Court ruling setback for property rights

The U.S. Supreme Court, ruling last month in Lingle v. Chevron USA, made it more difficult for property owners to battle rent control and other government takings. We hope the court’s unanimous decision does not portend bad news for another major property-rights case (Kelo v. City of New London, Conn.) before the court, which deals with the abuse of eminent domain.

In Lingle, the court sided with local governments when it declared that Hawaii was free to impose rent-control provisions on dealer-run gasoline stations as a way to keep down the costs of gasoline. It was a typical counterproductive, authoritarian government policy, one that seeks to help the public by regulating free enterprise.

Hawaii approved a law in 1997 aimed at Chevron, which controlled 60 percent of the state’s gasoline market. The law capped the rent the company could charge its independent dealers for their stations, and was designed to help limit the per-gallon price of gasoline.

Chevron sued, claiming the government was engaging in an uncompensated taking — in effect reducing the value of the company’s property just as if it had taken some of it outright. Surprisingly, the liberal 9th U.S. Circuit Court of Appeals sided with the gasoline company. Local and state governments, and the Bush administration, sided with Hawaii in its appeal, arguing that to throw out this regulation would mean that many other regulations would come under scrutiny by the courts.

Writing for the Supreme Court majority, Justice Sandra Day O’Connor ruled that supporting Chevron’s position would “require courts to scrutinize the efficacy of a vast array of state and federal regulations.” That echoed the view of the National Conference of State Legislatures, which worried that upholding the Ninth Circuit would deem it appropriate “for a court to second-guess the wisdom of a state policy decision.”

Although it is a proper role of the courts to second-guess whether the legislative branches are living up the standards of the Constitution, Justice O’Connor argued that under the separation of powers doctrine it is inappropriate for courts to analyze whether legislative remedies are successful — only whether they are constitutional.

But in this case it was not a question of whether the law effectuates its purpose, explained Merriem Hubbard of the Pacific Legal Foundation, which filed an amicus brief on behalf of Chevron, but whether it takes private property.

The court’s opinion was quite narrow. Chevron argued that the Hawaii law was a taking because it did not “substantially advance” a government interest. The court threw out that standard, but left alone other tests for upholding takings. The National Association of Home Builders, for instance, applauded the decision as a victory for property rights because the court upheld more stringent standards under which a property owner could seek compensation from the government, such as when a government passes a regulation that strips a property of all its value.

Nevertheless, Hubbard calls the decision a “significant setback” for property rights. We agree, and are disappointed that the court did not see the need to compensate owners when only a portion of a property’s value is taken, as in the case of rent control.