Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

American Petroleum Institute v. Cooper

United States Court of Appeals, Fourth Circuit

June 6, 2013

AMERICAN PETROLEUM INSTITUTE; AMERICAN FUELS AND PETROCHEMICAL MANUFACTURERS ASSOCIATION, Plaintiffs-Appellants,
v.
ROY A. COOPER, III, Attorney General of the State of North Carolina, Defendant-Appellee, NORTH CAROLINA PETROLEUM AND CONVENIENCE MARKETERS ASSOCIATION, Intervenor/Defendant-Appellee. PETROLEUM MARKETERS ASSOCIATION OF AMERICA, Amicus Supporting Appellees.

Argued: January 31, 2013

Appeal from the United States District Court for the Eastern District of North Carolina, at Raleigh. Louise W. Flanagan, District Judge. (5:08-cv-00396-FL)

ARGUED:

Robert Allen Long, Jr., COVINGTON & BURLING, LLP, Washington, D.C., for Appellants.

Melissa Lou Trippe, NORTH CAROLINA DEPARTMENT OF JUSTICE, Raleigh, North Carolina; Charles Foster Marshall, III, BROOKS, PIERCE, MCLENDON, HUMPHREY & LEONARD, Raleigh, North Carolina, for Appellees.

ON BRIEF:

Thomas L. Cubbage III, Henry B. Liu, Kristen E. Eichensehr, COVINGTON & BURLING, LLP, Washington, D.C., for Appellants.

Alexander McClure Peters, NORTH CAROLINA DEPARTMENT OF JUSTICE, Raleigh, North Carolina, for Appellee Roy A. Cooper, III; Eric M. David, Mary F. Peña, BROOKS, PIERCE, MCLENDON, HUMPHREY & LEONARD, Raleigh, North Carolina, for Appellee North Carolina Petroleum and Convenience Marketers Association. Alphonse M. Alfano, BASSMAN, MITCHELL & ALFANO, CHARTERED, Washington, D.C., for Amicus Supporting Appellees.

Before MOTZ, KING, and AGEE, Circuit Judges.

AGEE, Circuit Judge:

Plaintiffs American Petroleum Institute ("API") and American Fuels and Petrochemical Manufacturers Association ("AFPMA") (collectively "Plaintiffs") brought federal preemption-based challenges in the district court seeking to enjoin enforcement of North Carolina's Ethanol Blending Statute ("the Blending Statute"), N.C. Gen. Stat. § 75-90 (2008). Concluding that the Blending Statute was not preempted under any of the grounds advanced by Plaintiffs, the court granted summary judgment in favor of the State of North Carolina and the Intervenor-Defendant, the North Carolina Petroleum and Convenience Marketers Association ("NCPCMA") (collectively "Defendants"). For the reasons set forth below, we affirm the district court's judgment in part, vacate it in part, and remand for further proceedings consistent with this opinion.[1]

I.

This appeal involves the complex interplay of federal and state regulatory schemes concerning the distribution of renewable fuels. We begin with an overview of the applicable federal renewable fuel program and the state's Blending Statute.

In an attempt to increase the quantity of renewable fuels in the marketplace, Congress enacted a statutory regime that we refer to generally as the "federal renewable fuel program." See Energy Policy Act of 2005 ("the Act"), Pub. L. No. 109-58 (codified at 42 U.S.C. § 7545(o)). In furtherance of the Act, Congress authorized the Environmental Protection Agency ("EPA") to adopt regulations to mandate suppliers such as gasoline importers and refiners (but not distributors or marketers) to offer for sale renewable fuel, e.g., ethanol.[2] See 40 C.F.R. § 80.1406. The EPA is charged with determining, annually, how much renewable fuel should enter the marketplace, and assigning volume-based quotas to obligated entities in order to meet the annual requirement.

To monitor compliance, each gallon of renewable fuel produced or imported into the United States is assigned a unique renewable identification number ("RIN"). See 40 C.F.R. § 80.1128. These RINs are attached to the fuel, and transferred along with the fuel to purchasers. The RINs are tracked by the EPA, and if an obligated party fails to obtain an adequate number of RINs, it may be subject to a significant monetary penalty. See 40 C.F.R. §§ 80.1160, 80.1161, 80.1163. Once renewable fuel is blended with traditional gasoline (most often at a 1:9 ratio, creating the blended fuel "E-10" meaning 10 percent ethanol), the RIN separates from the renewable fuel, becomes the property of the entity who blended the renewable fuel with the gasoline, and may be traded on the open market. Under this mechanism, obligated parties who do not themselves blend renewable fuel with conventional gasoline may acquire RINs and also meet the EPA mandate on the quantity of RINs.[3]

At the heart of the issues in this case are the two common methods employed to blend ethanol with conventional gasoline. The first, "inline" blending, is conducted by suppliers and takes place at the terminal where distributors and retailers purchase the gasoline product from the suppliers.[4] The inline blending process consists of unblended ("pure") gasoline at the terminal being transferred to a holding container denominated as a "terminal rack." A computer measures and pumps ethanol from a separate tank (along with the supplier's brand-specific additives) into the pure gasoline. The blended gasoline is then transferred from the terminal rack to a transport vehicle for delivery to the retailer.

