Lingle v. Chevron
Chevron USA sued the state of Hawaii claiming that Act 257, which caps the maximum rent an oil company can charge dealers who lease its service stations at 15% of gross margin, violates the Takings Clause of the United State Constitution. The Hawaii State Legislature had enacted Act 257 in response to a highly concentrated gasoline market in Hawaii and the resulting high cost of gasoline to consumers. As one of six gasoline wholesalers in Hawaii, Chevron claimed Act 257 prevented it, through rental payments alone, from recovering its rental expenses and effected an unconstitutional regulatory taking because it failed to "substantially advance" a legitimate state interest.
The district court ruled in Chevron's favor. Hawaii appealed to the Ninth Circuit Court of Appeals, challenging the standard used to evaluate Chevron's regulatory takings claim (the "substantially advances" test) and asserting that. The Ninth Circuit determined the district court had applied the correct standard, but remanded the case on issues regarding the application of the standard.
On remand, the district court concluded that Act 257 was unconstitutional. The court also determined Act 257 failed to substantially advance a legitimate state interest because it would result in higher, not lower gasoline prices in Hawaii. Hawaii again appealed to the Ninth Circuit arguing that the district court misapplied the substantially advances test. The Ninth Circuit held that the district court had appropriately applied the substantially advances test.
Questions Presented:
1. Whether the Just Compensation Clause authorizes a court to invalidate state economic legislation on its face and enjoin enforcement of the law on the
basis that the legislation does not substantially advance a legitimate state interest, without regard to whether the challenged law diminishes the economic value or usefulness of any
property.
2. Whether a court, in determining under the Just Compensation Clause whether state economic legislation substantially advances a legitimate state interest, should apply a deferential standard of
review equivalent to that traditionally applied to economic legislation under the Due Process and Equal Protection Clauses, or may instead substitute its judgment for that of the legislature by
determining de novo, by a preponderance of the evidence at trial, whether the legislation will be effective in achieving its goals.
