Amicus Curiae Brief — Lingle v. Chevron USA Inc.

| SANT 4 20085

No. 04-163 \_OPFICE OF THE CLERK |

In the

Supreme Court of the Anited States

LInDA LINGLE, GOVERNOR OF HAWAII, ET AL.,

Petitioners,

Vv.

CHEVRON U.S.A. INc.,

Respondent.

On Writ of Certiorari to the United

States Court of Appeals for the Ninth Circuit

BRIEF OF AMICI CURIAE SMALL PROPERTY

OWNERS OF SAN FRANCISCO INSTITUTE, SAN

FRANCISCO APARTMENT ASSOCIATION,

CALIFORNIA APARTMENT ASSOCIATION and

SAN FRANCISCO ASSOCIATION OF REALTORS IN

SUPPORT OF RESPONDENT, CHEVRON U.S.A. INC.

Paut F. UTRECHT

Counsel of Record

Law Orrices OF Pau F. Utrecut

235 MONTGOMERY STREET

Suite 1130

SAN Francisco, CA 94104

(415) 956-8100

Becker Gallagher Legal Publishing, Inc. 800.890.5001

TABLE OF CONTENTS

re eee ea dees eo ON ee wae Os i

CE ee ee ee eee il

RE a 1

EE ee ee 3

eed sae ia ine ae eee ew ee ee ee 6

I. THE STATE OF HAWAII PRESENTS NO

REASON FOR THIS COURT TO OVERRULE

ITS DECISIONS UNDER THE SUBSTANTIAL

ADVANCEMENT TEST ............2.-. 6

A. The Takings Clause Does Not Prohibit

Government Action; It Ensures that No Group

is Singled Out to Bear the Cost of a Public

i seceuecten be caches eee ee es 9

B. Even If Invalidation Were the Wrong Remedy

in this Case, That Does Not Affect the Issue of

Whether Heightened Scrutiny Is Required by

the Fifth Amendment ................ 11

Il. HEIGHTENED SCRUTINY IS NECESSARY TO

INSURE THAT PUBLIC COSTS ARE NOT

SHIFTED TO PARTICULAR PROPERTY

OWNERS UNDER THE GUISE OF ORDINARY

ECONOMIC REGULATIONS ............ 14

a he 19

ii

TABLE OF AUTHORITIES

CASES

Agins v. Tiburon, 447 U.S. 255 (1980) ........ 6, 7,9

Armstrong v. United States, 364 U.S. 40 (1960) .. 10, 19

Babbitt v. Youpee, 519 U.S. 234 (1997)... 2.2.2... 12

Block v. Hirsh, 256 U.S. 135 (1921) ............. 14

Cwynar v. San Francisco,

90 Cal. Agpp.4ah G37 GAGE) . ww eee ccuueueeee 3

Dolan v. Tigard, 512 U.S. 374 (1994) ......... passim

Drouet v. Superior Court, 31 Cal.4th 583 (2003) ..... l

Eastern Enterprises v. Apfel,

504 U.S. G56 (ISTED . we cece teen eee 15, 16

Ehrlich v. Culver City, 12 Cal.4th 854 (1996) ....... 17

First English Evangelical Lutheran Church v. Los Angeles,

462 U.S. 306 (1967) .. ec cesses ue eee 10, 12

Kelo v. New London, No. 04-108 ............... 11

Lochner v. New York, 198 U.S. 45 (1905) . 4, 7, 8, 10, 11

Lucas v. South Carolina Coastal Council,

SOS U.S. KGS (Seen occ ecaee ee 4,6, 7,15

New State Ice Co. v. Liebmann, 285 U.S. 262 (1932) .. 11

Nollan v. California Coastal Commission,

EE Es ceccesecccc cc « passim

Parking Ass'n of Georgia, Inc. v. City of Atlanta,

WE BUUDQNSED ccc ccc cece cece cece. 17

Pennsylvania Coal Co. v. Mahon,

ccc cece. 4,9, 14

San Remo Hotel v. San Francisco,

27 Cal.4th 643 (2002) ......... I 7)

San Remo Hotel v. San Francisco, No. 04-340 ...... l

State Oil v. Kahn, 522 U.S. 3 (1997) ............. 7

Tom v. San Francisco, 120 Cal.App.4th 674 (2004) .. 1-3

Town of Flower Mound v. Stafford Estates, Ltd. ,

DEEP occ ccc ccccesrccccccs 16

CONSTITUTIONAL PROVISION

EE Cec c cc cece cceccces passim

OTHER AUTHORITY

Fred R. Shapiro, The Oxford Dictionary of American

Legal Quotations 401 (Oxford Univ. Press 1993) .. 13

1

STATEMENT OF INTEREST

Small Property Owners of San Francisco Institute, San

Francisco Apartment Association, California Apartment

Association and San Francisco Association of Realtors submit

this amici curiae brief supporting Chevron USA, Inc.'

The Small Property Owners of San Francisco Institute is

a non-profit organization dedicated to the fair treatment of

small property owners in San Francisco. The Institute was

recently founded to expand upon the efforts of Small Property

Owners of San Francisco (“SPOSF”), whose members

