robert j. giuffra, jr. ( sharon l....

DEFENDANTS’ OPPOSITION TO THE 177 STATES’ JOINT MOTION TO REMAND, THE NON-177

STATES’ JOINT MOTION TO REMAND, AND VERMONT’S SUPPLEMENTAL MOTION TO REMAND MDL NO. 2672 CRB (JSC)

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Robert J. Giuffra, Jr. (pro hac vice) [email protected] Sharon L. Nelles (pro hac vice) [email protected] David M.J. Rein (pro hac vice) [email protected] William B. Monahan (pro hac vice) [email protected] William H. Wagener (pro hac vice) [email protected] SULLIVAN & CROMWELL LLP 125 Broad Street New York, New York 10004 Telephone: (212) 558-4000 Facsimile: (212) 558-3588 Laura Kabler Oswell (State Bar No. 241281) SULLIVAN & CROMWELL LLP 1870 Embarcadero Road Palo Alto, California 94303 Telephone: (650) 461-5600 Facsimile: (650) 461-5700 Counsel for Volkswagen AG, Volkswagen Group of America, Inc., Volkswagen Group of America Chattanooga Operations, LLC, Audi AG, and Audi of America, LLC Additional Counsel Listed in Signature Block

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

IN RE: VOLKSWAGEN “CLEAN DIESEL” MARKETING, SALES PRACTICES, AND PRODUCTS LIABILITY LITIGATION

_____________________________________

This Document Relates to:

Alabama v. Volkswagen AG, et al., No. 3:16-cv-06389-CRB (N.D. Cal.)

People of the State of Illinois v. Volkswagen AG, et al., No. 3:16-cv-07370-CRB (N.D. Cal.)

) ) ) ) ) ) ) ) ) ) ) ) ) ) )

MDL No. 2672 CRB (JSC)

DEFENDANTS’ OPPOSITION TO THE 177 STATES’ JOINT MOTION TO REMAND, THE NON-177 STATES’ JOINT MOTION TO REMAND, AND VERMONT’S SUPPLEMENTAL MOTION TO REMAND

Hearing Date: TBD Time: TBD Honorable Charles R. Breyer

Case 3:15-md-02672-CRB Document 2988 Filed 03/01/17 of 58

DEFENDANTS’ OPPOSITION TO THE 177 STATES’ JOINT MOTION TO REMAND, THE NON-177


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Maryland Department of the Environment v. Volkswagen Group of America, et al., No. 3:16-cv-05090-CRB (N.D. Cal.)

Commonwealth of Massachusetts v. Volkswagen Group of America, et al., No. 3:16-cv-05088-CRB (N.D. Cal.)

State of Minnesota v. Volkswagen Aktiengesellschaft, et al., No. 3:17-cv-00187-CRB (N.D. Cal.)

State of Missouri v. Volkswagen Aktiengesellschaft, et al., No. 3-16-cv-06938-CRB (N.D. Cal.)

Montana Department of Environmental Quality v. Volkswagen Aktiengesellschaft, et al., No. 3:17-cv-00471-CRB (N.D. Cal.)

New Hampshire v. Volkswagen Aktiengesellschaft, et al., No. 3:16-cv-06387-CRB (N.D. Cal.)

State of New York, et al. v. Volkswagen Group of America, et al., No. 3:16-cv-05089-CRB (N.D. Cal.)

State of Ohio v. Volkswagen Aktiengesellschaft, et al., No. 3:16-cv-07157-CRB (N.D. Cal.)

Commonwealth of Pennsylvania, Department of Environmental Protection, et al. v. Volkswagen Group of America, et al., No. 3:16-cv-05159-CRB (N.D. Cal.) Tennessee ex rel. Slatery v. Volkswagen Aktiengesellschaft, et al., No. 3:16-cv-06546-CRB (N.D. Cal.)

State of Vermont, et al. v. Volkswagen Group of America, et al., No. 3:16-cv-06299- CRB (N.D. Cal.)

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )


-i- DEFENDANTS’ OPPOSITION TO THE 177 STATES’ JOINT MOTION TO REMAND, THE NON-177


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TABLE OF CONTENTS

SUMMARY OF ARGUMENT .....................................................................................................1

BACKGROUND ..........................................................................................................................10

A. The Complaints ......................................................................................................10

1. The 177 States ............................................................................................10

2. The Non-177 States....................................................................................11

B. Procedural Posture .................................................................................................12

C. Regulatory Background .........................................................................................13

ARGUMENT ................................................................................................................................15

I. THE NON-177 STATES’ CLAIMS RAISE A FEDERAL QUESTION. ...................17

A. The Non-177 States’ Anti-Tampering and I&M Claims Raise Federal Questions................................................................................................................18

B. Missouri’s and Ohio’s Environmental Claims Raise Federal Questions. ..............26

II. THE STATES’ REQUESTED injunctive and penalty RELIEF RAISES A FEDERAL QUESTION. .................................................................................................27

A. The Injunctive Relief Requested by the States Raises a Federal Question. ...........28

B. The Penalties Requested by the States Also Raises a Federal Question. ...............32

III. FEDERAL JURISDICTION IS REQUIRED TO ADJUDICATE THE SUBSTANTIAL AND DISPUTED QUESTIONS OF FEDERAL LAW. ..................38

A. The Federal Issues Are Substantial. .......................................................................38

B. The Federal Issues Are Actually Disputed. ...........................................................40

C. Federal Jurisdiction Would Not Disturb Any Federal-State Judicial Balance. ..................................................................................................................42

IV. VERMONT’S REQUESTED RELIEF FOR VIOLATIONS OF ITS CONSUMER PROTECTION ACT RAISES A FEDERAL QUESTION. ................45

CONCLUSION ............................................................................................................................47


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TABLE OF AUTHORITIES

Page(s)

Cases

Abada v. Charles Schwab & Co., 300 F.3d 1112 (9th Cir. 2002) .................................................................................................40

Air Products & Chemicals, Inc. v. Reichhold Chems., Inc., 755 F.2d 1559 (Fed. Cir. 1985)................................................................................................27

Amalgamated Ass’n of Street, Electric Railway & Motor Coach Employees of America v. Lockridge, 403 U.S. 274 (1971) .......................................................................................................6, 34, 36

In re Office of Attorney Gen. of State of N.Y., 709 N.Y.S.2d 1 (N.Y. App. Div. 1st Dep’t 2000) .................................................13, 14, 15, 45

Arditi v. Lighthouse Int’l, 676 F.3d 294 (2d Cir. 2012).....................................................................................................21

Arizona v. United States, 132 S. Ct. 2492 (2012) .........................................................................................................4, 36

Armitage v. Deutsche Bank AG, No. C 05-3998, 2005 WL 3095909 (N.D. Cal. Nov. 14, 2005)...............................................36

Ayres v. General Motors Corp., 234 F.3d 514 (11th Cir. 2000) .................................................................................................26

Bell v. Cheswick Generating Station, 734 F.3d 188 (3d Cir. 2013).....................................................................................................44

Beshear ex. rel. Commonwealth of Kentucky v. Volkswagen Group of America, Inc., No. 16-cv-27 (E.D. Ky. May 25, 2016) ...................................................................................47

Arizona ex rel Brnovich v. Volkswagen AG, 193 F. Supp. 3d 1025 (D. Ariz. 2016) remanded ...............................................................24, 25

Bryan v. BellSouth Communications, Inc., 377 F.3d 424 (4th Cir. 2004) ...................................................................................................27

Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341 (2001) ......................................................................................................... passim

California v. Volkswagen AG, No. 3:16-cv-03620 (N.D. Cal. June 27, 2016) .........................................................................23


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Chicago v. Int’l College of Surgeons, 522 U.S. 156 (1997) .....................................................................................................10, 15, 46

Christiansen v. Colt Industries Operating Corp., 486 U.S. 800 (1988) ................................................................................................................24

DeCarlo v. Archie Comic Publications, Inc., 11 Fed. App’x 26 (2d Cir. 2001) ..............................................................................................28

Devon Energy Production Co. v. Mosaic Potash Carlsbad, Inc., 693 F.3d 1195 (10th Cir. 2012) ...............................................................................................36

Down v. Flagstar Bank, F.S.B., No. 10-cv-847, 2011 WL 1326961 (E.D.Va. Apr. 4, 2011) ....................................................28

Easton v. Crossland Mortg. Corp., 114 F.3d 979 (9th Cir. 1997) .........................................................................................8, 21, 22

Engine Manufacturers Ass’n v. EPA, 88 F.3d 1075 (D.C. Cir. 1996) ......................................................................................... passim

Engine Manufacturers Ass’n v. South Coast Air Quality Management Dist., 541 U.S. 246 (2004) ...........................................................................................................14, 15

Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1 (1983) ...............................................................................................................15, 24

Grable & Sons Metal Products Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308 (2005) ......................................................................................................... passim

Great Northern Railway. Co. v. Alexander, 246 U.S. 276 (1918) .................................................................................................................41

Green Mountain Chrysler Plymouth Dodge Jeep v. Crombie, 508 F. Supp. 2d 295 (D. Vt. 2007)...........................................................................................14

Gully v. First National Bank in Meridian, 299 U.S. 109 (1936) .................................................................................................................16

Gunn v. Minton, 133 S. Ct. 1059 (2013) .......................................................................................................20, 37

Horowitz v. Marlton Oncology P.C., 116 F. Supp. 2d 551 (D.N.J. 1999) ....................................................................................19, 20

Jackson v. General Motors Corp., 770 F. Supp. 2d 570 (S.D.N.Y. 2011) ......................................................................................43


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Kunkel v. Topmaster International, Inc., 906 F.2d 693 (Fed. Cir. 1990)..................................................................................................27

League to Save Lake Tahoe v. B.J.K. Corp., 547 F.2d 1072 (9th Cir. 1976) .................................................................................................19

Lougy v. Volkswagen Group of America, Inc., Civ. No. 16-1670 (JLL), 2016 WL 3067686 (D.N.J. May 19, 2016) ......................................25

Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062 (9th Cir. 2008) .................................................................................................47

Martin v. Franklin Capital Corp., 546 U.S. 132 (2005) .................................................................................................................47

West Virginia ex rel. McGraw v. Eli Lilly & Co., 476 F. Supp. 2d 230 (E.D.N.Y. 2007) .....................................................................8, 17, 23, 42

Merrell Dow Pharmaceuticals Inc. v. Thompson, 478 U.S. 804 (1986) .............................................................................................................7, 24

Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, 136 S. Ct. 1562 (2016) ..................................................................................................... passim

Mitskovski v. Buffalo & Fort Eire Public Bridge Auth., 435 F.3d 127 (2d Cir. 2006).....................................................................................................27

Motor & Equipment Manufacturers Ass’n v. EPA, 627 F.2d 1095 (D.C. Cir. 1979) ....................................................................................... passim

Motor & Equipment Manufacturers Ass’n v. Nichols, 142 F.3d 449 (D.C. Cir. 1998) .................................................................................................18

Motor Vehicles Manufacturers Ass’n of the United States, Inc. v. New York Dep’t of Environmental Conservation, 17 F.3d 521 (2d Cir. 1994).......................................................................................................31

New York City Health & Hospitals Corp. v. WellCare of New York, 769 F. Supp. 2d 250 (S.D.N.Y. 2011) ................................................................................17, 38

Nevada v. Bank of America Corp., 672 F.3d 661 (9th Cir. 2012) ...................................................................................................20

Olguin v. Inspiration Consolidated Copper Co., 740 F.2d 1468 (9th Cir. 1984) .................................................................................................21

Ormet Corp. v. Ohio Power Co., 98 F.3d 799 (4th Cir. 1996) ............................................................................................. passim


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Osborn v. Bank of the United States, 22 U.S. 738 (1824) ...................................................................................................................16

Pacific Merchant Shipping Ass’n v. Goldstene, 517 F.3d 1108 (9th Cir. 2008) .................................................................................................43

Pan American Petroleum Corp. v. Superior Court of Delaware, 366 U.S. 656 (1961) .................................................................................................................40

In re Pharmaceutical Industry Average Wholesale Price Litigation, 457 F. Supp. 2d 77 (D. Mass. 2006) ..............................................................................7, 17, 44

Public School Teachers’ Pension & Retirement Fund of Chicago v. Guthart, No. 14-cv-1384, 2014 WL 2891563 (N.D. Cal. June 25, 2014) ..............................................21

Pullman Co. v. Jenkins, 305 U.S. 534 (1939) ...........................................................................................................40, 41

Rhode Island Fishermen’s Alliance, Inc. v. Rhode Island Dep’t of Environmental Management, 585 F.3d 42 (1st Cir. 2009) ............................................................................................7, 17, 24

Rodriguez v. Hovensa, 2014 WL 1308836 (D.V.I. Mar. 31, 2014) ..............................................................................20

San Diego Building Trades Council v. Garmon, 359 U.S. 236 (1959) .................................................................................................................36

Schroeder v. Trans World Airlines, 702 F.2d 189 (9th Cir. 1983) ...................................................................................................22

Seminole Tribe v. Florida, 517 U.S. 44 (1996) ........................................................................................................... passim

Shriners Hospitals for Children v. Wells Fargo Bank, N.A., No. 16-cv-3460, 2017 WL 57339 (N.D. Cal. Jan. 5, 2017) .....................................................20

Sierminski v. Transouth Financial Corp., 216 F.3d 945 (11th Cir. 2000) .................................................................................................41

Sims v. Florida Department of Highway Safety & Motor Vehicles, 862 F.2d 1449 (11th Cir. 1989) ...................................................................................13, 26, 43

Sparta Surgical Corp. v. Nat’l Ass’n of Sec. Dealers, Inc., 159 F.3d 1209, 1213 (9th Cir. 1998) .......................................................................................41

Tran v. Hous. Auth. of Los Angeles, 619 Fed. App’x 618 (9th Cir. July 15, 2015) ...........................................................................47


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United States v. Economy Muffler & Tire Center, Inc., 762 F. Supp. 1242 (E.D. Va. 1991) .........................................................................................18

United States v. Volkswagen AG, No. 16-cr-20394 (E.D. Mich. Jan. 11, 2017) .................................................................9, 34, 40

Williams v. Costco Wholesale Corp., 471 F.3d 975 (9th Cir. 2006) .......................................................................................15, 25, 41

Wisconsin Department of Industry, Labor & Human Relations v. Gould, Inc., 475 U.S. 282 (1986) ...................................................................................................6, 9, 31, 37

Wyoming v. Volkswagen Group of America, Inc., No. 16-cv-6646 (N.D. Cal. Nov. 1, 2016) ...............................................................................23

In re Zyprexa Prods. Liab. Litig., 375 F. Supp. 2d 170 (E.D.N.Y. 2005) .................................................................................8, 17

Statutes and Regulations

40 C.F.R. § 19.4 .............................................................................................................................32

40 C.F.R. § 86.1803-01 .......................................................................................................... passim

28 U.S.C. § 1367 ................................................................................................................10, 16, 46

28 U.S.C. § 1447 ............................................................................................................................47

42 U.S.C. § 7507 .................................................................................................................... passim

42 U.S.C. § 7524 .................................................................................................................... passim

42 U.S.C. § 7543 .................................................................................................................... passim

Ala. Admin Code R. 335-3-9 .........................................................................................................18

Cal. Health & Safety Code § 43211...............................................................................................32

Mass. Gen. Laws Ann. Ch. 111, § 142A. ......................................................................................35

Minn. Stat. § 8.31 .....................................................................................................................29, 34

Mo. Rev. Stat. § 643.151 ...............................................................................................................29

Mont. Admin. Rule 17.8.325 .........................................................................................................18

Mont. Code Ann. § 27-19-101 .........................................................................................................5

Mont. Code Ann. § 75-2-413 .........................................................................................................29


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Tenn. Code Ann. § 68-201-111 .....................................................................................................29

Tenn. Code Ann. § 68-201-112 .....................................................................................................18

Other Authorities

H.R. Rep. No. 90-728 (1967), reprinted in 1967 U.S.C.C.A.N. 1938 ..........................................44


-1- DEFENDANTS’ OPPOSITION TO THE 177 STATES’ JOINT MOTION TO REMAND, THE NON-177

STATES’ JOINT MOTION TO REMAND, AND VERMONT’S SUPPLEMENTAL MOTION TO REMAND

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SUMMARY OF ARGUMENT

The States’ motions to remand should be denied. Although nominally sounding

under state law theories, the environmental claims brought by the 14 states seeking remand and

the consumer protection claim brought by Vermont (together, the “States”) all raise substantial

federal law questions that warrant federal jurisdiction.1 The States contend that Defendants

violated certain of each State’s environmental laws (and, for Vermont, also its consumer

protection laws) by selling diesel vehicles that contained “defeat device” software causing them

to emit “excessive” nitrogen oxides in violation of federal environmental law. But the Clean Air

Act (“CAA”) reflects a federal legislative scheme in which “States” are barred from “adopt[ing]

or attempt[ing] to enforce any standard relating to the control of emissions from new motor

vehicles or new motor vehicle engines,” except to the extent that the CAA grants California the

right to set its own standards (and for states to elect to follow California’s standards). 42 U.S.C.

