite, Congress has

financially supported state and local incentive programs

for fuel-efficient and alternative fueled vehicles. The

Court of Appeals erred in concluding that Congress

intended any state or local regulation that expressly

relies on a distinction between hybrid and non-hybrid

vehicles to be preempted by the EPCA. See FDA v.

Brown & Williamson Tobacco Corp., 529 U.S. at 140-59

(examining later-enacted tobacco-specific legislation to

determine scope of ‘DA's authority to regulate tobacco).

The impact of this ruling on pending and existing state

and local incentive programs promoting the purchase

of commercially-available fuel-efficient vehicles is by

itself a sufficient reason to grant certiorari.

2. The Court of Appeals’ Ruling Recklessly

Places Hundreds of Fuel-Efficient Vehicle

Incentives at Risk.

Cutting emissions of greenhouse gases and

traditional pollutants and reducing dependence on

petroleum are pressing national challenges to which

state and local governments have creatively and

enthusiastically responded. States have aggressively

pursued a wide variety of plans to improve air quality,

increase the use of renewable energy, promote energy

efficiency and combat global climate change. Reducing

emissions of greenhouse gases has been a particularly

important goal for the City of New York, as its coastal]

location and low elevation leave it vulnerable to rising

sea levels that will accompany global climate change in

the decades to come. The City has committed itself to

reducing citywide carbon emissions by 30 percent below

2005 levels by 2030, and the City was a plaintiff in

Massachusetts v. HPA, 549 U.S. 497 (2007), successfully

challenging the federal government’s failure to regulate

greenhouse gas emissions.

Making improvements in fuel efficiency and

reducing emissions from motor vehicles are critical

components of this larger environmental! effort. Cars

and ligt trucks account for roughly 20 percent of United

States carbon dioxide emissions. U.S. EPA # 430-R-10-

006, 2010 U.S. Greenhouse Gas Inventory Report, 3-12

(2010), available at http://www.epa.gov/climatechange/

emissions/usinventoryreport.html. Cities and states

across the country have taken the initiative to reduce

pollution and conserve energy resources. They have

created incentives for the use of cleaner, more fuel-

efficient vehicles in both the private and public sectors

by enacting or proposing hundreds of incentive

programs for hybrid electric passenger vehicles alone.

State and local laws and regulations promoting the

use of commercially-available clean, fuel-efficient

vehicles are ubiquitous. Governments in all fifty states

and the District of Columbia have adopted alternative

fueled vehicle incentives. See U.S. Dep’t of Energy

Alternative Fuels & Advanced Vehicle Data Center:

Federal & States Incentives & Laws, http://

www.afde.energy.gov/afde/laws/ (last visited Nov. 2,

2010). These programs take on many forms and function

through a variety of mechanisms, but all draw

distinctions between vehicle models based on engine

technology or relative fuel efficiency. Some types of

incentives include sales tax’ and income tax‘ incentives

3. See, e.g., CONN. GEN. Star. § 12-412(67)-12-412(68) (2010)

(removing sales tax from alternative-fuel vehicles and

conversion equipment); H.B. 2726, 2010 Leg., Reg. Sess. (Haw.

2010) (proposing exemption for plug-in hybrid vehicles from

rental surcharge); H.B. 2668, 96th Gen, Assemb., Ist Sess. (I]l.

2009); Mp. Cope ANN., TRANSP. § 13-815 (2010) (excise tay credit

of up to $2,000 for purchase of plug-in hybrid vehicles); H.B.

2813, 186th Gen. Ct., Reg. Sess. (Mass. 2009) (proposing sales

tax exemption for hybrids); Or. Rev. Stat. § 316.116 (2010) (tax

credit for purchase or modification of plug-in hybrid vehicles);

H.B. 2180, 61st Leg., Reg. Sess. (Wash. 2009) (proposing

temporary tax exemption for plug-in hybrid vehicles).

4. See, e.g., Coto, Rev. Stat. § 39-22-516 (2010) (income tax

credit up to $6,000 for purchase or conversion of hybrid electric

vehicle); Conn. Gen. Stat. §12-217i (2010) (income tax credit

for ten percent of incremental cost of purchasing alternative

fueled vehicle); Ga. Copk Ann. § 48-7-40.16 (2010) (tax credit of

up to $5,000 for purchase of low-emission or zero-emission

vehicles); H.B. 1654, 2010 Leg., Reg. Sess. (Haw. 2009)

(proposing $2000 tax credit for taxi fleet owners to purchase

hybrid vehicles); lowaA ADMIN. CobE r. 701-40.67(422) (2010)

($2000 income tax deduction for hybrid vehicles); La. Rev. Star.

ANN. § 47:6035 (2010) (income tax credit for fifty percent of cost

(Cont'd)

for the purchase of hybrid vehicles or conversion kits,

sales rebates for purchase of hybrid vehicles,’

exemptions allowing hybrid vehicles to drive in HOV lanes

regardless of the number of occupants in the vehicle,°

free parking or reduced parking rates for hybrid

vehicles,’ exemption of hybrid vehicles from emissions

(Cont'd)

of converting vehicles to electricity or other alternative-fuel);

Va. Cone ANN. § 58.1-438.1 (2010) (income tax deduction for

purchase of clean-fuel vehicles); W. Va. Cope § 11-6D-5 (2010)

(tax credit up to $50,000 for purchase of alternative-fuel

vehicles).

5. The California Air Resource Board’s Clean Vehicle

Rebate Program offers $5,000 cash rebates for plug-in hybrid

electric vehicles. California Center for Sustainable Energy,

http://energycenter.org/index.php/incentive-programs/clean-

vehicle-rebate-project (last visited Nov. 2, 2010); see also 36

Fla. Admin. Weekly 2393 (May 21, 2010) (offering $5,000 cash

rebate for plug-in hybrid conversion kits).

6. See,e.g., Aniz. Rev. Stat. § 28-2416 (2010); Cat. Ven. Cope

§ 5205.5 (Deering 2010); CoLo. Rev. Star. § 42-4-1012; Ga. Copr

ANN. § 32-9-4 (2010); S.B. 295, 2010 Leg., Reg. Sess. (Haw. 2009);

Mob. Cope Ann., Transp. § 25-108 (2010) (for qualified plug-in

hybrids); S.B. 1920, 186th Gen. Ct., Reg. Sess. (Mass. 2009); 15

N.Y.C.R.R. §§ 9028.00, 9047.00 (2010); Va. Copr. ANN. § 33.1-

46,2 (2010).

7. See, e.g., Albuquerque, N.M. Code of Ordinances § &-5-

1-5 (2010) (allowing hybrids and other fuel-efficient vehicles

free parking at city meters); Aspen, Colo. Mun. Code § 24.24

(2010) (allowing hybrid vehicles to park in any Residential

Permit Zone or High Occupancy Vehicle (HOV) Zone space and

exempting such vehicles from two-hour parking restrictions);

Ferndale, Mich. Code of Ordinances § 18-90 (2010) (granting

free on-street parking on all city streets and free parking in

municipal parking lots to hybrid vehicles and high mileage

(Cont'd)

inspections® and licensing fees,’ retirement extensions

for hybrid taxis and other for-hire vehicles,’ taxi lease

rate incentives,’ and exemptions from highway tolls.’

(Cont'd)

vehicles); Haw. Rev. Stat. § 29-71 (2010) (requiring parking lots

that have at least one hundred parking spaces to designate one

per cent of spaces exclusively for electric vehicles); Huntington,

N.Y. Town Code §§ TC3-6, TC3-21 (2010) (providing free parking

at meters and requiring parking lots to designate space for

hybrid vehicles); San Antonio, Tex. Code of Ordinances § 19-

226 (2010) (providing free parking at city meters).

8. See, e.g., IDAHO Cope Ann. § 39-116B (2010); Mp. Cope

ANN., TRANSP. § 23-202 (2010) (exempting plug-in hybrids from

emissions inspections for the first three years after

registration).

9. See, e.g., Aspen, Colo. Mun. Code § 24.24 (2010) (city pays

hybrid owners a $100 rebate on annual state licensing fee):

reauced license tax on alternative-fuel vehicles in Arizona. Ariz.

Rev. Star. §§ 28-5801, 28-5805 (2009).

10. The City of Dallas permits hybrid and alternative-fuel

taxicabs and shuttles to be up to seven years old, while regular

vehicles may only be up to five years old. Dallas, Tex. City Code

§ 45-7.2.1(a) (2010); see also N.Y. City Admin. Code § 19-535

(permitting an additional 1-2 years for clean air taxicabs).

11. The City of San Francisco allows owners of hybrid

taxicabs to charge an additional $7.50 per ten-hour shift, above

the lease cap for non-hybrid taxicabs. S.F. Mun. Code, Police

Code § 1135.2 (2010).

12. See, e.g., FLA. AbmMiIn. Cope Ann. 14-100.004 (2010)

(exempting hybrid vehicles from express lane tolls); H.F. 1956,

86th Sess. (Minn. 2009) (proposing to exempt hybrid vehicles

from tolls and allowing them to use HOV lanes).

Incentive programs are an important means by

which state and local governments can improve air

quality and increase fuel efficiency without directly

regulating fuel economy standards. Such programs have

historically been an area of federal-state-local

partnership, not the subject of preemption disputes. For

instance, the United States Department of Energy

(“DOE”) Alternative Fuels and Advanced Vehicles Data

Center (“AFDC”) tracks many of these incentive

programs and provides the public with detailed

information on federal, state and local incentives for

alternative fueled vehicles. AFDC: Federal and State

Incentives and Laws, http://www.afdc.energy.gov/afde/

laws/ (last visited Nov. 2, 2010). DOE even provides a

factsheet designed to help cities adopt successful “green

taxi” programs, in which it touts lease rate incentives

for hybrid vehicles as a means for putting more fuel-

efficient taxicabs on the road. DOE, Hybrid Taxis Give

Fuel Economy a Lift, DOE/GO-102009-2776 (April

2009), available at http://www.afde.energy.gov/afde/pdf 3/

45148.pdf.

The purpose and design of these programs is to put

“greener” vehicles on the road without mandating their

production or purchase. These programs, like the City’s

challenged lease rate incentives, seek to encourage the

purchase of vehicle models that are already commercially

available. Consistent with congressional intent, incentive

programs have helped to put greater numbers of hybrid

electric and other alternative fueled vehicles on the road

over the past two decades. AFDC: Data, Analysis &

Trends, Vehicles, http://www.afde.energy.gov/afde/data/

vehicles.html (last visited Nov. 2, 2010).

This case presents a question of urgent national

importance. One of federalism’s chief virtues is that it

promotes innovation by allowing for the possibility that

“a single courageous State may, if its citizens choose,

serve as a laboratory; and try novel social and economic

experiments without risk to the rest of the country.”

See New State Ice Co. v. Liebmann, 285 U.S. 262, 311

(1932) (Brandeis, J., dissenting). As a result of the Court

of Appeals’ overly broad ruling, local laws or regulations,

including incentive programs that distinguish between

vehicle models on the basis of fuel efficiency, have now

been placed at risk of preemption challenges. While

state and local incentive programs for fuel-efficient

vehicles have never before been considered preempted

by the EPCA, this is a new area of developing law and

the Second Circuit is the first federal court of appeals

to interpret the EPCA preemption provision.” As other

cities attempt to “green” their taxi fleets, taxi owners

have begun to challenge these local efforts in federal

13. The preemption clause in EPCA has been interpreted by

other federal district courts, most notably in Central Valley

Chrysler-Jeep, Inc. v. Goldstone, 529 F. Supp. 2d 1151 (E.D. Cal.

2007) and Green Mountain Chrysler Plymouth Dodge Jeep v.

Crombie, 508 F. Supp. 2d 295 (D. Vt. 2007). The courts in both of

these cases held that state regulation of carbon emissions from

motor vehicles under the Clean Air Act did not necessarily implicate

preemption under the EPCA. The court in Green Mountain held

that EPCA § 32919 preempts only laws that contro] or supersede a

core PCA function such as setting fuel economy standards. 508 F.

Supp. 2d at 354. The Central Valley court similarly held that EPCA

§ 32919 should be construed as narrowly as possible and limited

only to measures establishing fuel economy standards. 529 F. Supp.

2d at 1174-76

courts. Cases at the district court level in the First,"

Fifth’? and Ninth'® Circuits have cited the decisions in

this case. Prompt resolution of the question presented

is vital for the preservation of state and loca!

governments as laboratories for innovation in the

development of permissible incentive programs

promoting fuel-efficient vehicle use.

14. The City of Boston’s rule requiring that all new taxicabs

be hybrid electric was permanently enjoined in Ophir v. City of

Boston, 647 F. Supp. 2d 86 (D. Mass. 2009), a decision in which the

district court cited extensively to MTBOT I and II. See Ophir, 647

F. Supp. 2d at 90-92. Boston subsequently changed its regulation

to provide a $10 per shift lease rate incentive for new vehicles and

an additional $8 per shift for hybrid vehicles. The district court

initially enjoined that rule from the bench but later required that

the parties present evidence on whether the incentive is a de facto

mandate — similar to the evidentiary hearing held in MTBOT I].

See Ophir v. City of Boston, No. 09-cv-10467-WCY (D. Mass. Feb.

