CINCINNATI (CN) — Clean diesel truck buyers argued Thursday that their fraud and deceptive trade practices claims against GM for the use of a "defeat device" to pass emissions tests are not preempted by federal law and urged an appeals court panel to revive their class action.
The vehicle owners sued GM and Robert Bosch LLC in 2017, claiming the auto giant manipulated Environmental Protection Agency testing protocols through the use of an "online defeat device" to fudge emissions numbers for its Duramax "clean diesel" truck engines.
According to the plaintiffs, GM used deceptive marketing to tout the engines' "whopping reduction" in carbon emissions despite knowing that once the defeat device was disabled in real-world driving scenarios, the pollution numbers would exceed federal limits.
Consumers were duped into pay nearly $600 more per truck for the sham "clean diesel" technology, according to experts' estimates in the suit.
A federal judge dismissed all claims against GM in July 2023 and ruled the suit was preempted by the Clean Air Act.
U.S. District Judge Thomas Ludington, a George W. Bush appointee, determined the truck owners' state law claims were "inextricably intertwined" with violations of the act and relied heavily on the Sixth Circuit's recent ruling in In re: Ford Motor Company.
"Plaintiffs' allegations about 'defeat devices' concealing excess emissions from the EPA hinge solely on the violation of EPA regulations, as confirmed by plaintiffs' emissions expert ... [and they] repeatedly testified that their only concern for emissions output was regulatory compliance," Ludington said in his opinion.
In their brief to the Sixth Circuit, the truck owners attempted to distinguish their case from Ford and argued their case is not based on any agency findings.
"In contrast [to Ford], plaintiffs do not challenge any EPA findings and the claims are not premised on violations of federal law," they said. "Instead, plaintiffs challenge defendants' failure to disclose the Duramax trucks' emissions during real-world driving, not any failure to follow testing procedures."
Attorney Steve Berman of the Seattle firm Hagens, Berman, Sobol, and Shapiro LLP argued Thursday on behalf of the truck owners and said his clients are the "frontline victims of fraud" in this case and therefore have standing to bring RICO claims.
U.S. Circuit Judge Raymond Kethledge, a George W. Bush appointee, mentioned the "indirect purchaser" rule and questioned whether the buyers' relationship with car dealers precluded them from bringing the present action.
The rule, first announced in the 1977 U.S. Supreme Court case Illinois Brick v. State of Illinois, states that a buyer who is two or more steps removed from the RICO violator lacks standing to bring a lawsuit.
"The rule is the rule," Kethledge told the attorney.
"I don't think it's that crystal clear," Berman replied. "There's only one plaintiff that can sue here. The buyers are the only ones the advertising was directed to. Dealers are not advertised to."
Kethledge was skeptical of the buyers' claim and told their attorney the case seems like an attempt to revisit the agency's ultimate decision to grant a certificate of compliance to GM for their clean diesel engines.
"The EPA's testing regime is inescapably at the heart of everything," he said.
Attorney Jay Lefkowitz of the New York firm Kirkland and Ellis argued on behalf of GM and emphasized the current case involves "the same set of circumstances present in Ford."
"This case starts and ends with the allegations in the complaint," he told the panel. "Federal agencies have enforcement discretion ... and this case is a collateral attack on the EPA's judgment."
Lefkowitz pointed out that while defeat devices are illegal, the device installed in the Duramax trucks merely changes the way the diesel engines operate in certain real-world conditions.
He was quick to distinguish the current case from the 2015 discovery of defeat devices in several Volkswagen diesel engines, a dispute that ultimately led to sanctions from the agency and a settlement agreement with consumers.
U.S. Circuit Judge Karen Moore, a Bill Clinton appointee, questioned the automaker's attorney about the indirect purchaser rule and, specifically, whether it leaves room for any party to bring a RICO claim.
"The dealers could certainly sue," Lefkowitz answered.
"Why would they have any incentive to sue?" Moore asked.
Lefkowitz pointed out the loss of goodwill with consumers might be sufficient to file suit.
GM's attorney cited testimony from the buyers' own experts and echoed Kethledge's point about emissions testing.
"Their own marketing experts said that based on the messaging, a reasonable consumer would believe GM complied with EPA standards. Any fraud committed on consumers is a byproduct of fraud committed on the EPA," Lefkowitz said.
U.S. Circuit Judge Rachel Bloomekatz, a Joe Biden appointee, rounded out the panel.
No timetable has been set for the court's decision.
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