§ 7543.

The States’ attempt through these lawsuits to regulate new-vehicle manufacturing

using a jumbled hodgepodge of state-law standards demonstrates precisely why Congress

enacted a harmonized national system for regulating new-vehicle emissions. The idiosyncratic

standards, enforcement, and relief demanded by the States here would subject new-vehicle

manufacturers to a tangled mosaic of emissions regulation that would impede new-vehicle

manufacturing to the ultimate detriment of the American consumer. The States’ effort to

proceed this way raises a litany of federal questions under the CAA that should be addressed

1 The States comprise two groups that each filed joint motions to remand: (i) Maine, Maryland, Massachusetts, New York, Pennsylvania, and Vermont (together, the “177 States”), see Dkt. No. 2832; and (ii) Alabama, Illinois, Minnesota, Missouri, Montana, Ohio, New Hampshire, and Tennessee (together, the “Non-177 States”), see Dkt. No. 2834. Vermont also filed a supplemental motion to remand in support of its consumer-protection claim, to which this opposition also responds. See Dkt. No. 2835. Maine’s action had not been transferred to this Court at the time the 177 States’ motion to remand was filed. Nevertheless, because transfer was imminent, Maine was included in the 177 States’ brief, see 177 St. Mot. at 1 n.1, and Defendants therefore include in this opposition responses to Maine’s arguments. Oklahoma and New Mexico each separately filed motions to remand, to which Defendants have responded in separate briefs submitted herewith.




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uniformly by this federal MDL Court—not by 14 separate state courts. This Court should

decline the States’ invitation to inject chaos into the congressionally-mandated national system

for regulating new-vehicle emissions and thus deny the States’ motions to remand their actions.

Through the CAA, Congress empowered the United States Environmental

Protection Agency (“EPA”) with exclusive authority to regulate and enforce federal emissions

standards for new automobiles. The EPA has set limits for new-vehicle emissions of nitrogen

oxides (NOx) and has issued extensive regulations and guidance concerning so-called “defeat

devices,” i.e., certain types of devices that reduce the effectiveness of the emissions system

during normal vehicle operation. Under the oversight of this Court, Defendants have reached

historic settlements with the EPA to resolve claims that certain of Defendants’ new diesel

vehicles, sold nationwide, contained unlawful defeat devices that caused those vehicles to emit

NOx exceeding EPA standards.

The CAA and EPA regulations implement the extraordinarily strong federal

interest in setting standardized rules for new-vehicle emissions, to avoid the muddled thicket of

regulation and enforcement that would result if each state unilaterally set and enforced its own

standards. In Section 209 of the CAA, Congress left no room for any “State” “to adopt or

enforce any standard relating to the control of emissions from new motor vehicles” or to “require

certification, inspection, or any other approval relating to the control of emissions from any new

vehicle.” 42 U.S.C. § 7543(a) (emphasis added). The sole exception is that California, subject to

obtaining the EPA’s approval, may adopt and enforce its own new-vehicle standards; under

Section 177 of the CAA, other states may choose to adopt and enforce standards “identical to the

California standards.” 42 U.S.C. § 7507 (emphasis added). But no “State” can take any action,

“directly or indirectly,” that might create a “third vehicle” that complies with emissions

standards “different than a motor vehicle or engine certified in California” or by the EPA. Id.

The State plaintiffs fall into two broad categories. The 177 States have each

adopted California’s emissions standards, and are thus entitled to adopt and to enforce new-

vehicle emissions standards—if and only if those standards are “identical” to California’s. 42




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U.S.C. § 7507. On the other hand, the Non-177 States have not adopted California’s emissions

standards and are thus precluded by Section 209 from “adopt[ing] or attempt[ing] to enforce

any” “new-motor vehicle” “standard” at all. 42 U.S.C. § 7543(a).

Although the term “defeat device” is defined solely by federal law, and consumers

in each of the States have already been guaranteed relief secured by the EPA and the California

Air Resources Board (“CARB”) settlements in this Court, all of the States hope to further

penalize Defendants, under color of state law, for selling new vehicles containing defeat devices.

All the States seek to enforce their state environmental laws, directly or indirectly. Specifically,

the 177 States allege that Defendants’ vehicles violated California new-vehicle standards

adopted by each 177 State, thus giving rise to a claim for violation of state-law standards. All of

the Non-177 States try to enforce their environmental laws indirectly, relying on the fiction that a

manufacturer’s inclusion of a defeat device in a new vehicle violates state regulations governing

vehicles “in use,” including state “anti-tampering” laws. Vermont also brings consumer

protection claims under its deceptive-trade-practice statute, premised on the core notion that

Defendants marketed their new diesel vehicles as “green,” “clean,” or “environmentally

friendly,” when in fact those vehicles contained illegal defeat devices in violation of federal law.

Each State demands massive monetary penalties from Defendants—dwarfing the

penalties permitted under federal or California law—for vehicles and conduct already covered by

Defendants’ federal settlements with the EPA and other agencies. Many States also seek to

inject themselves into the design of Defendants’ future vehicles by seeking injunctive relief—

even though the CAA squarely dedicates new vehicle emissions oversight only to the EPA and to

California, and even though Defendants have already reached a settlement with the EPA, under

this Court’s auspices, providing for comprehensive supervision and other injunctive relief.

Defendants properly removed the States’ actions.

First, the Non-177 States’ claims all will require adjudication of questions of

federal law. See Section I, infra. Notwithstanding the CAA’s express retention of federal

authority, the core of the Non-177 States’ claims is that Defendants’ new vehicles were




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manufactured to include “defeat devices”—a term defined only by federal law, see 40 C.F.R.

§ 86.1803-01—that hid from the EPA that the vehicles’ emissions exceeded “federal” standards,

thereby misleading the “EPA” into certifying these vehicles for sale. (AL Compl. ¶¶ 50, 72, 79;

see also TN Compl. ¶¶ 6, 12). Artful pleading and recitation of state laws cannot change the fact

that the Non-177 States’ claims all implicate the inherently federal question of whether the

design of Defendants’ new vehicles violated federal emissions standards—a matter in which

state law can play no role. See, e.g., 42 U.S.C. § 7543(a) (states may not “enforce any standard”

concerning new-vehicle emissions); Arizona v. United States, 132 S. Ct. 2492, 2502 (2012)

(where comprehensive federal system exists, a state cannot “give itself independent authority to

prosecute federal . . . violations” even if the state “has the same aim as federal law and adopts its

substantive standards”). Federal-question jurisdiction exists where, as here, “state-law

claims . . . implicate significant federal issues.” Grable & Sons Metal Prods. v. Darue Eng’g &

Mfg., 545 U.S. 308, 312 (2005); see also Merrill Lynch, Pierce, Fenner & Smith Inc. v.

Manning, 136 S. Ct. 1562, 1569 (2016) (federal question jurisdiction where suit raising state-law

claim depends on plaintiff’s ability to “prove the violation of a federal duty”); Buckman Co. v.

Plaintiffs’ Legal Comm., 531 U.S. 341, 347 (2001) (“The relationship between a federal agency

and the entity it regulates is inherently federal in character because the relationship originates

from, is governed by, and terminates according to federal law”). Fundamentally, all of the Non-

177 States’ claims implicate the significant federal issues of whether a defeat device in a new

vehicle implicates a “standard” under the CAA that the states cannot seek to enforce.

Second, the relief sought by all of the States, the 177 States and the Non-177

States alike, also presents substantial federal questions and provides an independent basis to

uphold the removals. See Section II, infra. All of the 177 States seek both monetary penalties

and injunctive relief. For example, New York seeks to permanently enjoin Defendants from

selling any “new motor vehicle equipped with a defeat device or any new motor vehicle not

eligible for sale pursuant to emissions and environmental standards” in New York. (New York




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Complaint (“NY Compl.”), Prayer for Relief ¶ B).)2 Vermont additionally seeks monetary

penalties and injunctive relief under its consumer protection statute.3 And, certain of the Non-

177 States seek both monetary penalties and injunctive relief, including orders “[p]reliminarily

and permanently enjoining the Volkswagen Defendants from any future violations of [the state’s]

Mobile Source Regulations”—all premised on the theory that a manufacturer’s use of a “defeat

device” in a new vehicle constitutes “tampering” in violation of those federal regulations.

(Illinois Complaint (“IL Compl.”) ¶ 2.)4 By their terms, each of these pleas for injunctive relief

potentially could inject the States and their courts into determining the adequacy of any national

defeat device “fix” approved by the EPA and California, overseen by this Court, and to bar

Defendants from installing “defeat devices” in new vehicles in the future—conduct squarely

governed by the CAA and EPA regulations. Federal jurisdiction applies to lawsuits—such as

these—seeking “prospective injunctive relief in order to end a continuing violation of federal

law.” Seminole Tribe v. Fla., 517 U.S. 44, 73 (1996).

The States’ claims for monetary penalties also raise federal questions. Although

the 177 States adopted California’s standards, none adopted penalties for violations of new-

vehicle standards identical to those imposed by California (only up to $5,000 per violative

vehicle during the relevant period). Instead, each 177 State seeks to impose its own generic air-

pollution penalties, which are consistently higher than California’s specific penalty for new-

vehicle emissions violations. For example, Massachusetts and Pennsylvania seek fines of

2 See also Massachusetts Complaint (“MA Compl.”), Prayer for Relief ¶ A; Maryland Complaint (“MD Compl.”), Prayer for Relief ¶ A; Maine Complaint (“ME Compl.”), Prayer for Relief ¶ B; Pennsylvania Complaint (“PA Compl.”), Prayer for Relief ¶ B; Vermont Complaint (“VT Compl.”), Relief Sought ¶ 4 (all seeking permanent injunctions against, inter alia, sales of new motor vehicles).

3 See VT Compl., Relief Sought ¶ 4 (seeking to “permanently enjoin[ ] Defendants . . . from future violations of the . . . Vermont Consumer Protection Act including . . . installing defeat devices in vehicles” and selling or leasing vehicles that exceed “applicable NOx and/ or NOx/NMOG emissions standards”).

4 See also MONT. CODE ANN. §§ 27-19-101, 75-2- 413(2)(a) (2015); MT Compl. ¶ 72 (requesting “injunctions prohibiting Defendants from continuing” to violate Montana’s anti-tampering provisions).




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$25,000 per day per violation (MA Compl., Prayer for Relief, ¶ C; PA Compl., Prayer for Relief,

¶ E), and Vermont seeks penalties of $85,000 for each violation and up to an additional $42,500

for each day that a violation “continues” (VT Compl. ¶ 43). Whether CAA Section 177 requires

that states adopting California standards also apply California’s penalties (rather than imposing

their own idiosyncratic penalty regimes) presents a question of federal law. See Amalg. Ass’n of

St., Elec. Ry. & Motor Coach Emp. v. Lockridge, 403 U.S. 274, 287 (1971) (the “range and

nature of those remedies that are and are not available is a fundamental part” of a regulatory

system).

The Non-177 States also demand penalties that intrude upon EPA’s discretion and

ability to impose an appropriate federal remedy for a violation of federal standards, after

considering factors specified by Congress. See 42 U.S.C. § 7524 (setting statutory cap on

penalties imposable by EPA and listing factors to be considered in setting penalty); Wis. Dep’t of

Indus., Labor & Human Rels. v. Gould, Inc., 475 U.S. 282, 288-89 (1986) (state statutes

penalizing violations of federal law “incrementally diminish[] the [National Labor Relations]

Board’s control over enforcement of the NLRA and thus further detract from the ‘integrated

scheme of regulation’ created by Congress”); cf., e.g., IL Compl. p. 8 ¶ 3 (Illinois seeks penalties

of $50,000 per violation plus $10,000 per day per violation). Defendants are aware of no

precedent for a state (other than California) imposing monetary penalties for violations of new-

vehicle emissions standards. Remanding these actions would lead to each state court

adjudicating the scope of the CAA and what incremental penalties each state can assess for what

are, at their core, violations of federal law. This ultimately would create a patchwork regulatory

regime antithetical to the CAA’s carefully delineated scheme.

Third, federal jurisdiction is appropriate here under Grable, 545 U.S. 308,

because the federal issues here are necessary, substantial and actually disputed, and because

resolution of these issues in federal court will not disrupt any congressional policy governing the

responsibilities of the federal and state courts. See Section III, infra. Grable affirmed the

removal of a state-law action that required interpretation of “the meaning of [a] federal tax




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provision,” “an important issue of federal law that sensibly belongs in a federal court.” Id. at

315. Here, the CAA was enacted to avoid “the spectre of an anarchic patchwork of federal and

state regulatory programs.” Engine Mfrs. Ass’n, 88 F.3d at 1078-79. Yet the States seek to

undercut the efficacy of the harmonious CAA scheme by imposing a mosaic of disparate

enforcement standards. Like Grable, therefore, “federal jurisdiction is consistent with

congressional judgment about the sound division of labor between state and federal courts.” 545

U.S. at 313. As the Fourth Circuit recognized when finding federal-question jurisdiction over a

state-law dispute over emissions allowances for power stations under the CAA, where “the

resolution of a federal issue in a state-law cause of action could, because of different approaches

and inconsistency, undermine the stability and efficiency of a federal statutory regime, the need

for uniformity becomes a substantial federal interest, justifying the exercise of jurisdiction by

federal courts.” Ormet Corp. v. Ohio Power Co., 98 F.3d 799, 807 (4th Cir. 1996) (citation

omitted).

* * *

The States offer several arguments in favor of remand, none of which is

persuasive. The States first seek to confuse the issue by mischaracterizing Defendants’

arguments in support of federal jurisdiction as mere federal preemption defenses. (See Non-177

St. Mot. at 11-12; 177 St. Mot. at 14.) But the questions of whether federal jurisdiction exists

and whether the States’ claims are preempted are distinct; the rule is simply that a federal

defense, such as preemption, cannot be the basis to find federal jurisdiction. See Merrell Dow

Pharms. Inc. v. Thompson, 478 U.S. 804, 808 (1986). Thus, the First Circuit has found federal-

question jurisdiction even where “there may well be a preemption defense lurking in the wings.”

R.I. Fishermen’s Alliance, Inc. v. R.I. Dep’t of Envtl. Mgmt., 585 F.3d 42, 50 (1st Cir. 2009). To

be sure, Defendants believe that the CAA preempts each State’s claims or relief and will assert a

federal preemption defense in whichever court—federal or state—hears the merits of these cases.

But the States cite no case holding that the existence of a federal defense precludes the existence

of federal jurisdiction. To the contrary, federal courts have denied remand motions filed by




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States in the context of complex federal schemes where there is “a substantial federal issue that

properly belongs in federal court.” In re Pharm. Indus. Avg. Wholesale Price Litig., 457 F.