25, 2010) (order granting request for evidentiary hearing). Prior to

the evidentiary hearing, Boston again revised its lease rate

incentives to provide only an incentive for new taxicabs, and the

case was dismissed on Sept. 20, 2010.

15. In Association of Taxicab Operators, USA v. City of Dallas,

No. 3:10-CV-769-K (N. Dist. Tex. Aug. 30, 2010), front-of-the-line

privileges for compressed natural gas taxicabs at Dallas Love Field

airport were challenged as preempted by the CAA. Upholding the

regulation, the district court cited MTBOT II for the holding that

incentive programs are not preempted by the Clean Air Act. It

distinguished the Second Circuit’s MTBOT I] opinion on the basis

that only the $12 disincentive was actually before the court. Ass'n

of Taxicab Operators at 14.

16. In Green Alliance Taxi Cab Ass'n v. King County, No.

CO8-1048RAJ, 2010 U.S. Dist. LEXIS 72409 (W.D. Wash. June 29,

2010), King County awarded fifty new taxi licenses under a

competitive selection process, one requirement of which was that

the licensee agree to utilize hybrid electric vehicles with fuel economy

rating of 40 MPG in the city. The award of licenses was challenged

(Cont’d)

CONCLUSION

lor the foregoing reasons, the petition for a writ of

certiorari should be granted.

Respectfully submitted,

MICHAEL A. CARDOZO

Corporation Counsel of the

City of New York

LEONARD J. KOERNER*

100 Church Street

New York, New York 10007

(212) 788-1010 or 13862

lkoerner@law.nye.gov

Of Counsel

Francis F. Caputo

Susan Paulson

Adam Stolorow

Counsel for Petitioners

(Cont'd)

as preempted by the EPCA. The district court granted summary

judgment in favor of King County, distinguishing the County’s action

as a voluntary incentive program, 1n contrast to the regulatory

actions of Boston and New York City in Ophirand MT'BOT J and I],

which the Green Alliance court considered mandates or de facto

mandates. 2010 U.S. Dist. LEXIS 72490 at *12-13.

APPENDIX

APPENDIX A — OPINION OF THE UNITED

STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

DECIDED JULY 27, 2010

Docket No. 09-2901-cv

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

615 F3d 152 (2d Cir. 2010);

2010 U.S. App. LEXIS 15303; 40 ELR 20198

January 22, 2010, Argued

July 27, 2010, Decided

METROPOLITAN TAXICAB BOARD OF TRADE;

MIDTOWN CAR LEASING CORP;

BATH CAB CORP; RONART LEASING CORP:

GEID CAB CORP; LINDEN MAINTENANCE

CORP; and ANN TAXI, INC.,

Plaintiffs-Appellees,

MIDTOWN OPERATING CORP, SWEET IRENE

TRANSPORTATION CO. INC., OSSMAN ALI,

and KEVIN HEALY,

Plaintiffs,

CITY OF NEW YORK; MICHAEL R. BLOOMBERG,

in his offical capacity as Mayor of the City of

New York; THE NEW YORK CITY TAXICAB &

LIMOUSINE COMMISSION; MATTHEW W. DAUS,

Appendix A

in his official capacity as Commissioner, Chair, and

Chief Executive Officer of the TLC; PETER

SCHENKMAN, in itis official capacity as Assistant

Commissioner of the TLC for Safety & Emissions;

ANDREW SALKIN, in his official capacity as First

Deputy Commissioner of TLC,

Defendants-Appellants.

JUDGES: Before: WALKER, STRAUB, and

LIVINGSTON, Circuit Judges.

OPINION BY: JOHN M. WALKER, JR.

OPINION

JOHN M. WALKER, JR., Corcuit Judge:

The Taxicab & Limousine Commission of New York

City (“TLC”) and several New York City officials

(collectively, “the City”) appeal the grant of a preliminary

injunction by the United States District Court for the

Southern District of New York (Paul A. Crotty, Judge),

that enjoined the enforcement of the City’s revisions to

the maximum lease rates for taxicabs that effectively

shifted fuel costs from drivers of fleet taxis to fleet

owners to incentivize the use of hybrid-engine and fuel-

efficient vehicles. The district court held that the new

rules likely related to fuel economy standards and new

vehicle emissions and were thus preempted under the

Energy Policy and Conservation Act (“EPCA”), 49

U.S.C. § 32919(a), and the Clean Air Act (“CAA”), 42

U.S.C. § 7543(a). Metro. Taxicab Bd. of Trade v. City of

N.Y., 633 F. Supp. 2d 83, 105-06 (S.D.N.Y.2009).

Appendix A

BACKGROUND

In December 2007, the City issued rules requiring

that new taxicabs that were put into service on or after

October 1, 2008 achieve at least 25 city miles per gallon

of fuel, and those that were put into service beginning

October 1, 2009 achieve 30 city miles per gallon (the “25/

30 MPG rule”). In September 2008, the plaintiffs,

including the Metropolitan Taxicab Board of Trade and

several taxi fleet operators, sued the City, seeking to

enjoin the 25/30 MPG rule on the basis that it violated

preemption clauses in the EPCA and the CAA.' The

district court granted a preliminary injunction after

determining that the 25/30 MPG rule related to fuel

economy standards and was thus preempted by the

E PCA. Metro. Taxicab Bd. of Trade v. City of N.Y., No.

08 Civ. 7837, 2008 U.S. Dist. LEXIS 94021, 2008 WL

ASE6021 (S.D.N.Y. Oct. 31, 2008). The City did not

appeal that decision.

1. The EPCA states, in relevant part: “|A] State or apolitical

subdivision of a State may not adopt or enforce a law or

regulation related to fuel economy standards or average fue]

economy standards for automobiles covered by an average fuel

economy standard under this chapter.” 49 U.S.C. § 32919(a).

The CAA states, in relevant part: “No State or any political

subdivision thereof shall adopt or attempt to enforce any

standard relating to the control of emissions from new motor

vehicles or new motor vehicle engines subject to this part.”

42 U.S.C. § 7543(a).

2. The district court, having “limited its review to the

stated purpose of the rules, as published in the City Record,”

rejected the plaintiffs’ argument under the CAA. Metro.

(Cont’d)

Appendix A

On March 26, 2009, the City repealed the 25/30 MPG

rule, and issued new rules that regulated taxicab “lease

caps” - the maximum dollar amount per shift for which

taxis can be leased - to provide incentives for reduced

fuel usage and cleaner taxis. Under the new rules, the

lease caps for hybrid and “clean diesel” taxis are raised

by $3 per shift. 85 RCNY § 1-78(a)(3)(i). At the same

time, the new rules reduce the lease caps for non-hybrid,

non-clean diesel vehicles, nearly all of which are Ford

Crown Victorias, in three phases. The new rules lower

the per shift lease caps on the Crown Victorias, except

those that are wheelchair accessible, by $ 4 on May 1,

2009; by $8 on May 1, 2010; and by $ 12 on May 1, 2011.

The current baseline lease caps from which these

adjustments are made are: $ 105 for all day shifts; $ 115

for night shifts on Sunday, Monday, and Tuesday; $ 120

for night shifts on Wednesday; and $ 129 for night shifts

on Thursday, Friday, and Saturday. 35 RCNY § 1-

78(a)(1). After the third phase is implemented, the lease

cap difference between hybrids and Crown Victorias

(Cont’d)

Taxicab, 2008 U.S. Dist. LEXIS 94021, 2008 WL 4866021, at *14.

The district court held that the plaintiffs had failed “to show

how the 25/30 Rules are a standard relating to the control of

emissions from new motor vehicles.” /d. (internal quotation

marks omitted).

3. A hybrid vehicle for purposes of the new rules is a

“commercially available mass production vehicle originally

equipped by the manufacturer with a combustion engine system

together with an electric propulsion system that operates in an

integrated manner.” 35 RCNY § 3-03.1(b). We use the term

“hybrid” to encompass both hybrid vehicles as defined under

the new rules and vehicles propelled by a “clean diesel” engine.

Appendix A

would be $ 15 per shift, reflecting the $ 3 upward

adjustment for the hybrid lease caps and the $ 12

downward adjustment for the Crown Victoria lease caps.

The new rules are designed to effectively shift fuel costs

from taxi drivers, who currently pay for fuel, to fleet

owners, who currently make vehicle purchasing

decisions without the need to internalize fuel costs.

The plaintiffs amended their initial complaint to

challenge these new rules and moved for a preliminary

injunction against the enforcement of the Crown

Victoria lease caps, again citing the preemption

provisions of both the EPCA and the CAA. For obvious

reasons, the plaintiffs did not challenge the $ 3 upward

adjustment of the lease caps for hybrid taxis, which

benefitted them, and that adjustment went into effect

on May 1, 2009.

At an evidentiary hearing on the plaintiffs’ motion,

experts for both sides testified on the economic impact

of the new rules on taxi fleet owners. The testimony of

the plaintiffs’ expert James Levinsohn tended to

demonstrate that fleet owners would earn between $

5,500 and $ 6,500 less per year for each Crown Victoria

leased under the eventual $ 12 downward adjustment

in comparison to leasing a hybrid under the $ 3 upward

adjustment. The plaintiffs’ expert estimated the current

annual profit of leasing a Crown Victoria to be $ 8,518

per car per year. Thus, the lease cap reduction would

lower profits by 65% to 75% for each Crown Victoria.

The City did not challenge this estimated impact on

plaintiffs’ profits. The City’s expert testified, however,

Appendix A

that fleet owners could still make a “reasonable rate of

return” on their purchase of a Crown Victoria

notwithstanding the $ 12 downward adjustment.

On June 22, 2009, the district court granted a

preliminary injunction on the grounds that the plaintiffs

were likely to succeed on their claims that the new rules

were preempted under the EPCA and the CAA. The

district court accepted the plaintiffs’ expert’s view of

the economic impact of the new rules on fleet owners’

profits and concluded that such a severe disparity in

the expected profits from leasing a hybrid as compared

to a Crown Victoria would leave the fleet owners with

no rational alternative to leasing the former and thus

amounted to a de facto mandate to purchase hybrid

vehicles. The district court found such a mandate to be

related to both fuel economy standards and the

reduction of vehicle emissions, and thus sufficiently

likely to be preempted under the EPCA and the CAA

so as to warrant a preliminary injunction.

The City appeals the grant of the preliminary

injunction.

DISCUSSION

This Court reviews the grant of a preliminary

injunction for abuse of discretion. See Almontaser v.

N.Y. City Dep’t of Educ., 519 F.3d 505, 508 (2d Cir.

2008)(per curiam); Grand River Enter. Six Nations, Ltd.

v. Pryor, 481 F.3d 60, 66 (2d Cir. 2007)(per curiam). “A

district court abuses its discretion when it rest its

Appendix A

decision on a clearly erroneous finding of fact or makes

an error of law.” Almontaser, 519 F.3d at 508. In order

to justify a preliminary injunction, a movant must

demonstrate 1) irreparable harm absent injunctive

relief; 2) “either a likelihood of success on the merits, or

a serious question going to the merits to make them a

fair ground for trial, with a balance of hardships tipping

decidedly in the plaintiff’s favor,” id.; and 3) that the

public’s interest weighs in favor of granting an

injunction. Winter v. Natural Res. Def Council, Inc.,

129 S. Ct. 365, 374, 172 L. Ed. 2d 249 (2008). “When, as

here, the moving party seeks a preliminary injunction

that will affect government action taken in the public

interest pursuant to a statutory or regulatory scheme,

the injunction should be granted only if the moving

party meets the more rigorous likelihood-of-success

standard.” County of Nassau, N.Y ». Leavitt, 524 F.3d

408, 414 (2d Cir. 2008) (brackets and internal quotation

marks omitted). In this case, the City’s sole challenge

to the preliminary injunction is that the plaintiffs are

not likely to succeed on their preemption claims.

I. Preemption Under the EPCA

The EPCA preemption clause states:

[A] State or a political subdivision of a State

may not adopt or enforce a law or regulation

related to fuel economy standards or average

fuel economy standards for automobiles

covered by an average fuel economy standard

under this chapter.

49 U.S.C. § 32919(a).

Appendix A

“Since [preemption] claims turn on Congress’s

intent, we begin as we do in any exercise of statutory

construction with the text of the provision in question,

and move on, as need be, to the structure and purpose

of the Act in which it occurs.” N.Y. Staie Conference of

Blue Cross & Blue Shield Plans v. TravelersIns. Co.,

514 U.S. 645, 655, 115 S. Ct. 1671, 181 L. Ed. 2d 695

(1995) (citations omitted). In the context of judging the

scope of the preemption provision of the Employee

Retirement Income Security Act (“ERISA”), 29 U.S.C.

§1144(a), the Supreme Court has held that determining

whether a state law relates to a preempted subject

matter requires examining whether the challenged law

contains a “reference” to the preempted subject matter

or makes the existence of the preempted subject matter

“essential to the law’s operation.” Cal. Div. of Labor

Standards Enforcement v. Dillingham Constr, N.A.,

Inc., 519 U.S. 316, 324-25, 117 S. Ct. 832, 186 L. Ed. 2d

791 (1997). If the law contains such a reference or makes

the existence of preempted subject matter essential to

the law’s operation, then that state law is preempted

by the federal law. See zd. at 325 (“Where a State’s law

acts immediately and exclusively upon ERISA plans.. .,

or where the existence of ERISA plans is essential to the

law’s operation . .., that ‘reference’ will result in

[preemption}.”).4

4. Evenif there is no reference to or essential incorporation

of the preempted subject matter, courts must still ask whether

the law nevertheless contains requirements that “amount[] to

‘connectionjs] with’” the preempted subject matter. Dillingham,

519 U.S. at 328 (second alteration in original) (quoting Travelers,

514 U.S. at 658). However, because we find that the City’s new

rules contain a reference to fuel economy standards or make

fuel economy standards essential to the operation of those rules,

we need not specifically address whether the new rules have a

connection with fuel economy standards.

