Bruce Merrick v. Diageo Americas Supply, Inc.

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 15a0261p.06

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________

BRUCE MERRICK, et al., ┐
Plaintiffs-Appellees, │
│
│ No. 14-6198
v. │
>
│
DIAGEO AMERICAS SUPPLY, INC., │
Defendant-Appellant. │
┘
Appeal from the United States District Court
for the Western District of Kentucky at Louisville.
No. 3:12-cv-00334—Charles R. Simpson III, District Judge.
Argued: August 6, 2015
Decided and Filed: November 2, 2015

Before: SILER, ROGERS, and STRANCH, Circuit Judges.

_________________

COUNSEL

ARGUED: Ryan A. Shores, HUNTON & WILLIAMS LLP, Washington, D.C., for Appellant.
William F. McMurry, WILLIAM F. MCMURRY & ASSOCIATES, Louisville, Kentucky, for
Appellees. ON BRIEF: Ryan A. Shores, William L. Wehrum, Andrew D. Knudsen, HUNTON
& WILLIAMS LLP, Washington, D.C., Walfrido J. Martinez, HUNTON & WILLIAMS LLP,
New York, New York, John S. Reed, Rebecca A. Naser, Brooks D. Kubik, Megan L. Renwick,
REED WEITKAMP SCHELL & VICE PLLC, Louisville, Kentucky, for Appellant. William F.
McMurry, WILLIAM F. MCMURRY & ASSOCIATES, Louisville, Kentucky, Douglas H.
Morris, Lea A. Player, MORRIS & PLAYER PLLC, Louisville, Kentucky, for Appellees. Peter
D. Keisler, Quin M. Sorenson, SIDLEY AUSTIN LLP, Washington, D.C., J. Philip Calabrese,
PORTER WRIGHT MORRIS & ARTHUR LLP, Cleveland, Ohio, Robert L. Brubaker, L.
Bradfield Hughes, Eric B. Gallon, PORTER WRIGHT MORRIS & ARTHUR LLP, Columbus,
Ohio, for Amici Curiae.

1
No. 14-6198 Merrick, et al. v. Diageo Americas Supply Page 2

_________________

OPINION
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ROGERS, Circuit Judge. This interlocutory appeal concerns whether the federal Clean
Air Act preempts common law claims brought against an emitter based on the law of the state in
which the emitter operates. The Clean Air Act’s text makes clear that the Act does not preempt
such claims. This conclusion is further supported by the Act’s structure and history, together
with relevant Supreme Court precedents.

Diageo Americas Supply, Inc. distills and ages whiskey at its Louisville facilities. The
distillation and aging process results in tons of ethanol emissions. Ethanol vapor from the
facilities wafts onto nearby real and personal property where the ethanol combines with
condensation to propagate whiskey fungus. The whiskey fungus allegedly “creates an unsightly
condition [on the property,] requiring abnormal and costly cleaning and maintenance, [and
causes] early weathering of surfaces [and] unreasonable and substantial annoyance and
unreasonable interference with the use and enjoyment of the property.”

Ethanol emissions are regulated under the Clean Air Act. As explained by the Third
Circuit in a similar case, the Clean Air Act is:

a comprehensive federal law that regulates air emissions under the auspices of the
United States Environmental Protection Agency (“EPA”). Congress enacted the
law in response to evidence of the increasing amount of air pollution created by
the industrialization and urbanization of the United States and its threat to public
health and welfare. 42 U.S.C. § 7401(a)(2). The Clean Air Act states that air
pollution prevention and control is the primary responsibility of individual states
and local governments but that federal financial assistance and leadership is
essential to accomplish these goals. Id. § 7401(a)(3)–(4). Thus, it employs a
“cooperative federalism” structure under which the federal government develops
baseline standards that the states individually implement and enforce. In so
doing, states are expressly allowed to employ standards more stringent than those
specified by the federal requirements. 42 U.S.C. § 7416.
The Clean Air Act makes the EPA responsible for developing acceptable
national ambient air quality standards (“NAAQS”), which are meant to set a
uniform level of air quality across the country in order to protect the populace and
the environment. Id. § 7409(b)(1). Before such levels are adopted or modified by
No. 14-6198 Merrick, et al. v. Diageo Americas Supply Page 3