Supp. 2d 77, 80 (D. Mass. 2006) (denying Arizona’s remand motion where interpretation of

federal Medicare scheme at issue); see also W.Va. v. Eli Lilly & Co., 476 F. Supp. 2d 230, 234

(E.D.N.Y. 2007) (denying West Virginia’s motion to remand state-law claim where federal

questions at issue that “encompass a broad range of federal regulatory and funding provisions”

under the federal Medicaid scheme); In re Zyprexa Prods. Liab. Litig., 375 F. Supp. 2d 170, 172-

73 (E.D.N.Y. 2005) (denying Louisiana’s motion to remand where complaint “contain[ed]

numerous references to alleged violations of federal law” and “raise[d] important federal

questions”).

The Non-177 States also claim that “the States’ complaints, on their faces, do not

assert a federal cause of action” (Non-177 St. Mot. at 5) and that they merely apply “in-use”

regulations that “the CAA clearly delegates to the states” (id. at 22). Specifically, under 42

U.S.C. § 7543(d), states may “control, regulate, or restrict the use, operation or movement of

registered or licensed motor vehicles.” The Non-177 States thus assert claims under their anti-

tampering and inspection and maintenance (“I&M”) state laws generally applicable to all

vehicles that are in “use” on their roads. But these claims depend explicitly on proving that

Defendants’ new vehicles were manufactured to include “defeat devices”—a term exclusively

defined by federal law, see 40 C.F.R. § 86.1803-01—and that the vehicles are alleged to have

violated federal emissions standards when they rolled off the assembly line. These claims,

although facially reliant only on state law, plainly “arise” under federal law because the “very

success depends on giving effect to a federal requirement.” Manning, 136 S. Ct. at 1570. “[I]n

addition to examining the literal language selected by the plaintiff, the district court must analyze

whether jurisdiction would exist under a properly pleaded complaint.

“A plaintiff may not avoid federal jurisdiction by omitting from the complaint

federal law essential to his or her claim or casting in state law terms a claim that can only be

made under federal law.” Easton v. Crossland Mortg. Corp., 114 F.3d 979, 982 (9th Cir. 1997).




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Here, the Non-177 States’ claims are nominally brought under anti-tampering and inspection and

maintenance (“I&M”) state laws. Because these anti-tampering and I&M claims “rise[] or fall[]

on the plaintiff’s ability to prove the violation of a federal duty,” they thus necessarily “arise”

under federal law. Manning, 136 S. Ct. at 1569. And, the Non-177 States’ claims necessarily

raise the federal question of where CAA Section 209 draws the line between permissible state

“in-use” regulation and its explicit prohibition on states “adopt[ing] or attempt[ing] to enforce

any standard relating to the control of emissions from new motor vehicles.” 42 U.S.C.

§§ 7543(a), (d).

Fundamentally, the States’ arguments ignore the effect of their cumulative

demands for massive penalties and other relief on the functioning of the federal scheme. The

States seek to further penalize the same conduct for which the federal government has already

penalized Defendants, and to layer more injunctive relief atop extensive, carefully crafted federal

remedial measures. Under this Court’s supervision, the EPA has agreed with Defendants on a

buyback recall and an emissions modification recall—worth well over $10 billion—as well as a

$2.925 billion payment that goes well beyond full remediation for excess emissions, and a

$2 billion investment in zero emission vehicles; Defendants have also agreed to a civil penalty of

$1.45 billion dollars to resolve the EPA’s (and the U.S. Customs and Border Protection’s) civil

penalty claims; and the Department of Justice has also obtained a criminal plea agreement under

which Volkswagen will pay a criminal penalty of $2.8 billion, plead guilty to three statutory

violations, and agree to a corporate monitor for three years.5 Allowing each State to adjudicate

the applicability of a huge, separate penalty scheme would “incrementally diminish[]” the EPA’s

authority over the CAA, “and thus further detract[] from the ‘integrated scheme of regulation’

created by Congress.” Gould, 475 U.S. at 288-89 (supplemental state-law sanction for federal

5 See First Partial Consent Decree, MDL No. 2672 CRB (JSC), Dkt No. 2103-1, at 3-4 (Oct. 25, 2016); Second Partial Consent Decree, MDL No. 2672 CRB (JSC), Dkt. No. 2520-1, at 15-16 (Dec. 20, 2016)); Third Partial Consent Decree, MDL No. 2672 CRB (JSC), Dkt. No. 2758-1 ¶¶ 9, 90 (Jan. 11, 2017)); Rule 11 Plea Agreement, United States v. Volkswagen AG, No. 16-cr-20394, (E.D. Mich. Jan. 11, 2017), Declaration of Morgan A. Costello (N.Y. Decl.), Ex. C.




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labor-law violations “diminishe[d] the [National Labor Relations] Board’s control over

enforcement of [statute] and thus . . . detract[ed] from the integrated scheme of regulation created

by Congress”); see also Buckman, 531 U.S. at 348 (federal agencies use their enforcement

powers “to achieve a somewhat delicate balance of statutory objectives . . . [and that balance]

can be skewed by [supplemental state enforcement]”).

* * *

Each State asserts claims or requests for relief that give rise to federal jurisdiction,

which warrants the exercise of federal jurisdiction over and the removal of each case.6 The

States’ motions to remand their actions to their respective state courts should be denied.

BACKGROUND

A. The Complaints

1. The 177 States

Each of the 177 States filed a pleading in its respective state court between July

19, 2016 and December 29, 2016. Each alleges that Defendants employed “defeat devices” in

certain new diesel vehicles that caused those vehicles to pass emissions tests but to emit

excessive NOx while in normal vehicle operation and use.7 None of the 177 States’ pleadings

points to a definition of “defeat device” under any state’s law. Cf. 40 C.F.R. § 86.1803-01 (EPA

regulation generally defining “defeat device” as a device that “reduces the effectiveness of the

emissions control system under conditions that may reasonably be expected to be encountered in

normal vehicle operation and use”). Yet each of the 177 States seeks civil penalties and

injunctive relief for Defendants’ alleged violations of state environmental laws.

Vermont also alleges that the Defendants’ concealment of the “defeat devices” in

certain new diesel vehicles, and marketing of such vehicles as “green” or environmentally 6 It is axiomatic that where federal question jurisdiction exists over any one of the claims in a removed action, the Court possesses federal jurisdiction over the case as a whole. See 28 U.S.C. § 1367(a); Chicago v. Int’l Coll. of Surgeons, 522 U.S. 156, 165 (1997).

7 See MA Compl. ¶ 2; MD Compl. ¶¶ 5, 208; ME Compl. ¶¶ 2, 42, 49, 98; NY Compl. ¶¶ 37, 185-186; PA Compl. ¶ 78, 99, 111; VT Compl. ¶¶ 80, 203.




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friendly was a deceptive practice that violated the Vermont Consumer Protection Act and seeks

civil penalties and injunctive relief for the violations of its consumer protection laws.8

2. The Non-177 States

Each of the Non-177 States filed a pleading in its respective state courts between

September 15, 2016 and December 15, 2016. Like the 177 States, all the Non-177 States’

pleadings allege that illegal “defeat devices” were included in certain new diesel vehicles sold by

Defendants to deceive emissions tests. But none of the Non-177 States’ pleadings points to a

definition of “defeat device” under any state’s law.

Based on these allegations, the Non-177 States allege three sets of claims. Ohio

and Missouri allege that Defendants violated state environmental protection laws by installing

the defeat devices in their vehicles at the time of manufacture, “before sale and delivery” of the

vehicles in those states. (Ohio Complaint (“OH Compl.”) ¶ 111; Missouri Petition (“MO Pet.”) ¶

94.) All of the Non-177 States bring claims under their respective “anti-tampering” laws based

on Defendants’ sale of vehicles with “defeat devices,” which caused the vehicles to produce

excessive NOx emissions.9 And Tennessee and Missouri allege that the installation of “defeat

devices” violated state inspection & maintenance laws because they “falsifie[d], tamper[ed] with,

or render[ed] inaccurate the [on-board diagnostic systems’] ability to produce an accurate

assessment during the annual state I&M testing.” (TN Compl. ¶ 102; see also MO Pet. ¶ 58, 161

(citing state I&M regulations).)

8 See VT Compl. ¶ ¶ 236-37; id., Relief Sought ¶ 4.

9 See Alabama Complaint (“AL Compl.”) ¶¶ 21, 32-33; New Hampshire Complaint (“NH Compl.”) ¶ 22; Tennessee Complaint (“TN Compl.”) ¶¶ 19-21; MO Pet. ¶¶ 36, 106; OH Compl. ¶¶ 22-26; IL Compl. ¶¶ 8-11; Minnesota Complaint (“MN Compl.”) ¶¶ 20-21; Montana Complaint (“MT Compl.”) ¶ 15.




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B. Procedural Posture

The actions were removed as set forth in the following table. Each of these

removed cases was transferred to this Court. None of the States contends that Defendants’

removal was untimely. State Date

Action Filed

Court (Initial Pleading)

State Docket No.

Date of Removal

Federal Docket No. (Removal Court)

Federal Docket No. (MDL)

Alabama Sept. 15, 2016

Circuit Court of Jefferson County, Alabama, for the Tenth Judicial Circuit at Birmingham

01-CV-2016903390

Oct. 14, 2016

2:16-cv-01681 (N.D. Ala.)

3:16-cv-06389-CRB

Illinois Nov. 7, 2016

Circuit Court for Cook County, Illinois, Chancery Division

16-CH-14507

Dec. 7, 2016

1:16-cv-11160 (N.D. Ill.)

3:16-cv-07370-CRB

Maine Dec. 29, 2016

Superior Court, Kennebec County, Maine

CV-2016-242

Jan. 27, 2017

1:17-cv-00038 (D. Me.)

3:17-cv-00784-CRB

Maryland July 19, 2016

Circuit Court for Baltimore City, Maryland

24-C-16004114

Aug. 18, 2016

1:16-cv-02921 (D. Md.)

3:16-cv-05090-CRB

Mass. July 19, 2016

Superior Court of the Commonwealth of Massachusetts, Suffolk County

16-2266D Aug. 18, 2016

1:16-cv-11690 (D. Mass.)

3:16-cv-05088-CRB

Minn. Dec. 8, 2016

District Court for Hennepin County, Minnesota, Fourth Judicial District

27-CV-16-17753

Dec. 22, 2016

0:16-cv-04337 (D. Minn.)

3:17-cv-00187-CRB

Missouri Oct. 17, 2016,

22nd Judicial Circuit Court of St. Louis City, Missouri

1622-CC10852

Nov. 15, 2016

4:16-cv-01778 (E.D. Mo.)

3-16-cv-06938-CRB

Montana Dec. 15, 2016

First Judicial District Court for Lewis and Clark County, Montana

DDV 2016-1045

Jan. 12, 2017

6:17-cv-00003 (D. Mont.)

3:17-cv-00471-CRB

New Hamp.

Sept. 15, 2016

Superior Court of Merrimack County, New Hampshire

217-2016-CV-00558

Oct. 14, 2016

1:16-cv-00457 (D. N.H.)

3:16-cv-06387-CRB

New York

July 19, 2016

Supreme Court of the State of New York, Albany County

904021/16

Aug. 17, 2016

1:16-cv-01005 (N.D.N.Y.)

3:16-cv-05089-CRB

Ohio Oct. 26, 2016

Court of Common Pleas, Franklin County, Ohio

16-CV-010206

Nov. 22, 2016

2:16-cv-01119 (S.D. Oh.)

3:16-cv-07157-CRB




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State Date Action Filed

Court (Initial Pleading)

State Docket No.

Date of Removal

Federal Docket No. (Removal Court)

Federal Docket No. (MDL)

Penn. Aug. 1, 2016

Commonwealth Court of Pennsylvania

423 MD 2016

Aug. 24, 2016

1:16-cv-01765 (M.D. Pa.)

3:16-cv-05159-CRB

Tenn. Sept. 28, 2016

Chancery Court of Davidson County, Tennessee, for the Twentieth Judicial District at Nashville

16-1044-III

Oct. 21, 2016

3:16-cv-02767 (M.D. Tenn.)

3:16-cv-06546-CRB

Vermont Sept. 8, 2016

Superior Court of the State of Vermont, Washington Unit

536-9-16 Oct. 7, 2016

2:16-cv-00269 (D. Vt.)

3:16-cv-06299- CRB

C. Regulatory Background

Federal law provides distinct roles for the federal government and the states in

fighting air pollution. The “CAA contemplated that the states would carry out their

responsibility chiefly by regulating stationary sources, such as factories and power plants.”

Engine Mfrs. Ass’n v. EPA, 88 F.3d 1075, 1078-79 (D.C. Cir. 1996). But “[i]n contrast to

federally encouraged state control over stationary sources, regulation of motor vehicle emissions

ha[s] been a principally federal project.” Id. at 1079. “The regulatory difference is explained in

part by the difficulty of subjecting motor vehicles, which readily move across state boundaries,

to control by individual states.” Id. Indeed, “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.’” Id. (quoting Motor &

Equip. Mfrs. Ass’n v. EPA, 627 F.2d 1095, 1109 (D.C. Cir. 1979)).

For new vehicles, Congress has “expressed its intent to occupy the regulatory role

over emissions control to the exclusion of all the states . . . except California.” Motor & Equip.

Mfrs. Ass’n, 627 F.2d at 1109. Specifically, Section 209 of the CAA prohibits states and their

political subdivisions from “adopt[ing] or attempt[ing] to enforce any standard relating to the

control of emissions from new motor vehicles or new motor vehicle engines” and from

“requir[ing] certification, inspection, or any other approval relating to the control of emissions

from any new motor vehicle or new motor engine.” 42 U.S.C. § 7543(a).




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Section 209 “was intended to have a broad preemptive effect” and to foreclose

state-law claims “relating to” emissions by new vehicles. In re Office of Attorney Gen. of State

of N.Y., 269 A.2d 1, 8-10 (N.Y. App. Div. 1st Dep’t 2000) (emphasis in original) (state could not

bring “common-law claim . . . for fail[ure] to comply with federal [emissions] standards” or

“provid[e] their own regulatory or judicial remedies for conduct prohibited or arguably

prohibited by [the CAA]”); Sims v. Fla. Dep’t of Highway Safety & Motor Vehicles, 862 F.2d

1449, 1455 (11th Cir. 1989) (CAA § 209 “indicates Congress’s intent to exclusively regulate the

control of new motor vehicle emissions prior to their initial sale”). The “clear and undisputed

intent of Congress” was to create a harmonized federal scheme, thereby “avoiding a chaotic

situation from developing where vehicle manufacturers would be subject to 50 different sets of

requirements relating to emissions controls.” In re Office of Attorney Gen, 269 A.2d at 11

(alterations, citations, and internal quotation marks omitted).

The CAA creates only one exception to total federal control of new-car emissions:

California may adopt its own standards and enforcement procedures if the EPA “determines that

the State standards will be, in the aggregate, at least as protective of public health and welfare as

applicable Federal standards.” 42 U.S.C. § 7543(b)(1). Thus, the EPA must review and

authorize California’s proposed standards and enforcement procedures to ensure that they are not

arbitrary and capricious and are consistent with federal law. See 42 U.S.C. § 7543(b)(1)(A)-(C).

Because of this review and approval process, “once EPA issues a waiver for a California

emissions standard, it becomes a motor vehicle standard of the government, with the same

stature as a federal regulation.” Green Mtn. Chrysler Plymouth Dodge Jeep v. Crombie, 508

F. Supp. 2d 295, 347 (D. Vt. 2007) (noting that Congress “could not have intended that an EPA-

approved emissions reduction regulation did not have the force of a federal regulation”).

Congress slightly relaxed its strict “California only” rule by enacting Section 177

of the CAA, 42 U.S.C. § 7507. Under Section 177, if the EPA grants a waiver with respect to

certain California standards, then other states may adopt and enforce standards “identical” to the

EPA-approved California standards. 42 U.S.C. § 7507. But such states cannot adopt or enforce




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non-“identical” emissions standards, “prohibit or limit, directly or indirectly, the manufacture or

sale of a new motor vehicle . . . certified in California as meeting California standards, or take

any action of any kind to create, or have the effect of creating, a motor vehicle . . . different than

a motor vehicle . . . certified in California under California standards (a ‘third vehicle’) or

otherwise create such a ‘third vehicle.’” Id.

