Category: Transportation

Politics Trumps Economics? Trump’s Revocation of California’s Waiver Under the Clean Air Act

Today President Trump announced on Twitter that the U.S. was revoking California’s waiver under the Clean Air Act (CAA) which allowed it to impose stricter tailpipe emission standards than the federal ones. California’s Governor Newsom and Attorney General Becerra immediately announced that the state would file suit to challenge the revocation.

While the revocation has been characterized as an immediate rollback, the federal corporate average fuel economy (CAFE) standards[1] established under the previous administration, which are consistent with California’s, remain in place. Last year the Trump administration proposed to rollback those standards, freezing the efficiency and emission rules in 2021 and canceling further increases in stringency set through 2028. The final rule has not yet been issued. It is rumored that it will not be, as the administrative record supporting it has many problems and most acknowledge that it faces significant legal hurdles.

A little historical context is helpful. California began regulating tailpipe emissions in the 1960’s under then-Governor Reagan to combat air pollution. When the CAA was signed by President Nixon in 1970 it included a provision, Section 209, that allows California to establish stricter standards by obtaining a waiver of the normal federal preemption rules from U.S. Environmental Protection Agency (EPA). Once granted, other states then can adopt California’s standards. Thirteen states and the District of Columbia have adopted California’s current standards.

For 30 years, under both Republican and Democratic administrations, Section 209 waivers to combat air pollution were routinely granted. In April 2007, the U.S. Supreme Court decided Massachusetts v. EPA, 549 U.S. 497 (2007), ruling that greenhouse gases (GHGs) are pollutants under the CAA. In December 2007, the Bush administration denied California’s request for a waiver to impose tailpipe emission standards aimed at reducing GHGs. California promptly sued in January 2008, joined by 11 other states. That case was pending before the U.S. Supreme Court when President Obama took office. In 2009, the parties settled the case before the Court issued its decision, and in 2010 the U.S. and California reached an agreement that aligned the state and federal standards. Those standards were subsequently expanded and a new waiver was granted in January 2013. It is that waiver that is now being revoked.

While litigation is inherently uncertain, it appears that California has a good case for challenging the revocation. Not only is the revocation unprecedented, there is no provision in the CAA providing for it. Section 209 only establishes the criteria for granting a waiver; it’s silent as to revocation. In 2013, the U.S. determined that the criteria for the waiver had been met, and both the states and the industry have acted in reliance on that determination for more than 6 years. The U.S. has also asserted that the federal Energy Policy and Conservation Act (EPCA) preempts California’s standards. However, in Massachusetts v. EPA, the Supreme Court ruled that EPCA does not displace EPA’s authority to regulate GHGs, and courts subsequently have extended that rationale to hold that EPCA does not preempt states’ regulation of GHGs under the waiver.

Just as it was in the late aughts, the automobile industry has been put in an extremely difficult position by this dispute. California has the 5th largest economy in the world, and when one adds in the 13 other states that have adopted its standards – states like New York and Pennsylvania – that equates to a large segment of the auto market. Having to produce vehicles to meet two different sets of emission standards would be extremely costly. The industry desperately needs regulatory certainty. Reflecting this, in June, 17 automakers sent a letter to President Trump calling for one national standard that included California, and in July, four automakers reached an agreement of sorts with California on emission standards.

Instead of the regulatory certainty that is needed for the economy to operate efficiently, it appears that this dispute will move into a phase of protracted litigation and years of regulatory uncertainty. The dispute may be good politics for those that want to motivate their base on each side, both Republicans in Washington D.C. and Democrats in Sacramento, but it is pretty clearly bad economics.

[1]   CAFE is, essentially, the average fuel efficiency of an automaker’s fleet of vehicles.

Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.

For more on the Clean Air Act, see the National Law Review Environmental, Energy & Resources law page.

Not So Fast And Furious – Executive Indicted for Stealing Self-Driving Car Trade Secrets

Back in March, 2017, we posted about a civil lawsuit against Anthony Levandowski, who allegedly sped off with a trove of trade secrets after resigning from Waymo LLC, Google’s self-driving technology company. Waymo not only sued Levandowski, but also his new employer, Uber, and another co-conspirator, Lior Ron. Since our initial post, things have gotten progressively worse for the Not So Fast and Furious trio: (1) Levandowski was fired in May, 2017; (2) Uber settled, giving up 5% of its stock, which totaled $245 million dollar;  and (3) the case against Levandowski and Ron was sent to arbitration, where the arbitration panel reportedly issued a $128 million interim award to Waymo.

Just when things couldn’t seem to get any worse, they did.

On August 15, 2019, a federal grand jury indicted Levandowski on 33 counts relating to trade secret theft. Levandowski has pled not guilty, has been released on $2 million dollars bail, and  is currently wearing an ankle monitor.

This legal saga is a reminder that trade secret theft is serious… it not only has civil consequences, but also criminal ones.  Unfortunately, trade secret theft happens every day.  And regardless of whether your company has trade secrets regarding self-driving car technology, worth hundreds of millions of dollars, or customer information worth less than a hundred thousand dollars, it’s important to make sure your company’s information is protected.

