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

LINGLE, GOVERNOR OF HAWAII, et al. v. CHEVRON U. S. A. INC.

Certiorari to the United States Court of Appeals for the Ninth Circuit.

No. 04–163. Argued February 22, 2005 — Decided May 23, 2005.

363 F. 3d 846, reversed and remanded.

O'Connor, J., delivered the opinion for a unanimous Court. Kennedy, J., filed a concurring opinion, post, p. 548.

Mark J. Bennett, Attorney General of Hawaii, argued the cause for petitioners; with him on the briefs were Michael L. Meaney, Deputy Attorney General, Seth P. Waxman, Paul R. Q. Wolfson, Robert G. Dreher, and John D. Echeverria. Deputy Solicitor General Kneedler argued the cause for the United States as amicus curiae in support of petitioners. Craig E. Stewart argued the cause for respondent; with him on the brief were Donald B. Ayer, Michael S. Fried, and Louis K. Fisher.

The report occupies pages 528 through 550 of volume 544 of the United States Reports. The opinion of the Court begins at page 531 and ends at page 548; the concurring opinion of Justice Kennedy begins at page 548.

[544 U.S. 528] “Concerned about the effects of market concentration on retail gasoline prices, the Hawaii Legislature passed Act 257, which limits the rent oil companies may charge dealers leasing company-owned service stations. Respondent Chevron U. S. A. Inc., then one of the largest oil companies in Hawaii, brought this suit seeking a declaration that the rent cap effected an unconstitutional taking of its property and an injunction against application of the cap to its stations. Applying Agins v. City of Tiburon, 447 U. S. 255, 260 — where this Court declared that government regulation of private property ‘effects a taking if [it] does not substantially advance legitimate state interests’ — the District Court held that the rent cap effects an uncompensated taking in violation of the Fifth and Fourteenth Amendments because it does not substantially advance Hawaii's asserted interest in controlling retail gas prices. The Ninth Circuit affirmed.”

[544 U.S. 528] “Held: Agins' ‘substantially advance[s]’ formula is not an appropriate test for determining whether a regulation effects a Fifth Amendment taking. Pp. 536–548.”

[544 U.S. 528] “(a) The paradigmatic taking requiring just compensation is a direct government appropriation or physical invasion of private property. . . . Beginning with Pennsylvania Coal Co. v. Mahon, 260 U. S. 393, however, the Court recognized that government regulation of private property may be so onerous that its effect is tantamount to a direct appropriation or ouster. Regulatory actions generally will be deemed per se takings for Fifth Amendment purposes (1) where government requires an owner to suffer a permanent physical invasion of her property, see Loretto v. Teleprompter Manhattan CATV Corp., 458 U. S. 419, or (2) where regulations completely deprive an owner of ‘all economically beneficial us[e]’ of her property, Lucas v. South Carolina Coastal Council, 505 U. S. 1003, 1019. Outside these two categories (and the special context of land-use exactions discussed below), regulatory takings challenges are governed by Penn Central Transp. Co. v. New York City, 438 U. S. 104, 124.”

[544 U.S. 529] “(b) The ‘substantially advances’ formula is not a valid method of identifying compensable regulatory takings. It prescribes an inquiry in the nature of a due process test, which has no proper place in the Court's takings jurisprudence. The formula unquestionably was derived from due process precedents, since Agins supported it with citations to Nectow v. Cambridge, 277 U. S. 183, 185, and Village of Euclid v. Ambler Realty Co., 272 U. S. 365, 395. . . . Thus, this test does not help to identify those regulations whose effects are functionally comparable to government appropriation or invasion of private property; it is tethered neither to the text of the Takings Clause nor to the basic justification for allowing regulatory actions to be challenged under the Clause. Pp. 540–545.”

[544 U.S. 529] “(c) The Court's holding here does not require it to disturb any of its prior holdings. Although it applied a ‘substantially advances’ inquiry in Agins itself, see 447 U. S., at 261–262, and arguably in Keystone Bituminous Coal Assn. v. DeBenedictis, 480 U. S. 470, 485–492, it has never found a compensable taking based on such an inquiry.”

