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

18 Fla. L. Weekly Fed. S 303, 125 S. Ct. 2074, 161 L. Ed. 2d 876, 544 U.S. 528, 2005 U.S. LEXIS 4342, 35 Envtl. L. Rep. (Envtl. Law Inst.) 20106, 73 U.S.L.W. 4343
CourtSupreme Court of the United States
DecidedMay 23, 2005
Docket04-163
StatusPublished
Cited by1,215 cases

This text of 18 Fla. L. Weekly Fed. S 303 (Lingle v. Chevron U. S. A. Inc.) is published on Counsel Stack Legal Research, covering Supreme Court of the United States primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lingle v. Chevron U. S. A. Inc., 18 Fla. L. Weekly Fed. S 303, 125 S. Ct. 2074, 161 L. Ed. 2d 876, 544 U.S. 528, 2005 U.S. LEXIS 4342, 35 Envtl. L. Rep. (Envtl. Law Inst.) 20106, 73 U.S.L.W. 4343 (U.S. 2005).

Opinions

[531]*531Justice O’Connor

delivered the opinion of the Court.

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. Through reiteration in a half dozen or so decisions since Agins, this [532]*532language has been ensconced in our Fifth Amendment takings jurisprudence. See Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U. S. 687, 704 (1999) (citing cases).

In the case before us, the lower courts applied Agins’ “substantially advances” formula to strike down a Hawaii statute that limits the rent that oil companies may charge to dealers who lease service stations owned by the companies. The lower courts held that the rent cap effects an uncompensated taking of private property in violation of the Fifth and Fourteenth Amendments because it does not substantially advance Hawaii’s asserted interest in controlling retail gasoline prices. This case requires us to decide whether the “substantially advances” formula announced in Agins is an appropriate test for determining whether a regulation effects a Fifth Amendment taking. We conclude that it is not.

I

The State of Hawaii, whose territory comprises an archipelago of 132 islands clustered in the midst of the Pacific Ocean, is located over 1,600 miles from the U. S. mainland and ranks among the least populous of the 50 States. Because of Hawaii’s small size and geographic isolation, its wholesale market for oil products is highly concentrated. When this lawsuit began in 1997, only two refineries and six gasoline wholesalers were doing business in the State. As of that time, respondent Chevron U. S. A. Inc. was the largest refiner and marketer of gasoline in Hawaii: It controlled 60 percent of the market for gasoline produced or refined in-state and 30 percent of the wholesale market on the State’s most populous island, Oahu.

Gasoline is sold at retail in Hawaii from about 300 different service stations. About half of these stations are leased from oil companies by independent lessee-dealers, another 75 or so are owned and operated by “open” dealers, and the remainder are owned and operated by the oil companies. Chevron sells most of its product through 64 independent [533]*533lessee-dealer stations. In a typical lessee-dealer arrangement, Chevron buys or leases land from a third party, builds a service station, and then leases the station to a dealer on a turnkey basis. Chevron charges the lessee-dealer a monthly rent, defined as a percentage of the dealer’s margin on retail sales of gasoline and other goods. In addition, Chevron requires the lessee-dealer to enter into a supply contract, under which the dealer agrees to purchase from Chevron whatever is necessary to satisfy demand at the station for Chevron’s product. Chevron unilaterally sets the wholesale price of its product.

The Hawaii Legislature enacted Act 257 in June 1997, apparently in response to concerns about the effects of market concentration on retail gasoline prices. See 1997 Haw. Sess. Laws no. 257, § 1. The statute seeks to protect independent dealers by imposing certain restrictions on the ownership and leasing of service stations by oil companies. It prohibits oil companies from converting existing lessee-dealer stations to company-operated stations and from locating new company-operated stations in close proximity to existing dealer-operated stations. Haw. Rev. Stat. §§486H-10.4(a), (b) (1998 Cum. Supp.). More importantly for present purposes, Act 257 limits the amount of rent that an oil company may charge a lessee-dealer to 15 percent of the dealer’s gross profits from gasoline sales plus 15 percent of gross sales of products other than gasoline. § 486H-10.4(c).

Thirty days after Act 257’s enactment, Chevron sued the Governor and Attorney General of Hawaii in their official capacities (collectively Hawaii) in the United States District Court for the District of Hawaii, raising several federal constitutional challenges to the statute. As pertinent here, Chevron claimed that the statute’s rent cap provision, on its face, effected a taking of Chevron’s property in violation of the Fifth and Fourteenth Amendments. Chevron sought a declaration to this effect as well as an injunction against the application of the rent cap to its stations. Chevron swiftly [534]*534moved for summary judgment on its takings claim, arguing that the rent cap does not substantially advance any legitimate government interest. Hawaii filed a cross-motion for summary judgment on all of Chevron’s claims.

To facilitate resolution of the summary judgment motions, the parties jointly stipulated to certain relevant facts. They agreed that Act 257 reduces by about $207,000 per year the aggregate rent that Chevron would otherwise charge on 11 of its 64 lessee-dealer stations. On the other hand, the statute allows Chevron to collect more rent than it would otherwise charge at its remaining 53 lessee-dealer stations, such that Chevron could increase its overall rental income from all 64 stations by nearly $1.1 million per year. The parties further stipulated that, over the past 20 years, Chevron has not fully recovered the costs of maintaining lessee-dealer stations in any State through rent alone. Rather, the company recoups its expenses through a combination of rent and product sales. Finally, the joint • stipulation states that Chevron has earned in the past, and anticipates that it will continue to earn under Act 257, a return on its investment in lessee-dealer stations in Hawaii that satisfies any constitutional standard.

The District Court granted summary judgment to Chevron, holding that “Act 257 fails to substantially advance a legitimate state interest, and as such, effects an unconstitutional taking in violation of the Fifth and Fourteenth Amendments.” Chevron U. S. A. Inc. v. Cayetano, 57 F. Supp. 2d 1003, 1014 (1998). The District Court accepted Hawaii’s argument that the rent cap was intended to prevent concentration of the retail gasoline market — and, more importantly, resultant high prices for consumers — by maintaining the viability of independent lessee-dealers. Id,., at 1009-1010. The court concluded that the statute would not substantially advance this interest, however, because it would not actually reduce lessee-dealers’ costs or retail prices. It found that the rent cap would allow incumbent [535]*535lessee-dealers, upon transferring occupancy rights to a new lessee, to charge the incoming lessee a premium reflecting the value of the rent reduction. Accordingly, the District Court reasoned, the incoming lessee’s overall expenses would be the same as in the absence of the rent cap, so there would be no savings to pass along to consumers. Id., at 1010-1012. Nor would incumbent lessees benefit from the rent cap, the court found, because the oil company lessors would unilaterally raise wholesale fuel prices in order to offset the reduction in their rental income. Id., at 1012-1014.

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18 Fla. L. Weekly Fed. S 303, 125 S. Ct. 2074, 161 L. Ed. 2d 876, 544 U.S. 528, 2005 U.S. LEXIS 4342, 35 Envtl. L. Rep. (Envtl. Law Inst.) 20106, 73 U.S.L.W. 4343, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lingle-v-chevron-u-s-a-inc-scotus-2005.