the EPA, “a reasonable time for interested persons to submit written comments”
must be provided. Id. § 7409(a)(1)(B). The EPA itself does not typically regulate
individual sources of emissions. Instead, decisions regarding how to meet
NAAQS are left to individual states. Id. § 7410(a)(1). Pursuant to this goal, each
state is required to create and submit to the EPA a State Implementation Plan
(“SIP”) which provides for implementation, maintenance, and enforcement of
NAAQS within the state. Id. All SIPs must be submitted to the EPA for approval
before they become final, and once a SIP is approved, “its requirements become
federal law and are fully enforceable in federal court.” Her Majesty the Queen in
Right of the Province of Ontario v. Detroit, 874 F.2d 332, 335 (6th Cir. 1989)
(citing 42 U.S.C. § 7604(a)).
States are tasked with enforcing the limitations they adopt in their SIPs.
They must regulate all stationary sources located within the areas covered by the
SIPs, 42 U.S.C. § 7410(a)(2)(C), and implement a mandatory permit program that
limits the amounts and types of emissions that each stationary source is allowed to
discharge, id. §§ 7661a(d)(1), 7661c(a). “[E]ach permit is intended to be a
source-specific bible for Clean Air Act compliance containing in a single,
comprehensive set of documents, all [Clean Air Act] requirements relevant to the
particular polluting source.” North Carolina, ex rel. Cooper v. Tenn. Valley
Auth., 615 F.3d 291, 300 (4th Cir. 2010) (internal quotation marks omitted).
Furthermore, pursuant to the federal Prevention of Significant Deterioration of
Air Quality program in areas attaining NAAQS, “a covered source must, among
other things, install the ‘best available control technology [] for each pollutant
subject to regulation . . . .” Coalition for Responsible Regulation, Inc. v. EPA,
684 F.3d 102, 133 (D.C. Cir. 2012) (quoting 42 U.S.C. § 7475(a)(4)).
....
The Clean Air Act contains a “citizen suit” provision, . . . [that in turn
contains] a “savings clause” which provides, in pertinent part:
Nothing in this section shall restrict any right which any person (or
class of persons) may have under any statute or common law to
seek enforcement of any emission standard or limitation or to seek
any other relief (including relief against the Administrator or a
State agency).
42 U.S.C. § 7604(e). This is the Clean Air Act’s “citizen suit savings clause.”

The Clean Air Act also contains a separate savings clause entitled
“Retention of State authority,” codified at 42 U.S.C. § 7416. This provision
focuses on states’ rights, and reads as follows:
Except as otherwise provided . . . nothing in this chapter shall
preclude or deny the right of any State or political subdivision
thereof to adopt or enforce (1) any standard or limitation respecting
emissions of air pollutants or (2) any requirement respecting
control or abatement of air pollution . . . .
No. 14-6198 Merrick, et al. v. Diageo Americas Supply Page 4

Id. § 7416. This is the Clean Air Act’s “states’ rights savings clause.”

Bell v. Cheswick Generating Station, 734 F.3d 188, 190–91 (3d Cir. 2013), cert. denied sub nom.
GenOn Power Midwest, L.P. v. Bell, 134 S. Ct. 2696 (2014) (some internal citations omitted).

Diageo’s Clean Air Act obligations with respect to the Louisville facilities are set out in
the terms of a Federally Enforceable District Origin Operating Permit issued and overseen by the
Louisville Metro Air Pollution Control District. The permit prescribes detailed requirements for
data collection, recordkeeping, and reporting. It also expressly incorporates most of the
regulations of the air pollution control district, including Regulation 1.09, which provides:

No person shall permit or cause the emission of air pollutants which exceed the
requirements of the District regulations or which cause injury, detriment,
nuisance, or annoyance to any considerable number of persons or to the public or
which endanger the comfort, repose, health, or safety of any such persons or the
public or which cause or have a natural tendency to cause injury or damage to
business or property.