typically own buildings with two to six apartments. SPOSF

together with SFAA and SFAR recently has defeated a local

ordinance prohibiting property owners from living in their

own properties. Tom v. San Francisco, 120 Cal.App.4th 674

(2004). SPOSF has also filed amicus briefs in the California

courts. E.g., Drouet v. Superior Court, 31 Cal.4th 583

(2003). Most recently, the Institute joined the Washington

Legal Foundation in filing an amicus brief in San Remo Hotel

v. San Francisco, No. 04-340. The Institute also conducts

education, outreach, and research programs designed to help

small property owners understand and protect their rights, and

works to help San Francisco’s residents understand the

societal costs of restrictive regulations and rent control.

The San Francisco Apartment Association (“SFAA”) has

been a non-profit trade association since 1917. SFAA’s 2,700

‘members own small to medium-sized apartment buildings in

' The parties have filed letters consenting to the filing of this amici

curiae brief. No counsel for any of the parties authored any part

of this brief. No person or entity other than the amici filing this

brief has made any monetary contribution to the preparation or

submission of this brief.

2

San Francisco with more than 60,000 rental units. SFAA

defends its members by challenging unfair local government

regulations, has prosecuted several actions, e.g., Tom v. San

Francisco, 120 Cal.App. 4th 674 (2004)(successful challenge

to ordinance prohibiting owner occupancy of property), and

has filed amicus briefs in the California courts. SFAA also

advises its members concerning the extraordinarily complex

and growing regulations imposed by the City and County of

San Francisco.

The California Apartment Association (“CAA”) is the

largest statewide rental-housing trade association in the United

States, with a diverse membership of 50,000 rental property

owners and managers ranging from California’s largest

property management companies to individuals with a single

rental unit, which control nearly two million rental units in

California. CAA provides a voice for rental property

providers throughout California, and encourages the fair,

ethical, and professional operation of rental housing.

The San Francisco Association of Realtors (“SFAR”)

(formerly the San Francisco Real Estate Board) was founded

as a non-profit association on February 6, 1905. It antedates

the National Association of Realtors and the California

Association of Realtors. It actively participated in the

formation of both of these organizations. SFAR presently

represents more than 4,200 members, most of whom are

active residential real estate brokers and agents. It is dedicated

to providing service to its membevs, the community, and the

public at large. SFAR was founded upon the principle that

the wise utilization of real property is fundamental to the

growth and survival of this country. To that end, it promotes

policies that lead to the highest and best use of land, the

safeguarding of property rights, equal opportunity in housing,

and professional competence. SFAR actively lobbies local

3

government in this regard and when necessary and appropriate

it properly challenges local ordinances. It joined with SFAA

and SPOSF in Tom v. San Francisco, 120 Cal.App.4th 674

(2004). It took the lead in Cwynar v. San Francisco, 90

Cal.App.4th 637 (2001), a takings challenge to a local

ordinance that limited the occupancy rights of owners of

residential real property. SFAR joins in filing this amicus

brief to advance the interest in fair judicial scrutiny under the

United States Constitution of local laws and regulations that

so diminish the bundle of sticks that is ownership as to effect

a taking.