Appendix A

As a threshold matter, we may rely on ERISA

preemption precedents such as Travelers and

Dillingham because the pertinent language in that

statute is virtually identical to the text in the preemption

provision of the EPCA, which preempts state laws that

are “related to fuel economy standards.” Compare 29

U.S.C.§ 1144(a), with 49 U.S.C. § 32919(a). Although the

same “relate[] to” provision arises in different

preemption statutes, we discern no basis for concluding

that the meaning of the language in each provision was

not intended to be the same. Cf Travelers Indem. Co. v.

Bailey, 129 S. Ct. 2195, 2208, 174 L. Ed. 2d 99 (2009)

(noting generally that, “[iJn a statute, ‘the phrase “in

relation to” is expansive’” and applying that statutory

reading to the interpretation of a private settlement

agreement). We note that the City itself relies on

Travelers in challenging the district court’s ruling. See

Appelants Br. at 57, 60. For purposes of assessing

preemption under the EPCA, the Supreme Court’s

discussions of the phrase “relate to” in ERISA cases is

directly applicable.

Thus, our first inquiry in determining whether the

new rules relate to “fuel economy standards,” 49 U.S.C.

§ 32919(a), is whether they contain a reference to fuel

economy standards or make fuel economy standards

essential to the operation of those rules. Dillingham,

519 U.S. at 324-25. We conclude that they do.

The new rules expressly rely on a distinction between

hybrid and non-hybrid vehicles. 35 RCNY § 1-78(a)(3)

(providing for the upward and downward lease cap

10a

Appendix A

adjustments on hybrid and non-hybrid vehicles,

respectively). The requirement that a taxi be a hybrid

in order to qualify for the upwardly adjusted lease cap

does nothing more than draw a distinction between

vehicles with greater or lesser fuel-efficiency. The

equivalency of the term “hybrid” with “greater fuel

efficiency” for purposes of the new rules is self-evident.

First, the EPCA specifically requires the separate

consideration of “dual fueled” vehicles, including

hybrids, in the determination of national fuel economy

standards. See 49 U.S.C. § 32901(a)(1)(J) (defining

“electricity” as one form of “alternative fuel’); see also

id. § 32905(b) (requiring the Administrator of the

Environmental Protection Agency to measure the fuel

economy of certain “dual fueled” automobile models in

part with reference to the fuel economy of that model

when operating on “alternative fuel”). Second, imposing

reduced lease caps solely on the basis of whether or not

a vehicle has a hybrid engine has no relation to an end

other than an improvement in fuel economy across the

taxi fleets operating in New York City.

Indeed, the City is unable to identify any plausible

alternative reason for the imposition of such an engine-

based rule. The City argues that the new rules “correct |

a structural problem with the standard vehicle lease

arrangement that artificially insulates fleet owners from

fuel costs.” Appellants Br. at 1. This proffered reason,

however, still aims at the improvement of fuel economy,

which underlies the “structural problem” relied upon

by the City. This argument, moreover, ignores the City’s

mechanism for its structura! correction, which is to shift

lla

Appendix A

costs solely on the basis of a vehicle’s level of fuel

efficiency, i.e., whether the vehicle is a hybrid. Indeed,

the City’s current list of approved vehicles includes every

car approved for use under the now-repealed 25/30 MPG

rule. The City’s list of approved vehicles under the new

rules, with the exception of wheelchair accessible

vehicles (which are exempt from the lease cap

adjustments) and the Crown Victoria, are either hybrids

or achieve at least 25 miles per gallon. See New York

City Taxi & Limousine Commission, Taxicab Vehicles in

Use, available at http://www.nye.gov/html/tle (follow

“Safety & Emissions” hyperlink; then follow “Taxicab

Vehicles In Use” hyperlink) (last visited June 1, 2010).

The virtually complete overlap of the approved vehicles

under the 25/30 MPG rule and th» new rules underlines

further that, in furtherance of the City’s regulatory

purpose, “hybrid” is simply a proxy for “greater fuel

efficiency.” In sum, tne new rules are not applicable to

gasoline costs in general, nor are they neutral to the

fuel economy of the vehicles tu which they apply. Rather,

they are directly related to fuel economy standards

because they rely on fuel economy, and on nothing else,

as the criterion for determining the applicable lease cap.

Because the parties appear to have assumed before

the district court that the new rules did not directly

reference fuel economy standards or incorporate those

standards into the new rules’ operation, they and the

district court focused on whether the new rules

effectively mandate the use of fuel efficient vehicles

through their economic impact. In that context, the

district court rejected the City’s argument that the new

12a

Appendix A

rules are permissible because they only provide an

incentive, rather than create a de facto mandate, for

the purchase of hybrid vehicles. Appellants Br. at 7, 28.

This attention to economic impact was misguided,

however, because the rules in question directly regulate

the relevant preempted subject matter.

II. The Plaintiffs’ Preliminary Injunction

Although we find the district court’s conclusion that

the rules effected a mandate irrelevant to our analysis,

the district court’s preliminary injunction was

appropriate. The City does not challenge the district

court’s determination that the plaintiffs face irreparable

harm absent injunctive relief, nor does it challenge the

preliminary injunction on either the balance of

hardships or public interest prongs of the preliminary

injunction standard. The sole issue before us is whether

the plaintiffs have established a likelihood of success on

the merits. Leavitt, 524 F.3d at 414.

The City’s new rules, based expressly on the fuel

economy of a leased vehicle, plainly fall within the scope

of the EPCA preemption provision. The plaintiffs,

therefore, have demonstrated a likelihood, indeed a

certainty, of success on the merits, and we affirm the

district court’s preliminary injunction on this ground.

Because preemption under the EPCA is sufficient to

affirm the preliminary injunction, there is no need to

reach the question of whether the preemption provision

of the CAA would invalidate the City’s new rules.

13a

Appendix A

CONCLUSION

We AFFIRM the district court’s order granting the

preliminary injunction.

l4a

APPENDIX B — OPINION OF THE UNITED

STATES DISTRICT COURT FOR THE

SOUTHERN DISTRICT OF NEW YORK

DECIDED JUNE 22, 2009

UNITED STATES DISTRICT COURT FOR THE

SOUTHERN DISTRICT OF NEW YORK

08 Civ. 7837 (PAC)

633 IF. Supp. 2d 83; 2009 U.S. Dist. LEXIS 52658;

70 ERC (BNA) 1236; 39 ELR 20140

June 22, 2009, Decided

June 22, 2009, Filed

METROPOLITAN TAXICAB BOARD OF TRADE;

MIDTOWN CAR LEASING CORP;

BATH CAB CORP; RONART LEASING CORP;

GEID CAB CORP; LINDEN MAINTENANCE

CORP; and ANN TAXI INC,

Plaintiffs,

-against

CITY OF NEW YORK; MICHAEL R. BLOOMBERG,

in his official capacity as Mayor of the City of New

York; THE NEW YORK CITY TAXICAB &

LIMOUSINE COMMISSION (“TLC”); MATTHEW

W. DAUS, in his official Capacity as Commissioner,

Chair, and Chief Executive Officer of the TLC;

PETER SCHENKMAN, in his official capacity as

Assistant Commissioner for Safety & Emissions of the

TLC; and ANDREW SALKIN, in his official capacity

as First Deputy Commissioner of the TLC,

Defendants.

I5a

Appendix B

JUDGES: PAUL A. CROTTY, United States District

Judge.

OPINION BY: PAUL A. CROTTY

OPINION

OPINION & ORDER

HONORABLE PAUL A. CROTTY, United States

District Judge:

This case involves a dispute between New York City

taxicab fleet owners and the City’s Taxicab & Limousine

Commission (“TLC”), relating to new TLC regulations

that promote the purchase of hybrid taxicabs by

reducing the rates at which taxicab owners may lease

their venicies to taxi drivers—thus reducing the owners’

overall profit—if the vehicle does not have a hybrid or

clean-diesel engine. The questions in this case are

whether the TLC’s new rules are a mandate to taxicab

owners to purchase only hybrid or clean-diesel vehicles,

and whether such a mandate is preempted by federal

law.

The history of this case is relevant: on October 31,

2008, the Court preliminarily enjeined New York City’s

requirement that all new taxicabs meet a specific miles

per-gallon (“mpg”) rating. The mpg regulation required

taxicab owners in New York City to purchase vehicles

with hybrid or clean-diesel engines, or wheelchair-

accessible vehicles. The Court found that the federal

l6a

Appendix B

Energy Policy and Conservation Act (“EPCA”)

preempted the local imposition of mpg standards. The

City immediately announced it would pursue an

alternative strategy. Mayor Bloomberg stated that,

“The courts are not the only way we can reach our goal

of a cleaner fleet of taxi cabs. Greening the taxi fleet is a

major priority, and we are going to use every mechanism

at our disposal to make New York a cleaner, healthier

city.”

The City pursued a regulatory framework that would

encourage taxicab fleet owners to buy hybrid taxicabs

in increasing numbers and discourage them from

purchasing long bodied, conventionally powered

taxicabs, which the City had approved for use in 2001.

Under the City’s new rules, if an owner purchases a

taxicab with a hybrid or clean-diesel engine (hereinafter,

“hybrid”), the rate at which the vehicle can be leased to

a driver for a 12-hour shift is increased by $ 3. By

contrast, if an owner leases out a non-hybrid, non-

wheelchair accessible vehicle (i.e. a Crown Victoria), the

maximum lease rate an owner may charge a driver is

reduced by $ 4 immediately, $ 8 in May 2010, and $ 12 in

May 2011. The new rules substantially reduce profits

for the owner who continues to choose non-hybrid

taxicabs, and Plaintiffs challenge the disincentive aspect

of the new regulations.

The City explained its desire for the new regulation:

1. Bill Sanderson, Fed Red Light on Mike in “Green Cab”

Fight, N.Y. Post, Nov. 1, 2008, at 2.

17a

Appendix B

Last month, we hit a speed bump in our efforts

to turn New York City’s yellow cabs green

when the courts upheld an archaic law,

preventing us from reducing greenhouse

gases and improving air quality ... By offering

incentives that will encourage more taxi fleet

owners to purchase hybrids, we have found

another avenue to reach our goal of greening

our yellow cabs, improving our air quality, and

reducing our carbon emissions.

See Press Release, Office of the Mayor, Mayor

Bloomberg Announces New Incentive/Disincentive

Program to Reach Goal of Green Taxi Fleet (Nov. 14,

2008). The same press release quoted TLC

Commissioner Matthew Daus as stating:

Cur goal from the beginning was to get fuel

efficient taxis on the road using whatever

appropriate methods required to achieve our

goal. The new program will incentivize the

purchase of cleaner vehicles, while ensuring

taxi drivers are not penalized because a

taxicab owner is reluctant to make the wiser

purchase of a hybrid vehicle. The 1,551 hybrid

taxicabs already on the road have saved their

drivers lots of money, while contributing to

cleaner air. This incentive package will help

us take these advances to the next level, and

help our city become a cleaner, healthier place.

Td.

18a

Appendix B

After several months of study, the TLC promulgated

the new regulations. The regulations: (1) eliminated the

prior requirement that determination of lease rates and

changes thereof be based on costs, and substituted

policy concerns as the key criterion for determining

lease rates; (2) described the incentives for hybrids

(higher lease rate) and the disincentives for

conventionally powered taxicabs (lower lease rates, in

increasing amounts over the next two years); and (3)

did not grandfather taxis purchased by owners

subsequent to 2001, when the City began mandating

taxicabs with Crown Victoria dimensions.

The City states that the new regulations correct a

structural disincentive that prevented many taxicab

owners from switching their fleets to hybrid vehicles,

while also meeting the goal of improving taxicab fuel

efficiency and minimizing the effect of taxicab emissions

on the environment.

The Mayor announced the new regulations:

We have never let roadblocks prevent us from

achieving our goals. So when the courts

prohibited New York City from taking

forward-looking actions that would create

cleaner air and a healthier place to live, we

said we would find another way to continue to

green the City’s yellow cabs - and we have.

Today’s actions by the laxi and Limousine

Commission provide financial incentives for

the purchase of fuel efficient taxis and will

19a

Appendix B

speed up the phase-out of older, inefficient

vehicles. Taxi fleet owners will have more

reason to purchase cleaner vehicles and taxi

drivers will be held financially harmless for

the vehicle purchase decisions of fleet owners.

The result will be more clean taxis on City

streets. Turning yellow cabs green will be

another step towards improving our air

quality, reducing the use of fossil fuels and

lowering our carbon emissions.

See Press Release, Office of the Mayor, Statement of

Mayor Bloomberg on Passage of Green Taxi Incentives

by the Taxi and Limousine Commission Board of

Commissioners (Mar. 26, 2009).

