Trial Court Incorrectly Granted Motion for Judgment on the Pleadings Challenging CARB’s Regulations Addressing In-use Engines

In a case heavy on administrative law and civil procedure, the Third District Court of Appeal determined that the California Air Resources Board acted within the scope of its authority when it promulgated regulations addressing heavy-duty engines currently in use. Therefore, the trial court should not have granted a motion for judgment on the pleadings which challenged these regulations. Engine Manufacturers Association v. California Air Resources Board, Case No. C071891(Nov. 24, 2014).

CARB is charged with overseeing the vast regulatory process designed to protect and improve California’s air quality. As part of these efforts, CARB regulates engines installed in vehicles certified for sale in the state. Most of these certified engines come equipped with an on-board diagnostic system (OBD). OBDs monitor emissions systems and detect malfunctions in these systems. Engine manufacturers must demonstrate to CARB that the installed OBDs will function properly for the “actual life” of the engine before new engines can be sold in the state. To satisfy this requirement, new engines are rigorously tested via an “accelerated aging process.” The OBD must function properly at the end of this test to pass for certification.

The regulations challenged in this case require engine manufacturers to apply the pre-certification testing on a sample of in-use engines for engines with model year 2010 and later. If the OBDs on the in-use engines selected for testing function properly, no further testing of the engine group is required. Otherwise, the regulations empower CARB to require additional testing or order recall and repair of engines in an engine class with failing OBDs.

The Engine Manufacturers Association (EMA) challenged the regulations for in-use engines. EMA’s complaint alleged that CARB exceeded its statutory authority by adopting regulations that would be “onerous and costly” for manufacturers and that the regulations unlawfully mandate recall and repair of engines.

After CARB filed an answer, EMA filed a motion for judgment on the pleadings. The motion was granted following lengthy proceedings before multiple trial court judges. The trial court reasoned that the authorizing statute at issue addressed only new engines, as opposed to in-use engines, and that the regulations were not “reasonably necessary.”

The Appellate Court’s Decision

The appellate court determined that EMA’s motion for judgment on the pleadings was granted in error. In short, since CARB filed an answer which raised fair grounds for presenting a defense, the case could not have been settled on the pleadings. Careful to show its work, the appellate court explained the analytical route it took to reach this conclusion.

First, the appellate court independently reviewed whether the OBD regulations were consistent with the law controlling the agency’s actions. The Health and Safety Code directs CARB to adopt regulations, rules, and standards to address air pollution caused by motor vehicles. Section 43013, subdivision (a) explicitly grants CARB the authority to adopt “in-use performance standards.” The appellate court characterized the regulations at issue—regulations ensuring in-use OBDs function properly as establishing an in-use performance standard—as falling within the scope of the statute. Along with rejecting the narrow reading of the statute urged by EMA and adopted by the trial court, the opinion emphasizes that the Legislature granted CARB broad authority to adopt regulations addressing vehicle emissions. This authority is limited by the requirement that regulations be feasible and cost-effective. But since CARB specifically denied EMA’s allegations to the contrary, the issue could not be settled in a judgment on the pleadings.

Second, the appellate court concluded EMA’s motion should not have been granted because the trial court improperly made a finding that the proposed OBD regulations were not “reasonably necessary” for CARB to carry out the intended purposes of the Health and Safety Code. While it is true that an agency’s regulations must be “reasonably necessary to effectuate the statutory purposes,” EMA had the burden to demonstrate, with evidence based on the pleadings, that the regulations did not meet this requirement. Since EMA did not meet this burden, the trial court should not have issued a ruling against CARB.

This published opinion may not break new ground on administrative law issues, but it provides a helpful explanation of judicial review of an agency’s quasi-legislative rules. The opinion is careful to note and explain the different standards of review the court applies.