The second blending method, "splash blending, "[5] describes a process by which a retailer purchases unblended gasoline from a supplier at the supplier's terminal. The retailer adds ethanol, purchased separately from an ethanol distributor, to the unblended gasoline in the transport vehicle by pumping the ethanol into that vehicle's tank. The ethanol is blended with the "pure" gasoline by the vehicle's movement, i.e., "splash" blending.

The Plaintiffs contended before the district court, and on appeal, that splash blending is more subject to error than inline blending and thereby inhibits their ability to preserve and verify the quality of their trademarked goods. In other words, they assert splash blending is more likely than inline blending to produce a blended gasoline product with an incorrect ethanol to gasoline ratio, which, among other things, could adversely affect motor vehicle performance. According to suppliers, they have tried to prevent these errors by transitioning away from splash blending and installing inline blending equipment at their terminals in North Carolina.

Against this backdrop the North Carolina General Assembly enacted the Blending Statute in 2008, which provides, in pertinent part:

(b) A supplier that imports gasoline into the State shall offer gasoline for sale to a distributor or retailer that is not preblended with fuel alcohol and that is suitable for subsequent blending with fuel alcohol.
(c) The General Assembly finds that use of blended fuels reduces dependence on imported oil and is therefore in the public interest. The General Assembly further finds that gasoline may be blended with fuel alcohol below the terminal rack by distributors and retailers as well as above the terminal rack by suppliers and that there is no reason to restrict or prevent blending by suppliers, distributors, or retailers. Therefore, any provision of any contract that would restrict or prevent a distributor or retailer from blending gasoline with fuel alcohol or from qualifying for any federal or State tax credit due to blenders is contrary to public policy and is void. This subsection does not impair the obligation of existing contracts, but does apply if such contract is modified, amended, or renewed.

N.C. Gen. Stat. § 75-90. The Blending Statute thus requires those entities importing gasoline into North Carolina (i.e., the suppliers) to offer unblended gasoline for sale to retailers and prevents suppliers from contractually restricting retailers from splash blending, i.e., blending ethanol with gasoline themselves.

In 2008, Plaintiffs filed a complaint against the State of North Carolina ("the State") in the U.S. District Court for the Eastern District of North Carolina, seeking to enjoin the State from enforcing the Blending Statute. The Plaintiffs alleged that the Blending Statute was preempted by (1) the Petroleum Marketing Practices Act ("PMPA"), 15 U.S.C. §§ 2801-2841; (2) the federal renewable fuel program; and (3) the Lanham Act, 15 U.S.C. §§ 1051-1113.[6] In 2010, the parties made certain factual stipulations and filed cross-motions for summary judgment relating to Plaintiffs' facial challenges to the Blending Statute.

The district court granted summary judgment in favor of Defendants on Plaintiffs' facial challenges, and correspondingly denied Plaintiffs' motion for summary judgment (hereinafter the "Facial Summary Judgment Order"). See Am. Petroleum Inst. v. Cooper, 681 F.Supp.2d 635 (E.D. N.C. 2010). In doing so, the court held that the Blending Statute was consistent with articulated Congressional goals in the context of the federal renewable fuel program. Relying heavily on this Court's opinion in Mobil Oil Corp. v. Virginia Gasoline Marketers & Automobile Repair Association, 34 F.3d 220 (4th Cir. 1994), the district court also rejected Plaintiffs' claims that either the Lanham Act or the PMPA preempted the Blending Statute.

Following the district court's Facial Summary Judgment Order, the parties engaged in further discovery on Plaintiffs' claims that the Blending Statue was preempted as applied to them. The parties again filed cross-motions for summary judgment, and the district court again granted summary judgment in favor of the Defendants, and correspondingly denied the Plaintiffs' motion for summary judgment ("As-Applied Summary Judgment Order"). See Am. Petroleum Inst. v. Cooper, 835 F.Supp.2d 63 (E.D. N.C. 2011).

On the federal renewable fuel program preemption issue, the court concluded that suppliers were essentially seeking the ability to exclude retailers from the selling or trading of RINs, and held that the federal renewable fuel program did not contemplate such a monopoly. In rejecting Plaintiffs' as-applied Lanham Act challenge, the court largely reiterated many of the conclusions set forth in the Facial Summary Judgment Order, including its holding that the Blending Statute does not affect the ability of suppliers to engage in quality control of their trademarked products. Lastly, the court rejected Plaintiffs' claim that, as applied to ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.