The TLC Commissioner echoed and amplified the

’ '

AuYOr S icilalrKs:

[t is good public policy to incentivize the

purchase of vehicles that will help us to clean

our environment, while equalizing the playing

field for drivers who have no say in the kinds

of vehicles they drive, and how big a role fuel

costs play in their income. With more than

15% of the city’s taxi fleet already clean-

fueled, this was the right thing to do, and it

was the right time to do it.

See Press Release, TLC, NYC Taxi and Limousine

Commission Approves Hybrid Incentive Plan (Mar. 26,

2009).

20a

Appendix B

Plaintiffs filed an Amended Complaint challenging

the City’s revised regulations and now bring a motion

for a preliminary injunction, pursuant to Rule 65 of the

Federal Rules of Civil Procedure, to enjoin the City’s

enforcement of the rules.

At the beginning it is appropriate to point out what

this case is not about. No one questions the desirability

of fuel efficient and environmentally “clean” vehicles;

all parties agree that the City’s pursuit of these goals is

laudable. Nor is there a question whether New York City

can incentivize the purchase of certain types of taxicabs.

Several years ago the City issued new taxi medallions

which were limited to hybrid vehicles. See N.Y. City

Administrative Code § 19-532(b) (2003). There was no

challenge to the incentive. Recently the City extended

the service life of hybrid vehicles from three to five years.

Id. § 19-535(b) (2006). Again, there was no challenge to

this incentive. Similarly, in the present case, Plaintiffs

do not challenge the $ 3 per shift “incentive” increase in

lease rates for hybrid taxicabs.

On the other hand, there is no doubt that the City

could not demand that new motor vehicles purchased,

sold, or operated in New York City meet certain mileage

or emission standards. The City does not contend

otherwise. The issue in this case is more limited and

the question is more focused: do the new lease cap

regulations have the preempted effect of mandating that

taxicab owners purchase only taxicabs with hybrid or

clean diesel engines.

2)a

Appendix B

The Court’s purpose is not to interfere with

government officials taking actions in the public

interest. Increasing the number of hybrid taxicabs is

an appropriate and important governmental priority.

Congress, however, has exercised its powers and

imposed both national fuel efficiency and engine

emissions standards. Congress also directed that the

federal standards controlled and preempted state and

local governments from acting where Congress has

already spoken. If the new rules are in fact a mandate,

the Court must determine whether the City’s program

interferes with the Congressional intent to preserve

exclusive jurisdiction. This involves two questions.

The Court first must determine whether the City’s

new lease cap regulations are a mandate to purchase

hybrid vehicles. Plaintiff taxi owners say that they have

no rea! choice under the proposed rules; they will be

forced to buy only hybrid vehicles to sustain economic

viability. The City maintains that the new lease cap rules

permit owners to continue to make a profit, and,

therefore, taxicab owners still have a choice. Second,

the Court must determine whether the new rules, if they

are in fact a mandate, are “related to” mileage or

emission standards so that the City’s law is preempted

by federal law governing those two issues.

The Court finds that Congress intended to retain

control over those two federal interests. The effect of

the new regulations is to mandate taxicab owners to buy

only hybrid vehicles. The requirement is preempted in

the same way as the City’s earlier attempt to impose

mpg requirements. Plaintiffs have demonstrated a

likelihood of success in showing that: (1) the new

regulations are preempted by federal law because they

22a

Appendix B

are a de facto mandate to purchase hybrid taxicabs; and

(2) these requirements are related to fuel economy

standards under the EPCA and the control of emissions

under the federal Clean Air Act (“CAA”). Accordingly,

the Plaintiffs’ motion for a preliminary injunction is

GRANTED.

BACKGROUND

I. The Court’s Prior Decision

In September 2008 the Plaintiffs* moved to enjoin

TLC Rule § 3.03(¢)(10)-(11), which required all new

taxicabs in New York City to be either wheelchair

accessible or to have a minimum city rating of 25 mpg

by October 1, 2008,° and a minimum city rating of 30

mpg by October 1, 2009 (hereinafter, the “25/30 Rules”).

(See Declaration of Elizabeth Saylor (“Saylor Decl.”) Ex.

1 (containing enjoined TLC Rule § 3-03(¢)(10)-(11)).) The

only vehicles that met the 25/30 Rules contained hybrid

or clean-diesel engines. Plaintiffs argued that the 25/30

Rules were preempted by the EPCA and the CAA.‘

2. The Plaintiffs in the original action are not the same

Plaintiffs in this action, although there is some overlap.

3. The City suspended implementation of the prior rules

until November 1, 2008, so that the pai ties and the Court could

properly brief and consider the dispute.

4. The EPCA preemption clause says that a state or

political subdivision of a state may not “adopt or enforce a law

or regulation related to fuel economy standards... .” 49 U.S.C.

§ 32919(a). The CAA preemption clause says that no state or

political subdivision of a state “shall adopt or attempt to enforce

any standard relating to the control of emissions from new

motor vehicles or new motor vehicle engines ... .” 42 U.S.C. §

7543(a).

23a

Appendix B

Plaintiffs claimed irreparable injury because the EPCA

and CAA provided no private right of action, and

accordingly they would be unable to recover their

financial damages under 42 U.S.C. § 1983, unless the

Court issued an injunction.

On October 31, 2008, the Court found that the EPCA

preempted the 25/30 Rules because the rules, by their

own language, clearly related to fuel economy standards

by setting fuel economy standards for taxicabs. See

Metro. Taxicab Bad. of Trade v. City of New York, No. 08

Civ. 7837 (PAC), 2008 U.S. Dist. LEXIS 94021, 2008 WL

4866021, at *9 (S.D.N.Y. Oct. 31, 2008). The Court

rejected the City’s argument that the 25/30 Rules were

not preempted because they did not actually interfere

with the goals of the EPCA. The Court, relying on

Engine Manufacturers Association v. South Coast Air

Quahty, &41 U.S. 246, 124 8. Ct. 1756, 158 L. Ed. 2d 529

(2004), found that allowing one municipality to affect fuel

economy standards could have an unwanted aggregate

affect, if other states or municipalities followed suit. See

Metro. Taxicab, 2008 U.S. Dist. LEXIS 94021, 2008 WL

4866021, at *10 (citing Engine Mfrs., 541 U.S. at 255.)

The Court found that the CAA did not preempt the 25/

30 Rules, however, because the rules were silent

concerning emissions. The Court examined two cases

that discussed the interplay between the EPCA and the

CAA, and determined that even if emissions reduction

was a secondary consequence of the rules, it did not

follow that the rules were automatically preempted. 2008

U.S. Dist. LEXIS 94021, [WL] at *13-14 (analyzing Green

Mountain Chrysler Plymouth Dodge Jeep v. Crombie,

24a

Appendix B

508 F. Supp. 2d 295 (D. Vt. 2007), and Central Valiey

Chrysler-Jeep, Inc. v. Goldstene, 529 F. Supp. 2d 1151

(E.D. Cal. 2007)). Because the EPCA preempted the 25/

30 Rules and Plaintiffs would suffer irreparable harm,

the Court issued a preliminary injunction.

II. The New Regulations

On March 26, 2009, the TLC repealed the 25/30

Rules and enacted new regulations. The new

regulations, TLC Rule § 1-78(a)(3), created incentives

to increase taxi owners’ use of hybrid vehicles and

disincentives to decrease their use of Crown Victoria

model taxicabs. When fully implemented the regulations

weighted the disincentives four times greater than the

incentive. The Crown Victoria Long Wheel Base model

(“Crown Victoria”) has been the dominant model for

New York City taxicabs since the TLC approved it for

use in 2001. From 2001 to 2005, it was the sole vehicle

that complied with TLC specifications for taxicabs. (See

Declaration of Andrew Salkin (“Salkin Decl.”) P 5.) Of

the more than 13,000 vellow taxicabs, approximately

2,060 (16%) are either hybrid or clean-diesel vehicles,

while the balance of the remainder are Crown Victorias.

(Id. PP 4, 8.)

The new regulations affect the maximum lease rate

that vehicle owners may charge drivers leasing a taxicab

per 12-hour shift. The prior rules set a maximum lease

rate of: $ 105 for all day shifts; $ 115 for the night shift

on Sunday, Monday, and Tuesday; $ 120 for the night

shift on Wednesday; and $ 129 for the night shifts or

Thursday, Friday, and Saturday. See TLC Rule § 1-

25a

Appendix B

78(a)(1). The standard lease cap for one shift for a week

period is a maximum of $ 666. Jd. § 1-78(a)(2).

The challenged regulation, TLC Rule § 1-78(a)(3)(ii)

(hereinafter, “Lease Cap Rules” or “Rules’’), reduces the

maximum lease cap for all taxis not hybrid or clean

diesel, or wheelchair accessible.® The first reduction of

$ 4 per shift was to go into effect on May 1, 2009.° The

reduction is increased to $ 8 per shift on May 1, 2010;

and to $ 12 per shift on May 1, 2011. Jd. § 1-78(a)(3){ii).

The Rules also reward use of hybrid vehicles by

increasing the maximum lease cap for hybrid taxicabs

by $3 per shift. /d. § 1-78(a)(3)(i). As indicated, Plaintiffs

do not challenge the incentive aspect of the Lease Cap

Rules, which have taken effect.

The new Rules provide that taxi owners receive the

$ 3 lease can upward adjustment if they “hack up,” or

transform, their taxicab pursuant to the specifications

in TLC Rule § 3-03.1, which describes hybrid electric

taxicab specifications. The Rules define a hybrid vehicle

as a “commercially available mass production vehicle

originally equipped by the manufacturer wit» a

combustion engine system together with an electric

propulsion system that operates in an integrated

manner.” /d. § 3-03.1(b). The only vehicles that meet

5. As previously stated, the Court uses the phrase “hybrid”

to include all taxis with hybrid or clean diesel engines. The lease

rates for wheelchair-accessible vehicles are unchanged under

the Lease Cap Rules. (See TLC “Statement of Basis and

Purpose.”)

6. Upon the Court’s Order, the City suspended

implementation of § 1-78(a)(3)Gi) until July 1, 2009.

26a

Appendix B

the new requirement are in fact the same hybrid vehicles

that met the City’s now abandoned 25/30 Rules. The

City recognizes that its new regulatory mechanism

“operates within the same universe of approved

vehicles.” (See Defendants’ Letter Brief of May 22, 2009

(“Def. May 22, 2009 Letter”) 5.)

Ill. Promulgation and Stated Purpose of the Lease

Cap Rules

At the same time that it enacted the Lease Cap

Rules, the TLC also reseinded a rule, in place since 1997,

prohibiting the TLC from reducing the maximum lease

rate unless the TLC found “substantial evidence of

reduced operating expenses of the affected medallion

owners.” Jd. § 1-78(e).' After eliminating the

requirement for a cost-based rate determination, the

7. The full text of the rescinded § 1-78(e) is:

The Commission shall not lower any upper

limitation of lease rates established in Rule 1-

78 herein, unless in the view of the Commission,

the record before the Commission includes

substantial evidence of reduced operating

expenses of the affected medallion owners. The

Commission shall not raise any upper limitation

of lease rates established in Rule 1-78 herein,

unless in the view of the Commission, the record

before the Commission includes substantial

evidence of increased operating expenses of the

affected medallion owners. The factors to be

reviewed in consideration of any proposed

increase in the upper limitation of lease rates

shall also include, but not limited to [sic], the

(Cont'd)

2/a

Appendix B

TLC substituted “the Commission’s assessment of

appropriate policy considerations” for determining lease

rates. Jd. § 1-78.1(b). These two rule changes rescinded

the TLC’s longstanding “cost-based” approach for

enacting lease cap adjustments and permitted a “policy-

based” approach.

As anticipated by the City’s press releases of

November 2008 and March 2009,'° the TLC’s “Statement

of Basis and Purpose” for the new Lease Cap Rules is

to replace the enjoined rules in order to “create

incentives for taxicab owners to buy cleaner vehicles.”

(See Declaration of Ramin Pejan (“Pejan Decl.”) Ex. J.)

The statement continues by noting that the Rules “are

intended to place gasoline costs on the owner who

chooses the vehicle,” rather than on the driver, who pays

gasoline costs but “may have no voice in the owner’s

choice of vehicies.” id. Under the new Rules the costs

to the driver will be roughly equal between driving a

(Cont'd)

effects on driver earnings and the retention of

experienced drivers.

TLC Rule § 1-78(e) (emphasis added).

8. The Court, in its prior decision in this case, “limited its

review to the stated purpose of the (25/30 Rules], as published

in the City Record.” See Metro. Taxicab, 2008 U.S. Dist. LEXIS

94021, 2008 WL 486621, at *14. The City Record specified fuel

efficiency standards which were clearly related to federal

requirements. Here, however, the regulations refer to “hybrids”

and are silent on their “relatedness” to either fuel economy or

emissions. That silence does not end the inquiry and the Court

will examine the full record, including public statements, to

determine the meaning of the new rules.

28a

Appendix B

hybrid and non-hybrid vehicle, while the lease income

to owners of non-hybrid taxis will be reduced, according

to the TLC.? /d.

The Lease Cap Ru. s create a $ 15 spread by 2011

between what owners of hybrid taxicabs and owners of

Crown Victorias may charge in maximum lease rates per

vehicle per shift. The City states that the Lease Cap

Rules correct a structural disincentive in the current

rules that prevented many taxi owners from

transitioning to hybrid vehicles. (See Salkin Decl. P 32.)