The terms “standards,” “enforcement procedures,” and “enforce” in the CAA

have particular meanings. As the Supreme Court has explained, “the standards themselves are

separate from [the] enforcement techniques,” Engine Mfrs. Ass’n v. S. Coast Air Quality Mgmt.

Dist., 541 U.S. 246, 253 (2004), and “the distinction between standards and accompanying

enforcement procedures is a meaningful one.” Motor & Equip. Mfrs. Ass’n, 627 F.2d at 1113.

The word “standards” in Section 209 of the CAA means “quantitative levels of emissions,” while

“enforcement procedures” refer to “regulations involving certification or in-use maintenance

restrictions.” Motor & Equip. Mfrs. Ass’n, 627 F.2d at 1112. And, an “‘attempt to enforce’ a

‘standard’” is a “command, accompanied by sanctions,” that vehicles with particular emissions

characteristics may not be purchased or sold. Engine Mfrs. Ass’n, 541 U.S. at 255; see also, e.g.,

In re Office of Attorney Gen, 269 A.2d at 10 (under Section 209 of the CAA, states may not

“provid[e] their own regulatory or judicial remedies for conduct prohibited or arguably

prohibited by Federal [emissions] law”).

Here, each of the 177 States asserts that it has adopted California’s new-vehicle

emissions standards under state law.10

ARGUMENT

The Non-177 States’ substantive claims, and the relief sought by the 177 States

and the Non-177 States give rise to federal-question jurisdiction.11 For each State, at least one

10 See MA Compl. ¶ 236; MD Compl. ¶ 190; ME Compl. ¶ 103; NY Compl. ¶ 249; PA Compl. ¶ 126; VT Compl. ¶ 30. Maryland first adopted California emissions standards for model year 2011 vehicles. See MD Compl. ¶¶ 189-91.

11 In opposing remand, Defendants are not limited to the grounds set forth in their Notices of Removal. See Williams v. Costco Wholesale Corp., 471 F.3d 975, 977 (9th Cir. 2006) (“Once




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claim or form of requested relief implicates a federal question. Accordingly, these matters were

properly removed and the motions to remand brought by the 177 States and Non-177 States and

Vermont’s supplemental motion to remand should be denied.12

The Supreme Court has long recognized that “in certain cases federal-question

jurisdiction will lie over state-law claims that implicate significant federal interests.” Grable,

545 U.S. at 312. “This doctrine captures the commonsense notion that a federal court ought to

be able to hear claims recognized under state law that nonetheless turn on substantial questions

of federal law, and thus justify resort to the experience, solicitude, and hope of uniformity that a

federal forum offers on federal issues.” Id. However, there is no “single, precise, all-embracing

test” for jurisdiction over federal issues embedded in a state-law claim. Id. at 314 (internal

quotation marks omitted). Rather, courts bring a “‘common-sense accommodation of judgment

to [the] kaleidoscopic situations’ that present a federal issue, in ‘a selective process that picks the

substantial causes out of the web and lays the other ones aside.’” Id. at 313 (quoting Gully v.

First Nat’l Bank in Meridian, 299 U.S. 109, 117-18 (1936)).

Federal-question jurisdiction lies over a state-law claim that “necessarily raises a

stated federal issue, actually disputed and substantial, which a federal forum may entertain

without disturbing any congressionally approved balance of federal and state judicial

responsibilities.” Grable, 545 U.S. at 314. For instance, it is well-settled that a “suit raising a

state-law claim [that] rises or falls on the plaintiff’s ability to prove the violation of a federal

duty” gives rise to federal jurisdiction. Manning, 136 S. Ct. at 1569; see also, e.g., Osborn v.

Bank of the United States, 22 U.S. 738, 822 (1824) (federal jurisdiction lies where plaintiff’s

a case has been properly removed, the district court has jurisdiction over it on all grounds apparent from the complaint, not just those cited in the removal notice.”).

12 See, e.g., Int’l Coll. of Surgeons, 522 U.S. at 165 (“Here, once the case was removed, the District Court had original jurisdiction over ICS’ claims arising under federal law, and thus could exercise supplemental jurisdiction over the accompanying state law claims so long as those claims constitute ‘other claims that . . . form part of the same case or controversy.’”) (quoting 28 U.S.C. § 1367(a)); Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 13 (1983) (“[I]f either [of two causes of action in complaint] comes within the original jurisdiction of the federal courts, removal was proper as to the whole case.”).




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claim “may be defeated by one construction of the constitution or law of the United States, and

sustained by the opposite construction”).

In actions brought by states alleging state-law claims in the context of federal

regulatory schemes, federal courts have denied the states’ remand motions and found federal-

question jurisdiction where the states’ complaints “contain[ed] numerous references to alleged

violations of federal law,” argued that the defendant “violated federal regulations by marketing,”

and “raise[d] important federal questions.” In re Zyprexa, 375 F. Supp. 2d at 172-73 (denying

Louisiana’s remand motion). For example, West Virginia’s motion to remand a state-law claim

was denied where it presented federal questions that “encompass a broad range of federal

regulatory and funding provisions” under the federal Medicaid scheme. Eli Lilly & Co., 476 F.

Supp. 2d at 234. Arizona’s motion to remand likewise was denied when the meaning of a term

in the federal Medicare statute was “a substantial federal issue that properly belongs in federal

court.” In re Pharm. Indus. Avg. Wholesale Price Litig., 457 F. Supp. 2d at 80. Remand also

was denied when a New York public-benefit corporation’s state-law contract claim required

adjudication in light of “[t]he complex federal regulatory scheme” applicable to Medicare. N.Y.

City Health & Hosps. Corp. v. Wellcare of N.Y., 769 F. Supp. 2d 250, 259 (S.D.N.Y. 2011). See

also R.I. Fishermen’s Alliance, Inc. v. R.I. Dep’t of Envtl. Mgmt., 585 F.3d 42, 49 (1st Cir. 2009)

(remand denied where Rhode Island official’s authority depended on an “antecedent (and

embedded) federal question”). Remand should similarly be denied here.

I. THE NON-177 STATES’ CLAIMS RAISE A FEDERAL QUESTION.

The Non-177 States bring three types of claims, as described above, each of

which necessarily implicates questions of federal law: (i) claims under state anti-tampering laws,

(ii) claims under state I&M laws, and (iii) claims for violations of state environmental protection

laws.




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A. The Non-177 States’ Anti-Tampering and I&M Claims Raise Federal Questions.

All the Non-177 States assert claims under their state anti-tampering laws or I&M

laws.13 Notwithstanding that the CAA explicitly prohibits any “State” from “adopt[ing] or

attempt[ing] to enforce any standard relating to the control of emissions from new motor

vehicles,” 42 U.S.C. § 7543(a), the Non-177 States argue that these claims are grounded in their

authority under the CAA to regulate “in-use” emissions by motor vehicles. (See Non-177 St.

Mot. at 21-22.) As a threshold matter, this argument misconstrues the Non-177 States’

pleadings. The States allege that Volkswagen installed the “defeat devices” in new vehicles at

the time of manufacture, not while the vehicles were in use.14 Even putting aside that the Non-

177 States do not properly allege an “in use” violation, the Non-177 States’ claims raise federal

questions requiring construction and application of the CAA, because they depend upon alleging

and proving that the design of Defendants’ vehicles violated federal emissions standards at the

time of manufacture.

State anti-tampering laws generally prohibit modifying vehicle features following

installation by the manufacturer, such as disabling the emissions or engine-monitoring systems.15

“The states regulate automobiles after they have been purchased by consumers through

13 AL Compl. ¶ 91 (anti-tampering claim); NH Compl. ¶ 22 (anti-tampering claim); TN Compl. ¶¶ 99-108 (anti-tampering and I&M claims); MO Pet. ¶¶ 58, 161 (anti-tampering and I&M claims); OH Compl. ¶¶ 110-115 (two anti-tampering claims); IL Compl. ¶ 26 (anti-tampering claim); MN Compl. ¶ 65-72 (two anti-tampering claims); MT Compl. ¶ 68-71 (anti-tampering claim).

14 See, e.g., TN Compl. ¶ 56 (“The Defendant manufactured the Unlawful Vehicles . . . with one or more defeat devices that were not revealed or disclosed to state or federal regulators before the Unlawful Vehicles were entered into commerce and placed for sale in Tennessee.” (emphasis added)).

15 See, e.g., ALA. ADMIN. CODE. R. 335-3-9-.06 (“no person shall cause, suffer, allow, or permit the removal, disconnection, and/or disabling of a positive crankcase ventilator, exhaust emission control system, or evaporative loss control system which has been installed on a motor vehicle” (emphasis added)); MONT. ADMIN. R. 17.8.325(1) (“No person shall intentionally remove, alter or otherwise render inoperative, exhaust emission control, crank case ventilation or any other air pollution control device which has been installed as a requirement of federal law or regulation”) (emphasis added)).




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inspection and maintenance programs . . . [which] are designed to identify and ensure the repair

of in-use automobiles that are emitting excessive pollutants.” Motor & Equip. Mfrs. Ass’n v.

Nichols, 142 F.3d 449, 452–53 (D.C. Cir. 1998)16 Anti-tampering statutes are thus directed

towards mechanics or customers making improper modifications after the original sale, not

features installed in new vehicles by the manufacturer. See United States v. Econ. Muffler &

Tire Ctr., Inc., 762 F. Supp. 1242, 1244 (E.D. Va. 1991) (anti-tampering violation where repair

shop replaced factory-installed three-way catalytic converters with two-way catalytic

converters).

The Non-177 States’ anti-tampering and I&M claims cannot be adjudicated

without resolution of federal questions under the CAA’s regulatory scheme. The basis of the

States’ anti-tampering and I&M claims is that certain of Defendants’ new vehicles were

manufactured to include “defeat devices”—a term defined solely by federal law, see 40 C.F.R.

§ 86.1803-01—that impeded the discovery by the EPA that these vehicles’ emissions exceeded

federal standards. (See, e.g., OH Compl. ¶ 2 (“Volkswagen used defeat devices . . . to conceal

the fact that the vehicles did not comply, or come close to complying, with applicable state and

federal emissions standards”) (emphasis added); MT Compl. ¶ 40 (“The installation of defeat

devices . . . and the resulting tests showing conformity with the federal emissions standards for

NOx, enabled Defendants to falsely certify that the Subject Vehicles conformed to those

standards. This led the federal EPA to approve the [certificates of conformity] for these

vehicles.” (emphasis added).)

These claims raise multiple federal questions under the CAA and EPA

regulations, including whether the CAA allows an “in-use” claim to be predicated on a “defeat

device” installed at the time of manufacture, whether the CAA permits an “in-use” claim to be

16 See, e.g., TENN. CODE ANN. § 68-201-112(a)(3) (penalizing “any person who knowingly . . . [f]alsifies, tampers with, or renders inaccurate any monitoring device or method required to be maintained or followed”); see also TN Compl. ¶ 66 (“Tennessee has I & M testing programs in six counties that require all registered motor vehicles to pass periodic annual inspection tests” (emphasis added)).




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predicated on a violation of federal emissions standards for new vehicles, and where federal

authority to set manufacturing standards ends and state authority to prohibit tampering of and to

inspect “in-use” vehicles begins. Federal question jurisdiction exists where, as here, a state-law

claim depends upon the interpretation or application of federal law. For example, in Grable, the

Supreme Court upheld the removal of the state-law action as presenting a federal question

because the validity of an IRS notice was an “essential element of [the] claim.” 545 U.S. at 315;

see also, e.g., League to Save Lake Tahoe v. B.J.K. Corp., 547 F.2d 1072, 1075 (9th Cir. 1976)

(“questions concerning the interpretation and application of [interstate] ordinances present

federal questions”); see also Ormet Corp. v. Ohio Power Co., 98 F.3d 799, 807 (4th Cir. 1996)

(federal jurisdiction where state law claim depended on meaning of term “owner” in CAA).17

Federal jurisdiction is warranted here because, as set forth by the Supreme Court

in Grable, each Non-177 State’s complaint “necessarily raise[s] a stated federal issue, actually

disputed and substantial, which a federal forum may entertain without disturbing any

congressionally approved balance of federal and state judicial responsibilities.” 545 U.S. at 314.

The Non-177 States claim that Grable “should not apply” to their claims because the Grable

parties supposedly “contested one, narrow, legal question.” (Non-177 St. Mot. at 10.) Tellingly,

the 177 States, New Mexico or Oklahoma, all cite and apply Grable and do not join the Non-177

States’ argument. In fact Grable is commonly cited by courts determining whether a federal

17 The Non-177 States argue that the fact that a state-law claim is based on a federally-defined term does not give rise to federal jurisdiction, but this is unsupported by the cases they cite. See Non-177 St. Mot. at 15. For example, Horowitz v. Marlton Oncology P.C., 116 F. Supp. 2d 551 (D.N.J. 1999), reaffirmed the “general proposition that removal is proper where a state claim cannot be decided without a resolution of federal laws.” Id. at 556 n.4. Although the court found that it lacked federal question jurisdiction over state-law RICO claims that referenced violations of federal mail and wire fraud statutes, it reasoned that asserting federal jurisdiction would “flout congressional intent.” Id. at 555. Unlike the dual federal-state enforcement of RICO statutes, the CAA expressly recognizes the substantial federal interest in new vehicle emissions standards by reserving the enforcement of such standards to the EPA. Rodriguez v. Hovensa is also inapposite. 2014 WL 1308836 (D.V.I. Mar. 31, 2014). Rodriguez held that federal jurisdiction over the plaintiff’s CAA claims was not necessarily raised because the plaintiff asserted an “alternative theory of recovery that does not reference federal law.” Id. at *5-6. Here, by contrast, the Non-177 States’ theories of recovery all are enmeshed with substantial questions of federal law.




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claim “arises” out of state law claims.18 The Non-177 States incorrectly contend that Gunn v.

Minton, 133 S. Ct. 1059 (2013) “cabined Grable to those circumstances in which a state court’s

resolution would be controlling in numerous other cases.” (Non-177 St. Mot. at 10.) In Gunn,

however, the federal issue was “merely hypothetical” and its resolution would not have a

significant effect on federal law. 133 S. Ct. at 1066-67. Gunn contrasted this with Grable,

where resolution of the federal tax question would have affected the federal government’s role in

tax policy and enforcement. Id. at 1066. Like Grable, resolution of the issues here under the

CAA are not hypothetical; they will significantly impact the federal government’s ability to

oversee regulation of new-vehicle emissions.19

The Non-177 States further contend that their anti-tampering and I&M claims do

not implicate federal issues because “the face of the States’ complaints” only assert state law

claims. (Non-177 St. Mot. at 5.) But, when adjudicating removal, “in addition to examining the

literal language selected by the plaintiff, the district court must analyze whether jurisdiction

would exist under a properly pleaded complaint. A plaintiff may not avoid federal jurisdiction

by omitting from the complaint federal law essential to his or her claim or casting in state law

terms a claim that can only be made under federal law.” Easton v. Crossland Mortg. Corp., 114

F.3d 979, 982 (9th Cir. 1997); see Olguin v. Inspiration Consol. Copper Co., 740 F.2d 1468,

1473 (9th Cir. 1984) (courts may look to facts beyond “the four corners of the complaint to

support removal”). At the core, the States seek to penalize violations of federal law—

Defendants’ inclusion of “defeat devices” in the design of new motor-vehicle emissions

18 See, e.g., Manning, 136 S. Ct. at 1570 (citing Grable with approval); Nevada v. Bank of Am. Corp., 672 F.3d 661, 674 (9th Cir. 2012) (same); Shriners Hosps. for Children v. Wells Fargo Bank, N.A., No. 16-cv-3460, 2017 WL 57339, at *2-3 (N.D. Cal. Jan. 5, 2017) (same).

