Lingle v. Chevron U. S. A. Inc.

Background

A large oil company (Chevron) sued Hawaii after the State passed a 1997 law capping the rent oil companies may charge dealers at service stations. Chevron leased dozens of stations in Hawaii and the parties agreed the law would cut rent on some stations while increasing overall rental income on others; Chevron also said it would still earn a satisfactory return. The District Court and later the Ninth Circuit considered whether the rent cap was an unconstitutional taking because it did not "substantially advance" Hawaii’s goal of protecting consumers from high gasoline prices.

Reasoning

The Court was asked whether the "substantially advances" test from Agins should determine when a regulation is a taking that requires compensation. The Court said no. It explained that asking whether a rule effectively achieves its goal is a means-ends or due-process style question, not a proper Fifth Amendment taking test. Instead, the Court pointed to established takings rules that focus on how severe the burden on property is (physical invasions, total loss of economic use, or Penn Central factors) and special rules for land-use exactions.

Real world impact

After this decision, businesses cannot win a federal taking simply by showing a law fails to accomplish its goals. Courts will give more deference to legislative and agency judgments about economic regulations and will require plaintiffs to fit claims into existing takings categories. Because Chevron relied only on the discarded test, the case must now proceed under other recognized takings theories.

Dissents or concurrances

Justice Kennedy, in a short concurrence, noted the ruling does not prevent a separate due-process challenge if a regulation is arbitrary or irrational, but Chevron voluntarily dropped that claim.