Finally, the permit sets limits for emissions of various pollutants from the facilities. For
purposes of these limits, the permit distinguishes between fugitive and non-fugitive emissions.
Fugitive emissions are those emissions that “could not reasonably pass through a stack, chimney,
vent, or other functionally equivalent opening,” i.e., emissions that cannot reasonably be
channeled through some kind of screening mechanism. 40 C.F.R. § 52.21(b)(20). Non-fugitive
emissions, by contrast, are those emissions that can reasonably be channeled through a screening
mechanism. For volatile organic compounds, including ethanol, the permit caps non-fugitive
emissions at 100 tons per year. The permit does not cap fugitive ethanol emissions, i.e., those
from Diageo’s storage warehouses.

The plaintiffs in this case—owners, lessors, and renters of nearby properties affected by
whiskey fungus—complained to the air pollution control district about the proliferation of
whiskey fungus on their properties. In response, the district undertook an investigation that
resulted in the issuance of a Notice of Violation letter to Diageo on September 7, 2012. In the
letter, the district stated that, between June 2011 and May 2012, it received 27 complaints from
residents living near the facilities of a “black, sooty substance covering . . . everything exposed
to the outdoors.” The district found that Diageo had violated District Regulation 1.09 because:
No. 14-6198 Merrick, et al. v. Diageo Americas Supply Page 5

Diageo caused and allowed the emission of an air pollutant which crossed its
property line causing an injury and nuisance to nearby neighborhoods and the
public. Diageo’s warehouse emissions present a current and continuing threat to
[the] public, endangering the comfort and repose of its neighbors. Diageo’s
warehouse emissions cause damage to nearby property and have the natural
tendency to continue causing damage.

The Notice of Violation letter instructed Diageo to “submit to the District for approval a
compliance plan for the abatement and control of emissions from its warehouses that are
contributing to a nuisance, in accordance with District Regulation 1.12 by October 5, 2012.”
Diageo disputed that its operations at the facilities violated any district regulation, but
nevertheless committed to vacating two of its whiskey aging warehouses to eliminate the
problems of which plaintiffs complain. The record does not show whether Diageo followed
through with its commitment and what effect, if any, that had on the growth of whiskey fungus
on plaintiffs’ properties.

In addition to complaining to the air pollution control district, plaintiffs filed a class
action complaint in federal district court, seeking compensatory and punitive damages from
Diageo for negligence, nuisance, and trespass, and an injunction requiring Diageo to abate its
ethanol emissions by implementing certain control technologies at the facilities. Diageo moved
to dismiss the complaint on two grounds. First, Diageo argued that it had no duty to curb ethanol
emissions from its Louisville facilities. In support of this contention, Diageo relied on EPA
decisions, agency actions from other jurisdictions, and its own permits. Second, in a notice of
supplemental authority, Diageo argued that plaintiffs’ claims were preempted by the Clean Air
Act.

The district court largely rejected Diageo’s arguments. Addressing Diageo’s preemption
argument first, the district court considered the Act’s text in connection with decisions by the
Supreme Court, this court, and other federal courts of appeals. The district court concluded that
“Plaintiffs’ state common law tort claims against Diageo are not preempted by the [Clean Air
Act].”

