Lingle v. Chevron U. S. A. Inc.
The Court unanimously rejected a long-used legal test that had let property owners claim an unconstitutional "taking" simply by showing a regulation failed to "substantially advance" a legitimate government interest. That test, the Court held, actually measures something else entirely and has no place in takings law.
The ruling reversed a decision striking down Hawaii's cap on the rent oil companies could charge gas station dealers, and it clarifies that going forward, property owners must use one of the recognized takings tests — not an effectiveness-of-the-regulation argument — to win compensation under the Fifth Amendment.
“while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.”
Quoting Justice Holmes' classic formulation of when regulation becomes a compensable taking.
How it got here: A federal district court and the Ninth Circuit both struck down Hawaii's rent cap as an uncompensated taking; Hawaii asked the Supreme Court to review that ruling.
The Case in Depth
What happened
Hawaii capped the rent that oil companies could charge dealers leasing company-owned gas stations, aiming to protect independent dealers and keep gasoline prices in check amid a highly concentrated market. Chevron, Hawaii's largest gasoline refiner and marketer, sued, arguing the rent cap took its property because it wouldn't actually lower prices for consumers, even though the cap left Chevron's overall return on investment intact.
The question before the Court
Can a property owner win a takings claim just by showing that a regulation doesn't actually achieve the government's stated goal?
Why it matters
Governments enacting price controls, zoning rules, and other economic regulations no longer have to worry that a challenger can strike them down as unconstitutional \"takings\" merely by convincing a judge the law won't work as intended. Property owners with real takings claims must instead show a physical invasion, a total loss of value, or the kind of economic burden covered by existing tests.
What changes now
The case is sent back to the lower courts, but because Chevron only argued the now-rejected \"substantially advances\" theory, it is not entitled to summary judgment on its takings claim. Chevron could potentially pursue a different takings theory, such as one under the Penn Central balancing test, or its previously dismissed due process claim, in further proceedings. This is a final merits decision, not a temporary order.
What this does not decide
The Court did not decide whether Hawaii's rent cap is unconstitutional on any other ground, including as a violation of due process. Justice Kennedy's concurrence specifically noted the ruling leaves open whether an ineffective regulation could still violate due process, a claim Chevron had voluntarily dismissed.
Concurrences and dissents
Concurrence — Justice Kennedy
Justice Kennedy joined the majority in full but wrote separately to clarify that today's decision does not close off the possibility that a regulation could still violate due process if it is so arbitrary or irrational that it fails to accomplish any stated or obvious objective. He noted Chevron had voluntarily dropped its own due process claim, so the Court had no occasion to decide whether Hawaii's rent cap crossed that line.
How the Court got there
The legal reasoning, step by step
- The Court reviewed the recognized ways a regulation can amount to a Fifth Amendment taking: a permanent physical invasion of property, a regulation that eliminates all economically beneficial use of property (the rule from Lucas), or, for everything else, the multi-factor balancing test from Penn Central that weighs economic impact and interference with investment expectations.
- The Court traced the "substantially advances" phrase to Agins v. City of Tiburon, which borrowed it from due-process cases like Nectow and Euclid rather than from any takings precedent, showing the phrase was imported into takings law by accident rather than by design.
- The Court explained that a test asking whether a regulation is effective at achieving a government goal reveals nothing about how heavily the regulation burdens property or how that burden is spread among owners, so it cannot tell courts when fairness requires compensation.
- The Court reasoned that an ineffective-regulation argument is really a due-process style claim about the law's rationality, which is a different and logically prior question from whether property has been taken, since the Takings Clause assumes the government's purpose is valid and only asks about compensation.
- The Court also warned that using this test would force judges to second-guess legislatures' predictive judgments about whether laws will work, a role courts have long avoided in ordinary due-process review of economic regulation.
- Applying this reasoning, the Court found that Chevron's claim rested entirely on the argument that Hawaii's rent cap would not achieve its goals, not on any showing of a physical invasion, a total loss of value, or a Penn Central-style economic burden, so Chevron's takings claim could not succeed on the theory it presented.
Doctrinal impact
Cases affected by this decision
Overrules Agins v. City of Tiburon (447 U.S. 255)
The Court rejected Agins' 'substantially advances' language as a valid freestanding test for takings claims.
Distinguishes Nollan v. California Coastal Comm'n (483 U.S. 825)
The Court said this case applied a different, narrower rule about land-use permit conditions, not the rejected takings test.
Distinguishes Dolan v. City of Tigard (512 U.S. 374)
The Court said this case's rough-proportionality rule for permit conditions is unrelated to the rejected takings test.