Equally important is knowing how to investigate potential trade secret theft. Some helpful tips as you launch your investigation:

1. Secure and preserve all relevant computing devices and email/file-sharing accounts.

2. Consider enlisting the help of outside computer forensic experts.

3. Analyze the employee’s computing activities on company computers and accounts.

4. Determine whether there is any abnormal file access, including during non-business hours.

5. Examine the employee’s use of external storage devices and whether those devices have been returned.

6. Review text message and call history from the employee’s company issued cell phone (and never instruct anyone to factory reset cell phones).

7. Enlist the help of outside counsel to set the parameters of the investigation.

© 2019 Jones Walker LLP
For more on trade secret law, see the National Law Review Intellectual Property law page.

Heavy Metal Murder Machines and the People Who Love Them

What is the heaviest computer you own?  Chances are, you are driving it.

And with all of the hacking news flying past us day after day, our imaginations have not even begun to grasp what could happen if a hostile person decided to hack our automotive computers – individually or en masse. What better way to attack the American way of life but disable and crash armies of cars, stranding them on the road, killing tens of thousands, shutting down functionality of every city? Set every Ford F-150 to accelerated to 80 miles an hour at the same time on the same day and don’t stick around to clean up the mess.

We learned the cyberwarfare could turn corporal with the US/Israeli STUXNET bug forcing Iran’s nuclear centrifuges to overwork and physically break themselves (along with a few stray Indian centrifuges caught in the crossfire). This seems like a classic solution for terror attacks – slip malicious code into machines that will actually kill people. Imagine if the World Trade Center attack was carried out from a distance by simply taking over the airplanes’ computer operations and programing them to fly into public buildings.  Spectacular mission achieved and no terrorist would be at risk.

This would be easy to do with automobiles. For example, buy a recent year used car on credit at most U.S. lots and the car comes with a remote operation tool that allows the lender to shut off the car, to keep it from starting up, and to home in on its location so the car can either be “bricked” or grabbed by agents of the lender due to non-payment. We know that a luxury car includes more than 100 million lines of code, where a Boeing 787 Dreamliner contains merely 6.5 million lines of code and a U.S. Airforce F-22 Raptor Jet holds only 1.7 million lines of code.  Such complexity leads to further vulnerability.

The diaphanous separation between the real and electronic worlds is thinning every day, and not enough people are concentrating on the problem of keeping enormous, powerful machines from being hijacked from afar. We are a society that loves its freedom machines, but that love may lead to our downfall.

An organization called Consumer Watchdog has issued a report subtly titled KILL SWITCH: WHY CONNECTED CARS CAN BE KILLING MACHINES AND HOW TO TURN THEM OFF, which urges auto manufacturers to install physical kill switches in cars and trucks that would allow the vehicles to be disconnected from the internet. The switch would cost about fifty cents and could prevent an apocalyptic loss of control for nearly every vehicle on the road at the same time. (The IoT definition of a bad day)

“Experts agree that connecting safety-critical components to the internet through a complex information and entertainment device is a security flaw. This design allows hackers to control a vehicle’s operations and take it over from across the internet. . . . By 2022, no less than two-thirds of new cars on American roads will have online connections to the cars’ safety-critical system, putting them at risk of deadly hacks.”

And if that isn’t frightening enough, the report continued,

“Millions of cars on the internet running the same software means a single exploit can affect millions of vehicles simultaneously. A hacker with only modest resources could launch a massive attack against our automotive infrastructure, potentially causing thousands of fatalities and disrupting our most critical form of transportation,”

If the government dictates seat belts and auto emissions standards, why on earth wouldn’t the Transportation Department require a certain level of security of connectivity and software invulnerability from the auto industry.  We send millions of multi-ton killing machines capable of blinding speeds out on our roads every day, and there seems to be no standard for securing the hackability of these machines.  Why not?

And why not require the 50 cent kill switch that can isolate each vehicle from the internet?

50 years ago, when Ralph Nader’s Unsafe at Any Speed demonstrated the need for government regulation of the auto industry so that car companies’ raw greed would not override customer safety concerns.  Soon after, Lee Iacocca led a Ford design team that calculated it was worth the horrific flaming deaths of 180 Ford customers each year in 2,100 vehicle explosions due to flawed gas tank design that was eventually fixed with a tool costing less than one dollar per car.

Granted that safety is a much more important issue for auto manufacturers now than in the 1970s, but if so, why have we not seen industry teams meeting to devise safety standards in auto electronics the same way standards have been accepted in auto mechanics? If the industry won’t take this standard-setting task seriously, then the government should force them to do so.

And the government should be providing help in this space anyway. Vehicle manufacturers have only a commercially reasonable amount of money to spend addressing this electronic safety problem.  The Russian and Iranian governments have a commercially unreasonable amount of money to spend attacking us. Who makes up the difference in this crital infrastructure space? Recognizing our current state of cyber warfare – hostile government sponsored hackers are already attacking our banking and power systems on a regular basis, not to mention attempting to manipulate our electorate – our government should be rushing in to bolster electronic and software security for the automotive and trucking sectors. Why doesn’t the TSB regulate the area and provide professional assistance to build better protections based on military grade standards?

Nothing in our daily lives is more dangerous than our vehicles out of control. Nearly 1.25 million people die in road crashes each year, on average 3,287 deaths a day. An additional 20-50 million per year are injured or disabled. A terrorist or hostile government attack on the electronic infrastructure controlling our cars would easily multiply this number as well as shutting down the US roads, economy and health care system for all practical purposes.