This disincentive existed because taxi drivers, not

owners, pay for gasoline, and it costs more to transform

a hybrid vehicle into a taxi. Accordingly, because the

gas costs are irrelevant to taxi owners, many owners

choose the cheaper and time-tested option of hacking

up Crown Victorias.

The TLC determined that the incentive rate for

hybrids should be based on Plaintiffs’ representations

in the prior Metropolitan Taxicab case that it costs

approximately $ 6,000 more to purchase and hack up a

hybrid vehicle as compared to a Crown Victoria. (Salkin

Decl. P 26.) Dividing $ 6,000 by three years, the

statutory life of a taxicab, is $ 2,000. That figure divided

9. The City’s sensitivity to the impact of fuel costs on

taxicab drivers’ income does not appear to be consistent with

the TLC’s denial last year of the New York Taxi Workers

Allianee’s request for a fuel surcharge to offset the impact of

rising gasoline costs. The TLC found that even with the higher

gasoline costs, taxicab drivers made a living wage. (See Salkin

Decl. P 15; Pejan Deel. Ex. 1.)

29a

Appendix B

by the maximum number of shifts per year, 730, equals

approximately $ 2.75 per shift, which the TLC rounded

up to $3. (/d.) By allowing hybrid taxi owners to charge

this extra $ 3 per shift, those owners would recoup the

additional cost of changing to hybrid cars, according to

the TLC. (/d.)

To caleulate the $ 12 reduction in lease rates, the

TLC shifted from the capital cost of “hacking up” a

vehicle to the cost of gasoline in New York City during a

two-year period from December 11, 2006, to December

8, 2008, which was $ 3.05 a gallon. The TLC then

compared the expected costs of gasoline per shift for a

Crown Victoria and for the Ford Escape, the most

popular brand of hybrid taxicab. Based on averages of

15 miles per gallon and driving 135 miles per shift, the

costs in gasoline per shift would be $ 27.45 for the Crown

Victoria, In the rurd kscape, which averages 34 miles

per gallon, the gasoline cost is $ 12.11 per shift. The

TLC rounded the price differential to $ 15, and then

offset the $ 15 from the $ 3 incentive, resulting in a $ 12

downward adjustment. (/d. PP 28-29.)

Under the new regulations, the TLC did not

consider the operating costs of the medallion owners,

Instead, the TLC ealibrated a cost which the owner had

never borne and reduced the lease rate by that

calculated value. The TLC’s justification for this new

10. The City’s calculation seems to ignore the fact that the

statutory life of a hybrid vehicle is five years, not three. Using

the City’s methodology, the proper incentive for a taxicab with

a five-year life cycle would appear to be $ 1.64 per shift.

30a

Appendix B

regulation: to “green” the taxi fleet with cleaner and

more efficient taxicabs. The new lease cap regulations

would not have been possible under the prior regulatory

framework.

The TLC considered other regulatory options before

enacting the Lease Cap Rules. The TLC considere ’

requiring taxicab owners who lease their vehicles to pay

for the cost of fuel, either through direct reimbursement

of gas costs to drivers or by requiring Fleet Owners to

deliver a vehicle with a full tank of gas at the start of

each shift. (/d. P 33.) The TLC states that it did not

promulgate this rule because it was “logistically

infeasible” and difficult to enforce. (/d.)

IV. Procedural History

a. The Parties

The Amended Complaint, filed on April 17, 2009,

alleges that the Lease Cap Rules are preempted by the

EK PCA and the CAA because the Rules are essentially a

mandate to purchase vehicles with a certain mpg or

emissions rating.

The Plaintiffs are operators of taxicab fleets

(hereinafter, “Fleet Owners”) and a trade association

for fleet operators. The Fleet Owners regularly lease

their vehicles to drivers, and the majority of the vehicles

are Crown Victorias. Together, Plaintiffs control more

than 25% of the taxicabs in New York City. (See Am.

Compl. PP 7-11.) Industry-wide, fleet owners, the group

31a

Appendix B

presumptively benefitting from the current structural

disincentive to purchase hybrids, control approximately

35% of all taxicab medallions. (See Salkin Decl. P 32;

May 7, 2009 Oral Argument 1ranscript (“Oral Arg. Tr.”)

36:09-14.)

Defendants are New York City; the TLC, which is

the City’s regulatory agency for the taxicab industry;

Mayor Michael Bloomberg, in his official capacity; TLC

Commissioner, Chair, and Chief Executive Officer

Matthew Daus, in his official capacity; TLC Assistant

Commissioner for Safety & Emissions Peter Schenkman,

in his official capacity; and TLC First Deputy

Commissioner Andrew Salkin, in his official capacity.

b. The Evidentiary Hearing

Tne Court heid oral argument on Plaintiffs’ motion

on May 7, 2009. Following oral argument the Court held

an evidentiary hearing on May 20, 2009, to determine

the effect of the Lease Cap Rules on Fleet Owners and

whether the Rules force Fleet Owners to switch to

hybrid vehicles.

Plaintiffs presented three experts at the May 20,

2009 hearing: James Levinsohn,.an economist teaching

at the University of Michigan, who presented a detailed

estimation of the profit differential between Crown

Victoria and hybrid owners under the status quo lease

caps and under each of the first three years of the Lease

Cap Rules; Ray Mundy, a transportation and logistics

specialist teaching at the University of Missouri, who

32a

Appendix B

discussed the history of lease caps in New York City and

how tying lease caps to the use of hybrid vehicles would

affect the purchasing decisions of Fleet Owners; and

Dean Karlan, an economist teaching at Yale University,

who testified about brand loyalty and why businesses

make certain economic decisions.

Defendants presented two experts: Kurt Strunk, a

senior consultant at National Economic Research

Associates (“NERA”), who testified about errors in Dr.

Levinsohn’s economic study and concluded that so long

as Fleet Owners made more than $ 1 in profits under

the Lease Cap Rules, the new Rules would not “force”

them to switch to hybrids; and Rachel Weinberger, a

transportation planning specialist teaching at the

University of Pennsylvania, who testified that the prior

lease cap rules presented a structural disincentive for

Fleet Owners to switch to hybrid taxicabs, but that even

under the new Lease Cap Rules not all leet Owners

would behave in the most efficient economic manner and

switch to hybrid vehicles.

DISCUSSION

I. Preliminary Injunction Standard

A preliminary injunction may be granted upon a

showing of irreparable harm, and because this matter

involves a challenge to a New York City statutory or

regulatory scheme, Plaintiffs must also demonstrate a

likelihood of success on the merits. Jolly v. Coughlin,

76 F.3d 468, 473 (2d Cir. 1996). For the reasons given in

t4a

Appendix B

the previous decision, Plaintiffs have shown that they

will suffer irreparable harm without an injunction. See

Metro. Taxicab, 2008 U.S. Dist. LEXIS 94021, 2008 WL

4866021, at *5-7 (finding that Plaintiffs would have no

private right of recovery under the EPCA). The issue

for this preliminary injunction motion is whether

Plaintiffs have shown a likelihood of success of the

merits.

II. Likelihood of Success on the Merits

Plaintiffs argue that they are likely to succeed on

the merits because the Lease Cap Rules are preempted

by federal law. Under the Supremacy Clause, U.S. Const.

art. VI, cl. 2, “state laws that interfere with, or are

contrary to the laws of congress, made in pursuance of

the constitution are invalid.” Wis. Pub. Intervenor v

Mortier, 501 U.S, 597, 604, 111 5. Ct. 2476, Lib L. kd.

2d 532 (1991) (internal quotations and citation omitted).

The Supremacy Clause “

law either by express provision, by implication, or by a

conflict between federal and state law” N.Y. State

Conference of Blue Cross & Blue Shieid Plans

Travelers Insurance Co., 514 U.S. 645, 654, 115 S. Ct

1671, 181 L. Ed. 2d 695 (1995): see also Mortier. 50) U.S

at 604-05 (“Congress’ intent to supplant state authority

In a particular field may be express in the terms of the

statute.”),

may entail pre-emption of state

liven without express preemptive language, court:

may infer Congress’ intent to preempt state action

where “the scheme of federal regulation is sufficientl

34a

Appendix B

comprehensive to make reasonable the inference that

Congress ‘left no room’ for supplementary state

regulation.” Hillsborough County v. Automated Med.

Labs., Inc., 471 U.S. 707, 718, 105 S. Ct. 2871, 85 L. Ed.

2d 714 (1985) (quoting Rice v. Santa Fe Elevator Corp.,

331 U.S. 218, 230, 67S. Ct. 1146, 91 L. Ed. 1447 (1947)).

Where a party claims that federal law preempts state

action in a field traditionally occupied by state

regulation, courts must “start with the assumption that

the historic police powers of the States were not to be

superseded by the Federal Act unless that was the clear

and manifest purpose of Congress.” Rice, 331 U.S. at

230. In every preemption analysis, courts must look to

Congress’ intent to determine the scope of the

preemption. See Wyeth v. Levine, 129 S. Ct. 1187, 1194,

173 L. Ed. 2d 51 (2009) (“(T]he purpose of Congress is

the ultimate touchstone in every pre-emption case.”)

(quoting Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116

5. Ct. 2240, 135 L. Ed. 2d 700 (1996)).

Before analyzing Congress’ intent in enacting the

E PCA and the CAA and whether those federal] statutes

preempt the Lease Cap Rules, the Court must

determine whether the new rules are a de facto mandate

to Fleet Owners to purchase hybrid taxicabs. If the

Lease Cap Rules present only a single “real” option for

Fleet Owners, then the Rules are a mandate and the

Court will then determine if that single option is

preempted. See, e.g., Travelers Ins., 514 U.S. at 668

(“We acknowledge that a state law might produce such

acute, albeit indirect, economic benefits, by intent or

otherwise, as to force an ERISA plan to adopt a certain

3Sa

Appendix B

scheme ... and that such a state law might indeed be

preempted ... .”); Retail /ndus. Leaders Ass'n v.

Fielder, 475 F.3d 180, 193 (4th Cir. 2007); Retail Jndus.

Leaders Ass'n v. Suffolk County, 497 F. Supp. 2d 403,

417 (E.D.N.Y. 2007). If the Lease Cap Rules present

viable options to Fleet Owners to either purchase a

Crown Victoria or a hybrid, then the Rules are not a

mandate. A preemption analysis would then be

irrelevant since the City is not forcing the Fleet Owners

to take any new action—much less a potentially

preempted action. See Travelers Ins., 514 U.S. at 659

(noting that where a state law with some economic

impact did not bind the affected parties to “any

particular choice,” the state law did not function as a

regulation of a preempted area of law).

a. Are the Lease Cap Rules a Mandate?

i. Legal Precedent

There are no controlling cases that deal with

whether the Lease Cap Rules are a mandate, and, if so,

whether the Rules are preempted. Both parties cite to

cases involving the Employee Retirement Income

Security Act of 1974 (“ERISA”), in which the Supreme

Court and lower courts have addressed the issue of

preemption where a state law, while seemingly

presenting choices, essentially mandates an outcome

that is preempted by federal law.

In New York State Conference of Blue Cross & Blue

Shield Plans v. Travelers Insurance Co., 514 U.S. 645,

115 8. Ct. 1671, 131 L. Ed. 2d 695 (1995), a New York

36a

Appendix B

state statute required hospitals to collect surcharges

from patients covered by a commercial insurer, but

exempted patients insured by Blue Cross/Blue Shield.

Id. at 649. The effect of the law was to make “the Blues”

a cheaper and more attractive option for administrators

of employee benefit plans that fell under ERISA. The

plaintiffs, who were other health-care insurers, argued

that the law was preempted by language in the ERISA

statute stating that ERISA superseded all state laws

insofar as they “relate to” an employee benefit plan. The

Court determined that the only way to understand the

term “relate to” was to examine the objectives of the

ERISA statute and then compare “the purpose and the

effects” of the New York statute to see if they conflict.

Id. at 656-59. The Court noted that the intent of the

ERISA preemption provision was to ensure tiiat plan

administrators would work with a uniform body of law,

so as to minimize the administrative and financial

burden of complying with many different state

directives. Jd. at 657-58.

Examining the New York statute, the Court noted

that the law created an “indirect economic effect” on

plan administrators’ choices, but that “La]n indirect

economic influence, however, does not bind plan

administrators to any particular choice and thus function

as a regulation of an ERISA plan itself.” Jd. at 659-60.

The Court found that the statute’s indirect influence

affected a plan administrator’s decisions about which

plan to use, “but it does not affect the fact that any plan

will shop for the best deal it ean get, surcharges or no

surcharges.” Jd. at 660. In analyzing how the state law

37a

Appendix B

fit with Congress’ intent to preempt state regulation of

ERISA plans, the Court held that “cost uniformity was

almost certainly not an object of pre-emption, just as

laws with only an indirect economic effect on the relative

costs of various health insurance packages... are a far

ery from those ‘conflicting directives’ from which

Congress meant to insulate ERISA plans.” /d. at 662.

The law was not preempted because: (1) it did not force

only one, preempted, choice; and (2) the manner in which

the law indirectly affected ERISA plan decisions was

not part of Congress’ preemptive object.