The district court then addressed the sufficiency of the three state-law causes of action
listed in the complaint, along with the claim for injunctive relief. In doing so, the district court
No. 14-6198 Merrick, et al. v. Diageo Americas Supply Page 6

first considered plaintiffs’ argument that, because Diageo had offered materials outside the
pleadings—concerning its federal and state permits and the feasibility of implementing
technologies to control its ethanol emissions—the district court was required to convert Diageo’s
motion to dismiss into a motion for summary judgment. The district court excluded the
documents from its consideration, deciding that the documents “[were] not necessary for the
resolution of the issues argued in Diageo’s motion to dismiss.” Because it had excluded the
documents from consideration, the district court concluded, the documents did not obligate it to
convert Diageo’s motion to dismiss into a motion for summary judgment.

Turning to the substance of plaintiffs’ state common law claims, the district court
dismissed plaintiffs’ negligence claim on the ground that plaintiffs had not pled facts sufficient to
establish that Diageo owed them a duty of care, or that Diageo had breached that duty. The court
denied Diageo’s motion, however, with respect to plaintiffs’ remaining causes of action,
concluding that plaintiffs had alleged facts sufficient to establish nuisance and trespass, and to
entitle them to injunctive relief.

On Diageo’s motion, the district court certified its ruling for interlocutory appeal. A
panel of this court granted the petition to appeal pursuant to 28 U.S.C. § 1292(b). On appeal,
Diageo argues that plaintiffs’ state common law claims conflict with the Clean Air Act methods
for regulating emissions and, therefore, that allowing such claims to proceed would frustrate the
purposes and objectives of the Act.

The states’ rights savings clause of the Clean Air Act expressly preserves the state
common law standards on which plaintiffs sue. The clause saves from preemption “the right of
any State or political subdivision thereof to adopt or enforce (1) any standard or limitation
respecting emissions of air pollutants or (2) any requirement respecting control or abatement of
air pollution,” except that the “State or political subdivision may not adopt or enforce any
emission standard or limitation” that is “less stringent” than a standard or limitation under an
applicable implementation plan or specified federal statute. 42 U.S.C. § 7416. State courts are
arms of the “State,” and the common law standards they adopt are “requirement[s] respecting
control or abatement of air pollution.” Id. Thus, the states’ rights savings clause makes clear
that states retain the right to “adopt or enforce” common law standards that apply to emissions.
No. 14-6198 Merrick, et al. v. Diageo Americas Supply Page 7

A federal statute does not preempt state law if Congress did not intend the statute to do so, and
“the best evidence of” Congress’s intent “is the statutory text adopted by both Houses of
Congress and submitted to the President.” W. Va. Univ. Hosps., Inc. v. Casey, 499 U.S. 83, 98
(1991).

The phrase “any requirement,” as used in the states’ rights savings clause, clearly
encompasses common law standards. As a four-Justice plurality of the Supreme Court has
reasoned with respect to preempting language in a different statute, “[t]he phrase ‘[n]o
requirement or prohibition’ sweeps broadly and suggests no distinction between positive
enactments and common law; to the contrary, those words easily encompass obligations that take
the form of common law rules.” Cipollone v. Liggett Grp., Inc., 505 U.S. 504, 521 (1992)
(plurality opinion). The phrase “any requirement” is similarly broad in its sweep, suggesting that
it, too, encompasses common law rules. An expansive reading of “any requirement” is
consistent, moreover, with the Court’s historical tendency to treat common law standards as
“requirements” for purposes of a variety of statutes. In Bates v. Dow Agrosciences LLC, for
instance, the Court determined that the word “requirements” in the Federal Insecticide,
Fungicide, and Rodenticide Act “reaches beyond positive enactments, such as statutes and
regulations, to embrace common-law duties.” 544 U.S. 431, 443 (2005). In Riegel v. Medtronic,
Inc., the Court concluded that common law causes of action for negligence and strict liability
imposed “requirement[s]” for purposes of the Federal Food, Drug, and Cosmetic Act. 552 U.S.
312, 324 (2008). State common law standards therefore qualify as “requirements” for purposes
of the Clean Air Act states’ rights savings clause.