We are not addressing the issue now with nearly the seriousness that it demands.

How many true car–mageddons will need to occur before we all take electric security seriously?

Copyright © 2019 Womble Bond Dickinson (US) LLP All Rights Reserved.

This article was written by Theodore F. Claypoole of Womble Bond Dickinson (US) LLP.
For more on vehicle security, please see the National Law Review Consumer Protection law page.

Second Circuit Deepens Split with Third Circuit Over Aviation Safety Field Preemption, Awaiting Possible Supreme Court Resolution

There is no greater issue currently facing the aviation bar than whether the Federal Aviation Act (“FAAct”) preempts state law by occupying the entire field of air safety. In other words, do federal standards of care exclusively govern liability in the aviation industry, or are states allowed to govern aspects of aviation safety through a patchwork of unique tort or regulatory liability regimes? This question is the subject of a petition for writ of certiorari pending before the U.S. Supreme Court, seeking review of the Third Circuit’s decision in Sikkelee v. Precision Airmotive (2016). In Sikkelee, the Third Circuit concluded that Abdullah v. American Airlines – in which it previously held in the context of in-air operations that “federal law establishes the applicable standards of care in the field of air safety, generally, thus preempting the entire field from state and territorial regulation” – did not apply to state product liability claims concerning the design of aircraft engines.[1] The Supreme Court has asked the U.S. Solicitor General to weigh in on this important question.

Most recently, while the Sikkelee cert petition is pending, the Second Circuit decided Tweed-New Haven Airport Authority v. Tong (2019). In Tweed, the Court of Appeals doubled down on its prior holding in Goodspeed Airport v. East Haddam Inland Wetlands & Watercourses Commission (2011) that the FAAct occupies the “entire field of aviation safety” to the “exclusion of state law” and consequently preempts state laws that sufficiently interfere with federal regulation of air safety. Though the Third Circuit in Sikkelee tried to distinguish and reconcile such other broad field preemption decisions, the analytical split between them – made even more visible in Tweed – is unmistakable. The resultant uncertainty is antithetical to the very purposes of the FAAact – to create a uniform system of federal regulation for aviation industry participants. Tweed thus underscores the need for the Supreme Court to grant certiorari and resolve the split.

The Second Circuit’s Approach to Field Preemption

In Goodspeed, a small privately owned airport sought a declaratory judgment that local environmental and wetlands laws were preempted by the FAAct. The Second Circuit affirmed a “thorough and well-reasoned” district court decision using a two-step analysis for field preemption. The first step asks whether Congress intended the entire field to be occupied by federal law to the exclusion of state law. If so, the second step considers whether the state law in question sufficiently intrudes upon that field.

Applying the two steps, the Second Circuit had little difficulty concluding first that “the overall statutory and regulatory scheme” under the FAAct is “evidence of ‘a clear congressional intent to occupy the entire field of aviation safety to the exclusion of state law,’” because it “has established a comprehensive regulatory scheme ‘addressing virtually all areas of air safety,’ including the certification of aircraft, most airports, pilots and mechanics, air traffic control systems, air navigation and communication, and airspace classifications.” In so holding, the Court noted that it was joining the First, Third, Sixth, Ninth, and Tenth Circuits.

Turning to the second question, the Goodspeed Court considered whether the state environmental and wetland law at issue, which simply required a permit before cutting down trees in protected wetlands, “sufficiently interferes with federal regulation that it should be deemed preempted.” Examining the purpose and effect of the state law, the Court found that the law did not sufficiently enter into the scope of the preempted field: “Goodspeed Airport is not licensed by the FAA; it is not federally funded, and no federal agency has approved or mandated the removal of the trees from its property. Indeed, in its response to a formal inquiry from the district court, in this case, the federal government disclaimed any authority to order the trees’ removal.” In other words, as the district court had explained below, “Courts have long distinguished between state laws that directly affect aeronautical safety, on the one hand, and facially neutral laws of general application that have merely an incidental impact on aviation safety.”

In Tweed, the Second Circuit applied the same, two-step analysis in considering whether a state law preventing the expansion of an airport runway was impliedly field preempted. Tweed is a small commercial Airport. Its largest runway is currently 5,600 feet long making it one of the shortest commercial airport runways in the country, substantially limiting commercial flights. In 2002, Tweed had prepared a Master Plan with Federal Aviation Administration (“FAA”) involvement for upgrading its airport, including extending the runway. In 2009, however, the Connecticut legislature enacted a statute expressly blocking the expansion of the runway. In response, Tweed filed a declaratory judgment action seeking a determination that the statute was preempted by the FAAct. The district court rejected Tweed’s arguments, finding that Tweed lacked standing to sue, and that, even if it had standing, the FAAct did not preempt the statute. The Second Circuit reversed, finding both standing and preemption.

With regard to preemption, the Court of Appeals first reiterated the Goodspeed holding that the FAAct “was enacted to create a uniform and exclusive system of federal regulation in the field of air safety. . . . It was passed by Congress for the purpose of centralizing in a single authority . . . the power to frame rules for the safe and efficient use of the nation’s airspace.” Consequently, it reasoned, state laws that conflict with the FAAct “or sufficiently interfere with federal regulation of air safety are preempted.”

