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Wednesday, October 13, 2004

Law - U.S. Supreme Court to hear second private-property case

Late last month the Supreme Court elected to hear Kelo v. City of New London, involving the use of eminent domain for private development. See ILB entries here and here.

Tuesday, as reported here by Linda Greenhouse of the NY Times in a story headlined "Second Private-Property Case Accepted by Supreme Court," the Court accepted a related case. Some quotes:

With an important eminent domain case already on the docket, the Supreme Court expanded its examination of private-property rights on Tuesday by accepting a new case on how courts should decide when an economic regulation goes so far as to amount to an unconstitutional "taking" of private property.

The case is an appeal by the state government of Hawaii, where a federal court ruled unconstitutional a law limiting the rent that oil companies can charge to independent dealers who lease its service stations. The district court in Honolulu, in a decision upheld by the United States Court of Appeals for the Ninth Circuit, in San Francisco, held that expert testimony on the economic effect of the regulation had failed to prove that it would "substantially advance a legitimate state interest."

This was the wrong standard, the state argued vigorously in its Supreme Court appeal. The state said the Ninth Circuit had established an "intrusive" legal test that invited judges to substitute their own views of the "efficacy or wisdom of the government action" for the views of elected officials. Courts should limit themselves to deciding whether a government economic regulation has a rational basis, a much more deferential standard, the state argued.

The importance of this issue to government officials was underscored in briefs filed on Hawaii's behalf by New York, California, Connecticut and 16 other states as well as by the National Conference of State Legislatures, the United States Conference of Mayors and other government bodies. It has implications not only for rent-control laws like Hawaii's, but for environmental, health and safety rules as well as for the zoning and land-use regulations that have been the focus of the courts' concerns about the Fifth Amendment's "takings" clause.

The Fifth Amendment provides that private property shall not be "taken for public use without just compensation." In the case the Supreme Court accepted late last month, Kelo v. City of New London, No. 04-108, the question is whether private economic development that will add to the city's tax base is an appropriate "public use" for which a city can exercise its power of eminent domain to condemn property of lower economic value.

The new case, Lingle v. Chevron U.S.A. Inc., No. 04-163, presents a related but distinct question: whether the challenged rent regulation is a taking in the first place. The Supreme Court's precedents make clear that the government does not have to physically acquire property in order to "take" it and incur the obligation to pay for it. A regulation can be a taking if it strips the property of much of its economic use.

Another write-up on the case can be found here - it is a story by David Savage of the LA Times that begins:
WASHINGTON — A Hawaii dispute has prompted the Supreme Court to take up a legal question with potential impact in rent-control havens like Santa Monica: When does a government regulation go so far as to unconstitutionally "take" private property?

In the past, the court has said the government has broad authority to impose economic regulations, including rent-control laws, even though the limits cut into the profits of landlords. Despite decades of litigation, property owners have failed to knock down laws such as those in Santa Monica and Berkeley that limit how much they can charge.

But the Constitution also says the government may not take private property, and the line between a business regulation that limits profits and the taking of property is not always clear.

In April, the U.S. 9th Circuit Court of Appeals surprised some government lawyers when it ruled that a Hawaii rent-control measure amounted to a "regulatory taking" of private property.

The 1997 measure was designed to hold down gasoline prices on the islands, which are among the nation's highest. Lawmakers hoped to maintain independent service station dealers, and they set limits on how much oil companies could charge in rent for service station dealerships.

Posted by Marcia Oddi on October 13, 2004 07:07 AM
Posted to General Law Related