It is also plain that state courts are parts of the “State” for purposes of the states’ rights
savings clause. The states’ rights savings clause implies that “State” refers to something that can
“adopt or enforce . . . requirement[s].” State courts “adopt” state law “requirements” by making
and modifying the common law, and state courts are the branch of state government most often
tasked with “enforcing” state law “requirements.” Indeed, the Supreme Court has interpreted the
word “State” in the Clean Water Act states’ rights savings clause, 33 U.S.C. § 1370(1)—which is
No. 14-6198 Merrick, et al. v. Diageo Americas Supply Page 8

materially indistinguishable from the Clean Air Act states’ rights savings clause,1 see Bell,
734 F.3d at 195—to cover state courts and the common law rules they shape. See Int’l Paper
Co. v. Ouellette, 479 U.S. 481, 497–98 (1987). The Court’s interpretation of the word “State” in
the Clean Water Act states’ rights savings clause strongly indicates that the same word in the
Clean Air Act states’ rights saving clause, 42 U.S.C. § 7416, includes state courts. State
common law standards are thus “requirements” adopted by “States,” such that the Clean Air Act
states’ rights savings clause preserves them against preemption.

Other parts of the text of the Clean Air Act are fully consistent with this conclusion. For
instance, Congress set out the Act’s purposes and objectives in a section of the Act labeled
“Congressional findings and declaration of purpose,” which provides in part “that air pollution
prevention (that is, the reduction or elimination, through any measures, of the amount of
pollutants produced or created at the source) and air pollution control at its source is the primary
responsibility of States and local governments.” 42 U.S.C. § 7401(a)(3). Allowing states to
apply their common law to emissions advances the Act’s stated purposes by empowering states
to address and curtail air pollution at its source. See id. at § 7401(a)(3), (c). Regulation of
emissions under state common law, moreover, is consistent with Congress’s declaration that it
“is the primary responsibility of States” to prevent and reduce air pollution “through any
measures.” Id. at § 7401(a)(3) (emphasis added).

The legislative history of the Clean Air Act also indicates that it was not Congress’s
purpose to preempt state common law claims like those of the plaintiffs. For instance, the Report
of the Senate Committee on Public Works explained that the citizen suit provision of the Clean
Air Act “would specifically preserve any rights or remedies under any other law. Thus, if

1
Diageo argues that the Clean Water Act states’ rights savings clause is distinguishable from its Clean Air
Act counterpart because the Clean Water Act states’ rights savings clause contains the following sub-clause not
found in the Clean Air Act states’ rights savings clause:
[N]othing in this chapter shall . . . be construed as impairing or in any manner affecting any right
or jurisdiction of the States with respect to the waters (including boundary waters) of such States.
33 U.S.C. § 1370(2). That sub-clause is irrelevant for purposes of preemption because it does not purport to affect
or expand the application of state common law under the Act. Rather, the sub-clause merely “preserve[s] the
authority of each State to allocate water quantity as between users; [it does] not limit the scope of water pollution
controls that may be imposed [by states] on users who have obtained, pursuant to state law, a water allocation.”
PUD No. 1 of Jefferson Cnty. v. Wash. Dep’t of Ecology, 511 U.S. 700, 720 (1994). The sub-clause thus does not
affect the symmetry, for purposes of preemption analysis, between the Clean Water Act states’ rights savings clause
and the Clean Air Act states’ rights savings clause. See Bell, 734 F.3d at 195–97.
No. 14-6198 Merrick, et al. v. Diageo Americas Supply Page 9

damages could be shown, other remedies would remain available. Compliance with standards
under this Act would not be a defense to a common law action for pollution damages.” S. Rep.
No. 91-1196, at 38 (1970).