Thus turning to the second step in the analysis, the Court considered whether the statute fell within the scope of the preempted field. It found that the statute directly impacted air safety by limiting the length of the runway, which in turn limited the number of passengers, amount of baggage, and even the type of planes that could use the airport. The Court also considered the extent of FAA involvement with Tweed overall and with the length of the runway specifically, concluding that the “FAA’s involvement with Tweed and its runway project has been direct and significant.” As the Court explained, Tweed is federally regulated as part of the Tweed-New Haven Airport Layout Plan, which requires approval by the FAA. Additionally, as a primary commercial service airport, Tweed needs to hold an operating certificate pursuant to federal regulations. It is required to submit its Master Plan to the FAA, which, as early as 2002, included a plan for extending the length of the runway. The FAA directly approved the Master Plan, including the extension of the runway. For all these reasons, the Court held that the state law was preempted.

The Third Circuit’s Conflicting Approach

In Abdullah v. American Airlines (1999), the Third Circuit similarly considered whether the FAAct preempted the field of air safety thus barring a tort claim premised on an alleged failure by aircraft crew to warn passengers of expected turbulence. The Plaintiffs alleged negligence by the pilot and flight crew for failing to either avoid the turbulent conditions or warn the passengers so they could protect themselves. The Court of Appeals found implied field preemption based on its conclusion that the FAAct and relevant federal regulations “establish complete and thorough safety standards for interstate and international air transportation that are not subject to supplementation by or variation among, jurisdictions.” Indeed, the Third Circuit expressly distinguished its holding from those in which courts had only found preemption of “discrete aspects of air safety,” explaining that “federal law establishes the applicable standards of care in the field of air safety, generally, thus preempting the entire field from state and territorial regulation.”

Despite the breadth of this express holding in Abdullah, the Third Circuit subsequently held in Sikkelee that the FAAct does not preempt state law aviation product liability claims. The plaintiff had alleged that a design defect in the carburetor of an airplane engine resulted in the aircraft crashing shortly after takeoff. Examining whether that claim was subject to implied field preemption, the Third Circuit did not use the Second Circuit’s two-step analysis, but instead essentially conflated the inquiries, focusing entirely on whether there was pervasive enough federal regulation addressing the particular aviation safety aspect at issue to rebut the general presumption against preemption.

In that regard, the defendants pointed to the extensive certification process required by the FAA in order to receive a type certificate for the engine: “This certification process can be intensive and painstaking, for example, a commercial aircraft manufacturer seeking a new type certificate for wide-body aircraft might submit 300,000 drawings, 2,000 engineering reports, and 200 other reports in addition to completing approximately 80 ground tests and 1,600 hours of flight tests.” As the defendants explained, the type certificate “certifies that a new design for an aircraft or aircraft part performs properly and meets the safety standards defined in the aviation regulations,” and any changes to the design thereafter must be approved by the FAA. A “major” change to the type certificate requires the issuance of an amended or supplemental type certificate. The defendants argued that, because a type certificate applicant goes through such a rigorous regulatory process culminating in the certification of a part as meeting safety standards defined in the aviation regulations, the question of whether a part design was reasonably safe under state law was preempted by the FAAct.

The Third Circuit disagreed. Focused on the general presumption against preemption, the Court of Appeals considered the fact that “aviation torts have been consistently governed by state law” as far back as 1914. It also read the text of the FAAct as “not signal[ing] an intent to preempt state law products liability claims.” The Third Circuit dismissed the extensive regulations addressing the engine design and certification process as merely establishing “a baseline requirement” for “minimum standards.”

In thus holding that the FAAct did not impliedly preempt the field of aviation safety pertaining to engine certification, the Third Circuit tried to distinguish and reconcile its approach to field preemption with that of other Courts of Appeals, including the Second Circuit: “Appellees observe that various Courts of Appeals have described the entire field of aviation safety as preempted, but, on inspection, even those courts have carefully circumscribed the scope of those rulings. The Second, Ninth, and Tenth Circuits all assess the scope of the field of aviation safety by examining the pervasiveness of the regulations in a particular area rather than simply determining whether the area implicated by the lawsuit concerns an aspect of air safety.”

Not so. Again, for example, the Second Circuit has not started its analysis by “examining the pervasiveness of the regulations in a particular area” of aviation. In direct conflict with Sikkelee, the Second Circuit through Tweed has now twice readily found at the outset of its analyses that the FAAct impliedly preempted the “entire” field of aviation safety. Only thereafter has the Second Circuit examined the state law at issue to determine if it sufficiently intruded into the preempted field (Tweed), or, rather, was merely incidental to it (Goodspeed).

This fundamental difference in analyzing field preemption belies the Third Circuit’s attempt to distinguish product liability cases (Sikkelee) from in-air operations (Abdullah). Indeed, the Second Circuit acknowledged no such distinction in Tweed, and in its predecessor, Goodspeed, the Court affirmed the district court’s “thorough and well-reasoned” explanation that, in response to the FAAct’s “congressional mandate, the FAA has established a comprehensive regulatory scheme addressing virtually all areas of air safety, including the certification of aircraft.” Thus, unlike the Third Circuit, the Second Circuit would not start its analysis of a case involving engine product liability by examining whether the pervasiveness of aircraft design and certification regulations sufficiently evinces an intent to overcome a general presumption against preemption, but, rather, by yet again recognizing field preemption over all aspects of aviation safety – including engine design – and would then ask whether the state tort standards of care at issue sufficiently intrude upon the scope of that field. In that regard, we think the Second Circuit would have little difficulty concluding that they do. Like the extent of federal involvement with the physical layout of the airport in Tweed, the level of federal involvement in engine design and certification is indisputably “direct and significant,” such that state tort law standards of care that purport to govern the safety of engine design clearly intrude upon it.