Significantly, however, the Court left open an

unresolved question:

[W]e do not hold today that ERISA pre-empts

only direct regulation of ERISA plans, nor

eculd we do imat with fidelity to the views

expressed in our prior opinions on the matter.

We acknowledge that a state law might

produce such acute, albeit indirect, economic

effects, by intent or otherwise, as to force an

ERISA plan to adopt a certain scheme of

substantive coverage or effectively restrict its

choice of insurers, and that such a state law

might indeed be pre-empted . .

Id. at 668 (internal citations omitted). While this

observation is dicta, the Supreme Court clearly

recognized that the indirect economic pressures of a

state law could force a party to adopt a scheme that

would be preempted, even if the Court did not find such

pressures in Travelers Insurance.

38a

Appendix B

The Supreme Court analyzed the potentially

preemptive impact of a state law operating as a de facto

mandate in California Division of Labor Standards

Enforcement v. Dillingham Construction, 519 U.S. 316,

117 S. Ct. 832, 136 L. Ed. 2d 791 (1997). There, a

California law allowed contractors to pay lower wages

to workers from state-certified apprenticeship programs

when working on public works projects. Jd. at 319-20.

At issue was whether the California law affected the

apprentice programs’ ERISA plans by essentially

forcing them to obtain a state certification, which

arguably was preempted because it “relate[{d] to”

ERISA. The Court held that the law was not preempted

by the ERISA statute because the wage law was “quite

remote frei the areas with which ERISA is expressly

concerned—’reporting, disclosure, fiduciary

responsibility, and the like.’” Jd. at 330 (quoting

Travelers Ins., 514 U.S. at 661). The Court also

analoyized the case to Travelers Insurance and found

that the added inducement from the lower wage paid

for state-approved apprentices was not “tantamount to

a compulsion upon apprenticeship programs.” /d. at 333.

The Court noted that the wage statute “alters the

incentives, but does not dictate the choices, facing

ERISA plans.” Jd. at 334.

The Fourth Circuit distinguished Travelers

Insurance and Dillingham Construction in Retail

Industry Leaders Association v. Fielder, 475 F.3d 180

(4th Cir. 2007), another ERISA case. In that case

Maryland passed a law that targeted Wal-Mart and

forced the company—and, by specifically excluding other

39a

Appendix B

employers who might fall within the statute, only that

company—to either spend at least 8% of its total payroll

on health insurance for its employees or pay the shortfall

to the state. Jd. at 188. The Fourth Circuit examined

how the Maryland regulation conflictec with the purpose

of the ERISA statute, which was to permit ease of

nationwide plan administration. The court held that “the

only rational choice employers have under the [Maryland

act] is to structure their ERISA healthcare benefit plans

so as to meet the minimum spending threshold,” because

no reasonable employer would pay money to the state

that it could instead spend on its employees. /d. at 193.

The court looked at the Maryland legislature’s intent

in passing the so-called Fair Share Act and found that

the intent and effect were to create a “fee or a penalty”

that gave Wal-Mart “an irresistible incentive” to increase

health benefits. Jd. at 194 (“The Maryland General]

Assembly intended the Act to have precisely this

effect.”).

The Fourth Circuit distinguished the Wal-Mart case

from Travelers Insurance and Dillingham

Construction for several reasons. First, it said that the

Maryland law directly regulated ERISA plan

structuring, whereas Travelers Insurance and

Dillingham Construction involved indirect regulations,

so the Maryland law had a “tighter causal link between

the regulation and employers’ ERISA plans,” making

it more analogous to cases where ERISA regulation was

preempted. /d. at 195-96. Second, the court found that

the law allowed for no meaningful alternatives to

increasing the payment for health insurance, and that

40a

Appendix B

even if those alternatives did exist, they would still affect

plan decisions in a preempted manner. /d. at 196-97.

Retail Industry Leaders Association v. Suffolk

County, 497 F. Supp. 2d 403 (E.D.N.Y. 2007), dealt with

facts nearly identical to Fielder. In Suffolk County, the

local legislature targeted Wal-Mart to make health care

expenditures of at least $ 3 per employee work-hour or

pay the shortfall and civil penalties to the county. 497 F.

Supp. 2d at 406. The court looked at the legislative

history of the local act and found that “Suffolk County

enacted it in order to mandate that covered employers

and, specifically, Wal-Mart, increase snvending on

healtheare coverage.” Jd. at 417. Citing to Felder, the court

also found that “the alternative options for compliance

with the Act are unrealistic.” /d. at 418. Since it was a

mandate, the act was preempted under ERISA because

it “would disrupt uniform plan administration.” Jd.

The rule derived from these cases is that a local law

is preempted if it directly regulates within a field

preempted by Congress, or if it indirectly re;, ates

within a preempted field in such a way that effectively

mandates a specific, preempted outcome. This Court’s

initial ruling in Metropolitan Taxicab was an example

of a local law directly regulating within a preempted field.

See 2008 U.S. Dist. LEXIS 94021, 2008 WL 4866021, at

*S, Fielder is an example of a case involving an effective

mandate of a preempted outcome. See 475 F.3d at 198-

96. Conversely, a local law is not preempted when it only

indirectly regulates parties within a preempted field and

presents regulated parties with viable, non-preempted

4la

Appendix B

options, as held in Travelers Inswrance and Dillingham

Consiruction.

ii. Application to the Facts

The Lease Cap Rules at issue contro] the maximum

lease rates which taxicab owners may charge. They allow

a higher rate for hybrids and much lower rates for Crown

Victorias. While silent on mileage and emission

standards, the Rules were expressly adopted to

encourage the purchase of hybrid vehicles which meet

the City’s mileage goals and desired emission standards.

The Court must look to the effect of the Lease Cap

Rules on Fleet Owners to determine if they are a de

facto mandate to purchase hybrid vehicles. Plaintiffs

bear the burden to persuade the Court that the Rules

constitute a mandate “vy a clear showing.” Mazurek v.

Armstrong, 520 U.S. 968, 972, 117 S. Ct. 1865, 188 L.

Ed. 2d 162 (1997) (citation omitted). While 7'ravelers

Insurance llingham Construction, Fielder, and

Suffolk Cu. y describe how a court should analyze the

interplay between an effective mandate and preemption,

they provide little guidance on how a court should

determine whether specified economic incentives

actually create a mandate. For this reason the Court

asked the parties to present expert evidence on the

effect of the Lease Cap Rules.

In his written declaration of May 18, 2009, anc at

the May 20, 2009 evidentiary hearing, Plaintiffs’ expert

economist, Dr. Levinsohn, estimated the expected

42a

Appendix B

impact of the Lease Cap Rules on Fleet Owners by using

financial data supplied by the Plaintiffs. Dr. Levinsohn

calculated the difference in profit for Fleet Owners if

they used entirely Ford Escape Hybrids compared to

Crown Victorias, factoring in the comparative revenue

from lease charges; the comparative cost of purchasing

and hacking up a taxicab; medallion costs; the

comparative operating cost; and other general

administrative costs.

If the lease cap rates had remained unchanged, Dr.

Levinsohn estimated that Fleet Owners using Crown

Victorias made approximately $ 8,500 per year in profits,

while those using hybrids earned only $5,100 in profits,

meaning that hybrid profit was $ 3,400 less per vehicle

per year. (See Declaration of James Levinsohn

(“Levinsohn Decl.”) 8-9; see also Plaintiffs’ Ex. 31 from

May 20, 2009 Evidentiary Hearing (“Pl. Hr’g Ex.”).)

A chart that Plaintiffs presented at the May 20, 2009

hearing illustrates Dr. Levinsohn’s findings from his

analysis of two Fleet Owner operations, Gotham Yellow

LLC (“Gotham”) and Ronart Leasing Corp. (“Ronart”):

43a

Appendix B

Profits Per Car Per Year

Gotham Data

*2* Under current lease *3* Under challenged

‘ease rates,

*2*rates, for car *3*for car purchased

in:

*2* purchased today

May 2009 May 2010 May 2011

Crown Vics $8,518 §$ 3,327 $1,511 $ 58]

Hybrid »d,103 % 7,099 $ 7,099 $ 7,099

Penalty $3,415 $ 3,772 $ 5,588 $ 6,518

(Difference

in profits)

44a

Appendix B

Ronart Data

*2* Under current lease *3* Under challenged

lease rates,

*2*rates, for car *3*for car purchased in:

*2*purchased today

May 2009 May 2010 May 2011

Crown Vices $4,962 $363 -$1,348 -$ 2,241

Hybrid $1,617 $3,258 $ 3,258 $ 3,258

Penalty -$ 3,040 $ 2,895 $ 4,606 ~ 5,499

(Difference

in profits)

See Pl. Hr’g Ex. 31.

The Lease Cap Rules immediately increase the lease

cap for hybrid taxicabs by $ 3, but reduce the lease cap

rates for Crown Victorias by $ 4. The impact of this is

that the profitability of using hybrid taxicabs is

increased and Crown Victoria profitability is decreased.

The current $ 3,415 disadvantage for hybrids changes

to a $ 3,772 advantage for hybrids, under the figures

for Gotham, representing a swing of close to $ 7,200.

45a

Appendix B

(/d.) The swing under Ronart’s data for the same period

is nearly $6,250. (/d.) One year later, in May 2010, when

the maximum lease rate for Crown Victorias is reduced

by $8, the profits for Crown Victoria owners are reduced

to approximately $ 1,500 under Gotham’s data, and the

hybrid advantage increases to nearly $ 5,600. (/d.)

Finally, in May 2011, when the Lease Cap Rules reduce

the rates for Crown Victorias by $ 12 per shift, the profits

from Crown Victoria taxicabs are reduced to $ 581 and

the hybrid advantage increases to approximately $ 6,500.

(Jd.) Under Ronart’s data Crown Victoria owners

operate at a loss in the second and third years of the

Lease Cap Rules. (/d.)

In Dr. Levinsohn’s opinion, the size of the profit

disparity between hybrids and Crown Victorias is so

great that no rational taxicab owner would choose to

take such a loss in profit When ine available alternative

is so much more profitable.

Plaintiffs’ expert on the taxicab industry, Ray

Mundy, submitted a written declaration and testified

that the TLC first regulated lease rates in 1996 and first

set lease caps in 1997. (See Declaration of Ray Mundy

(“Mundy Decl.”) PP 26-27.) Dr. Mundy explained the

detailed, cost-based analysis of changes in fleet owner

profit that the TLC undertook in 2004 when

implementing new lease caps and fare increases. (/d.

PP 30-32.) Dr. Mundy also stated that in his experience

in the taxi industry nationwide, he has never

encountered an example of a regulatory agency

decreasing a lease rate for a vehicle that was formerly

46a

Appendix B

approved. (/d. P 34.) Had the prior regulations stayed

in place, the City could not have made the cost changes

it enacted. The Lease Cap Rules reduced revenues for

certain types of vehicles, without regard to cost, in order

to implement the City’s policy choice: taxi owners should

buy hybrids.

Defendants’ consultant Kurt Strunk framed the

“mandate” question differently than Dr. Levinsohn.

According to Mr. Strunk, the Lease Cap Rules are not

a mandate so long as Crown Victoria operators continue

to earn any profit. (See Declaration of Kurt Strunk

(“Strunk Decl.”) 6; see also May 20, 2009 Evidentiary

Hearing Transcript (“Hr’g Tr.”) 117:04-07.) There is no

reason to compare costs and revenues associated with

purchasing a hybrid, he said, because the relevant data

point is that Crown Victoria operators will continue to

make some profit under the Lease Cap Rules. In Mr.

Strunk’s opinion, any amount over zero is sufficient to

demonstrate that there is an economic profit and,

therefore, there is no mandate. (Hr’g Tr. 117:04-07.)

Mr. Strunk admitted that it was unusual for a

regulatory agency to determine ratemaking changes

based on policy, rather than on a cost analysis.

“Ratemaking based on cost is more common,” he said;

Mr. Strunk was unaware of any agencies in the United

States that regulated on anything other than costs. (See

id. 120:11-121:09.)

Defendants’ transportation expert Rachel

Weinberger echoed Mr. Strunk’s analysis: Fleet Owners

47a

Appendix B

had a reasonable choice, even under the Lease Cap

Rules, because Fleet Owners could make “a reasonable

return on [their] investment, which would be an

economic rent greater than zero.” (/d. 125:02-03.) Dr.

Weinberger was not as critical of Dr. Levinsohn’s analysis

as Mr. Strunk was. (“But I do, actually, want to applaud

Dr. Levinsohn. I thought he did a very nice piece of work

in a very short amount of time from an academic

perspective.” /d, 123:09-11.) Nonetheless she adhered

to Mr. Strunk’s point: economic rents above zero cannot

constitute a mandate. (/d. 123:12-15.) Dr. Weinberger

compared the Fleet Owners’ situation to her own status

as a property owner; she chooses not to maximize her

profits and raise the rent on her tenants because they

are a known quantity and she makes an acceptable

profit. (7d. 126:11-21.) Upon questioning by the Court,

however, Dr. Weinberger acknowledged that if given an

empty apartment and the choice between a tenant

paying $ 100 rent and a tenant paying $ 200 rent, she

would “lo]f course” choose the $ 200 tenant because she

is a reasonable business person. (Jd. 126:22-127:08.)