SUMMARY OF ARGUMENT

Amici file this brief because the constitutional issues

raised by this case are poorly presented by a fight waged by

a multi-national corporation with billions of dollars and a state

with millions of taxpayers. Unlike the property owners who

will be most affected by the decision in this case, Chevron can

afford to protect itself by using its Tesources to influence the

political process.

The consequences of the constitutional issue are best

illustrated by the millions of property owners who are

targeted by cities and states to pay the costs of public goods

that should be borne by the public as a whole. The vast

majority of those property owners cannot protect themselves

in the political process and are, accordingly, targeted by cities

and states to pay for problems that they did not cause and did

not exacerbate. It is all too easy for legislators to exact funds

from the few, rather than explain tax increases to the voters.

And, with enormous budget deficits, state and local

governments are increasingly reaching for easy options.

4

The appeal of such easy options was predicted by Justice

Oliver Wendell Holmes more than 70 years ago, when this

Court held that the police power to regulate property must be

limited by the courts under the Fifth Amendment:

If instead, the uses of private property were subject to

unbridled, uncompensated qualification under the

police power, “the natural tendency of human nature

[would be] to extend the qualification more and more

until at last private property disappear[ed]” .

Luéas v. South Carolina Coastal Council, 505 U.S. 1003,

1014 (1992), quoting Pennsylvania Coal Co. v. Mahon, 260

U.S. 393, 415 (1922).

Hawaii seeks to preserve and protect those easy options,

and asks this Court to reverse its prior decisions in order to

give state and local governments that luxury. In Hawaii’s

view, any meaningful judicial review of its legislation under

the decades-old substantial advancement test would amount to

a return to the Lochner era. Hawaii raises the specter that

judicial review of legislation that imposes public costs on a

few private property owners will transform the courts into an

unelected, super-legislature.

That argument is wrong. No decision of the courts under

the Takings Clause could ever prohibit Hawaii’s legislature

from acting in its own perception of the public good. The

Takings Clause requires only that Hawaii’s taxpayers pay the

costs of regulations that go too far. Indeed, that is the only

question in this case, and the lower courts properly held that

Hawaii may not single out two property owners to pay the

entire cost of this attempted solution to a public problem. The

cost should be borne by the public as a whole. ~

5

In short, this is an unusual case that presents the usual

problems. Here, Hawaii has chosen to regulate Chevron’s

property, requiring Chevron to subsidize its gasoline station

operators. Hawaii's stated purpose was to reduce the price of

gasoline to the consumer for the public good. But, the law’s

failure to advance that purpose demonstrates that Hawaii’s

real (if unstated) purpose was to provide a subsidy for local

gasoline station operators at Chevron’s expense, and that is a

cost that the public should bear.

The State argues, however, that the courts may not even

evaluate the legislation under the substantial advancement test.

The State claims that if the courts ask whether a legislative

decision to subsidize gasoline station operators at the expense

of two property owners substantially advances a legitimate

government purpose, the legislative heavens will fall. And,

Hawaii stretches the argument even further. As Hawaii

‘ould strike the “balance” between legislators and the courts,

the courts must give legislators free rein to reduce their

burgeoning deficits and appease their taxpayers by imposing

the costs of public programs on small groups of property

owners.

This Court has long disagreed. The issues raised by

Hawaii have long been foreclosed by decisions of this Court

establishing the substantial advancement test. Nothing new is

offered by Hawaii. Contrary to Hawaii’s claims, this Court’s

substantial advancement decisions have not transformed the

courts into super-legislatures. Indeed, the substantial

advancement test makes the courts precisely what they should

be: guardians of the Constitution. :

In this case, the lower courts merely required, as the

Takings Clause demands, that Hawaii not impose the cost of

this regulation on Chevron. If this law is invalidated because

6

the State chooses not to pay that cost, that does not mean that

the courts have imposed their own economic policies. The

State is free, and remains free, to adopt economic regulations

that its legislators believe will create a public benefit, as long

as they do not impose the cost of those decisions on a few

property owners, rather than Hawaii’s taxpayers as a whole.