Supreme Court precedents interpreting and applying the Clean Water Act confirm that
the Clean Air Act does not preempt plaintiffs’ state common law claims. Clean Water Act
precedents are persuasive with respect to the Clean Air Act because many provisions in the
Clean Water Act—including the savings clauses—were modeled on the Clean Air Act, so that
the two acts are often in pari materia. United States v. Stauffer Chem. Co., 684 F.2d 1174, 1187
(6th Cir. 1982). As the Third Circuit has explained:

[T]here is little basis for distinguishing the Clean Air Act from the Clean Water
Act—the two statutes feature nearly identical savings clauses and employ similar
‘cooperative federalism’ structures. Both Acts establish a regulatory scheme
through which source states, and not affected states, play the primary role in
developing the regulations by which a particular source will be bound. Both Acts
contain citizen suit provisions which allow individuals to bring suit to enforce
their terms under certain circumstances, and both Acts contain two savings
clauses: one located within the citizen suit provision which focuses on the rights
of individuals to sue, and a second independent savings clause which focuses on
states’ rights.

Bell, 734 F.3d at 196 (internal quotation marks and citation omitted).

The Supreme Court has reasoned that the Clean Water Act preserves source state
common law claims, even though it preempts application of source state common law claims to
out-of-state sources:

The saving clause specifically preserves other state actions, and therefore nothing
in the Act bars aggrieved individuals from bringing a nuisance claim pursuant to
the law of the source State. By its terms the CWA allows States . . . to impose
higher standards on their own point sources, and in [City of Milwaukee v. Illinois
& Michigan, 451 U.S. 304 (1981),] we recognized that this authority may include
the right to impose higher common-law as well as higher statutory restrictions.
451 U.S. at 328 (suggesting that “States may adopt more stringent limitations . . .
through state nuisance law, and apply them to in-state dischargers”); see also
Comm. for Jones Falls Sewage Sys. v. Train, 539 F.2d 1006, 1009, and n.9
(4th Cir. 1976) (CWA preserves common-law suits filed in source State).
No. 14-6198 Merrick, et al. v. Diageo Americas Supply Page 10

Ouellette, 479 U.S. at 497–98. The Ouellette Court’s interpretation of the Clean Water Act
states’ rights savings clause to preserve claims based on the law of the source state leads directly
to the conclusion that the analogous states’ rights savings clause in the Clean Air Act similarly
preserves claims based on the law of the source state.

This conclusion is directly supported by holdings of the Third Circuit and the Iowa
Supreme Court. In cases materially indistinguishable from this one, those courts have held that
the Clean Air Act does not preempt claims brought by plaintiffs under the common law of the
source state. See Bell, 734 F.3d at 196–98; Freeman v. Grain Processing Corp., 848 N.W.2d 58,
80 (Iowa), cert. denied, 135 S. Ct. 712 (2014). Diageo points to North Carolina, ex rel. Cooper
v. TVA, 615 F.3d 291 (4th Cir. 2010), in which the Fourth Circuit held that the Clean Air Act
preempted a plaintiff’s state common law claims. Cooper, however, did not involve claims
under the common law of the source state. Rather, Cooper involved claims against Alabama and
Tennessee sources brought under North Carolina law. Id. at 297. That difference was
dispositive on the preemption issue, for reasons having to do with federalism and the holding in
Ouellette:

[T]he district court’s decision compromised principles of federalism by applying
North Carolina law extraterritorially to TVA plants located in Alabama and
Tennessee. There is no question that the law of the states where emissions
sources are located, in this case Alabama and Tennessee, applies in an interstate
nuisance dispute. The Supreme Court’s decision in Ouellette is explicit: a “court
must apply the law of the State in which the point source is located.” 479 U.S. at
487. While Ouellette involved a nuisance suit against a source regulated under
the Clean Water Act, all parties agree its holding is equally applicable to the
Clean Air Act.

Id. at 306. The Fourth Circuit in Cooper applied the same framework the Third Circuit applied
in Bell and the Iowa Supreme Court applied in Freeman. All three courts distinguished between
claims based on the common law of the source state—which are not preempted by the Clean Air
Act—and claims based on the common law of a non-source state—which are preempted by the
Clean Air Act. Applying that framework here leads to the conclusion that the Clean Air Act
does not preempt plaintiffs’ claims.