Conclusion

The fundamental and critical circuit split on the proper analysis of implied field preemption in aviation cases, illustrated and emphasized most recently by Tweed, undermines the very purpose of the FAAct of creating uniform and consistent standards of care for safety in the aviation industry. We hope the Supreme Court will grant certiorari and resolve it.

[1] The Third Circuit remanded the case for consideration of conflicts preemption and on subsequent review of the district court’s determination that the product liability claims were conflict preempted, it reversed and remanded for further proceedings. The pending cert petition seeks review of both preemption rulings. This article, however, is focused solely on field preemption.

© 1998-2019 Wiggin and Dana LLP

For more aviation cases, see the National Law Review Utilities & Transport type of law page.

Drive.ai Introduces External Communication Panels to Talk to Public

Self-driving cars are inherently presented with a challenge—communicating with their surroundings. However, Drive.ai has attempted to address that challenge by equipping its self-driving cars with external communication panels that convey a variety of messages for drivers, pedestrians, cyclists and everyone else on the road. Drive.ai CEO Bijit Halder said, “Our external communication panels are intended to mimic what an interaction with a human drive would look like. Normally you’d make eye contact, wave someone along, or otherwise signal your intentions. With [these] panels everyone on the road is kept in the loop of the car’s intentions, ensuring maximum comfort and trust, even for people interacting with a self-driving car for the first time.” To help the company build its platform, one of the company’s founders recorded herself driving around normally and analyzed all the interactions she had with other drivers, including eye contact and hand motions.

Specifically, the panel uses lidar sensors, cameras, and radar to determine if any pedestrians are in or near a crosswalk as it approaches the crosswalk. If the vehicle detects that pedestrian’s path, the car begins to slow down and displays the message “Stopping for you.” Once the vehicle comes to a complete stop, it displays the message “Waiting for you.” When there are no more pedestrians are detected, the vehicle will display the message “Going now, please wait” to let other pedestrians to wait to cross.

Drive.ai continues to conduct research to determine the best means of communication including the best location for such communications, which is currently right above the wheels based on its previous studies. Halder said, “The more you can effectively communicate how a self-driving car will act, the more confidence the public will have in the technology, and that trust will lead to adoption on a broader scale.”

 

Copyright © 2019 Robinson & Cole LLP. All rights reserved.
More more in vehicle technology advances, see the Utilities & Transport page on the National Law Review.

Is Electric Scooter Safety Next on the Regulatory Menu?

A few years ago, hoverboards drew a lot of attention from the U.S. Consumer Product Safety Commission (CPSC). Formally known as self-balancing electric scooters, hoverboards became an instant success because they combined practical mobility and enjoyment. But that success was not without some setbacks. When news stories in 2015 linked hoverboards to fires (which we wrote about here), the same popularity that drove sales also attracted public and government scrutiny.

While the CPSC typically does not discuss ongoing investigations, in January 2016, the attention around hoverboards drove then-Chairman Elliot Kaye to make public statements about the agency’s inquiries. And in February 2016, then-Acting Director of Compliance Robert Howell issued a public letter to manufacturers, urging them to test their products according to Underwriters Laboratories (UL) 2272, which would not become a formal voluntary consensus standard for another nine months. These statements were unusual. The public and congressional attention on alleged hoverboard fires drove the CPSC to be more public in its efforts.

Poised for the Next New Thing

With the hoverboard memory fresh in its mind, the CPSC is likely to get ahead of future potential emerging technology issues. One product that the agency may see as ripe for early intervention is a cousin of hoverboards: electric scooters. We last wrote about how scooter manufacturers have provided a roadmap for other technology companies to respond to complaints. Scooters share some features of regulatory interest with hoverboards – they’re both powered by lithium ion batteries, for instance – but they also have some unique features. Specifically, the wildly popular scooter-sharing rental model means scooters carry riders with varying levels of ability and knowledge about the product, presenting companies with the challenge of addressing rider safety without a readily available opportunity to warn or instruct them on scooters’ use.

Scooters are everywhere in many cities, creating both opportunities and litigation challenges for companies. States and municipalities have struggled to figure out how they can address the safety of riders and others, including pedestrians, cyclists, and motorists. They have set a variety of rules on issues like how many scooters can operate, where they can go, and how fast they can move. Some cities are testing the waters carefully, using pilot programs to see how scooters could integrate with other modes of transport. These debates are usually about how scooter riders should ride – the rules of the road/sidewalk – but not about how scooters should be designed and built.

The CPSC has the authority to regulate the safety of scooters. In addition to the question of battery safety, CPSC staff and commissioners have expressed concerns about falls or other mechanical hazards, such as the consequences of potential structural failures. And while the agency is engaged, so far its activities have been modest. CPSC staff have collaborated on UL 2272 since it was issued in 2016. The standard now includes electric scooters under the term “Light Electric Vehicles,” but the standards committee has not adopted any scooter-specific provisions.

