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Lochner Lives

Los Angeles Daily Journal
Wednesday, September 8, 2004
Timothy J. Dowling


Accusations that courts are "Lochner-izing" are bandied about so casually these days that accusers risk sounding like the boy who cried wolf. But how else should one describe the recent ruling in Chevron USA Inc. v. Bronster, 363 F.3d 846 (9th Cir. 2004), in which the 9th U.S. Circuit Court of Appeals enforced its own judgment regarding a key economic policy issue, affording no deference to the state Legislature? Judicial second-guessing of elected officials about the wisdom of economic policy is the very essence of Lochner-era jurisprudence. The wolf clearly is in the flock.

The Chevron case, pending before the U.S. Supreme Court on a petition for certiorari, involves a challenge under the Just Compensation Clause to a Hawaii law designed to promote competition in the retail gasoline market. Because Hawaii is geographically small and isolated, its economy is subject to a high risk of oligopolistic concentration. To ensure continued price competition at the pump, Hawaii lawmakers passed Act 257, which prohibits oil companies from converting independent lessee gas stations into company-operated gas stations. The law also places a ceiling on rents charged by oil companies to prevent them from driving independent lessees out of business.

Chevron challenged Act 257 as an uncompensated taking of property because, in Chevron's view, the rent cap fails to advance a legitimate government purpose. Chevron presented testimony that the law could lead to higher gasoline prices, while the state of Hawaii called experts who testified that Act 257 is a reasonable way to avoid a price-gouging oligopoly in the retail market.

The trial court gave no deference to the state's legislative judgment and held that Act 257 works an unconstitutional taking of property because it does not substantially advance a legitimate public interest. It concluded that the law would not benefit Hawaii consumers because, in the court's view, the economic theories presented by Chevron were "more persuasive" than the state's position. The 9th Circuit affirmed, applying heightened scrutiny, rejecting the familiar rational-basis test typically applied under the Due Process Clause, and giving no deference to the views of the state Legislature regarding the wisdom of the law.

Plain and simple, the 9th Circuit and trial court invalidated Act 257 because they disagreed with the state's elected lawmakers that the measure would advance the interests of Hawaii consumers. The courts articulated a naked preference for Chevron's economic views and rejected the state's legislative judgment on the efficacy of Act 257, just as the Lochner court concluded that New York's worker protection laws were unnecessary and unwise. See Lochner v. New York, 198 U.S. 45 (1905).

And like Lochner, the 9th Circuit's ruling finds no plausible basis in the text, structure or original understanding of the Constitution. The U.S Supreme Court has recognized that the Just Compensation Clause originally was understood as applying only to physical appropriations of property. Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992). Although the court has extended the clause to regulation that constitutes the functional equivalent of an expropriation, its text - "nor shall private property be taken for public use, without just compensation" - cannot reasonably be read as authorizing invalidation of economic regulation based on a means-end inquiry into the law's efficacy.

In fact, the text and structure of the Just Compensation Clause cut directly against the rulings below. The clause requires that any taking be for a public use, a requirement that is satisfied if the Legislature "rationally could have believed that the [legislation] would promote its objective." Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984). And yet the 9th Circuit construes the clause as also requiring a second means-end inquiry under heightened scrutiny to determine whether a taking occurred. What possible justification could there be for reading the clause as requiring the same inquiry twice under two different standards?

The 9th Circuit's use of the Just Compensation Clause to invalidate legislation further highlights the ruling's inherent dissonance. The purpose of the clause is "to secure compensation in the event of otherwise proper interference" with property. First English Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 304 (1987). Of course, if a court were to award compensation on concluding that a law did not advance the public interest, the result would be even more bizarre. Any such law would be improper, because government officials are authorized to act only in the public interest. It makes no sense to say that an unauthorized law is cured by the payment of compensation to affected property owners or that the public should pay when laws provide no public benefit. This anomaly in remedies shows that the Due Process Clause, not the Just Compensation Clause, provides the appropriate framework for evaluating whether a law adequately advances a legitimate goal.

Under established precedent, a regulatory taking arises where government action denies economically viable use of land or compels a permanent physical occupation by a third party. In Agins v. City of Tiburon, 447 U.S. 255 (1980), the court stated that a taking also occurs where government action does not substantially advance a legitimate purpose, but this "substantially advance" test has been largely ignored by lower courts and widely criticized by scholars for improperly importing due-process analysis into takings jurisprudence. Fortunately, five members of the U.S. Supreme Court agree. In Eastern Enterprises v. Apfel, 524 U.S. 498 (1998), four dissenting justices stated flat-out that the Just Compensation Clause does not apply to challenges to the reasonableness or efficacy of legislation, and a fifth justice concurring in the judgment declared means-end inquiries to be in "uneasy tension" with a proper understanding of the clause. All five concluded instead that only the Due Process Clause governs judicial examination into the reasonableness and efficacy of the law at issue there.

Federal and state appellate courts are deeply split on whether to apply any means-end inquiry under the Just Compensation Clause and, if so, what level of scrutiny should apply. These divergent rulings and conflicting signals from the Supreme Court have prompted judges on both sides of the issue to call out for clarification by this court. In Santa Monica Beach Ltd. v. Superior Court, 19 Cal.4th 952 (1999), Justice Joyce Kennard wrote that "only the high court can resolve this question and, given the importance of this area of the law, I respectfully suggest that it do so when the opportunity next arises." In the same case, dissenting Justice Janice Rogers Brown insisted, that if a heightened means-end inquiry is inappropriate under the Just Compensation Clause, "the high court ought to tell us so, preferably sooner rather than later."

Hawaii is seeking review by the high court. The Chevron case pits libertarians who push for individual freedom uber alles against traditional legal conservatives who argue, in the words of Federalist 78, that judges should exercise "neither force nor will but merely judgment." To vindicate the rule of law and preserve the proper role of judges in our democracy, the U.S. Supreme Court should grant review, side with traditional conservatives, and uphold the judgment of Hawaii's elected representatives.

Timothy J. Dowling is chief counsel of Washington, D.C.-based Community Rights Counsel, which filed an amicus brief on behalf of a coalition of government officials in support of Hawaii's petition for certiorari in Chevron.

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