The Supreme Court’s decision in American Electric Power Co. v. Connecticut (AEP),
131 S. Ct. 2527 (2011), does not undermine that conclusion. AEP involved a suit against “the
No. 14-6198 Merrick, et al. v. Diageo Americas Supply Page 11

five largest emitters of carbon dioxide in the United States.” Id. at 2534. The AEP plaintiffs
alleged that, by contributing to global warming, “defendants’ carbon-dioxide emissions created a
‘substantial and unreasonable interference with public rights,’ in violation of the federal common
law of interstate nuisance,” and sought injunctive relief through a court-ordered imposition of
emissions caps. Id. The Supreme Court, however, held “that the Clean Air Act and the EPA
actions it authorizes displace any federal common law right to seek abatement” of such
emissions. Id. at 2537. In so holding, the Court emphasized two considerations. First, when it
comes to setting federal emissions standards, the Act entrusts expert agencies, not courts, with
primary decisionmaking authority. Second, relative to expert agencies, courts are ill suited to the
complex balancing required in setting emissions standards. Id. at 2539–40.

Diageo argues that the Supreme Court’s reasons for concluding that the Clean Air Act
displaces federal common law all militate with equal force in favor of holding that the Act
preempts state common law. There are fundamental differences, however, between displacement
of federal common law by the Act and preemption of state common law by the Act. For one
thing, the Clean Air Act expressly reserves for the states—including state courts—the right to
prescribe requirements more stringent than those set under the Clean Air Act. 42 U.S.C. § 7416.
The Act does not grant federal courts any similar authority.

In addition, the displacement of federal common law with applicable statutory law is a
natural occurrence in a common law legal system where courts with jurisdiction over disputes
must come up with legal principles in the absence of statutory rules of decision. See AEP, 131 S.
Ct. at 2536. As the Supreme Court explained in AEP:

“[W]hen Congress addresses a question previously governed by a decision
rested on federal common law,” the Court has explained, “the need for such an
unusual exercise of law-making by federal courts disappears.” Legislative
displacement of federal common law does not require the “same sort of evidence
of a clear and manifest [congressional] purpose” demanded for preemption of
state law. “‘[D]ue regard for the presuppositions of our embracing federal system
. . . as a promoter of democracy,’” does not enter the calculus, for it is primarily
the office of Congress, not the federal courts, to prescribe national policy in areas
of special federal interest. The test for whether congressional legislation excludes
the declaration of federal common law is simply whether the statute “speak[s]
directly to [the] question” at issue.
Id. at 2537 (internal citations omitted).
No. 14-6198 Merrick, et al. v. Diageo Americas Supply Page 12

The question whether state law is preempted demands due “regard for the presuppositions
of our embracing federal system.” Id. (internal citation omitted). When Congress acts to
preempt state law—especially in areas of longstanding state concern—it treads on the states’
customary prerogatives in ways that risk upsetting the traditional federal-state balance of
authority. See Geib v. Amoco Oil Co., 29 F.3d 1050, 1058 (6th Cir. 1994). This is why there is a
strong presumption against federal preemption of state law, one that operates with special force
in cases “in which Congress has legislated . . . in a field which the States have traditionally
occupied.” Medtronic, Inc v. Lohr, 518 U.S. 470, 485 (1996). Environmental regulation is a
field that the states have traditionally occupied. See Huron Portland Cement Co. v. City of
Detroit, 362 U.S. 440, 442 (1960). Accordingly, even if the express language of the states’
rights savings clause here did not preserve state common law claims, principles of federalism
and respect for states’ rights would likely do so in the absence of a clear expression of such
preemption.

Finally, the AEP Court itself explicitly stated that its holding was not dispositive of
whether the Clean Air Act preempts state common law claims involving emissions.

