When it issued its recent decision in Lingle v. Chevron U.S.A. Inc., 2005 WL 1200710, the U.S. Supreme Court untangled a quarter-century-old jurisprudential knot that it confessed probably was caused by its near absence from the field of takings law since 1922.
Lingle involved a challenge by Chevron to a Hawaii statute restricting the rent Chevron could charge some of its station operators. Chevron claimed that was a taking of its property even though it suffered no net loss of income.
In its first modern-era regulatory taking case, the High Court had opined that a taking of property would be found if a regulation either failed to substantially advance a legitimate state interest or denied the owner economically viable use of property. (Agins v. City of Tiburon, 447 U.S. 255 .) The first prong of that formula was always puzzling because it sounds like due process rather than takings.
Logically, such a taking would occur even without any economic impact on a property owner if it simply failed to advance the interest for which it was adopted. While the regulation might indeed be unconstitutional, should it be a taking? Employing what Lingle called a “fortuitously coined phrase,” Agins said “yes.” Lingle acknowledged that the lower courts had followed Agins “to its logical conclusion,” but didn’t care for the result. With hindsight, Lingle concluded that the true answer was “no.”
To keep the record clear, I filed an amicus curiae brief in Lingle on behalf of the National Association of Home Builders urging the Court to retain the Agins rule. I believe it is healthy for government to be concerned about the effects of its actions on individuals and to realize there is the possibility that courts will review those actions on multiple constitutional grounds. But I don’t think this is a blockbuster decision. Others demur (see comments quoted in Brent Kendall, “Justices Repudiate ‘Takings’ Test,” Los Angeles Daily Journal, May 24, 2005, p. 5), but I think they overreact.
John Echeverria, one of the prevailing lawyers in the case who can certainly feel proud of his victory, claimed that the case is “a virtual death knell of the Takings Clause as a vehicle for right-wing judicial activism,” and Andrew Schwartz, who wrote a brief supporting Hawaii, concluded that “a huge segment of takings liability has been eliminated.”
I’m not sure what Echeverria’s rhetoric means. If one were to line up all the cases decided in this field in the past 25 years, there isn’t much “right-wing judicial activism” in evidence. The activism seems to come from the other political wing, if at all. And as for the elimination of “a huge segment of takings liability,” read on.
The Agins “substantially advances” formulation has not been used very often. It has rarely been used (as the Supreme Court put it in Lingle) as “a free-standing test.” Rather, it has generally appeared as a buttress to liability for economic harm claimed under a different theory. Its most significant use has been in a small handful of cases from the Ninth Circuit Court of Appeals (including Lingle) and thus will have more impact in the western states than in the rest of the country.
Some courts had gone so far in displaying their displeasure with the disjunctive Agins test that they refused to recognize the “substantially advances” test as an independent test, but merely applied it as an additional requirement for recovery in economic impact cases. (E.g., Del Oro Hills v. City of Oceanside, 31 Cal.App.4th 1060 .)
More importantly, the risk to government under this theory was never very great. It was more political than fiscal. Although some agencies complained that this theory left them open to damage claims, that was not the thrust of the issue. As in Lingle, the claims presented simply asked for invalidation, not compensation. Having legislation struck down can prove embarrassing, but most politicians are used to that, and besides, it allowed them a free pass to tell constituents that they tried, but those darned courts wouldn’t let them do the people’s will. It hasn’t even been a significant source of “liability,” let alone a “huge” one.
The most important thing about Lingle for the government was that – having taken the issue into the spotlight of a Supreme Court hearing – the government didn’t lose. As little exposure as the theory had received in other parts of the country before now, a Chevron win would have encouraged more such litigation elsewhere. But that’s a negative win, not a positive gain.
The opinion is actually most interesting in its implications for substantive due process litigation in the future. Lingle did two things. On the one hand, it disentangled takings and due process law and said that the principles of the latter do not form the basis for liability in the former. On the other hand, it left arbitrary, capricious government action, including action that fails to substantially advance legitimate state interests, subject to judicial review under a substantive due process challenge. The implications of that will have to await further judicial development, but one issue that is highlighted by the opinion and another that lurks just beneath the surface bear discussion.
First is the importance of the seven-year-old decision in Eastern Enterprises v. Apfel, 524 U.S. 498 (1998). Eastern had a decision (because five Justices agreed on the result) but no holding (because five Justices did not agree on the basis for that result). Eastern was a 4-1-4 decision. Justice O’Connor wrote for a four Justice plurality that retroactive legislation imposing huge financial liability on a former mining company for the health needs of former miners and families with whom the company had no relationship was an unconstitutional taking. Four dissenters concluded it was not a taking and didn’t violate the due process clause either. Justice Kennedy filed a concurring opinion agreeing with Justice O’Connor that the statute was unconstitutional. However, he reached his conclusion based on substantive due process, not takings, analysis.
I suspect Justice O’Connor was conscious of that decision when she said in Lingle that the new decision “does not require us to disturb any of our prior holdings.” If there had been a “holding” in Eastern, she might have had to alter that statement. In case she had forgotten, Justice Kennedy filed a short concurring opinion in Lingle for the sole purpose of noting that arbitrary and irrational regulations might violate the due process guarantee – citing his opinion in Eastern as his authority.
The importance of Eastern is that five Justices believed in the due process mode of analysis, and five Justices believed that the statute was unconstitutional. The only problem was that they were not the same five Justices. Will they realign in the future? And how will replacement Justices (if any) fit in?
The second issue is the standard of review of governmental action under the due process clause. If the standard is an “anything goes,” or an affirmance if any rationale can be conjured by a court after the fact to support the regulation, then the government will benefit from a laissez-faire type of review.
At its most extreme, the Third Circuit Court of Appeals has recently adopted a “shocks the conscience” test to determine whether regulations violate due process. (United Artists v. Township of Warrington, 316 F.3d 400 [3d Cir. 2003].) That test, of course, was drawn from exceptional police cases involving involuntary stomach pumping (Rochin v. California, 342 U.S. 165 ) and high-speed chases through residential neighborhoods (County of Sacramento v. Lewis, 523 U.S. 833 ).
But is that what will, or should, happen in land regulation cases? Given that the land use process typically involves lengthy studies and multiple public hearings and decisions, a more apt model would examine the actual decision made and judge it against the Constitution on a less “shocking” level. Some federal circuits seem inclined in that direction. (See, e.g., Simi Inv. Co. v. Harris County, 236 F.3d 240 [5th Cir. 2000] [“blatant governmental interference with property rights”]; Burrell v. City of Kankakee, 815 F.2d 1127 [7th Cir. 1987] [“arbitrary and irrational conduct”].)
The Ninth Circuit, where as the home of Lingle the new decision will have the greatest impact, hasn’t had any substantive due process cases in nearly a decade. In Armendariz v. Penman, 75 F.3d 1311 (9th Cir. 1996), that court held in an en banc decision that property owners could not bring substantive due process cases, but would have to consolidate their claims under the takings clause. Now that Lingle has opted for due process as the remedy for this kind of regulatory action, Armendariz can no longer control. What the Ninth Circuit will decide after its long absence remains to be seen. Before Armendariz, the Ninth Circuit’s land use cases had opted for the “arbitrary and capricious” model, based on the regulators’ actions. (E.g., Herrington v. County of Sonoma, 834 F.2d 1488 [9th Cir. 1987]; Del Monte Dunes at Monterey v. City of Monterey, 920 F.2d 1496 [9th Cir. 1990].)
This article was originally published in the June 17, 2005 issue of the Los Angeles Daily Journal.