19 In addition, the Non-177 States are wrong in claiming that “there are no pure issues of federal law the resolution of which will necessarily influence all of the States’ claims.” See Non-177 St. Mot. at 10-11. Adjudication of these cases will entail multiple “pure issues of federal law,” including the interpretation of “defeat devices” under federal law; whether and to what extent under the CAA states that have not adopted California’s emissions standards can seek enforcement of their own emissions standards, including “in use” authority under the CAA, to regulate so-called defeat devices; and whether and to what extent under the CAA’s “in use” provision state anti-tampering and I&M laws apply to new-vehicle emissions systems.




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systems—by recharacterizing that conduct as violations of state anti-tampering and I&M laws.

The States cannot “disguise a federal cause of action as one under state law in order to

completely foreclose the federal forum.” Pub. Sch. Teachers’ Pension & Ret. Fund of Chi. v.

Guthart, No. 14-cv-1384, 2014 WL 2891563, at *3 (N.D. Cal. June 25, 2014); see also, e.g.,

Arditi v. Lighthouse Int’l, 676 F.3d 294, 298-99 (2d Cir. 2012) (a plaintiff cannot “avoid removal

to federal court by declining to plead necessary federal questions”) (internal alterations and

quotation marks omitted).

Attempting to claw their claims back into the realm of state law, the Non-177

States argue that “the phrase ‘defeat device’ is common parlance,” and is “merely background in

describing why Volkswagen’s conduct was so reprehensible.” (Non-177 St. Mot. at 14.) But

plaintiffs cannot duck federal jurisdiction by arguing that when their complaints used a term

defined and governed solely by federal regulations, they intended that term to have some other

unspecified meaning; under the artful-pleading doctrine, their claims sound in federal law no

matter what words the complaints use to describe a federally regulated defeat device. See, e.g.,

Easton, 114 F.3d at 982 (“A plaintiff may not avoid federal jurisdiction by . . . casting in state

law terms a claim that can only be made under federal law.”); Schroeder v. Trans World

Airlines, 702 F.2d 189, 191 (9th Cir. 1983) (affirming denial of remand where “the true nature of

the complaint” involved federal law and because “jurisdiction based upon the presence of a

federal question may not be evident from the language of the complaint”). More fundamentally,

defeat device theories comprise the backbone of, not background to, the States’ claims. For

instance, Illinois’ anti-tampering claim is based on the contention that Defendants “manufactured

and installed undisclosed and unauthorized ‘defeat devices’” in the “Unlawful Vehicles,” which

“caus[ed] the Unlawful Vehicles to emit nitrogen oxides in excess of the legal limit.” (IL

Compl. ¶¶ 8, 11 (emphasis added).) Illinois concedes that this breached “legal limit” is the

federal “USEPA’s Tier 2” and “Tier 3 emissions standards.” (Id. ¶¶ 23-27.) Similarly,

Tennessee’s anti-tampering claim seeks to penalize Defendants for “installing and using a defeat

device on each of the Unlawful Vehicles,” in violation of “established federal motor vehicle




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standards.” (TN Compl. ¶¶ 99, 102, 105 (emphasis added); see also id. at ¶ 99 (Defendants

allegedly used defeat devices to “render[] inoperative [a] device or element of design installed on

or in a motor vehicle or motor vehicle engine in compliance with regulations under the federal

Clean Air Act . . .” (emphasis added) (citing 42 U.S.C. § 7401 et seq.)).) Tennessee’s I&M claim

likewise posits that “defeat devices” “falsifie[d], tamper[ed] with, or render[ed] inaccurate the

[on board diagnostic]’s ability to produce an accurate assessment of . . . true emissions

performance during the annual state I&M testing, which is required in order to be in compliance

with federal motor vehicle emissions standards.” (Id. ¶ 102 (emphasis added).) Other States’

anti-tampering and I&M claims similarly are predicated on “defeat devices” rendering vehicles

non-compliant with federal standards.20 Far from “background,” these allegations are grounded

in federal law and form the core of the Non-177 States’ anti-tampering and I&M claims.

The States argue that there should be a heightened presumption against federal

jurisdiction because they are sovereign entities. (See Non-177 St. Mot. at 4; 177 St. Mot. at 8-9;

VT Mot. at 5.) This ignores that federal courts have frequently found federal jurisdiction where,

as here, states seek to enforce state laws raising federal issues in the face of a detailed federal

regulatory scheme. For instance, in Eli Lilly, West Virginia’s motion to remand state-law claims

that implicated “a broad range of federal regulatory and funding provisions” under the federal

Medicaid statutes was denied because, inter alia, “at issue here is not simply a federal standard,

but also the added factor of an intricate federal regulatory scheme.” 476 F. Supp. 2d at 234; see

also, e.g., In re Pharm. Indus., 457 F. Supp. 2d at 82 (denying Arizona’s motion to remand

where consumer fraud claims required interpretation of “average wholesale price” found in

federal Medicare statutes). Notably, two states in this MDL (California and Wyoming) chose to

file their actions in federal court, implicitly recognizing the value of a harmonized resolution in

20 See, e.g., AL Compl. ¶¶ 1-2, 33-34, 38-39, 46-47, 53-54, 56-57, 72(d); NH Compl. ¶¶ 15, 49, 66-68, 77, 80-83, 90-91; MO Pet. ¶¶ 2, 22, 66-67, 76, 93-96, 101, 104-106, 116-117, 156-61; OH Compl. ¶¶ 2-5, 49, 52-53, 60, 65-66, 72-73, 75, 77-81, 83, 91, 107-120; MN Compl. ¶¶ 1-2, 21-23, 25-26, 29, 32, 37-38, 40-41, 46, 59, 61, 63, 67, 71; MT Compl. ¶¶ 1, 33, 38-42, 69-70.




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light of the national regulatory scheme.21 And, in all events, the heart of the States’ claims is that

Defendants used defeat devices to trick EPA new-vehicle emissions tests, but “[p]olicing fraud

against federal agencies is hardly a field which the states have traditionally occupied.” Buckman,

531 U.S. at 347 (internal quotation marks omitted).

The Non-177 States argue, incorrectly, that Defendants merely raise federal

preemption defenses that cannot provide a basis for federal jurisdiction. (Non-177 St. Mot. at

11-12.) While Defendants fully anticipate that the Non-177 States’ claims will ultimately be

found preempted by the CAA, the concepts of preemption and federal jurisdiction are distinct:

The Non-177 States cite no case holding that claims subject to a preemption defense cannot also

be subject to federal jurisdiction. Rather, a federal defense such as preemption cannot itself

provide the basis for federal jurisdiction. See, e.g., Franchise Tax Bd., 463 U.S. at 10-14

(determining whether federal-question jurisdiction based on federal ERISA issues,

notwithstanding federal preemption defense); see also Merrell, 478 U.S. at 808. Thus, the First

Circuit has found federal-question jurisdiction notwithstanding “a preemption defense lurking in

the wings.” R.I. Fishermen’s Alliance, Inc. v. R.I. Dep’t of Envtl. Mgmt., 585 F.3d 42, 50 (1st

Cir. 2009). That these are distinct inquiries is confirmed by the fact that, even if the Non-177

States survive a motion to dismiss on grounds of preemption, the court will still need to

adjudicate federal questions to decide the case—for example, the applicable federal standards for

“defeat devices” and emissions controls; the interplay between the CAA’s “in use” provision and

its prohibition on State enforcement of new-vehicle emissions standards; and (as more fully

discussed in Section II, below) the scope of permissible relief.

Finally, the Non-177 States cannot side-step federal question jurisdiction by

arguing that some of their claims “are based on alternative theories” that do not raise federal

issues. (See Non-177 St. Mot. at 15.) The Non-177 States make no claim that does not raise

21 See Complaint, California v. Volkswagen AG, No. 3:16-cv-03620 (N.D. Cal. June 27, 2016), ECF No. 1; Complaint, Wyoming v. Volkswagen Grp. of America, Inc., et al., No. 16-cv-6646 (N.D. Cal. Nov. 1, 2016), ECF No. 1.




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substantial questions under the CAA, and there is no claim that they assert that can be

adjudicated without reference to federal standards. This distinguishes their pleadings from the

cases on which they rely.22 In Manning, adjudication of federal securities law issues was not

necessary to decide all of the plaintiffs’ state law claims. 772 F.3d 158, 163-64 (3d Cir. 2014),

aff’d on other grounds, 136 S. Ct. 1575. And, Arizona ex rel Brnovich v. Volkswagen AG, 193

F. Supp. 3d 1025 (D. Ariz. 2016), remanded a state consumer claim because it could be partially

premised on a misrepresentation that did not implicate federal law—reasoning that cannot apply

here, because only a federal standard governs new-vehicle emissions in the Non-177 States.23

Unlike the cases on which the Non-177 States rely, the Non-177 States’ claims

cannot be adjudicated without deciding whether Defendants have breached federal standards for

new-vehicle emissions under the CAA. 24 This is because, under the CAA, new-vehicle 22 Christiansen v. Colt Indus. Operating Corp., 486 U.S. 800 (1988) did not involve the scope of federal “arising-under” jurisdiction. Rather, Christensen dealt with a “peculiar jurisdictional battle between the Courts of Appeals for the Federal [and] Seventh Circuit[s],” id. at 803, namely whether antitrust claims under the federal Sherman Act “arose under” patent law and thus were subject to the exclusive jurisdiction of the Federal Circuit. See id. at 807-11. The Court concluded that while the application of patent law would be essential to certain theories of antitrust liability, patent law was not essential to establish any claim. See id. at 811-12.

23 Brnovich did not address environmental claims or relief associated with such claims, because Arizona did not assert environmental claims. Moreover, the Brnovich court erroneously credited arguments that “Arizona believes” that Volkswagen violated Arizona consumer-protection law by making false “representations regarding its vehicles in comparison to gasoline vehicles and older diesel engines,” which theory supposedly would not require resolution of a federal issue. 193 F. Supp. 3d at 1029 (emphasis added). But the Brnovich opinion neither cited any allegation in the Brnovich complaint that Volkswagen had made such comparisons, nor explained how such comparisons could be made except by reference to federal emissions standards. Respectfully, the Brnovich court erred by rewriting the operative complaint filed in state court, because that complaint (and not post-removal amendments) determines whether federal-question jurisdiction exists. See Williams, 471 F.3d at 976.

24 The Non-177 States also rely on the District of New Jersey’s decision in Lougy v. Volkswagen Group of America, Inc., Civ. No. 16-1670 (JLL), 2016 WL 3067686 (D.N.J. May 19, 2016). While Defendants disagree with the decision’s reasoning, it is not applicable here. First, New Jersey has adopted California’s emissions standards under Section 177 of the CAA. As a result, unlike the Non-177 States, New Jersey’s claims presented no issues concerning the interpretation and scope of the “in use” provisions of the CAA. Second, Lougy found that New Jersey’s environmental claims were “based on alternative theories, at least three of which have no necessary federal element.” Id. at *3. As discussed above, the Non-177 States present no such alternative theories here. Third, Lougy did not adjudicate the cumulative effect on the federal CAA scheme of multiple states each seeking to enforce their own standards, which issue is squarely presented here.




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emissions are either governed by federal standards (for the Non-177 States) or California

standards (for the 177 States). There is no ability for the Non-177 States to deviate from the

federal standards or seek to enforce the federal standards themselves. This regulatory scheme

ensures that any state law claims by Non-177 States concerning new vehicle emissions, such as

those asserted here, necessarily will be entangled in questions over the interpretation of the CAA.

Those questions should be decided by a federal court.

B. Missouri’s and Ohio’s Environmental Claims Raise Federal Questions.

Missouri and Ohio also both assert state-law environmental claims predicated on

the use of a “defeat device.” Because a “defeat device” is defined solely by federal law, and

because Missouri and Ohio may not enforce the federal standards governing “defeat devices,”

their state-law environmental claims raise substantial federal questions under the CAA.

The federal CAA allocates to the EPA and California (and states which adopt

standards identical to the EPA-approved California standards) the exclusive responsibility for

setting and enforcing new-vehicle emissions standards. See 42 U.S.C. §§ 7507, 7543(a). By

definition, none of the Non-177 States (including Missouri and Ohio) have adopted California’s

emissions standards for new vehicles and they are thus prohibited from attempting to enforce any

such standard. Yet both Missouri and Ohio nonetheless claim that, by including “defeat devices”

in the design of new Volkswagen vehicles, Volkswagen violated their state environmental

protection laws. (See MO Pet. ¶ 161 (Defendants, “[b]y installing a device designed to conceal

or dilute emissions during vehicle emissions inspections . . . caused or permitted an elevation in

the level of NOx, a regulated air contaminant, that discharged from the Unlawful Vehicles during

normal on-road operation” in violation of Missouri environmental protection laws); OH Compl.

¶ 108 (Defendants sold vehicles with a component “intended . . . to bypass or defeat an emission

control system” in violation of Ohio environmental protection laws).)

A claim sounding in state law necessarily raises federal issues where “resolution

of the dispute requires the interpretation and application of the [federal statute].” Ormet, 98 F.3d

at 807; see also Ayres v. Gen. Motors Corp., 234 F.3d 514, 518 (11th Cir. 2000) (finding federal




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question jurisdiction where “resolution of th[e] [state-law claims] depend[ed] entirely on

interpretation of the federal . . . statutes”). Here, Missouri and Ohio attempt to regulate the use

of a “defeat device” in a new vehicle through a state-law enforcement action, purportedly

without reference to a federal standard. But because “defeat devices” are defined and prohibited

only by federal law, and because CAA § 209 prohibits Non-177 states from enforcing “any

standard” concerning new-vehicle emissions, adjudicating Missouri’s and Ohio’s claims will

require answering the federal questions of whether a “defeat device” claim implicates a federal

“standard” and whether the CAA permits states to penalize a manufacturer when a new vehicle

that violates federal standards is driven. See Engine Mfrs., 88 F.3d at 1079 (“regulation of motor

vehicle emissions . . . [is] principally [a] federal project”); Sims, 862 F.2d at 1455

(“[E]nforcement of the [CAA] before [the] first sale of [new motor vehicles] is the sole and

exclusive prerogative of the federal government . . . [and] no state shall . . . attempt to enforce

any [federal or state] standard relating to the control of emissions from new motor vehicles prior

to initial sale.”) (emphasis in original).

Ormet, like these matters, involved state-law claims requiring interpretation of the

CAA. In reversing the district court and finding federal question jurisdiction, the Fourth Circuit

recognized that “[w]here the resolution of a federal issue in a state-law cause of action could,

because of different approaches and inconsistency, undermine the stability and efficiency of a

federal statutory regime, the need for uniformity becomes a substantial federal interest, justifying

the exercise of jurisdiction by federal courts.” 98 F.3d at 807. Whether a “defeat device” claim

does or does not implicate an emissions “standard,” and where federal authority to set and

enforce “standards” ends and where state authority to regulate vehicles “in-use” begins, are

issues that require uniform resolution in federal court.

II. THE STATES’ REQUESTED INJUNCTIVE AND PENALTY RELIEF RAISES A FEDERAL QUESTION.

Federal-question jurisdiction is also proper here because the injunctive and

penalty relief sought by the States (both Section 177 and Non-177 states) seeks to remedy federal

violations and otherwise raises federal questions. The Supreme Court has made clear that federal




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jurisdiction lies over lawsuits seeking “prospective injunctive relief in order to end a continuing

violation of federal law.” Seminole Tribe, 517 U.S. at 73 (internal quotation marks omitted).

Appellate and district courts have thus recognized the need to pay “attention to the relief sought

by the plaintiff” to determine whether there is federal-question jurisdiction. Kunkel v. Topmaster

Int’l, Inc., 906 F.2d 693, 695 (Fed. Cir. 1990); see also Mitskovski v. Buffalo & Fort Erie Pub.

Bridge Auth., 435 F.3d 127, 135 (2d Cir. 2006) (federal jurisdiction where “relief will inevitably

require construction of [an international] compact” raising substantial federal issues); Bryan v.

