By Nate Raymond
(Reuters) - Ohio's Supreme Court on Tuesday cleared the way for the state's attorney general to move forward with a lawsuit against Volkswagen AG (OTC:VWAGY) over its "Dieselgate" scandal and manipulation of emissions-control systems.
The court ruled 6-1 that the federal Clean Air Act did not pre-empt state law-based claims that Ohio Attorney General Dave Yost is pursuing, or prohibit state oversight after a vehicle or engine is sold.
"This is a major decision that will ensure that Volkswagen (DE:VOWG_p) can be held accountable," Yost said in a statement.
VW promised an appeal to the U.S. Supreme Court, saying the decision could create "regulatory chaos" and inhibit the U.S. Environmental Protection Agency's ability to regulate emissions by giving state and local governments overlapping authority.
The German automaker has agreed to pay more than $25 billion in the United States for claims from owners, environmental regulators, states and dealers, and offered to buy back about 500,000 polluting U.S. vehicles.
VW admitted in 2015 to having secretly used illegal software to evade emissions rules, and pleaded guilty in 2017 to conspiracy and obstruction of justice.
Ohio sued in 2016, accusing VW of conducting deceptive recalls and updates of diesel vehicles that were sold or leased in the state.
A trial judge said federal law pre-empted Ohio's claims, but a mid-level appeals court revived the state's case, prompting VW to appeal.
In upholding the appeals court ruling, Justice Patrick Fischer said federal law did not pre-empt or conflict with Ohio's claims that VW violated the state's Air Pollution Control Act through the post-sale tampering with vehicles' emissions-control systems.
That, he said, made VW's fear it could be punished for following Ohio law "unfounded."
"There is no conflict between the relevant federal and state statutes or any obstacle to Congress's objectives," Fischer wrote.
Justice Michael Donnelly dissented, and said the case could theoretically result in a more than $1 trillion judgment.