In sum, while Chevron may not be the most sympathetic

beneficiary of the Fifth Amendment, this case hardly provides

a reason to revisit this Court’s decisions under the Takings

Clause. When the courts protect the few -- even the richest of

the few -- they send a message that legislators must follow the

Constitution. The lower courts followed this Court’s

decisions and those decisions were right.

ARGUMENT

I. THE STATE OF HAWAII PRESENTS NO REASON

FOR THIS COURT TO OVERRULE ITS DECISIONS

UNDER THE SUBSTANTIAL ADVANCEMENT

TEST :

In Agins v. Tiburon, 447 U.S. 255, 260 (1980), this Court

held that an economic regulation violates the Takings Clause

of the Fifth Amendment if it fails to substantially advance a

legitimate government interest. This Court has repeatedly

reaffirmed that holding. E.g., Lucas, 505 U.S. at 1016.

This Court has also expressly rejected the very argument

that Hawaii makes here -- that Takings Clause claims should

be reviewed under the same test as claims under the Due

Process Clause. Petitioners’ Brief on the Merits (“Pet. Mer.

Br.”) at 14-36; Nollan v. California Coastal Commission,

483 U.S. 825, 834 n. 3 (1987) (takings tests are not “the same

as those applied to due process and equal protection claims”);

—

7

Dolan v. Tigard, 512 U.S. 374, 391 (1994) (reasonable

relationship test does not apply under Takings Clause because

it “seems confusingly similar to the term ‘rational basis’

which describes the minimal level of scrutiny under the Equal

Protection Clause”).

Understandably, the State does not even address the

standards set out by this Court for overturning its own

decisions. E.g., State Oil v. Kahn, 522 U.S. 3, 20 (1997)

(“We approach the reconsideration of decisions of this Court

with the utmost caution.”). Instead, the State offers its fear

that this Court’s Takings Clause decisions will result in a

judicial reviv.i of Lochner v. New York, 198 U.S. 45 (1905).

Hawaii’s arguments have been made and rejected before,

and this legislation giving subsidies to its gasoline station

operators for the “public good” adds nothing to the debate.

As an obvious point, this Court was fully aware of Lochner-

era jurisprudence when it decided Agins, and when it

repeatedly reaffirmed the underlying doctrinal grounds for

Agins’ holding. E.g., Lucas, 505 U.S. at 1016. The Takings

Clause addresses dangers of governmental leveraging that the

Due Process Clause does not address. Nollan, 483 U.S. at

834-837. The substantial advancement test under the Takings

Clause is required to prevent legislators from using

regulations to force a few property owners io bear the general

costs of remedying societal problems. That potential for

mischief cannot be prevented by the political process alone

because it will always be politically popular to impose the

costs of the many on the few.

The last 25 years have shown that, with the substantial

advancement test, this Court struck the appropriate balance

between protecting property rights and allowing sufficient

latitude for governmental regulation of property. Since Agins,

8

there has been no flood of substantial advancement litigation,

let alone a flood of judgments for plaintiffs. Indeed, the

substantial advancement test is sufficiently difficult to meet

that it takes a regulation as extreme as rent control for

gasoline stations to satisfy the test.

Even in the few cases in which regulations have gone too

far, the substantial advancement test presents no serious

conflict between the courts and legislators. A decision under

the Takings Clause does not require the courts to invalidate

legislation as in Lochner. It requires only that the costs of the

legislation be borne by taxpayers, rather than by property

owners who are singled out because they can be forced to

pay. Even when a court rules that legislation is a taking, its

ruling will not prevent any legislature from acting in the name

of the public good. The legislature may proceed as long as it

pays the cost of its legislation.

Hawaii’s predictions of legislative ruin caused by this case

are unwarranted. An affirmance in this Case will not ruin any

legislature, but may ruin the careers of individual legislators

who are willing to disregard their constitutional oaths. In

virtually every city and state, legislators will not be reelected

if their constituents are required to pay for all that they were

promised. For those legislators, the “solution” is increasingly

to force the few to pay for the many, whether by

constitutionally permissible means or not. Here, the lower

courts followed this Court’s decisions and rejected that

“solution.”

