Re-reading the 'Takings' Clause

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

This is a unanimous decision by the Court, and one that overturns an important precedent in the Fifth Amendment ‘takings’ clause, that requires just compensation when property is appropriated by the government. I do not know as much about the Fifth Amendment as I do about others so I may miss a few intricacies.

In this case Chevron argued that Hawaii’s law capping rent on its leased property was an unconstitutional taking because it limited the economic benefit that Chevron could derive. The test used was whether the legislation advanced a legitimate State interest. Chevron won because their economist was more persuasive than Hawaii’s in showing that “oil companies would raise wholesale gasoline prices to offset any rent reduction required [the Act], and that the result would be an increase in retail gasoline prices.” Thus, “even if the rent cap did reduce lessee-dealers’ costs, the [lower] court found, they would not pass on any savings to consumers.”

This opinion describes Holmes’ articulation that “while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking,” and highlights its ambiguity as to the phrase “too far.” The Court also recognized three tests that have been used to clarify this phrase. (1) “the extent to which the regulation has interfered with distinct investment-backed expectations,” (2) the “character of the governmental action”, and (3) whether the action merely affects property interests through “some public program adjusting the benefits and burdens of economic life to promote the com­mon good.” Each “of these tests focuses directly upon the severity of the burden that government imposes upon private property rights.” Alternatively, the standard used in the Chevron case, and the standard that has been generally accepted, is whether the act “substantially advances legitimate State interests.”

In Agins v. City of Tiburon the court articulated that a taking has occurred when the legislation passes the “denies an owner economically viable use of his land” test or the “substantially advances” test. Justice O’Connor demonstrates in this opinion that the disjunctive ‘or’ has been read so as to leave the “substantially advances” test as independent of other tests. She further argues that the “substantially advances” test is a “means-end test,” requiring the law to be based on the extent to which it is effective, something that she views judiciary as being particularly unsuited to evaluate.

Therefore, the Court here holds that legislation may be found to be unconstitutional by alleging a “physical” taking, a “total regulatory taking,” any of the above three tests, or a “land-use exaction” that does not advance the same governmental interest as the legislation addresses.