Since Fleet Owners must purchase vehicles every year

as prior purchases age out of the fleet, it would seem

that the renting of the empty apartment would be the

more apt analogy.

In addition to Dr. Weinberger’s and Mr. Strunk’s

testimony that the Lease Cap Rules are not a mandate,

the City contrasts data from the purchasing decisions

of Fleet Owners against individual owners who drive

their own taxicabs. Individual owners already pay for

their own gas and thus have an incentive to purchase

48a

Appendix B

hybrids. The City classifies two types of owners who

drive their own vehicles: (1) those who own the vehicles

but lease their medallions (“DOVs”); and (2) those who

own medallions and their own vehicle and may or may

not lease out the vehicle, but who also drive several shifts

a year (“non-affiliation owners”). (See Salkin Decl. P 30-

ol.)

The City states that DOVs account for approximately

7,000 taxicabs, more than 50% of all cabs. Non-affiliation

owners account for 3,000 taxicabs. (/d. P 31.) In the 16-

month period from January 2008 to Api 2009, vehicles

purchased by DOVs were split 55% Crown Victoria and

40% hybrid or clean diesel.'' Vehicles purchased by non-

affiliation owners during that time were 47% Crown

Victoria and 47% hybrid or clean diesel. Fleet Owners

purchased 70% Crown Victorias and 28% hybrid or clean

diesel. (See Pejan Deel. Ex. K.)

The City argues that since DOVs and non-affiliation

owners—the parties with a greater economic incentive

to purchase hybrids due to high gas prices—continued

to purchase Crown Victorias even after the economic

incentive to purchase hybrids existed, it proves that taxi

owners will still choose to buy Crown Victorias even

when confronted by a substantia] economic incentive not

to do so. (See Salkin Decl. P 37; Pejan Decl. Ex. K.) This

argument is a surmise because the existing buying

pattern does not reflect the $ 12 per-shift disincentive

11. The Court assumes that the remaining 5% of vehicles

were wheelchair-accessible, the third category of permissible

taxicabs

49a

Appendix B

the City adopted for the express policy purpose of

putting more hybrid taxicabs on the street.

Based on the foregoing evidence from the testimony

at the hearing and the written declarations of the

parties, there is one clear conclusion to be drawn from

the Lease Cap Rules, the manner in which they were

adopted, and the methodology of the new regulatory

architecture. The Lease Cap Rules’ purpose is to

incentivize the purchase of hybrids, while at the same

time provide a very meaningful disincentive to the

continuing use of conventionally powered vehicles, The

combined effect of the lease cap changes, and even the

disincentive alone, constitutes an offer which can not,

in practical effect, be refused.

The City argues that the Fleet Owners cannot show

irreparable harm hased on the initia! $ 4 reduction. But

if the Fleet Owners waited for the $ 12 disincentive to

take effect in 2011, the City would surely argue that the

Fleet Owners were too late. The Court need not wait,

however. By creating the $ 12 disincentive, the City

clearly intended to send an obvious signal as to the

economic consequences for continuing to stay with

Crown Victorias. While the City might have addressed

the structural disincentive in other ways—perhaps a

larger incentive for hybrid taxi owners—it chose a $ 12

disincentive for conventional vehicles, at a weight four

times the incentive for hybrids. The disincentive reduces

income without any consideration of Fleet Owner costs

and imposes an immediate penalty for continuing to use

the same vehicle that the City mandated within this

decade.

SOa

Appendix B

Any doubt about the City’s intent in enacting the

Lease Cap Rules is dispelled by looking at how the City

changed the rules. TLC Rule § 1-78(e) required the TLC

to find “substantial evidence of reduced operating

expenses of the affected medallion owners” before it

reduced maximum lease cap rates. Such a study would

have taken some time, and almost certainly would not

have found any evidence that operating expenses

declined in the five years between 2004 and 2009. Rather

than dealing with costs, which had been the guide for

over a decade, the TLC changed the rules so that it “may

initiate lease cap changes at any time, based on the

Commission's assessment of appropriate policy

considerations.” See TLC Rule § 1-78.1(b). Using only a

policy analysis, the TLC could quickly change the

maximum lease caps to create a penalty for Crown

Victoria operators and a benefit for drivers, regardless

of any changes to Fleet Owners’ operating expenses.

Defendants’ own expert, Mr. Strunk, acknowledged that

he had never seen such a policy-based approach to

ratemaking regulation in the United States. The only

reasonable inference that can be drawn from the TLC’s

procedural maneuvering is that it intended that the

substantially reduced lease cap rates for Crown Victoria

owners would convince the owners to transfer to hybrid

vehicles.

There is one final piece of evidence in the question

of whether Fleet Owners are effectively forced to switch

to hybrid taxicabs under the new rules. Based on Dr.

Levinsohn’s economic analysis—to which the City

presents no competing analysis, only a critique of his

Sla

Appendix B

methodology—the Lease Cap Rules, when fully phased

in, provide an economic incentive of approximately $

5,500 to $ 6,500 per vehicle to switch to hybrids. Dr.

Levinsohn calculated that profits for Crown Victoria

owners are currently $ 8,500 per vehicle per year. Under

the new Lease Cap Rules, ‘leet Owners who continue

to use Crown Victorias would forgo a profit margin up

to 76% of their current profit. (See Levinsohn Deel. 11-

12; Pl. Hr’p Ex. 31.) A sensible business person faced

with such a profit reduction would choose to avoid that

loss and, in this case, favor the more profitable hybrid

taxicab option. See Fielder, 475 F.3d at 198 (discussing

the “only rational choice” that an employer could make

when faced with supposed options under Maryland's

Fair Share Act). The City’s expert, Dr. Weinberger,

acknowledged as much when discussing her hypothetical

economie decisions as a landlord; when faced with the

option of taking substantially higher nrofits in rent, she

“of course” would take the money. (Hr’p Tr. 126:22-

127:08.)

The Court cannot accept the City’s argument that

any rate structure that yields more than $ 1 in profit

does not “compel” or mandate a result. The taxicab

industry, as much as any other industry, is profit

oriented and business owners try to maximize profits.

Even a first-grader who has nothing recognizes that

getting $ 100 is much better than getting $ 1, even

though the first-grader is better off with $ 1 than with $

0. Given a choice, the first-grader will always take $ 100,

just as the Fleet Owners will always take a profit of $

7,100 (hybrids) over a profit of $ 580 (Crown Victorias),

S2a

Appendix B

the expeeted differential in May 2011 under Dr.

Levinsohn’s analysis. (See Pl. Hr’p lex. 31, supra P21.)

The City’s presentation of recent purchasing

patterns of DOVs and non-affiliation owners is not

convincing. The ceonomic position of DOVs and non

affiliation owners is not comparable to the Fleet Owners’

position. While ‘leet Owners lease their vehicles out two

shifts a day, every day, the TLC prohibits drivers from

operating their taxicabs more than 12 consecutive

hours. See TLC Rule § 2-28. Accordingly, DOVs and non-

affiliated owners do not have as strong an incentive as

the City suggests to currently switch to hybrid taxicabs

because DOVs and non-affiliation owners only pay for

their own gas a maximum of half of the shifts. This could

explain why many DOVs and non-affiliation owners

continue to buy Crown Victorias; due to the cost of

purchasing and hacking up hybrid taxicabs, it may still

be in their economic benefit to drive Crown Victorias.

The purchasing: patterns that the City presents are not

strong arguments that Fleet Owners will act against

their economic interests and buy Crown Victorias once

the Lease Cap Rules are in effeet. Far stronger evidence

of likely future purchasing performance is the sharp

reduction in profits directly associated with the

ownership of a Crown Victoria once the Lease Cap Rules

are in place.

Looking at all the evidence, it is clear to the Court

that the Lease Cap Rules do not present viable options

for Fleet Owners and instead operate as an effective

mandate to switch to hybrid vehicles. Having decided

Sta

Appendix B

that the Lease Cap Rules constitute a mandate, the

Court turns to the issue of preemption.

b. Preemption Under the EPCA

Preemption claims turn on Congress’ intent, so the

Court must review Congress’ goals in enacting the

lk} PCA and the relevant text of the provision in question.

See Wyeth v. Levine, 1298S. Ct. at 1194; Travelers Ins.,

914 U.S. at 655. The Court reviewed this same issue in

the previous case involving these parties. See Metro.

Taxicab, 2008 U.S. Dist. LEXIS 94021, 2008 WI,

4866021, at *8.

Congress enacted the EPCA to address the energy

crisis resulting from the 1973 Mideast oil embargo. See

Ctr for Biological Diversity v. Nat'l Highway Traffic

Safety Admain., 588 F.8d 1172, 1182 (9th Cir. 2008) (citing

H.R. Rep. No. 94-340 at 1-8 (1975), as reprinted in 1975

U.S.C.C.A.N. 1762, 1763-65). The goals of the EPCA are

to improve motor vehicle efficiency and to “decrease

dependence on foreign [oil] imports, enhance national

security, achieve the efficient utilization of searce

resources, and guarantee the availability of domestic

energy supplies at prices consumers can afford.” /d.

(quoting S. Rep. No. 94-516 (1975) (Conf. Rep.), as

reprinted wm 1975 U.S.C.C.A.N. 1956, 1957); see also

Green Mountain, 508 F. Supp. 2d at 805-06. The

Department of Transportation (“DOT”) is charged with

establishing federal fuel economy standards on a fleet-

wide basis. See 49 U.S.C. §§ 32902(a), 32902(c). These

average standards are known as “corporate average

S4a

Appenal \ B

fuel economy” or “CAFE” standards. The CAFE

standard is “a performance standard specifying: a

minimum level of average fuel economy applicable to a

manufacturer in a model year.” /d. § 82901(a)(6).

The EPCA contains an express preemption clause:

When an average fuel economy standard

preseribed under this chapter... is in effect,

a State or political subdivision of a State may

not adopt or enforce a law or regulation

related to fuel economy standards or average

fuel economy standards tor automobiles

covered by an average fuel economy standard

under this chapter.

AQ U.S.C. § 32919(a) (emphasis added). This language

is quite clear: “Congress’s undoubted intent was to

make the setting of fuel economy standards exclusively

a federal concern.” Green Mountain, 508 F. Supp. 2d at

b54.

The DOT delegates the responsibility for setting fuel

economy standards to the National Highway Traffic

Safety Administration (“NHTSA”). 49 C.ER. § 1.50(f).

The NHTSA must weigh four factors when setting

standards: “technological feasibility, eeonomic

practicability, the effect of other motor vehicle standards

of the Government on fuel economy, and the need of the

United States to conserve energy.” 49 U.S.C. § 82902(f).

The NHTSA has interpreted “economic practicability”

to include consideration of consumer choice, economic

SSa

Appendix B

hardship for the auto industry, and vehicle safety. Green

Mountain, 508 F. Supp. 2d at 307. The NHTSA balances

the goals of improving fuel economy with maintaining

consumer choice and avoiding adverse economic effects

on auto manufacturers. As a California district court

deseribed it:

NHTSA must set fuel economy at the

maximum feasible level while avoiding serious

adverse economic effeets on manufacturers

and maintaining a reasonable amount of

consumer choice among a broad variety of

vehicles. Accordingly, Congress carefully

drafted the CAFE program to require fuel

economy restrictions that do not have the

effect of either imposing impossible burdens

or unduly limiting consumer choice as to

capacity and performance of motor vehicles.

Central Valley Chrysler-Jeep v. Witherspoon, 456 FE.

Supp. 2d 1160, 1169 (é.D. Calif. 2006) (internal citations

and quotations omitted).

A manufacturer’s fleet of new passenger vehicles

currently must average at least 27.5 miles per gallon.

See 49 U.S.C. § 32902(b). By 2020 that minimum fleet

average rises to 35 miles per gallon. /d. Less than a

month ago President Obama proposed new CAFE

standards that would require a fleet average of 35.5

miles per gallon by 2016. See Press Release, The White

House, President Obama Announces National Fuel

Ki fficiency Policy (May 19, 2009). There is no question

Soa

Appendix B

that the federal government is actively pursuing

regulation that would affect national fuel efficiency

standards.

The City acknowledges that the prior 25/30 Rules

are preempted under the EPCA because they “related

to fuel economy standards.” (See Oral Arg. Tr. 16:138-

15.) Defendants now argue that the Lease Cap Rules,

even if they are a mandate, are not preempted under

the EPCA because they simply designate hybrid vehicles

as required taxicabs and do not require vehicles with a

certain mpg rating. The City argues that the term

“related to” should be construed narrowly, so that a de

facto requirement to purchase hybrid taxicabs does not

“relate to” fuel economy standards under 49 U.S.C. §

32919(a).

A constricted interpretation of the term “related to”

is not appropriate. The Supreme Court just recently

referred to that term as “expansive.” In Travelers

Indemnity Co. v. Bailey, Nos. 08-295, 08-307, 1298S. Ct.

2195, 174 L. Ed. 2d 99, 2009 U.S. LEXIS 4537, 2009 WL

1685625 (June 18, 2009), a case dealing with the

enforceability of a Bankruptey Court order enjoining

related state court lawsuits, the Supreme Court stated

unequivocally that “liJn a statute, ‘[t]he phrase ‘in

relation to’ is expansive.’” 2009 U.S. LEXIS 4537, 2009

WL 1685625, at *8 (quoting Smith v. United States, 508

U.S. 223, 237, 113 8S. Ct. 2050, 124 L. Ed. 2d 138 (1993)).