For the same pragmatic reasons, this Court should reject

Hawaii's contention that the political process is sufficiently

robust to protect property owners from oppression by the

majority. Pet. Mer. Brf. at 37-42. While that might be true

of Chevron because it has enough resources to do battle in the

9

political arena, it is not true of most property owners. Amici,

for example, do not have Chevron’s resources. SPOSF’s

members typically own 2-6 unit buildings and the members of

SFAA and CAA typically own 5-100 unit buildings. In

jurisdictions like San Francisco, where 65% of the voters are

tenants, the minority of property owners cannot protect

themselves from the political process. Justice Holmes’

prediction that, “the natural tendency of human nature” is to

expand the police power until “private property

disappear[ed],” Pennsylvania Coal, 260 U.S. at 415, has

proven true: “private property . . . is now extinct in San

Francisco[, which] has implemented a neo-feudal regime

where the nominal owner of property must use that property

according to the preferences of the majorit[y]”. San Remo

Hotel v. San Francisco, 27 Cal.4th 643, 692 (2002) (Brown,

dissenting). If property owners are protected at all, it will be

through the courts.

In sum, Hawaii has chosen to make a small case involving

a few gasoline stations into a reason to overrule this Court’s

decisions and give cities and states free rein to violate the

Takings Clause. In the process, Hawaii has shown that the

substantial advancement test is even more vital now than it

was 25 years ago when Agins was decided.

A. The Takings Clause Does Not Prohibit Government

Action; It Ensures that No Group is Singled Out to

Bear the Cost of a Public Burden

The Takings Clause is perhaps the most disarming of the

Bill of Right’s protections of the few against the tyranny of

the many. Unlike the other provisions of the Bill of Rights,

the Takings Clause does not prohibit government action.

Instead, it requires only that government pay just

compensation for its actions, thereby spreading the cost of its

10 an

actions benefitting the public to all taxpayers. As this Court

explained in First English Evangelical Lutheran Church v.

Los Angeles, 482 U.S. 304, 315 (1987):

The basic understanding of the [Fifth] Amendment

makes clear that it is designed not to limit the

governmental interference with property rights per se,

but rather to secure compensation in the event of

otherwise proper interference amounting to a taking.

In the end, the Takings Clause requires only what the

legislators should know is right. When the courts enforce this

constitutional right, they merely “bar Government from

forcing some people alone to bear public burdens which, in all

fairness and justice, should be borne by the public as a

whole.” Armstrong v. United States, 364 U.S. 40, 49 (1960).

Hawaii hopes to transform this Takings Clause case into

an enormous conflict between the courts and legislatures.

According to Hawaii, the substantial advancement test under

the Takings Clause has revived (or will revive) the Lochner

era by allowing unelected judges to second-guess the wisdom

of politically-popular economic regulations. Pet. Mer. Brf.

at 39.

Even as a doctrinal matter, Hawaii’s argument makes no

sense at all. The Takings Clause does not prohibit

government regulations, it simply requires the government to

use tax dollars to accomplish its purpose rather than forcing

a few to pay the cost. First English, 482 U.S. at 315;

Armstrong, 364 U.S. at 49. By contrast, when a government

regulation is found to violate the Due Process Clause, the

government may not continue to enforce the regulation - even

if the government were willing to pay the costs imposed by

the regulation.

11

~- In the Lochner era, judges did use the Due Process Clause

to second-guess legislative decisions and impose their own

economic views. One reason that this Court ultimately

overruled Lochner was to enable each state to try novel (and

thus untested) solutions to economic problems. New State Ice

Co. v. Liebmann, 285 U.S. 262, 311 (1932) (Brandeis,

dissenting) (“It is one of the happy incidents of the federal

system that a single courageous state may, if its citizens

choose, serve as a laboratory; and try novel social and

economic experiments without risk to the rest of the

country.”). But, the Takings Clause does not call for judges

to impose their economic views and thereby prevent economic

regulations that are novel. The only issue for the courts under

the Takings Clause is who pays for the novel or experimental

solutions.’ Thus, Hawaii’s point fails at the threshold. Under

the Takings Clause, the courts cannot second-guess legislative

judgments or usurp legislative power. At most, the courts can

direct the state to pay for the cost of their own legislation.

