Chevron Loses Ruling on Rent Caps in Hawaii

The Supreme Court ruled Monday that Hawaii did not overstep its authority when, to keep gasoline prices in line, it imposed caps on the rent paid by dealer-run stations.

The unanimous decision was a defeat for San Ramon, Calif.-based Chevron Corp., which argued that Hawaii’s law was an unconstitutional “taking” of private property. It means that state legislatures preserve their authority to set local economic regulations without extensive second-guessing by federal courts.

Ruling otherwise would “require courts to scrutinize the efficacy of a vast array of state and federal regulations -- a task for which courts are not well suited,” Justice Sandra Day O’Connor wrote for the court.

“Moreover, it would empower -- and might often require -- courts to substitute their predictive judgments for those of elected legislatures and expert agencies,” she said.

The stakes were high, although the outcome was expected. A ruling for Chevron would have opened the door to lawsuits from businesses challenging numerous laws -- including residential rent control, environmental regulations and minimum-wage requirements -- on grounds they were an unfair “taking” of profits.

Hawaii, which had some of the nation’s highest gasoline prices, passed the law in 1997 to protect independent dealers and promote competition. It restricted lease prices that oil companies could charge their dealer-owned stations and barred the companies from taking over those stations.

Chevron then sued, arguing the law was an unconstitutional “taking” of the company’s profit because it failed to “substantially advance” the state’s goal of lowering retail gasoline prices. The 5th Amendment provides that private property should not be taken for public use without just compensation.

Two lower courts agreed, ruling the law was unconstitutional because it in effect stripped Chevron’s property of much of its economic use.

Hawaii was backed in its appeal by the Bush administration and 19 states, including California, which argued that judges should give deference to elected state and local governments to set economic policy.

The case was one of three this term seeking to delineate the rights of property owners.

Shares of Chevron rose 85 cents Monday to $52.57 on the New York Stock Exchange.