BellSouth Comms., Inc., 377 F.3d 424, 432 (4th Cir. 2004) (relief requested would “present[] a

federal question”); Air Prods. & Chems., Inc. v. Reichhold Chems., Inc., 755 F.2d 1559, 1562

(Fed. Cir. 1985) (finding federal jurisdiction based on “the pleadings . . . , in particular the relief

requested,” where plaintiff sought injunction against patent infringement under federal law)

(emphasis added).25 This provides an additional and independent basis for federal-question

jurisdiction and the removal of these actions.

A. The Injunctive Relief Requested by the States Raises a Federal Question.

All of the 177 States and at least some of the Non-177 States seek judicially

enforceable permanent injunctions that would enmesh their state courts in adjudicating issues of

federal environmental law. Federal jurisdiction lies over lawsuits, such as these, seeking

“prospective injunctive relief in order to end a continuing violation of federal law.” Seminole

Tribe, 517 U.S. at 73 (internal quotation marks omitted). All of the 177 States request that their

state courts issue permanent injunctions against Defendants to prevent the future sale or delivery

of vehicles equipped with “defeat devices.” Specifically:

New York, Massachusetts, Maryland, and Pennsylvania each seek an order “permanently enjoining [Defendants] from . . .[s]elling . . . into [the state] any new motor vehicle equipped with a defeat device or any new

25 See also DeCarlo v. Archie Comic Publ., Inc., 11 F. App’x 26, 29 (2d Cir. 2001) (where complaint alleges a claim or seeks a remedy provided by federal law, “federal jurisdiction is properly invoked.”) (quoting Bassett v. Mashantucket Pequot Tribe, 204 F.3d 343, 355 (2d Cir. 2000)); Down v. Flagstar Bank, F.S.B., No. 10-cv-847, 2011 WL 1326961, at *3 (E.D. Va. Apr. 4, 2011) (federal jurisdiction where “the relief sought necessarily depends on a substantial question of federal law”).




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motor vehicle not eligible for sale pursuant to emissions and environmental standards in [the state] [,and] [b]ypassing, defeating, or rendering inoperative any device or element of design installed on or in a new motor vehicle in compliance with emissions and environmental standards in [the state].” (NY Compl., Prayer for Relief ¶ B; see also MA Compl., Prayer for Relief ¶ A (same); MD Compl., Prayer for Relief ¶ B (same); PA Compl., Prayer for Relief ¶ B (same).)

Maine seeks an order “[p]ermanently enjoining Defendants from delivering for sale . . . in Maine any new motor vehicle equipped with a defeat device or any new motor vehicle not eligible for sale . . . pursuant to emissions and environmental standards in Maine.” (ME Compl., Prayer for Relief ¶ B.)

Vermont seeks an order “permanently enjoining Defendants . . . from future violations of the VAPCR [Vermont Air Pollution Control Regulations] . . . including . . . installing defeat devices in vehicles [and] . . . delivering for sale . . . in Vermont vehicles which are not covered by a CARB Executive Order, [or] do not comply with applicable NOx and/ or NOx/NMOG emissions standards.” (VT Compl., Relief Sought ¶ 4.)

Four of the 177 States also request an order appointing a “monitor overseen by the [state] Court to ensure Volkswagen’s future compliance with emissions and environmental standards in the [state].” (MA Compl., Prayer for Relief, ¶ B; see also MD Compl., Prayer for Relief ¶ D; NY Compl., Prayer for Relief ¶ D; PA Compl., Prayer for Relief ¶ C.)

Of the Non-177 States, Illinois and Montana seek to enjoin future violations of

their state anti-tampering laws, predicated on their theory that a vehicle manufacturers’ inclusion

of a “defeat device” constitutes “tampering” that can be regulated by state law. Illinois thus

demands that its state courts “[p]reliminarily and permanently enjoin[] the Volkswagen

Defendants from any future violations of Section 240.103 of the Board’s Mobile Source

Regulations,” (IL. Compl. ¶ 2), which prohibit tampering with vehicles’ “air pollution control

systems or mechanisms.” (IL. Compl. ¶ 18.) Montana similarly requests “injunctions

prohibiting Defendants from continuing” to violate its state anti-tampering law. (Mont. Compl. ¶

72.) Ohio law authorizes the state Attorney General to seek “an action for an injunction” against

any person violating Ohio’s air pollution laws, which Ohio cites in its complaint seeking

“equitable” relief. (Ohio Compl. ¶ 104 (citing OHIO REV. CODE ANN. § 3704.06(B)), Prayer for

Relief ¶ E.) Other Non-177 States’ pleadings similarly cite statutes authorizing injunctions




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against violations of their environmental or anti-tampering laws and broadly seek “equitable” or

other relief.26

Each of these requested injunctions permanently would inject a state court into the

process of prospectively interpreting and enforcing compliance with federal new-vehicle

emissions standards (in the Non-177 States) or California new-vehicle emissions standards, as

approved by the federal government (in the 177 States). For instance, state courts would be

called upon to review, approve and supervise the design of new vehicles—i.e., assessing whether

Defendants’ future vehicles contain “defeat devices,” emit “excessive” NOx, or otherwise

comply with emissions standards. Because the EPA and California may have different views on

these matters than the various States, the requested injunctive relief disrupts the federal system

by creating the risk that state courts would impose standards or requirements differing from the

federal and California standards and thus impermissibly “create . . . a ‘third vehicle.’” 42 U.S.C.

§ 7507.27 This risk is magnified by the sheer number of states each seeking their own injunctions

26 See AL Compl., Prayer for Relief ¶ 3 (seeking all “[o]ther relief under state law . . . deem[ed] just and appropriate”) and ¶ 95 (seeking relief under ALA. CODE § 22-22A-5(18), which permits the “Attorney General . . . to commence a civil action to enjoin . . . violation” of Alabama’s anti-tampering laws); MN Compl., Prayer for Relief ¶ 4 (seeking all “further relief as provided by law or . . . deem[ed] appropriate”) and id., Prayer for Relief ¶ 2 (invoking MINN. STAT. § 8.31, which authorizes the state Attorney General “to sue for and have injunctive relief in any court of competent jurisdiction against any such violation or threatened violation” of Minnesota’s regulatory scheme); MO Pet., Prayer for Relief ¶ C (seeking all “other and further relief . . . deem[ed] just and proper”) and id. ¶ 161 (alleging Defendants’ conduct violated Mo. Rev. Stat. § 643.151(3), which in relevant part permits the state to seek “injunctive relief to prevent any further violation” of Missouri’s anti-tampering statute); MT Compl. ¶ 72 (seeking “injunction[] prohibiting the Defendants from continuing to commit [ ] violations” alleged in the complaint pursuant to MONT. CODE ANN. § 75-2-413(2)(a), which permits “enforcement [of Montana’s anti-tampering statute] . . . by injunction or other appropriate remedies”); NH Compl. ¶ 130 (citing N.H. REV. STAT. § 125-C:15(II), which provides “[a]ny violation of . . . shall be subject to enforcement by injunction, including mandatory injunction”) and id., Prayer for Relief ¶ B (seeking all other “additional relief . . . deem[ed] appropriate and just”); TN Compl., Prayer for Relief ¶ 6 (seeking all “other and additional relief . . . deem[ed] appropriate and just”) and TENN. CODE ANN. § 68-201-111 (authorizing Tennessee to seek “injunctive relief to prevent violation [of the state’s regulatory scheme]”).

27 The CAA permits only the EPA and California to set and enforce new-vehicle emissions standards, to avoid “the possibility of 50 different state regulatory regimes” and “the spectre of an anarchic patchwork of federal and state regulatory programs.” Engine Mfrs. Ass’n, 88 F.3d at 1078-79 (internal quotation marks omitted).




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in their own state courts. Federal jurisdiction, in this MDL Court, is necessary to avoid standard-

setting turmoil and protect the “no-more-than-two-vehicles” scheme established by the CAA.

The States also would inject their state courts into the federal (and California)

process of remediating the vehicles that the States allege violated federal (and California)

emissions standards—interfering with the remediation process already under the supervision of

this Court. The EPA and CARB have already established extensive remediation procedures,

including a buyback recall in which Volkswagen will agree to buyback or terminate leases on

certain affected vehicles and an emissions modification recall in which Volkswagen will provide

a free EPA-and CARB-approved fix as an alternative to a buyback.28 The EPA, CARB and

Defendants also have already entered into consent decrees that include extensive injunctive

relief, all under the supervision of this federal Court.29

Incremental state-court injunctions, including restrictions on the development of

future vehicles, supervision of the remediation of current vehicles, and the appointment of

compliance monitors, will intrude upon the EPA’s authority to assess appropriate penalties for

violations of federal law, and will necessarily raise federal questions regarding their consistency

with, and permissibility under, federal law.30 See Gould, 475 U.S. at 289 (state labor law penalty

28 See Amended Partial Consent Decree, MDL No. 2672 CRB (JSC), Dkt No. 2103-1 (Oct. 25, 2016); Second Partial Consent Decree, MDL No. 2672 CRB (JSC), Dkt. No. 2520-1 (Dec. 20, 2016); Third Partial Consent Decree, MDL No. 2672 CRB (JSC), Dkt. No. 2758-1 (Jan. 11, 2017).

29 See Partial Consent Decree (California), MDL No. 2672 CRB (JSC), Dkt No. 1801, at 7-11 (Sept. 1, 2016); Amended Partial Consent Decree, MDL No. 2672 CRB (JSC), Dkt No. 2103-1, at 12-17 (Oct. 25, 2016); Second Partial Consent Decree, MDL No. 2672 CRB (JSC), Dkt. No. 2520-1, at 14-15 (Dec. 20, 2016); Second Partial Consent Decree (California), MDL No. 2672 CRB (JSC), Dkt No. 2519-1, at 7-10 (Dec. 20, 2016); Third Partial Consent Decree, MDL No. 2672 CRB (JSC), Dkt. No. 2758-1, at 10-38 (Jan. 11, 2017).

30 The 177 States, relying on Motor Vehicles Manufacturers’ Ass’n of U.S., Inc. v. N.Y. Department of Environmental Conservation, 17 F.3d 521, 531-32 (2d Cir. 1994), contend that their requested relief does not present a federal issue, because the CAA only requires that the 177 States adopt new vehicle emissions standards identical to those adopted by California, and does not require their penalties be identical to those provided by California. (177 St. Mot. at 15-16.) This argument misses the point of the identicality requirement. The purpose of that requirement is to ensure uniform regulation of new motor vehicle emissions. See Engine Mfr’s Ass’n, 88 F.3d at 1080 (discussing “legislative compromise” in which “manufacturers must cope with two regulatory standards” rather than “being faced with 51 different standards, as they had feared”).




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“diminishe[d] the [National Labor Relations] Board’s control over enforcement of [federal

statute]”); Buckman, 531 U.S. at 349 (where federal statute gives agency a “variety of

enforcement options that allow it to make a measured response to suspected fraud upon the

[agency],” including criminal prosecutions, civil money penalties and injunctive relief, such

“flexibility is a critical component of the statutory and regulatory framework under which the

[agency] pursues difficult (and often competing) objectives”). Congress could not have intended

such a result when it enacted the CAA. See Engine Mfrs. Ass’n v. EPA, 88 F.3d 1075, 1078-79

(D.C. Cir. 1996) (CAA sought to prevent creation of “an anarchic patchwork of federal and state

regulatory programs”); accord, e.g., Buckman Co., 531 U.S. at 350-51 (allowing state-law tort

claims based on misleading Food and Drug Administration would burden applicants with

“complying with the FDA’s detailed regulatory regime in the shadow of 50 States’ tort regimes”

and provoke “fear that their disclosures to the FDA, although deemed appropriate by the Agency,

will later be judged insufficient in state court”).

B. The Penalties Requested by the States Also Raises a Federal Question.

The States demand their own mix of substantial monetary penalties, implicating

federal questions about the scope of the CAA. The States’ penalties also uniformly exceed the

penalties imposed by the EPA or that are even permitted under California’s standards. The

massive and varying penalty demands of the States would enmesh state courts in the resolution

of federal questions as to whether the penalty demands are consistent with, or permissible under,

the federal scheme, including whether their individual or cumulative effect would conflict with

or undermine the national system for regulating new car emissions enacted in the CAA.

Although the CAA allows states to adopt California’s emissions standards, an

open federal question exists as to whether the CAA simultaneously requires the states to adopt

Indeed, the “third vehicle rule . . . is designed to reinforce the identicality requirement.” Envt’l Conservation, 17 F.3d at 536. Any state scheme or enforcement mechanism—such as an injunction authorizing state supervision over the manufacture of new motor vehicles—which tends to “have the effect of creating . . . a third vehicle” violates the third vehicle rule, 42 U.S.C. § 7507; see also Engine Mfr’s Ass’n, 88 F.3d at 1080 (CAA contemplates only “federal cars” or “California cars”), and thus undermines the identicality requirement.




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California’s penalties. While the 177 States seek to enforce California emissions standards, they

ask for a range of penalties under their own air pollution standards which are routinely—and

vastly—higher than those of California. At all relevant times, California imposed a penalty for

violations of California new-vehicle emissions standards of up to $5,000 per vehicle sold in the

state.31

The Non-177 States’ penalty demands are also vastly higher than those permitted

by the CAA for violations of federal emissions standards. Under the CAA, the EPA is

authorized to seek penalties of up to $25,000 for violations of the Act, by filing suit in federal

court. See 42 U.S.C. §§ 7524(a) & (b).32 The CAA prescribes several mandatory factors that the

federal court “shall take into account” in “determining the amount of any civil penalty,” 42

U.S.C. § 7524(b) (emphasis added), as well as factors that the EPA “shall take into account”

when assessing an out-of-court administrative penalty, id. § 7524(c)(2) (emphasis added). These

factors are “the gravity of the violation, the economic benefit or savings (if any) resulting from

the violation, the size of the violator’s business, the violator’s history of compliance . . ., the

effect of the penalty on the violator’s ability to continue in business, and such other matters as

justice may require.” 42 U.S.C. §§ 7524(b) & (c)(2). And, the EPA has issued a 29-page policy

statement setting forth the “framework EPA expects to use in exercising its enforcement

discretion in determining an appropriate settlement amount” for cases involving alleged

violations of new-vehicle standards.33

31 See CAL. HEALTH & SAFETY CODE § 43211 (2016) (permitting civil penalty of up to $5,000 per vehicle sold in California “that does not meet the emission standards adopted by [CARB]”). In January 2017, the statute was changed to permit civil penalties of up to $37,500. See CAL. HEALTH & SAFETY CODE § 43211 (2017).

32 With adjustments for inflation, the statutory cap is $32,500 for violations prior to January 12, 2009, $37,500 for violations occurring between January 12, 2009 to November 2, 2015, and $45,268 for any violation occurring after November 2, 2015 and assessed after January 15, 2017. 40 C.F.R. § 19.4.

33 EPA Memorandum, Clean Air Act Mobile Source Civil Penalty Policy – Vehicle and Engine Certification Requirements, Jan. 16, 2009 at 1, available at https://www.epa.gov/sites/production/files/documents/vehicleengine-penalty-policy_0.pdf.




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As the Court is aware, the EPA has exercised its discretion to settle its CAA

claims with Defendants, which included: (i) the creation of a $10.033 billion funding pool to

compensate certain current and former owners and lessees of affected 2.0 liter vehicles (see

Amended Partial Consent Decree, MDL No. 2672 CRB (JSC), Dkt No. 2103-1, at 12-17 (Oct.

25, 2016)), (ii) a $2.925 billion payment to fully remediate any excess emissions from the

affected vehicles, see id. (assessing $2.7 billion remediation) Second Partial Consent Decree,

MDL No. 2672 CRB (JSC), Dkt. No. 2520-1 (Dec. 20, 2016) (additional $225 million

remediation payment); (iii) an additional $2.0 billion in green investments, (see Amended Partial

Consent Decree, MDL No. 2672 CRB (JSC), Dkt No. 2103-1, at 12-17 (Oct. 25, 2016)); and (iv)

a $1.45 billion civil penalty to resolve the EPA’s civil claims (Third Partial Consent Decree,

MDL No. 2672 CRB (JSC), Dkt. No. 2758-1 (Jan. 11, 2017)). DOJ has also imposed a $2.8

billion criminal fine. See Rule 11 Plea Agreement, United States v. Volkswagen AG, No. 16-cr-

20394, (E.D. Mich. Jan. 11, 2017), Declaration of Morgan A. Costello (N.Y. Decl.), Ex. C, at 13.

