Testing the Scope of Fuel Economy Standard Preemption: The New York Taxicab Cases

by: Joshua E. Ney, Associate Editor, MTTLR

Image Feeding Frenzy by 54east. Used under a Creative Commons BY-NC 2.0 license.

Under the Energy Policy and Conservation Act (EPCA), the National Highway Traffic Safety Administration (NHTSA) prescribes corporate average fuel economy (CAFE) standards for passenger automobiles and light-duty trucks.¹ The CAFE standards specify a minimum fleet-wide average fuel economy applicable to manufacturers in a given model year.²

Since the enactment of the EPCA, the NHTSA has exercised this authority with relatively unchallenged exclusivity. The EPCA’s express preemption clause forbids States to “adopt or enforce a law or regulation related to fuel economy standards.”³ Until recently, few states had sought to regulate automobile fuel economy, and no court had determined that a state or local law violated this preemption clause. That changed on October 31, 2008, when a federal judge blocked the implementation of a new rule promulgated by the New York City Taxi & Limousine Commission (TLC).⁴ The ongoing legal battle is giving courts their first opportunity to define the scope of EPCA preemption.

The 2007 Rule: Preemption of State-Mandated Fuel Economy Standards

On December 11, 2007,⁵ the TLC approved a rule (the “2007 Rule”) requiring all taxicabs coming into service on or after October, 1, 2008, to have “a minimum city rating of twenty-five (25) miles per gallon.”⁶ Beginning October 1, 2009, the 2007 Rule would require all taxicabs coming into service to have a minimum rating of thirty (30) miles per gallon.⁷ In contrast, most of the current taxicabs in the City achieve only 12–14 miles per gallon.⁸

In September 2008, a coalition of affected parties filed a complaint in the United States District Court for the Southern District of New York, asserting that the EPCA preempted the 2007 Rule.⁹ The plaintiffs included the Metropolitan Taxicab Board of Trade (MTBOT), a trade association made up of taxicab fleets in the City.¹⁰ The court granted the plaintiffs’ motion for a preliminary injunction, finding that the plaintiffs had “demonstrated a likelihood of success on the issue of preemption.”¹¹ In the court’s view, “Congress’s undoubted intent was to make the setting of fuel economy standards exclusively a federal concern.”¹² Thus, the 2007 Rule fell squarely within the “ordinary meaning” of the EPCA’s preemption clause.¹³ The court rejected the City’s argument that the preemption clause only applies to fuel economy standards as they relate to manufacturers or sellers (as opposed to consumers, such as taxi owners).¹⁴

The 2008 Rule: Preemption of Voluntary Fuel Economy Incentives?

Following the district court decision, New York City Mayor Michael Bloomberg announced that the City would replace the enjoined 2007 Rule with “a series of initiatives to increase the use of fuel efficient and environmentally friendly taxicabs, through new financial incentives.”¹⁵ The incentives proposed by the Mayor (the “2008 Rule”) involve the City’s taxicab “lease cap” system. Under the “lease cap” system, a taxicab owner leasing his or her licensed taxicab to a driver may not charge a lease rate greater than the Standard Lease Cap.¹⁶ The Standard Lease Cap currently ranges from $105 to $129 per shift, depending on the time of the shift.¹⁷ Under the proposed 2008 Rule, fleet owners leasing fuel efficient vehicles will be allowed to charge drivers an additional $3 per shift, while the lease cap applicable to owners of non-fuel efficient vehicles will decrease by $12.¹⁸ These incentives are intended to compensate for the higher cost of purchasing fuel efficient vehicles.¹⁹

The precise contours of the 2008 Rule will not be clear until the TLC completes a formal rulemaking process.²⁰ However, the president of the MTBOT has already voiced his intention to challenge the Rule.²¹ This legal challenge will tee up a novel question regarding the scope of EPCA preemption: May a State or political subdivision adopt voluntary incentive programs to encourage the purchase of fuel efficient vehicles where it could not have mandated the purchase of such vehicles?²²

