The Takings Clause of the Fifth Amendment provides, “nor shall private property be taken for public use, without just compensation.”

The decision of the U.S. Supreme Court in Lingle v. Chevron USA Inc., 544 U.S. 528 (2005), reversed a series of Ninth Circuit cases defining the standard for facial review of legislation under the Takings Clause.

Lingle involved a challenge to a Hawaii statute limiting the rents that oil companies may charge for company-owned service stations.  Chevron USA argued that because of the realities of the Hawaiian gasoline market, the law achieves no beneficial practical result.

Chevron USA was successful in the District Court and two appeals to the Ninth Circuit, Chevron USA, Inc. v. Cayetano, 224 F.3d 1030 (9th Cir. 2000), and Chevron USA, Inc. v. Bronster, 363 F.3d 846 (9th Cir. 2004).  In both decisions, the Ninth Circuit applied the principle that “land use regulation can effect a taking if it does not substantially advance legitimate state interests.”

The Ninth Circuit has long interpreted the “substantially advance” standard as an objective test that examines whether the regulation really does further its intended goal.  This was a profoundly different inquiry from the subjective “rational basis” test applicable under the Due Process Clause and numerous other constitutional provisions, which examines only whether the legislature could have reasonably believed there was a connection between the regulation and some legitimate governmental purpose.

For example, the Ninth Circuit explained the distinction in Levald, Inc. v. City of Palm Desert, 998 F.2d 680 (9th Cir. 1993):
In reviewing economic legislation on substantive due process grounds, we give great deference to the judgment of the legislature.  Ordinances survive a substantive due process challenge if they were designed to accomplish an objective within the government’s police power, and if a rational relationship existed between the provisions and purpose of the ordinances.  Unlike in the takings context, there is no requirement that the statute actually advance its stated purpose; rather, the inquiry focuses on whether the governmental body could have had no legitimate reason for its decision.

(Emphases in original.)

The issue addressed by the parties in Lingle (a review of the decision in Chevron USA v. Bronster) was whether the Ninth Circuit was correct in its interpretation of the “substantially advance” standard for facial challenges to legislation under the Takings Clause, or whether the “substantially advance” test was the functional equivalent of the deferential “rational basis” test.

The Supreme Court had identified the “substantially advance” test as the appropriate standard for facial challenges under the Takings Clause in a long string of cases, beginning with Agins v. Tiburon, 447 U.S. 255 (1980), and including United States v. Riverside Bayview Homes, Inc., 474 U.S. 121 (1985), Nollan v. California Coastal Commission, 483 U.S. 825 (1987), and City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687 (1999).

In Nollan, the Court was emphatic about the distinction between the “substantially advance” test and the “rational basis” test, holding that the former is objective and strict while the latter is subjective and deferential:
Our opinions do not establish that [standards for taking cases] are the same as those applied to due process or equal protection claims.  To the contrary, our verbal formulations in the takings field have generally been quite different.  We have required that the regulation substantially advance the legitimate state interest sought to be achieved, not that the State could rationally have decided that the measure adopted might achieve the State’s objective.

It would therefore seem that the Ninth Circuit’s rulings in the Chevron cases were fully in accord with the Supreme Court’s decisions, but the Justices unanimously ruled otherwise.

The Court acknowledged that its repeated articulations of the “substantially advance” standard had been “regrettably imprecise.”  It recognized that “a means-end test . . . has some logic in the context of a due process challenge, for a regulation that fails to serve any legitimate governmental objective may be so arbitrary or irrational that it runs afoul of the Due Process Clause.”  However, “such a test is not a valid method of discerning whether private property has been ‘taken’ for purposes of the Fifth Amendment.”

In other words, the “rational basis” test is the one and only test for challenges to land-use regulation based on the relationship between the means the legislature has adopted and the end it seeks to achieve.  A total lack of regulatory effectiveness could be an important factor in assessing the overall rationality of land-use legislation under the Due Process Clause, but it does not in itself necessarily invalidate the legislation.

Indeed, there now appears to be no such thing as a facial challenge to legislation under the Takings Clause based upon a means-end analysis under any standard.  The Court reasoned that all compensable takings result from the effect of governmental action on private property.  Therefore, unless the government action is not for a “public use” at all, a taking cannot occur by the mere enactment of legislation in the absence of a concrete factual context.

The main idea underlying the Court’s decision appears to be that a violation of the Takings Clause can only occur if property is “taken,” either literally or, if the restriction is sufficiently extreme, by analogy.  Thus, a claim based on the argument that the regulatory means do not further the end does not entail the notion of a “taking” of property, and therefore is more appropriately raised under the Due Process Clause than under the Takings Clause.

The Court insisted (perhaps, in Queen Gertrude’s words, too much) that its decision in Lingle “does not require us to disturb any of our prior holdings.”  Rather, it characterized its articulations of the “substantially advance” standard in prior decisions either as “dicta,” or as “deriv[ations] from due process, not takings, precedents.”

Lingle does not affect the principle that a property restriction that is not for a “public use” is void.  The Court also acknowledged the continuing validity of taking claims arising in the following situations:

First, compensation is required when the government physically appropriates private property.

Second, under Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982), a compensable taking occurs if the government has effected “a permanent physical invasion” of private property, regardless of how trivial the invasion may be.

Third, under Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), compensation is required if a restriction deprives the owner of “all economically beneficial use” of the property, unless the proposed use would be a public nuisance or contrary to some other common-law doctrine.

Finally, a compensable taking may occur under principles established in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), and subsequent cases if, considering all factors, the restriction “goes too far” in imposing an unreasonable burden on a particular property owner.

Under both the public nuisance exception to the Lucas doctrine and the multifactor balancing analysis of Penn Central, the practical result achieved by the restriction remains relevant in a takings analysis.  However, direct challenges to land-use legislation based upon the effectiveness of the regulation are now limited to the deferential “rational basis” standard of the Due Process Clause.