The penalties demanded by the States differ wildly from these federal and

California standards. The 177 States assert penalty demands that are orders of magnitude greater

than the maximum $5,000 per vehicle penalty permitted under the California scheme that they

purport to follow. For example, among the 177 States, Pennsylvania seeks “$25,000 per day per

violation” of Pennsylvania law (PA Compl., Prayer for Relief ¶ E), and Vermont seeks relief

pursuant to statute that permits civil penalties of “$85,000 for each violation and up to an

additional $42,500 for each day that a violation continues.” (VT Compl. ¶ 43).34 The 177 States

have provided no authority explaining why Congress would go to such lengths to describe

34 ME Compl. ¶ 115 (seeking civil penalty of up to “$10,000 for each day of the violation”); MD Compl., Prayer for Relief ¶ A (seeking “civil penalty of $25,000 for each violation” of Maryland’s environmental statutes); MA Compl., Prayer for Relief ¶ C (seeking “civil penalty of $25,000 for each day of each violation”); NY Compl., Prayer for Relief ¶ A (seeking “civil penalties in the amount of $18,000 for the first violation, plus $15,000 per day the violation continued, and in the amount of $26,000 for each subsequent violation, and $22,500 per day the violation continued”). Certain states also seek fines. See, e.g., NY Compl., Prayer for Relief ¶ A (seeking fines of “$150 for the first violation, $300 for the second violation, and $450 for each subsequent violation”).




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uniform vehicle emissions standards and enforcement mechanisms in the CAA, yet allow the

states free reign to punish would-be transgressors using a chaotic patchwork of state law. See

Amalg. Ass’n of St., Elec. Ry. & Motor Coach Emp. v. Lockridge, 403 U.S. 274, 287 (1971) (the

“range and nature of those remedies that are and are not available is a fundamental part” of a

regulatory system).

The Non-177 States also seek substantial penalties that differ from the federal

scheme. Among the Non-177 States, Ohio seeks penalties of up to “$25,000 [t]wenty-[f]ive

[t]housand [d]ollars ($25,000.00) for each day of each violation” (OH Compl., Prayer for Relief

¶ A), and Illinois demands penalties of “[f]ifty [t]housand d[]ollars ($50,000.00) for each

violation” of its regulations “and an additional penalty of [t]en [t]housand [d]ollars ($10,000.00)

for each day of each violation.” (IL Compl. p. 8 ¶ 3).35

Moreover, none of the States’ monetary demands incorporates the factors which

the CAA mandates shall be considered by a federal court imposing penalties for violations of

EPA new-vehicle standards or by the EPA in considering an administrative penalty—which

would include the extensive “action[s] taken to remedy the violation” by Defendants under the

supervision of this Court. See 42 U.S.C. §§ 7524(b), (c)(2). Nor are the States’ demands based

on the sort of reasoned, detailed policy published by the EPA to guide its exercise of discretion

in determining an appropriate penalty. Put simply, the States are shooting from the hip;

Defendants are aware of no precedent for a state other than California bringing claims based on

new-vehicle emissions.

35 See also AL Compl. ¶ 97 (seeking “penalty of $25,000 per day, per violation”); MN Compl., Prayer for Relief ¶ 2 (seeking “penalties pursuant to . . . Minnesota Statutes section 115.071 . . . for each separate violation” and MINN. STAT. § 8.31 which authorizes penalties of “$10,000 per day per violation”); MO Pet., Prayer for Relief ¶ A (seeking “civil penalties . . . of $10,000.00 per day for each . . . in which there occurred a violation of [Missouri law]”); MT Compl. ¶ 71 (seeking “penalty of up to $10,000 for each violation”); NH Compl., Prayer for Relief (seeking a “penalty up to $25,000 for each Subject Vehicle sold, leased, or registered in New Hampshire”); TN Compl., Prayer for Relief ¶ 3 (seeking “civil penalties against the Defendants . . . not to exceed $25,000 per day for each day of violation”).




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Beyond their differences from the federal and California scheme, there are

idiosyncrasies between and among each State’s penalty regimes. For example, the States differ

as to what conduct constitutes a “violation,” how many “violations” are applicable to each

affected vehicle contains, and whether the violation “continues” and triggers penalty amounts

that compound daily. 36 The theoretical cumulative effect is potentially stratospheric, far

exceeding the values of the affected vehicles or any conceivable measure of the harm actually

caused by “excess” nitrogen oxide emissions. The reason for this anomalous result is clear:

Unlike California and the CAA, none of these States has a penalty statute designed for new-car

emissions violations (in which many new vehicles each emit a small amount of excess pollution).

Instead, the States seek to import generic penalty statutes designed for a small number of

stationary-source polluters that churn out large amounts of pollutants daily (e.g., factory

smokestacks). State-law penalties that impose large fines per “violation” and compound each

day a violation “continues” may make sense for large polluters, but lead to absurd results applied

to tailpipe emissions from many vehicles.

The penalties sought by the States cannot be adjudicated without entangling the

state courts in federal questions over what penalties are permissible and how penalties should be

set under the CAA scheme. The Supreme Court has recognized that “remedies form an

ingredient of any integrated scheme of regulation.” San Diego Bldg. Trades Council v. Garmon,

359 U.S. 236, 247 (1959); see also, e.g., Buckman, 531 U.S. at 349 (Food and Drug

Administration’s flexibility in fashioning remedies “is a critical component of the statutory and

regulatory framework”). Accordingly, “[c]onflict in technique can be fully as disruptive to the

system Congress erected as conflict in overt policy.” Lockridge, 403 U.S. at 287. A state can

36 Compare MA Compl., Prayer for Relief, ¶ C (seeking a civil penalty of $25,000, under MASS. GEN. LAWS ANN. CH. 111, §§ 142A-142O, for each day of each “violation” of Massachusetts law, plus additional fines) with ME Compl. ¶ 121 (alleging that “[e]ach Subject Vehicle without a valid CARB executive order . . . represents a separate violation . . . and a civil penalty for each day of continued violation should be assessed”) and MD Compl. ¶ 199 (alleging Maryland law authorizes “penalties of up to $25,000 per day for each violation” of its environmental statutes and “[e]ach day a violation continues is a separate violation.”).




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disrupt the federal scheme just as much “through an award of damages as through some form of

preventative relief.” Garmon, 359 U.S. at 247. Thus, even where the state sanctions have “the

same aim as federal law and adopt its substantive standards . . . [s]tates [should abstain from] . . .

impos[ing] [their] own penalties for the federal offenses [for doing such] would conflict with the

careful framework Congress adopted.” Arizona, 132 S. Ct. at 2502.37 This risk is heightened

here, because the CAA sets lower maximum penalties than the States and mandates the

consideration of factors that can reduce penalties. See id. at 2503 (impermissible conflict existed

where federal penalty scheme for immigration violation allowed for probation but state penalty

for that violation “rules out probation as a possible sentence (and also eliminates the possibility

of a pardon)”).

Allowing state court adjudication of the permissible penalties available to the

States under the CAA runs the risk that the state courts will “incrementally diminish” the EPA’s

authority to administer new vehicle emissions standards under the CAA “and thus further

detract[] from the ‘integrated scheme of regulation’ created by Congress.” Gould, 475 U.S. at

288-89 (state labor law sanction “diminishe[d] the [National Labor Relations] Board’s control

over enforcement of [statute]”). This risk is heightened here where no state court could

adjudicate the cumulative effect of the States’ penalty demands on the federal scheme. Each

State would need to adjudicate the applicability of federal law to the requested penalties, which

would interfere with the EPA’s ability to administer “a somewhat delicate balance of statutory

objectives,” Buckman, 531 U.S. at 348, especially where the EPA must consider factors set by

Congress when assessing penalties, 42 U.S.C. §§ 7524(b) & (c)(2). Adjudicating and setting

37 The Non-177 States, relying on Armitage v. Deutsche Bank AG, No. C 05-3998, 2005 WL 3095909 (N.D. Cal. Nov. 14, 2005), and Devon Energy Prod. Co. v. Mosaic Potash Carlsbad, Inc., 693 F.3d 1195, 1209 (10th Cir. 2012), contend that “penalty determinations do not provide federal jurisdiction.” Non-177 St. Mot. at 17. Armitage and Devon Energy, however, were both actions between private parties and so neither adjudicated whether federal law questions concerning penalty determinations could provide a basis for federal jurisdiction. Nor did either case suggest that federal law questions underpinning a party’s request for relief could not form a proper basis for finding federal-question jurisdiction.




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civil penalties for violations of federal new-vehicle standards is emphatically the province of the

EPA and the federal courts administering the CAA—not state courts administering state law.

III. FEDERAL JURISDICTION IS REQUIRED TO ADJUDICATE THE SUBSTANTIAL AND DISPUTED QUESTIONS OF FEDERAL LAW.

A. The Federal Issues Are Substantial.

There can be no question that the federal issues raised by the claims here are

substantial. A “substantial” federal issue implicates “a serious federal interest in claiming the

advantages thought to be inherent in a federal forum.” Grable, 545 U.S. at 313. “The

substantiality inquiry looks to the importance of the issue to the federal system as a whole.”

Gunn, 133 S. Ct. at 1066. For example, in Grable, the Supreme Court held that the exercise of

federal jurisdiction over a state-law action to quiet title was appropriate, because the parties

disputed the adequacy of a notice given by the Internal Revenue Service and “[t]he meaning of

the federal tax provision is an important issue of federal law that sensibly belongs in a federal

court.” Grable, 545 U.S. at 315. Here too, the CAA reflects a uniquely strong federal interest in

promoting uniform new-vehicle emissions standards across the nation, under an intricate federal

regulatory scheme. The CAA is precisely the type of “complex federal regulatory scheme” that

“calls for the ‘hope of uniformity that a federal forum offers on federal issues.’” N.Y. City

Health & Hosps. Corp. v. WellCare of N.Y. Inc., 769 F. Supp. 2d 250, 259 (S.D.N.Y. 2011)

(quoting Grable, 545 U.S. at 312).

The actions brought by the States collectively represent one of the first

instances—if not the first instance—in which a state other than California has sued and sought

injunctive relief and penalties based on alleged violations of state-law emissions standards for

new motor vehicles. Together, the States have brought suit against Defendants contending that

their new-vehicle emissions violated dozens of state-law statutes and regulations. These actions

followed on the heels of actions brought by the federal EPA, the regulator invested with

enforcement authority under the EPA, and CARB, the environmental regulator of the only state,

California, permitted to set new-vehicle emissions standards. As this Court well knows,

Defendants have entered into landmark settlements with federal regulators that provide for




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nationwide relief for consumers and environmental remediation. Those settlements impose a

complex web of multi-year injunctive obligations on Defendants, which are subject to the

oversight and enforcement authority of this Court.

Against this backdrop, the 177 States incorrectly argue that their suits raise no

substantial federal issues because they are “fact-bound and situation specific” and would have

“limited” effects. (177 St. Mot. at 19-20.) The Non-177 States similarly seek to minimize the

scope of their claims as “part of the States’ regulatory program to control air contaminants within

their borders.” (Non-177 St. Mot. at 18.) In fact, the injunctive and other relief sought by the

States would not be so limited. Allowing actions to proceed in each of the States’ courts renders

it likely that Defendants could be subject to injunctive and penalty requirements that are

cumulative to and which differ from those established by the federal government and CARB.

The Non-177 States go so far as to argue that they “are given wide latitude in formulating a

regulatory scheme to control air pollutants.” (Id.) But this turns on its head the federal interest

in regulating new-vehicle emissions enunciated in the CAA, which specifically prohibits states

from adopting and enforcing their own standards, unless they adopt California’s standards

(which the Non-177 States have not done). See U.S.C. 7543(a).

These cases also raise the important federal issue under the CAA of where federal

authority over new-vehicle emissions ends, and where state authority over “in-use” vehicles

begins. Whereas CAA Section 177(a) provides that no State may “adopt or attempt to enforce

any standard relating to the control of emissions from new motor vehicles,” 42 U.S.C. § 7543(a),

the Non-177 States argue that their claims “are predicated on ‘in-use’ regulations that the CAA

clearly delegates to the states,” Non-177 St. Mot. at 21-22; see 42 U.S.C. §7543(d). How the

CAA allocates authority between the state and federal governments clearly is “an important issue

of federal law that sensibly belongs in a federal court,” and which should not be litigated

piecemeal in state courts. Grable, 545 U.S. at 315. For example, a dispute concerning West

Virginia’s “obligation to reimburse its insureds for [a drug], using funds largely provided by the

federal government” under Medicaid presented a “substantial and disputed federal issue under




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Grable,” because “[a]t issue here is not simply a federal standard, but also the added factor of an

intricate federal regulatory scheme . . . requiring some degree of national uniformity in

interpretation.” West Virginia, 476 F. Supp. 2d at 233-34 (denying remand).

In short, by enacting the new-vehicle emissions provisions of the CAA, Congress

evinced a substantial federal interest in preventing “the spectre of an anarchic patchwork of

federal and state regulatory programs.” Engine Mfrs. Ass’n v. EPA, 88 F.3d 1075, 1078-79

(D.C. Cir. 1996) (internal quotation marks omitted). The States’ lawsuits, which they seek to

litigate under differing state-law standards in multiple state court fora, threaten to bring about

precisely that “anarchic patchwork.” Id. Where, as here, “the resolution of a federal issue in a

state-law cause of action could, because of different approaches and inconsistency, undermine

the stability and efficiency of a federal statutory regime, the need for uniformity becomes a

substantial federal interest, justifying the exercise of jurisdiction by federal courts.” Ormet, 98

F.3d at 807.

B. The Federal Issues Are Actually Disputed.

The States argue that because of “Volkswagen’s admissions to the States and the

undisputed findings of the EPA, there is no federal law ‘actually disputed.’” (Non-177 St. Mot.

at 17; see also 177 St. Mot. at 17.) The States are incorrect.

As a threshold matter, the federal plea agreement cited by the 177 States in their

remand motions does not appear in their pleadings.38 (See, e.g., 177 St. Mot. at 17 (citing

Statement of Facts, Rule 11 Plea Agreement, United States v. Volkswagen AG, No. 16-CR-20394

38 The States’ complaints vary significantly as to which “admissions” (if any) are alleged. For instance, Illinois does not identify any supposed admissions. Other states’ complaints vaguely refer to admissions about the existence of defeat devices, untethered to any emissions standard. See, e.g., NH Compl. ¶ 101 (“Respondents now admit that they developed a way to disable emissions control devices [during] real-world driving conditions”); MT Compl. ¶ 45 (VWGoA’s CEO “admitted to the U.S. Congress that they had installed the defeat devices”); MO Pet. ¶ 144 (citing testimony that vehicles “contained a ‘defeat device’ [that made vehicles] emit higher levels of [NOx] when the vehicles were driven . . . than during laboratory testing”). Others cite admissions that defeat devices disabled emissions-control systems when the vehicles were not undergoing “Federal Test Procedures.” See, e.g., AL Compl. ¶ 3; MN Compl. ¶ 56; OH Compl. ¶ 8. And still others cite admissions that vehicles exceeded federal and California emissions standards. See, e.g., NY Compl. ¶ 247.




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(E.D. Mich.), filed Jan. 11, 2017).) But post-complaint evidence, such as admissions in

connection with the plea agreement, has no bearing on the removability of an action. This is so

even if the pleading is amended post-removal to reflect the new evidence (and no State has

amended its pleading here). This reflects the settled rule that “‘[i]n determining the existence of

removal jurisdiction, based upon a federal question, the court must look to the complaint as of

the time of the removal petition was filed. Jurisdiction is based solely on the complaint as

originally filed and not as amended.’” Abada v. Charles Schwab & Co., 300 F.3d 1112, 1117

(9th Cir. 2002) (emphasis in original) (quoting O’Halloran v. Univ. of Wash., 856 F.2d 1375,

1379 (9th Cir. 1988)).39 Because “the propriety of removal is determined solely on the basis of

the pleadings filed in state court,” the 177 States cannot avoid federal jurisdiction by relying on

evidentiary assertions in their remand motion that do not appear in their state court pleadings.

