Lingle v. Chevron, U.S.A.

Brief Fact Summary.

The Hawaii legislature passed a law that did not allow oil companies from converting existing lessee-dealer-owned gasoline stations to company-owned stations, from locating company-operated stations in close proximity to already present lessee-dealer-operated stations, and restrained the amount of rent that an oil company could impose on a lessee-dealer. Chevron brought suit challenging the law as a violation of the Fifth and Fourteenth Amendment. The district court held in Chevrons favor, granting summary judgment. Lingle, the state’s governor, appealed, and the appellate court affirmed. The United States Supreme Court granted certiorari.

Synopsis of Rule of Law.

Agins v. City of Tiburon, the “substantially advances” formula, is not valid precedent to determine whether government regulations of private property effects a taking in violation of the Fifth Amendment. 447 U.S. 255 (1980).

Facts.

In Hawaii, approximately 300 service stations sell gasoline. Many of those stations in Hawaii are leased from oil companies,under an independent lessee-dealers. Pursuant to the arrangement, the oil company buys the land, builds a service station, and then leases the station to a lessee-dealer. In 1997, Hawaii’s legislature passed a law that did not allow oil companies from converting existing lessee-dealer-owned gasoline stations to company-owned stations, from locating company-operated stations in close proximity to already present lessee-dealer-operated stations, and restrained the amount of rent that an oil company could impose on a lessee-dealer. Chevron, the largest marketer and supplier of gasoline in Hawaii, sued the state’s governor, Lingle and others challenging the statute. Chevron contended that the statute’s rent cap was a taking of Chevron’s property, violating the Fifth and Fourteenth Amendments. Thereafter, the district court held in Chevron’s favor by granting Chevron’s motion for summary judgment and holding that the statute failed to “substantially advance” a legitimate state interest. Thus, the statute constituted an unconstitutional taking. Lingle appealed. The appellate court affirmed, and United States Supreme Court granted certiorari to review. 

Issue.

Whether the “substantially advances” formula, set forth in Agins v. City of Tiburon, is valid precedent to determine whether government regulations of private property effects a taking in violation of the Fifth Amendment. 447 U.S. 255 (1980).

Held.

No, the “substantially advances” formula, set forth in Agins v. City of Tiburon, is not valid precedent to determine whether government regulations of private property effects a taking in violation of the Fifth Amendment. 447 U.S. 255 (1980).

Concurrence.

The Court’s decision does not eliminate the chance that a regulation may still be so arbitrary or irrational, constituting a violation of due process; such inquiry would evaluate whether the regulation to accomplish a stated or obvious objective.

Discussion.

Under the Takings Clause of the Fifth Amendment,the government shall now take  private property for public use without just compensation. Further, in Agins v. City of Tiburon, this Court held that government’s action constitutes a taking “if [such action] does not substantially advance legitimate state interests. . . .” 447 U.S. 255, 260 (1980). In this case, the lower courts relied on this Court’s Agins“substantially advances” principle when declaring Hawaii’s statute unconstitutional. However, in Pennsylvania Coal Co. v. Mahon, this Court noticed that government regulation of private property may be extended too far, resulting in a complete taking compensable under the Fifth Amendment.260 U.S. 393 (1922).Commonly, there are two categories of regulatory action that are deemed to be per se takings under the Fifth Amendment. The first category involves government conduct, requiring an owner to suffer a permanent physical invasion of his property, which must be justly compensated. The second category iswhen the government conduct or regulation completely deprives an owner of “all economically beneficial us[e]” of his property, mandates just compensation. Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1019 (1992).Further, in Lucas, this Court held that the government’s just compensation must be provided for “total regulatory takings,” but not to the extent that “background principles of nuisance and property law independently restrict the owner’s intended use of the property.” Id. at 1026-1032.Likewise, in Penn Central Transportation Co. v. New York City, this court established several factors for identifying takings.438 U.S. 104 (1978).One of the primary factorsamong the concerns was the degree of significant “economic impact of the regulation on the claimant” Id. at 124. Overall, both the tests under Lucas and Penn Central, weigh heavily on the gravity of the burden that the government action or regulation imposed upon private property rights. In contrast, the Agins “substantially advances” formula was improperly construed by the lower courts as a stand-alone regulatory test, without the inclusion of Lucas or Penn Central. Under the “substantially advances” test, it determines the regulation’s validity, not whether the regulations constitutes a taking requiring just compensation. Further, the “substantially advances” formula articulated by Agins has is not properly situated in takings jurisprudence. Rather, a claimant alleging that a government regulation is unjustly compensating them should proceed under this Court’s holdings in Lucas, Penn Central, or other similar cases. Therefore, the court appeals decision is reversed and remanded for further proceedings consistent with the opinion.