To resolve this question, the court will need to determine whether the 2008 Rule is “related to fuel economy standards” within the meaning of the EPCA’s preemption clause. In general, where a federal statute contains an express preemption clause, the preemption determination rests on the “plain wording” of the clause.²³ In this case, however, the preemption clause’s use of “related to” language renders a simple “plain wording” analysis problematic.²⁴ The Supreme Court has pointed out that “[i]f ‘relate to’ were taken to extend to the furthest stretch of its indeterminacy, then for all practical purposes preemption would never run its course, [and the effect would be] to read the presumption against preemption out of the law.”²⁵ Rather, the court must “go beyond the unhelpful text and the frustrating difficulty of defining [‘related to’] and look instead to the objectives of the [EPCA] as a guide to the scope of the state law that Congress understood would survive.”²⁶

In light of this guidance, the court must answer the following question to determine whether the EPCA preempts the 2008 Rule: In enacting the EPCA, did Congress intend to withdraw from the States the authority to provide economic incentives influencing consumer choices with respect to vehicle fuel economy? If the answer is yes, then the 2008 Rule “relates to” fuel economy standards, and the EPCA preempts the Rule. If the answer is no, then the 2008 Rule does not “relate to” fuel economy standards and survives EPCA preemption.²⁷ This case will present a matter of first impression for the court. Furthermore, the Committee reports accompanying the bill that became the EPCA did not discuss the intended scope of the statute’s preemption clause.²⁸ Thus, it is difficult to predict how the court will rule. Stay tuned.

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1 The EPCA directs the United States Secretary of Transportation to prescribe the CAFE standards. 49 U.S.C. § 32902(a) (2006). The Secretary has delegated this authority to the NHTSA. 49 C.F.R. § 1.50(f) (2006).
2 49 U.S.C. § 32901(a)(6).
3 49 U.S.C. § 32919(a) (“When an average fuel economy standard prescribed under [the EPCA] is in effect, a State or a political subdivision of a State may not adopt or enforce a law or regulation related to fuel economy standards or average fuel economy standards for automobiles covered by an average fuel economy standard under [the EPCA].”)
4 Metro. Taxicab Board of Trade v. City of New York, No. 08 Civ. 7837 (PAC), 2008 WL 4866021 (S.D.N.Y. Oct. 31, 2008).
5 Press Release, New York City Taxi & Limo. Comm’n, TLC Unanimously Approves Regulations Leading to a Cleaner, Greener NY Taxi Fleet (Dec. 11. 2007).
6 New York, N.Y., TLC Rule § 3-03(c)(10) (2008).
7 TLC Rule § 3-03(c)(11).
8 William Neuman, As First Plan Stalls, Mayor Tries New Push for Green Taxis, N.Y. Times, Nov. 14, 2008.
9 Metro. Taxicab, 2008 WL 4866021, at *1.
10 Id.
11 Id.
12 Id. at *8 (quoting Green Mountain, 508 F. Supp. 2d at 307).
13 Id. at *9.
14 Id. (citing Engine Mfrs. Ass’n v. South Coast Air Quality Mgmt. Dist., 541 U.S. 246 (2004), (holding that a state law that restricted emissions in new vehicles was preempted by the Clean Air Act regardless of whether it targeted purchasers or manufacturers.))
15 Press Release, Office of the Mayor, New York City, Mayor Bloomberg Announces New Incentive/Disincentive Program to Reach Goal of Green Taxi Fleet (Nov. 14, 2008).
16 New York, N.Y., TLC Rule § 1-78(a) (2008).
17 TLC Rule § 1-78(a)(1).
18 Press release, Office of the Mayor, New York City, supra note 15.
19 Id.
20 Id.
21 Neuman, supra note 8.
22 Cf. Engine Mfrs. Ass’n v. South Coast Air Quality Mgmt. Dist., 541 U.S. 246, 255 (2004), (declining to resolve the application of Clean Air Act preemption to voluntary incentive programs).
23 Green Mountain Chrysler Plymouth Dodge Jeep v. Crombie, 508 F. Supp. 2d 295, 351 (D. Vt. 2007).
24 See Id. at 353.
25 See New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656 (1995) (cited in Green Mountain, 508 F. Supp. 2d at 353).
26 See Green Mountain, 508 F. Supp. 2d at 353 (quoting Travelers 514 U.S. at 656).
27 In context of the federal ERISA statute, whose express preemption clause also includes broad “relate to” language, the Supreme Court has found that a state program did not “relate to” the federal requirements where the state program “merely provide[d] some measure of economic incentive to comport with the State’s requirements.” Cal. Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 332 (1997).
28 Green Mountain, 508 F. Supp. 2d at 354.