In light of our holding that the Clean Air Act displaces federal common law, the
availability vel non of a state lawsuit depends, inter alia, on the preemptive effect
of the federal Act. [Ouellette, 479 U.S.] at 489, 491, 497 (holding that the Clean
Water Act does not preclude aggrieved individuals from bringing a “nuisance
claim pursuant to the law of the source State”). None of the parties have briefed
preemption or otherwise addressed the availability of a claim under state nuisance
law. We therefore leave the matter open for consideration on remand.

AEP, 131 S. Ct. at 2540. The distinction the AEP Court drew—between displacement of federal
law and preemption of common law—mirrors the distinction the Court drew in the context of the
Clean Water Act. In City of Milwaukee v. Illinois & Michigan, 451 U.S. 304 (1981), the Court
held that the Clean Water Act displaced federal common law governing water pollution because,
by enacting a comprehensive federal water statute, Congress had supplanted federal common
law. See id. at 322–25. The AEP Court’s description of the structure and scope of the Clean Air
Act closely mirrors the City of Milwaukee Court’s description of the structure and scope of the
Clean Water Act. Notwithstanding the displacement holding in City of Milwaukee, however, the
Supreme Court subsequently held in Ouellette that the Clean Water Act does not preempt claims
No. 14-6198 Merrick, et al. v. Diageo Americas Supply Page 13

based on source state common law. See Ouellette, 479 U.S. at 498–99. Given the parallels
between the two acts, City of Milwaukee and Ouellette together indicate that AEP’s holding
concerning displacement of federal common law does not support Clean Air Act preemption of
source state common law. Indeed, the citation of Ouellette in AEP suggests the opposite
conclusion: that the Clean Air Act does not preempt source state common law. For all of the
foregoing reasons, AEP does not support Diageo’s preemption arguments.

Many of Diageo’s remaining arguments mistake regulatory overlap for regulatory
conflict. The bare fact that Kentucky law may impose more stringent requirements than the
Clean Air Act does not mean that the Act preempts Kentucky law. “The fact that a state has
more stringent regulations than a federal law does not constitute conflict preemption.” Patriotic
Veterans, Inc. v. Indiana, 736 F.3d 1041, 1049 (7th Cir. 2013). “[S]tates frequently, and without
preemption by federal law, create more stringent laws regarding minimum wage, employment
discrimination, educational standards, gambling, and highway safety, to name a few.” Id. Nor is
Kentucky law preempted simply because it is the product of a less sophisticated or expert-driven
process than that of the Clean Air Act. The question, for preemption purposes, is whether
compliance with the state law defeats the purposes and objectives of the federal law, not whether
the two laws impose different standards by different means. There is no evidence that Congress
intended that all emissions regulation occur through the Clean Air Act’s framework, such that
any state law approach to emissions regulation would stand as an obstacle to Congress’s
objectives.

Diageo suggests that allowing state common law claims would “disrupt the CAA’s
balance of authority between federal and state law and conflict with the mechanism by which the
CAA allows states to impose more stringent standards than the ‘floor’ established by federal
law.” The Supreme Court disposed of an identical argument in Ouellette, remarking that:

An action brought against [a polluter] under [source-state] nuisance law would
not frustrate the goals of the CWA as would a suit governed by [affected-state]
law. [A]pplication of the source State’s law does not disturb the balance among
federal, source-state, and affected-state interests. Because the Act specifically
allows source States to impose stricter standards, the imposition of source-state
law does not disrupt the regulatory partnership established by the permit system.

479 U.S. at 498–99. What was true for the Clean Water Act holds true for the Clean Air Act.
No. 14-6198 Merrick, et al. v. Diageo Americas Supply Page 14

We acknowledge the concern that a comprehensive federal scheme imposes substantial
costs on industries, and that some suggest it is unduly burdensome for such industries to remain
subject, in addition, to the requirements and remedies of state common law. Such a concern
must however be directed to Congress. There is no basis in the Clean Air Act on which to hold
that the source state common law claims of plaintiffs are preempted.

The order of the district court is affirmed.