[544 U.S. 530] “Because Chevron argued only a ‘substantially advances’ theory, it was not entitled to summary judgment on its takings claim. P. 548.”

[544 U.S. 531] “On occasion, a would-be doctrinal rule or test finds its way into our case law through simple repetition of a phrase — however fortuitously coined. A quarter century ago, in Agins v. City of Tiburon, 447 U. S. 255 (1980), the Court declared that government regulation of private property ‘effects a taking if [such regulation] does not substantially advance legitimate state interests . . . .’ Id., at 260.”

[544 U.S. 539] “Although our regulatory takings jurisprudence cannot be characterized as unified, these three inquiries (reflected in Loretto, Lucas, and Penn Central) share a common touchstone. Each aims to identify regulatory actions that are functionally equivalent to the classic taking in which government directly appropriates private property or ousts the owner from his domain. Accordingly, each of these tests focuses directly upon the severity of the burden that government imposes upon private property rights.”

[544 U.S. 539] “The Court has held that physical takings require compensation because of the unique burden they impose: A permanent physical invasion, however minimal the economic cost it entails, eviscerates the owner's right to exclude others from entering and using her property — perhaps the most fundamental of all property interests.”

[544 U.S. 540] “And the Penn Central inquiry turns in large part, albeit not exclusively, upon the magnitude of a regulation's economic impact and the degree to which it interferes with legitimate property interests.”

[544 U.S. 542] “Although Agins' reliance on due process precedents is understandable, the language the Court selected was regrettably imprecise. The ‘substantially advances’ formula suggests a means-ends test: It asks, in essence, whether a regulation of private property is effective in achieving some legitimate public purpose. An inquiry of this nature has some logic in the context of a due process challenge, for a regulation that fails to serve any legitimate governmental objective may be so arbitrary or irrational that it runs afoul of the Due Process Clause. . . . But such a test is not a valid method of discerning whether private property has been ‘taken’ for purposes of the Fifth Amendment.”

[544 U.S. 542] “In stark contrast to the three regulatory takings tests discussed above, the ‘substantially advances’ inquiry reveals nothing about the magnitude or character of the burden a particular regulation imposes upon private property rights. Nor does it provide any information about how any regulatory burden is distributed among property owners. In consequence, this test does not help to identify those regulations whose effects are functionally comparable to government appropriation or invasion of private property; it is tethered neither to the text of the Takings Clause nor to the basic justification for allowing regulatory actions to be challenged under the Clause.”

[544 U.S. 543] “A test that tells us nothing about the actual burden imposed on property rights, or how that burden is allocated, cannot tell us when justice might require that the burden be shifted from a private property owner to the public at large.”

[544 U.S. 548] “Twenty-five years ago, the Court posited that a regulation of private property ‘effects a taking if [it] does not substantially advance [a] legitimate state interes[t].’ Agins, 447 U. S., at 260. The lower courts in this case took that statement to its logical conclusion, and in so doing, revealed its imprecision. Today we correct course. We hold that the ‘substantially advances’ formula is not a valid takings test, and indeed conclude that it has no proper place in our takings jurisprudence. In so doing, we reaffirm that a plaintiff seeking to challenge a government regulation as an uncompensated taking of private property may proceed under one of the other theories discussed above — by alleging a ‘physical’ taking, a Lucas-type ‘total regulatory taking,’ a Penn Central taking, or a land-use exaction violating the standards set forth in Nollan and Dolan. Because Chevron argued only a ‘substantially advances’ theory in support of its takings claim, it was not entitled to summary judgment on that claim. Accordingly, we reverse the judgment of the Ninth Circuit and remand the case for further proceedings consistent with this opinion.”

[544 U.S. 548] “It is so ordered.”

[544 U.S. 548] “This separate writing is to note that today's decision does not foreclose the possibility that a regulation might be so arbitrary or irrational as to violate due process.”

Editorial note. This record is a research edition, not a substitute for the official reporter. It reproduces the Reporter of Decisions apparatus and reproduces the Court's own text in verbatim passages arranged under the Court's own sequence of analysis, each bracketed with the official United States Reports page on which the passage appears. Passages set without quotation marks are Society prose; every quotation mark in this record encloses the Court's or the Reporter's words.