That is, unless -- as in this case -- the government refuses to

pay.

B. Even If Invalidation Were the Wrong Remedy in

this Case, That Does Not Affect the Issue of

Whether Heightened Scrutiny Is Required by the

Fifth Amendment

The State makes much of the fact that the remedy chosen

by the lower courts in this case was to invalidate Hawaii’s

rent control law. The State argues that the invalidation

? Of course, a different issue is presented when a governmental

taking of property is challenged on the ground that it is not for a

public use. In that case, the proper remedy is not compensation,

it is an injunction. This Court is considering the scope of the

public use requirement in Kelo v. New London, No. 04-108.

12

remedy shows that the substantial advancement test is really

a substantive due process test. The State’s underlying premise

is correct: the courts may not unilaterally order invalidation

as the remedy for a taking. Instead, the courts are required to

give the government the option of either paying just

compensation or accepting invalidation of the regulation and

paying temporary takings damages for the time that the

regulation was in effect. First English, 482 U.S. at 321

(“Once a court determines that a taking has occurred, the

government retains the whole range of options already

available - amendment of the regulation, withdrawal of the

invalidated regulation, or exercise of eminent domain.”).

However, it is often quite obvious that the government has

no desire or intention to pay just compensation. In those

cases, this Court has not hesitated to invalidate a regulation

once it was found to be a taking. E.g., Babbitt v. Youpee,

519 U.S. 234, 243-245 (1997).

In this case, Hawaii’s rent control law does not provide

for compensation, nor did the State argue in the lower courts

that the right remedy was an order requiring it to provide

compensation to Chevron. As this Court explained in First

English, “a governmental body may acquiesce in a judicial

declaration that one of its ordinances has effected an

unconstitutional taking of property; the landowner has no

right under the Just Compensation Clause to insist that a

‘temporary’ taking be deemed a permanent taking.” First

English, 482 U.S. at 317. In other words, a government, like

Hawaii, may choose not to contest the remedy of invalidation

because it is simply not willing to pay just compensation.

Apparently, some legislative experiments - like Hawaii’s

id

gasoline station rent control - are only worth trying if

someone else pays the price.’

Ultimately, whether the remedy of invalidation is the

proper remedy in this case is irrelevant to the real issue raised

by the State: should this Court overrule its prior precedents

establishing that there is a different standard of review under

the substantial advancement test of the Takings Clause than

the rational basis test of the Due Process Clause. The

legislature’s ability to advance the public good (according to

its own views of social and economic policy) is unaffected by

the Takings Clause. Nollan, 483 U.S. at 841-842

(“California is free to advance its ‘comprehensive program,’

if it wishes, by using its power of eminent domain for this

‘public purpose,’ [; but . . .] it must pay for it.”).

This case proves the point. Whether Hawaii (explicitly or

implicitly) acquiesced in the lower courts’ remedy invalidating

its legislation is completely irrelevant to the issue of the

correct standard of review. If the incorrect remedy is the

linch-pin of the State’s position as its merits brief seems to

indicate, there is a simple solution: remand the case with a

direction that the lower courts order the State to choose

between paying just compensation or accepting the

invalidation of its legislation.‘

> Senator Russell Long explained a similar difficulty in adopting

tax reform, most voters subscribe to the philosophy of “Don’t tax

you, don’t tax me, tax that fellow behind the tree.” Fred R.

Shapiro, The Oxford Dictionary of American Legal Quotations 401

(Oxford Univ. Press 1993), quoting Forbes, Dec, 15, 1976.

* One solution to the problem posed by the dispute over the

remedy in this case and avoid a fact question about whether the

government silently acquiesced to the invalidation remedy is for the

14

Il. HEIGHTENED SCRUTINY IS NECESSARY TO

INSURE THAT PUBLIC COSTS ARE NOT SHIFTED

TO PARTICULAR PROPERTY OWNERS UNDER

THE GUISE OF ORDINARY ECONOMIC

REGULATIONS

The regulatory takings doctrine has its modern roots in a

seminal opinion by Justice Oliver Wendell Holmes, who

explained:

The general rule at least is that while property may

be regulated to a certain extent, if regulation goes too

far it will be recognized as a taking... .. . We are

in danger of forgetting that a strong public desire to

improve the public condition is not enough to warrant

achieving the desire by a shorter cut than the

constitutional way of paying for the change.

