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Chevron USA, Inc. v. Cayetano

ELR Citation: 31 ELR 20091
Nos. No. 99-15108, 224 F.3d 1030/(9th Cir., 09/13/2000)

The court vacates a district court decision granting summary judgment in favor of an oil company claiming that a Hawaii statute proscribing the maximum rent that oil companies can collect from dealers who lease company-owned service stations is an unconstitutional regulatory taking. The court first holds that in determining whether the rent control constituted a taking, the district court applied the correct test. The correct test as suggested by the U.S. Supreme Court and by circuit court precedent, is whether the legislation substantially advances a legitimate state interest. The court next holds that although the district court applied the correct test, it should not have granted summary judgment to the oil company because genuine issues of material fact exist as to whether the statute will benefit consumers. Both the state and the oil company proffered affidavits of experts attesting to the statute's effects on the gasoline market in Hawaii. The two affidavits conflict as to whether incumbent gasoline dealers will capture a premium based on the increased value of their leaseholds due to the imposition of a maximum permissible regulated rent, thereby depriving new dealers and consumers from reaping the benefits of the statute. Questions also remain as to whether oil companies will raise the wholesale price of gasoline and thereby unilaterally offset the benefits of the statute. Moreover, the factual issues that remain are material to the ultimate determination required in this action. Factual disputes are material only if their resolution would alter whether the statute substantially advances a legitimate state interest. A challenged regulatory action substantially advances its interest if it bears a reasonable relationship to that interest. Whether the statute's rent cap is reasonably related to its objective of lowering fuel prices certainly depends on whether it will in fact lead to lower fuel prices.

The full text of this decision is available from ELR (35 pp., ELR Order No. L-261).

Counsel for Plaintiff
Robert C. Phelps, Craig E. Stewart
Pillsbury, Madison & Sutro
50 Fremont St., San Francisco CA 94105
(415) 983-1000

Counsel for Defendants
Jack A. Rosenzweig, Ted G. Clause, Deputy Attorneys General
Attorney General's Office
425 Queen St., Honolulu HI 96813
(808) 586-1282