Supreme Court Will Take Up Hawaii Dispute Over Rent Control

Times Staff Writer

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.


Chevron USA went to court to challenge the law, arguing that the cap on rents had the effect of taking its property, in violation of the 5th Amendment, which says that “private property [shall not] be taken for public use, without just compensation.”

A federal judge ruled for Chevron, and the 9th Circuit upheld the decision on a 2-1 vote.

In dissent, Judge William A. Fletcher said the ruling, if upheld, would cast doubt “on virtually all rent-control laws” because they could be attacked as unfair to property owners.

A coalition of cities and states, including California, joined lawyers for Hawaii Gov. Linda Lingle in appealing the matter to the high court. The justices announced they would hear the case of Lingle vs. Chevron in February.

It is the second major property rights dispute now before the court. Last month, the justices said they would decide whether cities could seize private homes to make way for new business development. In that case, homeowners from New London, Conn., say the government does not have the authority to seize private property, even if it pays just compensation.

The Hawaii case does not involve the seizing of private property, but a ruling in favor of Chevron could crimp the power of the government to regulate businesses and developers.

Under a state-initiated law, Santa Monica’s rent controls began to be phased out in 1999, when landlords could begin raising the rent on units when they became vacant. But as of Dec. 31, 60% of the city’s rental units remained under long-term lease and those tenants continued to be protected against rate increases, according to a report by the Santa Monica Rent Control Board.

Meanwhile, the Supreme Court said it would hear another in a long series of water disputes from the West, this one a fight between federal water managers and Central California farmers.

With several fish species threatened with extinction, federal managers of the Central Valley project diverted water into the Sacramento River and other streams. The move left less water for irrigation, and some farmers sued over the loss. But the 9th Circuit ruled that the federal government has a “sovereign immunity” that shields it from such claims.

The Supreme Court voted to hear the farmers’ appeal in the case of Orff vs. United States to decide whether farmers can win damages for the loss of the promised water.