However, consumer advocacy groups are asking the government to pay more attention to allegations of injuries associated with scooters, which may pressure the CPSC to be more assertive. The Consumer Federation of America (CFA) has urged the agency to conduct more research and seek recalls of scooters associated with injuries. The CFA has also asked Congress to give the CPSC a nudge. So far, groups like the CFA have not called for a mandatory product safety standard, but that possibility always exists.

How Scooter Companies Can Engage the CPSC

What’s going on in Washington presents scooter companies with the opportunity to ensure their voices are heard in these conversations. As with any CPSC-regulated industry, companies should comply with their obligations to report potential hazards and, as appropriate, recall products. Some companies have already conducted recalls, though seemingly without the CPSC’s public involvement. Companies should also continue to go beyond these case-by-case actions and ensure product safety issues are on their policy agenda in conversations with the CPSC, Congress, and other stakeholders.

For example, companies may want to set up introductory meetings with CPSC commissioners to build positive working relationships long before commissioners have a vote on a recall or a rule. Scooter companies may also want to engage at safety-related events to present themselves as thoughtful, responsible innovators.

Companies should also maintain their active involvement in voluntary standards bodies, namely with UL with respect to its 2272 standard on hoverboard and scooter electrical systems. Voluntary standards both help protect consumers and protect responsible companies against undercutting by less safety-minded market players. Currently, safety practices vary between companies. More uniformity can build consumer confidence and help establish the kind of “reasonably prudent company” benchmark that is key to litigation defense. Moreover, when companies work alongside the CPSC’s technical experts on the voluntary standards, they can build trust and rapport that can help future discussions.

Electric scooters are not going away. Their enormous potential in urban transportation is too valuable. But discussions about how to regulate scooters are just getting started. Scooter companies should make sure they are seated at the table; that is, as always, the best way to avoid being on the menu.

 

© 2019 Schiff Hardin LLP
More on CPSC regulation in the National Law Review Consumer Protection page.

U.S. Announces Possible Retaliatory Tariffs on European Union for Airbus Subsidies

The Office of the U.S. Trade Representative (USTR) announced in a Federal Register notice published July 5 that the agency is considering increasing duties on certain goods from the European Union (EU). This move is connected to a long-running World Trade Organization (WTO) dispute involving EU subsidies for Airbus, the aircraft manufacturing company.

The USTR has invited public comments on the proposed list and will hold a public hearing on Aug. 5, 2019.

Requests to appear at the hearing are due to the USTR by July 24, and written comments are due by Aug. 5. The public comment and hearing process will provide importers of goods from the EU, as well as domestic producers that compete with EU producers, the opportunity to be heard with regard to the products that may be subject to tariffs.

In April 2019, the USTR published a preliminary list of goods from the EU that could be targeted with tariffs, which included aircraft, motorcycles and wine. The July 5 list contains additional products, including whiskey, coffee, olives, pasta, cheese, pork, and metals, among other items. The goods on both lists are collectively worth about $25 billion of imports per year.

The tariffs stem from a WTO case filed by the United States in 2004, which was resolved by the WTO Appellate Body in 2011. In that case, European Communities and Certain member States — Measures Affecting Trade in Large Civil Aircraft (DS316), the Appellate Body found that certain EU subsidies for Airbus failed to comply with the WTO’s Agreement on Subsidies and Countervailing Measures (SCM Agreement).

The EU made certain changes to its subsidy regime in response to the Appellate Body’s decision, but the U.S. later asked the WTO to determine that the EU had not fully complied with the decision. That request led to another Appellate Body decision published in May 2018, in which the Appellate Body agreed with the U.S. that the EU was still not in compliance with the SCM Agreement.

The WTO is expected to determine the amount of retaliatory tariffs the United States can impose sometime this summer, and the April and July 2019 tariffs proposed by the USTR are likely being prepared in anticipation of the WTO decision.

 

© 2019 BARNES & THORNBURG LLP
For more from the Office of the US Trade Representative see the National Law Review page on Antitrust & Trade Regulation.

Steering Wheels Become Increasingly Optional

Florida is the latest state to allow vehicles to operate on the road without a steering wheel.  In doing so, Florida became the third state after Michigan and Texas to allow vehicles on its roads without a human even having the ability to drive them.  The legislation signed into law includes:

The bill authorizes operation of a fully autonomous vehicle on Florida roads regardless of whether a human operator is physically present in the vehicle. Under the bill, a licensed human operator is not required to operate a fully autonomous vehicle. The bill authorizes an autonomous vehicle or a fully autonomous vehicle equipped with a teleoperation system to operate without a human operator physically present in the vehicle when the teleoperation system is engaged. A remote human operator must be physically present in the United States and be licensed to operate a motor vehicle by a United States jurisdiction.

Florida is sure to become a hotbed of autonomous vehicle testing with this new law.  Starsky Robotics is one of the companies expected to take advantage by putting driverless vehicles on the road in 2020.  These would not be just any vehicles, but big rig trucks.  These trucks have already hit 55 mph, without a driver or crew.  Most predict that this is just the beginning with as many as eight million autonomous vehicles expected on the road by 2025 and 30 million by 2030. Of course, the devil is in some of the details. There are six levels of autonomous vehicles, with level 5, Full Automation, being the highest.