Pennsylvania Coal, 260 U.S. at 415-416.

In that opinion, the Court discussed rent control that was

imposed during World War I and concluded that while it was

“to the verge of the law”, it was not a taking because of the

exigeacies of the war-time “emergency”. /d. at 416, citing

Block v. Hirsh, 256 U.S. 135 (1921). Hawaii’s legislation is,

of course, not justified by any emergency, and is not even

near the verge of a constitutional measure. Its rent control

trial courts to routinely require defendants in takings cases to

explicitly elect between just compensation and invalidation plus

temporary takings damages before trial. In addition to insuring that

the government's right to select the remedy is observed, that

practice would help both the parties and the courts manage the trial

of takings cases: the issues at trial will be quite different depending

on which remedy the government selects.

15

regulation for a few gasoline station operators plainly goes

“too far” and requires just compensation under the Takings

Clause. But, Hawaii asks for more than just this Court’s

approval of this piece of legislation. Hawaii asks that this

Court abandon the very doctrine that allows the courts to

determine whether legislation has gone too far.

The substantial advancement test should be protected, not

abandoned, because it enables the courts to distinguish

between regulations that adjust the ordinary benefits and

burdens of economic relations from regulations that impose an

unfair burden on a few property owners. Nollan, 483 U.S. at

834-837 (substantial advancement test distinguishes an

ordinary economic regulation from “‘an out-and-out plan of

extortion’”); cf. Lucas, 505 U.S. at 1017-1018 (economically

viable use test distinguishes ordinary economic regulations

that adjust the “benefits and burdens of economic life” from

regulations that “carry with them a heightened risk that

private property is being pressed into some form of public

service under the guise of mitigating serous public harm.”).

The substantial advancement test protects property owners

from the significant danger that the government has used the

opportunity created by the immobility of real property to

single out a few owners (in this case, two oil companies) and

unfairly impose the cost of a public good on those property

owners.

Hawaii’s regulation poses precisely the same danger that

was identified in Nollan and Dolan. Chevron alleged that the

State leveraged its power to regulate property in order to

impose the cost of public burdens on property owners.”

> In this case, the State regulated particular pieces of real property,

i.e., the land under gasoline stations. Thus, the State’s reliance on

Justice Kennedy’s concurrence in Eastern Enterprises is irrelevant

16

While Hawaii admits that heightened scrutiny under the

substantial advancement test was appropriate in Nollan and

Dolan, it asks the courts to abandon that test in this case and

preclude the courts from determining whether Chevron’s

allegation was true. Hawaii argues that the courts should only

apply heightened scrutiny to review exactions imposed on a

single property owner in an administrative proceeding. Pet.

Mer. Brf. at 33-35.

If that were the only way that governments could violate

the Takings Clause, that might be a viable argument. But

there are many ways for governments to transfer wealth, and

to violate the Constitution. In this case, Chevron’s rights are

equally violated by this legislative regulation requiring it to

subsidize Hawaiian gasoline distributors as they would be by

an administrative regulation exacting payments to Hawaii to

fund the subsidy. In either case, Hawaii has leveraged its

police power to compel Chevron to pay for this legislation in

the name of the “public good.”°

because the issue in that concurrence was whether the Takings

Clause should apply to economic regulations that do not operate on

particular pieces of real property. Eastern Enterprises v. Apfel,

524 U.S. 498, 540-542 (1998).

* Even if this Court were to decide that legislation imposing an

economic regulation is only subject to deferential scrutiny , it should

not reach the issue of whether the same level of scrutiny is

applicable to legislation imposing exactions. While the

consequences to the property owner are the same, the dangers of

governmental leveraging are obviously greater when the

government requires real property owners to give their property (in

cash or fee title) directly to the government. Town of Flower

Mound v. Stafford Estates, Ltd., 135 S.W.3d 620 (2004).

