## Facts

- Rhode Island adopted Air Pollution Control Regulation No. 37, setting greenhouse-gas emissions limits for new passenger cars and light-duty trucks sold in the state.
- The regulation was modeled on California’s greenhouse-gas standards and was linked to California’s Clean Air Act waiver and opt-in framework.
- Automobile manufacturers and manufacturers’ associations, along with Rhode Island franchised new-vehicle dealers, sued state environmental officials seeking declaratory and injunctive relief invalidating the regulation as federally preempted.
- The manufacturers and associations had previously litigated materially identical federal preemption challenges to the same California-based standards in federal district courts in California and Vermont and lost on EPCA and Clean Air Act preemption theories.
- Rhode Island moved for judgment on the pleadings/summary judgment on the ground that issue preclusion barred relitigation by the manufacturers and associations and also barred the dealers under privity or “virtual representation.”

## Issues

1. Whether a new state defendant may invoke nonmutual defensive collateral estoppel to bar manufacturers and manufacturers’ associations from relitigating EPCA and Clean Air Act preemption issues decided against them in prior, final federal judgments involving substantively identical regulations.
2. Whether Rhode Island automobile dealers, who were nonparties to the prior actions, may be bound by those judgments under privity or “virtual representation” theories consistent with due process.
3. Whether, if preclusion applies, it bars all asserted EPCA and Clean Air Act preemption theories as to the parties subject to estoppel.

## Decision

- The court granted the state’s motion in part and denied it in part.
- As to the manufacturers and manufacturers’ associations, the court applied nonmutual defensive issue preclusion and barred relitigation of EPCA and Clean Air Act preemption issues resolved in the prior California and Vermont judgments.
- As to the Rhode Island dealers, the court refused to apply issue preclusion, rejecting “virtual representation” and concluding the dealers had not had a full and fair opportunity to litigate and could not be bound consistent with due process.
- The manufacturers’ and associations’ preemption claims were dismissed on preclusion grounds; the dealers’ preemption claims were allowed to proceed on the merits.

## Legal Principles

- Issue preclusion applies when an issue is identical to one previously litigated, actually litigated and decided, essential to a valid and final judgment, and asserted against a party (or qualifying privy) who had a full and fair opportunity to litigate.
- Nonmutual defensive issue preclusion permits a new defendant to bar a plaintiff from relitigating an issue the plaintiff previously lost, even if the defendant was not a party to the earlier case, where fairness factors support application.
- Substantive similarity of regulatory standards and identity of the federal preemption questions can satisfy the “identity of issues” requirement for collateral estoppel.
- Nonparty preclusion is limited by due process; absent recognized bases such as adequate representation, control of prior litigation, or a qualifying privity relationship, a nonparty cannot be bound by a prior judgment.
- “Virtual representation” is not a general substitute for due-process-based nonparty preclusion; overlapping interests alone do not justify binding nonparties.

## Conclusion

The court held that prior adverse federal judgments on EPCA and Clean Air Act preemption barred the automobile manufacturers and their associations from relitigating those issues against Rhode Island, but it declined to estop nonparty Rhode Island dealers because extending preclusion to them would exceed permissible due process limits on binding nonparties.


Lincoln-Dodge, Inc. v. Sullivan, 588 F. Supp. 2d 224 (D.R.I. 2008)