Second District Court of Appeal Upholds South Coast Air Quality Management District’s Rule Limiting Volatile Organic Compounds in Paint Thinners and Solvents against Challenge that the Rule Is Preempted; Rejects Claim that CEQA Required District to Analyze Alternatives to the Rule

On June 28, 2012, in W.M. Barr & Company Inc. v. South Coast Air Quality Management District ___Cal.App.4th___ (Case No. B233892), the Second District Court of Appeal upheld the South Coast Air Quality Management District’s Rule 1143, which requires manufacturers of consumer paint thinner and solvent products to limit the use of Volatile Organic Compounds (VOCs) in their products in order to meet the District’s obligations under the federal Clean Air Act and the California Clean Air Act.

In July 2010, the District adopted Rule 1143. The District believed that Rule 1143 would cause manufacturers to replace the VOCs with acetone, a highly flammable solvent. The District therefore prepared an environmental assessment under CEQA evaluating the fire hazard risks of substituting acetone and proposing specific product labeling to alert consumers.
W.M. Barr & Company, Inc. (Barr), a manufacturer of paint thinners and solvents, challenged Rule 1143 on the grounds that (1) Rule 1143 was preempted by the Federal Hazardous Substance Act (FHSA); (2) Rule 1143 was preempted by regulations simultaneously adopted by the California State Air Resources Control Board (the Board); and (3) the District did not comply with CEQA because it failed to consider alternatives to the measures it adopted. The trial court rejected each of these claims and the Court of Appeal affirmed.

First, the Court of Appeal found that Rule 1143 was not federally preempted. Barr argued that the FHSA preempts Rule 1143 because Rule 1143 requires products to include a “hang-tag” stating that the product has been formulated to meet low VOC standard and to have warnings on the label. According to Barr, the hang-tag requirement addresses the same fire risks as the FHSA, which includes requirements for fire warning labels, and therefore the FHSA preempts the rule’s hang-tag requirement. The Court of Appeal rejected this argument for two reasons. First, the language of the FHSA, which covers “directions for use,” does not expressly preempt the hang-tag because Rule 1143’s hang-tag requirement only requires the hang-tag to instruct users to see the product’s warning label, rather than containing specific directions for use under federal labeling requirements. Second, while Rule 1143 ostensibly addresses “increased fire hazards,” the hang-tag does not directly address fire hazards. Instead, the primary (and narrower) risk the hang-tag addresses is the risk the user will not be familiar with the hazards of the product because it has been reformulated to comply with Rule 1143. The broader question of fire risk is secondary to Rule 1143, and remains governed by the FHSA. Therefore, the court concluded, the FHSA did not preempt Rule 1143’s hang-tag requirement.

Next, the court considered whether state law preempts Rule 1143 and concluded it does not. Barr argued that under California Health and Safety Code section 41712, subdivision (f), Rule 1143 is preempted by the Board’s general purpose regulation of cleaning products, which bars the District from adopting a regulation for a consumer product for which the Board has already adopted a regulation. Barr asserted that because the Board had adopted a regulation for general purpose cleaners, Rule 1143 conflicted with this regulation and was therefore preempted. The court disagreed, explaining that Health and Safety Code section 41712, subdivision (f) states: “[a] district shall adopt no regulation pertaining to disinfectants, nor any regulation pertaining to a consumer project that is different than any regulation adopted by the state board for that purpose.” The court found that the phrase “any regulation already adopted by the state board for that purpose” implicitly refers to regulations already adopted by the Board. This language is clear: if the Board has not yet adopted a regulation in the area, an air management district would not, by definition, be able to adopt a regulation that was different. Here, the Board’s regulations governing paint thinners and multi-purpose solvents were enacted after Rule 1143, not before. Therefore, the court held that Rule 1143 was not preempted by state law.

Finally, the court considered Barr’s CEQA claim. Under CEQA, the District’s adoption, amendment or repeal of a District rule is a certified regulatory program. Certified regulatory programs are considered functionally equivalent to the preparation of an EIR or negative declaration and therefore, in lieu of an EIR or negative declaration, agencies may prepare a substitute environmental review document. In the case of the District, the substitute document is what the District terms an “environmental assessment.” Barr argued the District’s environmental assessment for Rule 1143, which functioned as a mitigated negative declaration, violated CEQA because it failed to consider feasible alternatives. The court rejected this argument because, as a functional equivalent to a mitigated negative declaration, the environmental assessment was not required to analyze feasible project alternatives. Substantial evidence supported the District’s conclusion that Rule 1143 would not cause any significant environmental impacts. Therefore, the District was not required to analyze or make findings regarding alternatives to Rule 1143. (by Laura Harris)