Although the Court noted that at some point the term

“relate to” loses any meaning because “‘everything is

related to everyt..ing else,” id. (quoting Dillingham

S7a

Appendix B

Constr, 519 U.S. at 335), the Court found that the state

Claims at issue “clearly” related to the Bankruptcy

Court’s injunction and so there was no need to “stake

out the ultimate bounds” of the connection. /d.

‘

In this case, while it is truc that the Lease Cap Rules

do not require a specific mpg rating, the effect of the

rules is to force taxicab owners to meet an mpg

threshold determined by the mileage rating of the

TLC’s appreved hybrid or clean diesel vehicles. All of

the TLC-approved hybrids or clean diesel vehicles are

rated 25 mpg or higher. (See Saylor Deel. Ex. 14.) These

are the same vehicles that the TLC approved under the

preempted 25/30 Rules. (Compare Saylor Decl. Ex. 4

with Saylor Decl. Ex. 14.) The Lease Cap Rules are

essentially a command to taxicab owners to meet that

higher mpg standard. See Am. Auto. Mfrs. Ass'n v.

Cahill, 152 F-3d 196, 200 (2d Cir. 1998) (finding that whiie

a New York law requiring that a percentage of vehicle

sales be “zero emission vehicles” did not “impose precise

quantitative limits on levels of emissions,” the CAA

nevertheless preempted the sales requirement because

the law was “in the nature of a command having a direct

effect on the level of emissions”).

The City’s purpose in enacting the Lease Cap Rules

also sheds light on the issue of preemption. See 7'ravelers

Ins., 514 U.S. at 658 (looking at the “purpose and the

effects” of the New York law); Fielder, 475 F.3d at 190

(examining the “nature and effect” of Maryland’s Fair

Share Act to determine preemption). While

consideration of the purpose of the local regulation is

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not the end-all to the Court’s preemption review, that

does not mean it should be ignored. It is fair to consider

purpose in conjunction with the law’s effects. See Gade

v. Nat'l Solid Wastes Mgmt. Ass'n, 505 U.S. 88, 105,

112 S. Ct. 2374, 120 L. Ed. 2d 73 (1992) (“In assessing

the impact of a state law on the federal scheme, we have

refused to rely solely on the legislature’s professed

purpose and have looked as well to the effects of the

law.”). Here, one of the City’s stated purposes in

enacting the Lease Cap Rules was to allow taxi owners

who choose “a fuel efficient” vehicle to realize a greater

lease income than owners who choose “a less efficient

vehicle.” (See Pejan Deel. Ex. J.) The City’s discussion

of “efficient” vehicles relates to how many miles per

gallon a vehicle travels. Indeed, the exact amount of the

disincentive is based on a calculation of miles per gallon.

(See Salkin Deel. P 29.) Looking beyond the reasons

stated in the City Record, TLC Commissioner Daus, in

announcing the Lease Cap Rules, stated that, “Our goal

from the beginning was to get fuel efficient taxis on the

road using whatever appropriate methods required to

achieve our goal.” (See Saylor Decl. Ex. 8 (emphasis

added).)

Focusing on the effect and purpose of the Lease Cap

Rules, it is clear that the rules “relate to” fuel economy

standards, as contemplated in 49 U.S.C. § 32919(a), the

Kk PCA preemption clause. The 25/30 Rules specifically

referred to mpg standards, but creative drafting and

the absence of specific reference to mileage do not make

the effect—or the purpose—of the Lease Cap Rules any

different than the prior preempted regulations. The

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Appendix B

iLease Cap Rules effectively mandate the use of taxicabs

with a certain mpg rating. See Cent. Valley, 529 F. Supp.

2d at 1175 (“The narrowest interpretation consistent

with the plain language of EK PCA’s preemptive provision

is that it encompasses only those state regulations that

are explicitly aimed at the establishment of fuel economy

standards, or that are the de facto equivalent of mileage

regulation ....”). The express language of the EPCA

preemption clause and the clear message from the White

House that the federal government is active within the

preempted field of fuel economy standards lead to one

conciusion: fuel economy standards are a federal matter

and the EPCA preempts local laws, such as the Lease

Cap Rules, that infringe upon the federal prerogative.

Further, the City cannot argue that the Lease Cap

Rules do not “relate to” fuel economy standards because

the rules burden only a small percentage of taxicab

vwners and only insignificantly affect the EPCA’s

objectives. As discussed in the previous litigation in this

case, the Supreme Court foreclosed such an argument

in Engine Manufacturers. The Court found that the

aggregate effect of allowing every state or political

subdivision to enact seemingly harmless rules would

create an “end result [that] would undo Congress’s

carefully calibrated regulatory scheme.” Engine Mfrs.,

541 U.S. at 255.

The purpose and effect of the Lease Cap Rules is to

force Fleet Owners to purchase taxicabs with a certain

mpg rating. Reading the language of the EPCA

preemption statute, 49 U.S.C. § 32919(a), it is clear that

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Appendix B

the Plaintiffs are likely to succeed in showing that the

Lease Cap Rules are “related to” fuel economy

standards and are preempted under the Supremacy

Clause.

c. Preemption Under the CAA

The Clean Air Act empowers the Environmental

Protection Agency (“EPA”) to promulgate regulations

necessary to prevent deterioration of air quality. 42

U.S.C. § 7601(a); Cent. Valley, 529 F. Supp. 2d at 1156.

Part of the EPA’s mandate under the CAA is to set

standards relating to emissions from new vehicles. 42

U.S.C. § 7521(a)(1); Motor & Equip. Mfrs. Ass’n v.

Nichols, 142 F.8d 449, 452, 330 U.S. App. D.C. 1 (D.C.

Cir. 1998) (“Subchapter II of the [CAA] vests in the

federal government the almost exclusive responsibility

for establishing automobile emission standards for new

cars.”). The CAA contains a preemption provision at §

209(a):

No State or any political subdivision thereof

shall adopt or attempt to enforce any

standard relating to the control of emissions

from new motor vehicles or new motor vehicle

engines... No State shall require

certification, inspection, or any other approval

relating to the control of emissions from any

new motor vehicle or new motor vehicle engine

as condition precedent to the initial retail

sale, titling ... or registration of such motor

vehicle, motor vehicle engine, or equipment.

42 U.S.C. § 7543(a) (emphasis added).

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Appendix B

Congress preempted states—and their political

subdivisions—from creating their own emissions

standards for new vehicles because Congress was

concerned about the possibility of 50 different standards

applying to one vehicle that so easily moves across state

lines. See Engine Mfrs. Ass’n ex rel. Certain of its

Members v. EPA, 88 F.3d 1075, 1079, 319 U.S. App. D.C.

12 (D.C. Cir. 1996) (“Congress had another reason for

asserting federal control in this area: the possibility of

50 different state regulatory regimes ‘raised the spectre

of an anarchic patchwork of federal and state regulatory

programs, a prospect which threatened to create

nightmares for the manufacturers.’”) (quoting Motor &

Equip. Mfrs. Ass'n, Inc. v. EPA, 627 F.2d 1095, 1109,

201 U.S. App. D.C. 109 (D.C. Cir. 1979))."”

The question for the Court is whether the Lease

Cap Rules, which effectively mandate the purchase of

hybrid taxicabs, relate to the control of emissions. In

12. Congress granted California an exception from

preemption because “Congress recognized that California was

already the leader in the establishment of standards for

regulation of automotive pollutant emissions at a time when

the federal government had yet to promulgate any regulations

of its own.” Engine Mfrs. Ass'n ex rel. Certain of its Members, 88

F.3d at 1079 (internal quotation and citation omitted). Congress

later permitted other states to adopt California’s standards, if

the EPA granted California a waiver. See Am. Auto. Mfrs. Ass'n,

152 F.3d at 198 (describing regulatory history); Green Mountain,

508 EF. Supp. 2d at 304 (same). The case in front of this Court

does not deal with any exceptions to § 209(a) preemption.

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Appendix B

the prior litigation the Court found that the 25/30 Rules

did not relate to emissions standards because those

rules specifically targeted fuel economy but were silent

as to emissions. Metra. Taxicab, 2008 U.S. Dist. LEXIS

94021, 2008 WL 4866021, at *14. This case is different.

One of the stated purposes of the Lease Cap Rules is to

“create incentives for taxicab owners to buy cleaner

vehicles.” (See Pejan Decl. Ex. J.) Additionally, the rules

reduce the maximum lease cap for “owners of less clean

taxicabs.” (/d.) While the enjoined 25/30 Rules

specifically did not target emissions, it is clear that one

purpose of the Lease Cap Rules is to affect taxicab

emissions by mandating the purchase of “cleaner

vehicles.”

As discussed earlier in the section on EPCA

preemption, see Discussion Section I[1(b), supra pp. 31-

32, the purpose of a regulation alone is not enough to

create preemption; courts must also examine the effect

of a local rule when conducting a preemption analysis.

See Travelers Ins.,514 U.S. at 658 (examining “purpose

and the effects”); Felder, 475 F.3d at 190 (examining

the “nature and effect”). In American Automobile

Manufacturers Association v. Cahill, the Second

Circuit discussed a New York law requiring that a

percentage of cars sold be “zero emission vehicles,” or

“ZEVs.” 152 F.3d at 197. The court looked at the

regulation’s purpose and effect, and found that even

though the ZEV requirement did not impose a precise

limit on emissions levels, the sales regulation was

preempted because it had the purpose of “effect[ing] a

general reduction in emissions” and was “in the nature

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Appendix B

of a command having a direct effect on the level of

emissions.” /d. at 200.

The case here is not unlike American Automobile

Manufacturers Association. The Lease Cap Rules have

a purpose of reducing emissions from taxicabs. The

Court has already found that the rules are effectively a

mandate requiring the purchase of hybrid taxicabs.

Similar to what the Second Circuit reasoned when

looking at the ZEV sales requirement, a requirement

to purchase hybrid taxicabs is also a command that

would directly affect the level of emissions. This is

certainly the City’s goal in enacting the Lease Cap

Rules, and reducing emissions would be its result.

Section 209(a), the CAA preemption provision,

specifically reserves emissions regulation for new

vehicles to the federal government. As discussed earlier,

even though the effect of the Lease Cap Rules on

nationwide regulation and vehicle production will be

minor, the aggregate effect of permitting such local

regulation would create an “end result [that] would undo

Congress’s carefully calibrated regulatory scheme.”

Engine Mfrs., 541 U.S. at 255.

Engine Manufacturers is instructive in another

aspect. The Court there held that the CAA preeinpted

local rules requiring fleet operators to use “alternative-

fuel vehicles” or vehicles that met certain emission

specifications. /d. at 259. With almost no discussion, the

Court assumed that regulations requiring “alternative-

fuel vehicles” related to the contro] of emissions under

the CAA’s preemption statute. /d. at 249-52. The only

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Appendix B

issue before the Court was whether preemption under

the CAA applied equally to laws addressing purchasers

of vehicles as well as manufacturers or dealers. 7d. at

248-49. The Court did not specify why a mandate to use

“alternative-fuel vehicles” meant that the vehicles were

of a type that related to emissions control. In two

footnotes, the Court defined “alternative-fuel vehicles”

as, essentially, vehicles not powered by gasoline or diesel

fuel. See Jd. at 249-50 n.1, 2.

Here, § 3-03.1 of the TLC Rules defines a hybrid

vehicle as a “commercially available mass production

vehicle originally equipped by the manufacturer with a

combustion engine system together with an electric

propulsion system that operates in an integrated

manner.” The City argues that the definitions for

“alternative-fuel vehicles” that the Court in Engine

Manufacturers assumed without discussion were

related to emissions standards are unlike the definition

for hybrid vehicles in the City’s rules. Exact parity

between the two definitions, however, is not required.

It is a matter of common sense that a rule with the

stated purpose of increasing the number of “cleaner

vehicles” and with the effect of requiring the purchase

of hybrid taxicabs is a rule “relating to the control of

emissions.” 42 U.S.C. § 7543(a). The Supreme Court in

Engine Manufacturers did not need testimony from

scientific experts to explain the connection between

“alternative-fuel vehicles” and emissions regulation.

Neither does this Court need further testimony to

understand the close relation between hybrid vehicles

and emissions.

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Appendix B

The Lease Cap Rules effectively force Fleet Owners

to purchase hybrid taxicabs, and the purpose and effect

of the rules is to reduce emissions."* CAA § 209(a)

preempts New York City from enacting regulations

related to emissions control, and the Plaintiffs have

demonstrated a likelihood of success in proving such

preemption.

CONCLUSION

For the reasons previously stated, the Court finds

that the Lease Cap Rules are a de facto mandate upon

the Plaintiffs to purchase hybrid vehicles. The Court

further finds that the Plaintiffs have demonstrated

irreparable harm and a likelihood of success in showing

that such a mandate is preempted by the EPCA and

the CAA. The Lease Cap Rules relate to fuel economy

and emissions regulation, which are substantially federal

eaneerns, Accordingly, the Piaintiffs’ motion for a

preliminary injunction is GRANTED.

Dated: New York, New York

June 22, 2009

SO ORDERED

/s/ Paul A. Crotty

PAUL A. CROTTY

United States District Judge

13. The Court also noted earlier i

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