17

Moreover, the State’s administrative/legislative distinction

is indefensible. “A city council can take property just as well

as a planning commission can.” Parking Ass'n of Georgia,

Inc. v. City of Atlanta, 515 U.S. 1116, 1117-1118 (1995)

(Justices Thomas and O’Connor, dissenting from denial of

certiorari). The fact that the State chose to impose this

regulation by legislation on the two oil companies that leased

gasoline stations, rather than by administrative action, should

hardly make a constitutional difference.’ Constitutional rights

should not turn on whether the cities and states choose to ask

their legislators to act unconstitutionally or ask their

administrators to do so.

Nollan provides an apt example. While creating an

easement for public beach access was a legitimate government

purpose, the State of California could have taken the easement

by legislation just as easily as it did in the administrative

process. In any event, California chose not to pay for the

” It is true that legislative procedures and administrative procedures

are different. Thus, it may make sense to treat regulations imposed

by an administrative agency somewhat differently than those

imposed by a legislature. For example, under Nollan and Dolan,

the government bears the burden of proving that the administrative

action substantially advances a legitimate government purpose.

That burden is justified because the administrative agency has a

quasi-judicial procedure to gather admissible evidence and must

base its decision on that evidence. By contrast, the legislative

process is usually not based on admissible evidence gathered before

the law is adopted. As a result, it may be appropriate to place the

burden of proof on the property owner to establish that a legislative

regulation fails the substantial advancement test. Ehrlich v. Culver

City, 12 Cal.4th 854, 906 (1996) (Kennard and Baxter,

concurring). Other than that, there is no justification for treating

legislation and administrative actions differently under the

substantial advancement test.

18

easement. Nollan, 483 U.S. at 841-842 (“California is free to

advance its ‘comprehensive program,’ if it wishes, by using

its power of eminent domain for this ‘public purpose,’ [; but

. . .] it must pay for it.”). The problem faced by California

was that it did not have a good reason to require the Nollans

to provide the easement by legislative or administrative

regulation: the Nollans did not cause the lack of access. The

only problem that they caused was a lack of visual access, and

that problem could not be solved by requiring them to provide

an easement for public beach access.

Dolan provides another example. In Dolan, the city took

title to land instead of requiring flood control measures, i.e.,

took more than was needed to satisfy its ostensible purpose.

Again, the substantial advancement test enabled the courts to

determine whether the city’s proffered purpose was advanced

by the regulation. If not, the purpose of the economic

regulation must have been to shift the cost of the public good

to the regulated property owners. Dolan, 512 U.S. at 387-

388, 392-395.

Here, when Hawaii adopted gasoline station rent control,

its proffered purpose was to lower gasoline prices. But, the

lower courts properly determined that was not the true

purpose because the law will not actually lower gasoline

prices. The only result that was absolutely certain from the

legislation was that Chevron would subsidize gasoline station

operators by reducing their costs. While that subsidy may not

be unconstitutional under the Takings Clause, Hawaii was

required to pay the cost of the subsidy, rather than impose the

cost on Chevron.

The courts could not have made that determination without

the substantial advancement test. If that test were abandoned,

as Hawaii urges, the courts would be completely precluded

19

from making any significant inquiry into the critical question

under the Takings Clause: whether the government is forcing

“some people alone to bear public burdens which, in all

fairness and justice, should be borne by the public as a

whole.” Armstrong v. United States, 364 U.S. 40, 49 (1960).

In sum, the lower courts followed this Court’s prior

holdings under the Takings Clause and, if those holdings are

abandoned, state and local governments will be free to ignore

the Takings Clause in their future legislation and

administrative decisions.

CONCLUSION

More than two decades ago, this Court held that

legislatures may take private property only to substantially

advance a public purpose. That holding has been followed by

the courts and has not prevented legislators from acting within

their constitutional limits. If affirmed, this case will be no

exception.

Respectfully Submitted,

PAUL F. UTRECHT

Counsel of Record

LAW OFFICES OF PAUL F. UTRECHT

235 Montgomery Street, Suite 1130

San Francisco, CA 94104

(415) 956-8100