Not everyone agrees that this is all happening so quickly.  As the New York Times noted, “A growing consensus holds that driver-free transport will begin with a trickle, not a flood.” Of course, this makes sense.  Outside of people with a vested interest (we are looking at you Mr. Musk), few seem to truly believe that millions of level 5, completely driverless vehicles will be on the road.

But this does not mean that they will not make an impact. While vehicles may not be navigating complex systems in dense areas next year, they are likely to find plenty of uses.  Gated communities with known road structures and limited traffic might be a good location for the first generation of fully autonomous vehicles. And think of the myriad of shuttles at various locations that run the same route, over and over, day after day. That seems like a good use of a fully autonomous vehicle run by something other than gasoline. How about college campuses, with autonomous vehicles running all day and all night providing safe routes and passage for vulnerable students at all hours. Suffice to say, the day when people can wake up, get into a fully autonomous vehicle, and go to sleep while it takes them to work is perhaps not something the current work force will enjoy (except apparently for the occasional Tesla rider taped sleeping behind the wheel).

But whatever generation comes after Generation Z is unlikely to know a driving experience like what exists today, if there is any driving at all. Will they even drive at all, or will they fly in their autonomous flying cars? Project Vahana aims to offer just that. In their own words: “Project Vahana intends to open up urban airways by developing the first certified electric, self-piloted vertical take-off and landing (VTOL) passenger aircraft.” Getting to work will never be easier.  Unless of course, all this transportation runs into the fact that everyone works remotely.

 

© 2019 Foley & Lardner LLP
For more on Vehicle Legislation see the National Law Review page on Utilities & Transport.

State Investments in Electric Vehicle Charging Infrastructure

Various studies indicate that an overall lack of charging infrastructure serves as an impediment to the widespread adoption of electric vehicles (EVs). However, the road to transportation electrification is officially under construction following several major state investments.

At the end of May, in the largest single state-level investment in EV charging infrastructure, the California Public Utilities Commission (CPUC) approved more than $760 million worth of transportation electrification projects by the State’s three investor-owned utilities. The CPUC’s Decision, See A.17-01-020, Proposed Decision of ALJs Goldberg and Cook (May 31, 2018),  authorized Pacific Gas and Electric Company (PG&E) and Southern California Edison (SCE) to install vehicle chargers at more than 1,500 sites supporting 15,000 medium or heavy-duty vehicles. The FD also approved rebates to San Diego Gas & Electric (SDG&E) residential customers for installing up to 60,000 240-volt charging stations at their homes. Moreover, PG&E was authorized to build 234 DC fast-charging stations.

Besides the total spend and resulting emissions reductions represented by the Commission’s action, the Proposed Decision is also notable for the policy priorities it advances.  For instance, it clearly prioritizes the creation of electrification-related benefits for California’s disadvantaged communities (DACs).  (The authorizing legislation, SB 350, found that “[w]idespread transportation electrification requires increased access for disadvantaged communities . . . and increased use of [EVs] in those communities . . . to enhance air quality, lower greenhouse gases emissions, and promote overall benefits to those communities” § 740.12(a)(1)(C) (De Leon)).  Accordingly, the CPUC focused on promoting construction of charging infrastructure in DACs.   For example, the PG&E fast charging program will target construction in DACs by providing up to $25,000 per DC fast charger in rebates to cover a portion of the charger cost for sites located in DACs.

The CPUC also prioritizes the survival of non-utility charging competition.  For example, the Proposed Decision eliminates utility ownership of the charging infrastructure on the customer side of the meter in the SDG&E residential charging program. Additionally, for the PG&E and SCE’s medium and heavy-duty programs, the utilities will own make-ready infrastructure, but not the Electric Vehicle Supply Equipment (EVSE). Instead, the utilities will allow customers to choose their own EVSE models, EVSE installation vendors, and any network services providers.

The CPUC noted several benefits of allowing the utility to own electrification infrastructure only up to the point of the EVSE stub.  First, the Commission found that “[u]tility ownership of the charging infrastructure dramatically drives up costs, in comparison to alternative ownership models.” Instead, restricting utility ownership of charging equipment will allow more charging infrastructure to be built at the same (or lower) cost to ratepayers. Second, it allows private parties to compete and innovate, which will improve charging technology and lower costs. Lastly, non-utility competition addresses “stranded cost” fears, since private parties will bear the risks of nascent charging technologies.

While California has made the largest commitment, other states have also joined the effort to pave a national road toward the widespread adoption of EVs.

In New Jersey, utility company PSE&G recently proposed spending $300 million to set up a network of up to 50,000 charging stations. This investment would constitute a massive upgrade to New Jersey’s charging infrastructure, which currently consists of less than 600 charging stations according to U.S. Department of Energy data. The proposed investment is part of a larger $5.4 billion expansion in PSE&G’s five-year infrastructure plan, and represents the first major proposal of New Jersey’s largest utility to invest in EV infrastructure.

In New York, Governor Andrew Cuomo announced a $40 million commitment (that could grow to $250 million by 2025) by the New York Power Authority for its EVolve NY initiative. The new funding will be used to build fast chargers and to support EV model communities. EVolve NY is a part of the broader Charge NY 2.0 initiative, which advances electric car adoption by increasing the number of charging stations statewide. The new funding will aid New York as it aims to meet its particularly ambitious goal of 800,000 electric vehicles on the road by 2025.