Editorial note. The Court-authored sections of this record are SELECTED EXCERPTS, not complete opinions. Three limitations are declared. First, the numbered footnotes of the opinion are not reproduced. Second, the statement of facts and procedural history at pages 532 through 536, the survey of the regulatory takings cases at pages 536 through 539, the derivation of the Agins formula at pages 540 through 542, and the discussion of Nollan and Dolan at pages 546 through 548 are summarised rather than quoted at length. Third, the concurring opinion of Justice Kennedy appears here as its opening statement together with a Society description of its point; it is not reproduced in full.

Editorial note. Obvious typographic and scanning defects in the digitised bound volume have been silently corrected against the surrounding text; no substantive word has been altered, modernised, or paraphrased inside a quotation. For any purpose requiring the complete official text, consult the bound volume through the canonical source recorded with this authority.

Editorial note. Concerned about the concentration of the retail gasoline market, Hawaii enacted a statute limiting the rent that an oil company may charge a lessee-dealer operating a company-owned service station to fifteen per cent of the dealer's gross profits on gasoline plus fifteen per cent of gross sales of other products. Chevron, which leased stations to independent dealers in Hawaii, challenged the rent cap as a taking, contending that it would not in fact reduce retail prices for consumers and therefore did not substantially advance the State's asserted interest.

Editorial note. The District Court, relying on economic testimony, found that the rent cap would not achieve its purpose and held it an uncompensated taking; the Court of Appeals for the Ninth Circuit affirmed, applying the 'substantially advances' formula. The Supreme Court reversed and remanded, leaving Chevron's remaining claims for consideration below.

Editorial note. The 'substantially advances' inquiry has no proper place in takings jurisprudence. The rule derived is the taxonomy the opinion sets out. A regulatory taking may be established by showing a permanent physical invasion of property, in which case Loretto applies; by showing a deprivation of all economically beneficial use, in which case Lucas applies; or by satisfying the factors of Penn Central, namely the economic impact of the regulation, the extent of interference with distinct investment-backed expectations, and the character of the governmental action. The exactions cases, Nollan and Dolan, form a special application concerned with conditions on development permission. Beyond these categories a plaintiff must show a burden on property equivalent in kind to a direct appropriation; the wisdom or efficacy of the regulation is a matter for substantive due process, not for the Takings Clause.

Editorial note. Justice O'Connor traced the Agins formula to its source in Nectow and Euclid, which were due process decisions, and explained that its migration into takings law had been an inadvertence never examined on its merits. She reasoned that a means-ends test is unsuited to the Takings Clause because the Clause presupposes a valid public purpose and asks only whether the burden of achieving it has been unfairly concentrated on a particular owner; a test focused on regulatory effectiveness would both invite courts to second-guess legislative judgment and permit compensation where no property burden had been shown. She noted that Agins itself had been correctly decided on other grounds and that nothing in the decision disturbed the substantive due process inquiry in its proper place. Justice Kennedy, concurring, observed that the opinion did not foreclose a due process challenge to arbitrary regulation.

Editorial note. Lingle is the case with which any modern account of regulatory takings should begin, because it states the categories and assigns each of the leading decisions its place. It also restores an analytical separation that the treatise maintains throughout: due process asks whether the regulation is a legitimate exercise of the police power, and the Takings Clause asks who must bear the cost of a legitimate exercise. The decision has the further practical effect of foreclosing a line of litigation in which owners sought compensation by attacking the economic rationality of ordinary economic regulation.

Editorial note. Followed as the governing framework. Applied in Murr v. Wisconsin, 582 U.S. 383 (2017), in defining the parcel as a whole, and in Cedar Point Nursery v. Hassid, 594 U.S. 139 (2021), in locating compelled access within the physical takings category. Agins v. City of Tiburon, 447 U.S. 255 (1980), is superseded to the extent it supplied a takings test.

Editorial note. Read with U.S. Const. amend. V, and the treatise chapters on regulatory takings, on physical takings, and on zoning and the police power.