Williams, 471 F.3d at 976; see also, e.g., Sparta Surgical Corp. v. Nat’l Ass’n of Sec. Dealers,

Inc., 159 F.3d 1209, 1213 (9th Cir. 1998) (“[J]urisdiction must be analyzed on the basis of the

pleadings filed at the time of removal without reference to subsequent amendments.”).40

Moreover, the Non-177 States argue that Defendants have “extinguished even the

potential for dispute by conceding that [they] sold tampered-with Subject Vehicles.” (Non-177

St. Mot. at 16.) Even putting aside any post-pleading evidence, this assertion is wrong.

Defendants did not admit to “tampering” with any vehicle components—certainly not in the way

that the Non-177 States interpret that term—because “tampering” is not an activity conducted by

39 See also, e.g., Pan Am. Petroleum Corp. v. Superior Ct. of Del., 366 U.S. 656, 662 (1961) (federal jurisdiction “depend[s] on the particular claims a suitor makes in state court—on how he casts his action”); Pullman Co. v. Jenkins, 305 U.S. 534, 537 (1939) (“The second amended complaint should not have been considered in determining the right to remove, which . . . was to be determined according to the plaintiffs’ pleading at the time of the petition for removal.”); Great Northern Ry. Co. v. Alexander, 246 U.S. 276, 282 (1918) (federal jurisdiction depends on the pleadings, not “what the defendant may allege or prove or what the court may, after hearing upon the merits, . . . order” later in the case).

40 Though some courts have relied on post-removal evidence such as admissions or declarations to clarify jurisdictional facts as they existed at the time of removal, see, e.g., Sierminski v. Transouth Fin. Corp., 216 F.3d 945, 946 (11th Cir. 2000), such use has been limited to the amount in controversy requirement under diversity jurisdiction, not to whether a federal issue was actually disputed under federal question jurisdiction.




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manufacturers designing vehicles for later sale. See Section I.1. Although the Non-177 States

quote from their consumer protection settlement agreement with Defendants, the admissions in

that agreement say nothing about “tampering,” only that “the design specifications of [certain]

vehicles, as manufactured, differ materially from the design specifications” submitted to the

EPA and CARB. (Non-177 St. Mot. at 16 (emphasis added).)

In any event, even if the States’ post-pleading evidence could be considered, the

federal issues would remain squarely in dispute. The admissions, for example, have no bearing

on whether the relief sought by the States raises issues of federal law. Federal questions under

the CAA concerning the injunctive relief sought by the States, or concerning the penalty schemes

that the States seek to impose, are wholly unaffected by whether any Defendants admitted to any

particular conduct. These admissions also have no bearing on whether the Non-177 States’ state-

law claims under their environmental, anti-tampering and I&M laws in fact invoke federal

emissions standards and the application of those standards to the Non-177 States’ claims.

Defendants and the States plainly dispute the interpretation of the CAA.

Whereas the Non-177 States characterize their “defeat device” claims as arising “solely under

state law” without need for “an interpretation of a federal standard” (Non-177 St. Mot. at 1, 15),

Defendants consider these claims to be an attempt to “enforce any standard relating to” new-

vehicle emissions rather than an in-use regulation. 42 U.S.C. § 7543(a). Likewise, Defendants

dispute with all the States the application of the CAA to their claims for injunctive relief and

penalties. These disagreements about the scope, interpretation and application of a federal

statute are the essence of a legal dispute.

C. Federal Jurisdiction Would Not Disturb Any Federal-State Judicial Balance.

In this case, federal jurisdiction over the States’ claims would not “disturb[] any

congressionally approved balance of federal and state judicial responsibilities.” Grable, 545

U.S. at 314. To the contrary, invocation of federal jurisdiction is necessary here to avoid

disruption of that balance.




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These State actions seeking enforcement oversight of new-vehicle emissions—an

interest at the heart of the CAA—squarely implicate “an intricate federal regulatory

scheme . . . [that] requir[es] some degree of national uniformity in interpretation.” Eli Lilly, 476

F. Supp. 2d at 234. The congressionally-mandated balance in the CAA is heavily weighted

towards federal enforcement. In fact, Congress “expressed its intent to occupy the regulatory

role over emissions to the exclusion of all the states . . . except California.” Motor & Equip.

Mfrs. Ass’n, 627 F.2d at 1109. And, Congress empowered the EPA to bring civil claims in

federal court to penalize violations of new-vehicle standards. See 42 U.S.C. §7524(b) (EPA may

bring claim to assess and recover civil penalties in various district courts).

The 177 States claim that “state court [litigation] was specifically contemplated

by Congress” with the enactment of CAA § 177. (177 St. Mot. at 21.) But this ignores that

Congress did not approve the scheme now advocated by the 177 States, under which each state

nominally adopting California’s standards could seek injunctive and penalty relief differing

from, and far exceeding, California’s. This would create the state-specific patchwork of

regulations that the CAA explicitly sought to avoid. At the very least, the federal-state balance

would be furthered by permitting a federal court to decide the question of whether the CAA

contemplates the mosaic scheme of regulation advocated by the States.

The Non-177 States cannot cite authority that Congress contemplated any role for

those states or their state courts in regulating new-vehicle emissions. Instead, the Non-177 States

argue that their claims “turn solely on state—not federal—law,” because they “are predicated on

‘in-use’ regulations that the CAA clearly delegates to the states.” (Non-177 St. Mot. at 21-22.)

The Non-177 States are wrong. Section 209(d) of the CAA permits states to “control, regulate,

or restrict the use, operation, or movement” of vehicles. See 42 U.S.C. 7543(d). This includes,

for example, “carpool lanes, restrictions on car use in downtown areas, and programs to control

extended idling of vehicles.” Pac. Merch. Shipping Ass’n v. Goldstene, 517 F.3d 1108, 1115

(9th Cir. 2008) (internal quotation marks omitted). But the ability to “control, regulate, or

restrict” in-use vehicles does not open the back door to state regulation or penalization of new-




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vehicle emissions. This is because Section 209(d) “concerns state regulation of the use or

operation of motor vehicles subsequent to their sale . . . not emissions standards that

manufacturers must follow.” See Jackson v. Gen. Motors Corp., 770 F. Supp. 2d 570, 577

(S.D.N.Y. 2011) (emphasis added) (listing “access to certain lanes of traffic, engine idling rules”

as examples of in-use regulations under Section 209(d)), aff’d sub nom. Butnick v. Gen. Motors

Corp., 472 F. App’x 80 (2d Cir. 2012). The Non-177 States rely on Sims v. Fla. Dep’t of

Highway Safety & Motor Vehicles, (Non-177 St. Mot. at 21), but even this case explains that the

States’ in-use authority is “to regulate automobile use and operation subsequent to the initial

sale.” 862 F.2d 1449, 1463 n.8 (11th Cir. 1989).

The Non-177 States further contend that the “the federal-state balance Congress

provided for in the CAA” supports state jurisdiction because “the CAA gives the states broad

authority to design and develop implementation plans to meet the NAAQS [national ambient air

quality standards].” (Non-177 St. Mot. at 21-22.) The Non-177 States, however, conflate

different sections of the CAA. The CAA is divided into sections that demarcate the federal

government’s role in regulating different kinds of air pollution. Title I of the CAA governs

emissions from stationary sources, and envisions a “cooperative federalism” between federal,

state and local authorities to regulate and reduce air pollution from stationary sources such as

factories and power stations. Bell v. Cheswick Generating Station, 734 F.3d 188, 190-91 (3d

Cir. 2013). But Title I has nothing to do with mobile sources of emission—such as the vehicles

here—which are governed by Title II, including CAA § 209. Unlike Title I, Title II establishes

uniform national standards and excludes states (other than California) from setting and enforcing

new-vehicle emissions standards. See Background, Part C, supra. Retention of jurisdiction by

this Court would respect Congress’ goal of promoting uniform new-vehicle emissions standards

and enforcement. See H.R. Rep. No. 90-728 (1967), reprinted in 1967 U.S.C.C.A.N. 1938, 1957

(“identical Federal and State standards, separately administered, would be difficult for the

industry to meet since different administration could easily lead to different answers to identical

questions.”).




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Finally, there is no risk that finding federal jurisdiction here will attract a “horde

of original filings and removal cases raising other state claims with embedded issues.” Grable,

545 U.S. at 318. Because myriad lawsuits have already been filed and transferred to this MDL

Court, “granting federal jurisdiction in this case does not open the door to a horde: the horde has

already stormed the border.” and the balance of judicial responsibilities is not threatened. In re

Pharm. Indus. Avg. Wholesale Price Litig., 457 F. Supp. 2d at 82 (denying remand of lawsuit

filed by Arizona that “raise[s] the same issues that are currently before this court in a multi-

district litigation that involves over ninety similar . . . cases”).

IV. VERMONT’S REQUESTED RELIEF FOR VIOLATIONS OF ITS CONSUMER PROTECTION ACT RAISES A FEDERAL QUESTION.

In addition to its environmental claims as a 177 State, Vermont seeks two forms

of relief under its Consumer Protection Act, both of which require adjudication of federal law

questions. Specifically, Vermont requests:

An order “permanently enjoining Defendants . . . from future violations of the . . . Vermont Consumer Protection Act including . . . installing defeat devices in vehicles [and] . . . delivering for sale or lease, offering for sale or lease, selling or leasing in Vermont vehicles which are not covered by a CARB Executive Order, [or] do not comply with applicable NOx and/ or NOx/NMOG emissions standards, and engaging in unfair and deceptive acts and business practices.” (VT Compl., Relief Sought ¶ 4 (emphasis added).)

An order requiring “Defendants to provide restitution . . . to Vermont consumers who purchased or leased the unlawful vehicles, including promptly repairing [the] vehicles in a manner that removes or permanently disables any defeat device and ensuring compliance with applicable emissions standards . . . and providing a warranty that the unlawful vehicle will conform to all applicable emissions standards.” (VT Compl., Relief Sought ¶ 5 (emphasis added).)

Both requests for relief confer federal question jurisdiction on this court. If

granted, a Vermont state court would enforce injunctions prohibiting Defendants from installing

“defeat devices,” and requiring repair of any vehicles found to contain “defeat devices.” But

“defeat device” is a term defined solely by federal law, not Vermont law. To enforce the

injunction, the Vermont state court would need to determine whether the design features of




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future vehicles constitute a “defeat device” under federal law, and would also need to determine

whether any “defeat device” repair of current vehicles satisfies federal law standards. See 40

C.F.R. § 86.1803-01 (defining “defeat device”). This is not a hypothetical federal issue, but

rather is at the core of the injunctive relief requested by Vermont. If granted, a Vermont state

court would have effective control over the design of new vehicles sold in Vermont, potentially

creating a “third vehicle” in violation of the CAA, 42 U.S.C. § 7507, and ushering in the “chaotic

situation” of “vehicle manufacturers” being subject in different states to “different sets of

requirements relating to emissions controls.” In re Office of Attorney Gen, 269 A.2d at 11

(internal quotation marks omitted). This is precisely the type of “prospective injunctive relief” to

enforce federal law that warrants federal question jurisdiction. Seminole Tribe, 517 U.S. at 73.

Vermont argues that its consumer protection claims do not raise any disputed

federal issue because a court need not adjudicate any federal law issue to resolve Vermont’s

claims. (VT Mot. at 3-4.) Even if Vermont could prove without reference to any federal

standards that Defendants falsely advertised their vehicles, Vermont ignores that the injunctive

relief that it seeks will require adjudication of a federal issue, for the reasons set forth above.

Contrary to Vermont’s arguments (VT Mot. at 4-5), asserting federal jurisdiction

over Vermont’s consumer protection claims would not “disturb[] any congressionally approved

balance of federal and state judicial responsibilities.” Grable, 545 U.S. at 314 (emphasis added).

As set forth in Section Background, Part C, above, Congress has spoken on the responsibilities

for regulating new vehicle emissions standards and made clear “its intent to occupy the

regulatory role over emissions.” Motor & Equip. Mfrs. Ass’n, 627 F.2d at 1109. To the extent

Vermont’s claims are based on Defendants’ use of defeat devices to deceive regulators at the

EPA and CARB, “[p]olicing fraud against federal agencies is hardly a field which the States

have traditionally occupied.” Buckman, 531 U.S. at 347 (internal quotation marks omitted).

Finally, if the court determines that either Vermont’s environmental or consumer

protection claims present federal questions, then the court has jurisdiction over Vermont’s entire

case and it should remain in the MDL. See 28 U.S.C. § 1367(a); Int’l Coll. of Surgeons, 522




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U.S. at 165 (“Here, once the case was removed, the [d]istrict [c]ourt had original jurisdiction

over [plaintiff’s] claims arising under federal law, and thus could exercise supplemental

jurisdiction over the accompanying state law claims so long as those claims constitute ‘other

claims that . . . form part of the same case or controversy.’”) (quoting 28 U.S.C. § 1367(a)).

CONCLUSION

For the foregoing reasons, Defendants respectfully request that the Court deny the

States’ motion to remand.41

41 If remand is granted, Defendants request an opportunity to be heard before fees are awarded pursuant to 28 U.S.C. § 1447(c). “Absent unusual circumstances, courts may award attorneys’ fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). Here, removal is objectively reasonable because, inter alia, the States’ claims raise novel issues under the CAA and because their pleadings “contained allegations concerning violations of federal laws.” Tran v. Hous. Auth. of Los Angeles, 619 F. App’x 618, 619 (9th Cir. July 15, 2015); see also, e.g., Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1066-67 (9th Cir. 2008) (removal not objectively unreasonable where no court of appeals had ruled on federal issue). Faced with Kentucky’s similar arguments, a district court found remand not “clearly inevitable,” given “Defendants’ argument that the right to relief sought by [Kentucky] raise[]d issues of federal law.” Opinion, Beshear ex. rel. Commonwealth of Kentucky v. Volkswagen Grp. of Am., Inc., No. 16-cv-27 (Dkt. No. 25), at 6-7 (E.D. Ky. May 25, 2016).




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Dated: February 28, 2017 Respectfully submitted, By: /s/ Robert J. Giuffra, Jr.

Robert J. Giuffra, Jr. [email protected] Sharon L. Nelles [email protected] David M.J. Rein [email protected] William B. Monahan [email protected] William H. Wagener [email protected] SULLIVAN & CROMWELL LLP 125 Broad Street New York, New York 10004 Telephone: (212) 558-4000 Facsimile: (212) 558-3588 Laura Kabler Oswell SULLIVAN & CROMWELL LLP 1870 Embarcadero Road Palo Alto, California 94303 Telephone: (650) 461-5600 Facsimile: (650) 461-5700 Counsel for Volkswagen AG, Volkswagen Group of America, Inc., Volkswagen Group of America Chattanooga Operations, LLC, Audi AG, and Audi of America, LLC

Dated: February 28, 2017 Respectfully submitted, By: /s/ Cari K. Dawson (with permission)

Cari K. Dawson [email protected] ALSTON & BIRD LLP One Atlantic Center 1201 West Peachtree Street Atlanta, Georgia 3039-3424 Telephone: (404) 881-7000 Facsimile: (404) 881-7777 Liaison Counsel for the Porsche Defendants




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ATTESTATION (CIVIL LOCAL RULE 5-1(i)(3))

In accordance with Civil Local Rule 5-1(i)(3), I attest that concurrence in the

filing of this document has been obtained from the signatories.

Dated: February 28, 2017 SULLIVAN & CROMWELL LLP

/s/ Laura Kabler Oswell Laura Kabler Oswell


robert j. giuffra, jr. ( sharon l....

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