Late last year, the Massachusetts Department of Public Utilities approved a $45 million charging station program by local utility, Eversource. The program includes investments to support the deployment of almost 4,000 “Level 2 Stations” and 72 DC Fast Charging stations. Even more investment could be on its way to Massachusetts as utility company National Grid has also proposed investing in charging station infrastructure.

And in Maryland, utility companies have proposed spending $104 million to build a network of 24,000 residential, workplace and public charging stations. The program, currently before the state’s Public Service Commission, would be a major part of Maryland’s effort to reach 300,000 electric vehicles on the road by 2025.

On the federal level, energy-related projects could be eligible for the $20 billion “Transformative Projects Program” announced by the Trump administration in February.  However, President Trump recently remarked that his infrastructure plan will likely have to wait until after this year’s midterm elections.  In the meantime, states have shown that they are more than willing to take the lead in investing in transportation electrification infrastructure.  (In related news this week, Colorado’s decision to move toward adopting California’s greenhouse gas emissions standards for light-duty vehicles represents a parallel and noteworthy development, further indicating leadership and action from states focused on developing advanced vehicle technology.)  It’s also notable that in addition to utility commission activity, states are also expressing support for advanced vehicle technology While the states have certainly taken a lead, their investments also complement significant action in the private sector, including the recent effort to stand up the Transportation Electrification Accord.  See our recent post on that subject, and continue to follow Inside Energy and Environment for continued updates on this subject.

© 2018 Covington & Burling LLP

This post also includes contributions from Michael Rebuck, a summer associate.

This post was written by Jake Levine Covington & Burling LLP.

Fiat Chrysler Car Hacking Case Put In Neutral

Plaintiff lawyers’ continued search for damage theories to assert in claims arising from a data breach – or fear of a breach – received a potential setback this week when Chief Judge Michael Reagan of the United States District Court for the Southern District of Illinois permitted Fiat Chrysler and Harmon International to seek an interlocutory appeal of the court’s earlier ruling in Flynn v. Fiat Chrysler US that class plaintiffs had standing to bring their “car hacking” claims in federal court.  The ruling comes just one month before the scheduled start of trial. Fiat Chrysler and Harmon moved for an appeal after the Ninth Circuit ruled in a similar case, Cahen v. Toyota Motor Corp, that plaintiffs did not have standing to pursue diminution in value damages against Toyota based on a fear that the vehicles were susceptible to hacking.

 Both Flynn and Cahen were filed in 2015, following a series of well-publicized demonstrations by white hat hackers that certain Toyota and Fiat Chrysler cars could be hacked and remotely controlled by a third party, in potentially malicious ways. Plaintiffs in both lawsuits asserted that the cybersecurity vulnerabilities that gave rise to the potential for hacking constituted a design defect that reduced the value of their cars.

 The Ninth Circuit in Cahen previously rejected this diminution of value theory, agreeing with the District Court that “plaintiffs have not, for example, alleged a demonstrable effect on the market for their specific vehicles based on documented recalls or declining Kelley Bluebook values . . . nor have they alleged a risk so immediate that they were forced to replace or discontinue using their vehicles, thus incurring out-of-pocket damages.” In rejecting Fiat Chrysler’s motion to dismiss in the Flynn case, Judge Reagan reached a different conclusion, finding that plaintiffs had standing to seek diminution of value damages.  Key to the court’s decision was the fact that the cybersecurity defects in Chrysler cars that had been widely reported (originally in a Wired magazine article)  led to a nationwide recall. The recall itself gave rise to additional reports of car hacking involving Chrysler cars, which the plaintiffs argued provided a foundation for a jury to conclude that the market value of Fiat Chryslers had been reduced. Additionally, plaintiffs alleged that the recall had not fixed the cybersecurity vulnerabilities, which the court found could give rise to a conclusion that the market for Chryslers had been altered.

 In certifying the case for appeal, Judge Reagan explained that the initial finding of standing was debatable and noted that a ruling by the Seventh Circuit in favor of Fiat Chrysler would obviate the need for trial. The case remains stayed while the Seventh Circuit considers whether to agree to review the court’s standing ruling.

 A ruling by the Seventh Circuit rejecting the District Court’s standing analysis in Flynn would potentially close what had been a new front in data breach litigation. Flynn had been one of only a few data security cases in the country to proceed past the motion to dismiss stage on a diminution in value theory of damages. What made Flynn particularly remarkable is that there had not been an actual reported breach that resulted in physical or other damages.

 On the other hand, a ruling in favor of plaintiffs could have widespread ramifications and, in theory, could give rise to design defect claims against manufacturers of other connected products — such as refrigerators, medical devices, and smart televisions — based on data security vulnerabilities that increase the risk of hacking.

The Internet of Things is growing rapidly. According to Gartner, there are over 5 billion devices connected to the internet, and by 2020, there will be 25 billion, with revenues expected to exceed $300 billion. To be sure, there are important differences between the automobile market and the market for other consumer products that may limit the viability of overpayment damages claims for data security vulnerabilities outside of automobiles. Still, the potential that these IoT manufacturers could be subject to products liability claims stemming from cybersecurity vulnerabilities is an issue to watch carefully.

Copyright © by Ballard Spahr LLP
Philip N. Yannella of Ballard Spahr LLP