The Takings Clause of the Fifth Amendment, made applicable to the states through the Fourteenth Amendment, provides that private property shall not be taken for public use, without just compensation. As its text makes plain, the Takings Clause does not prohibit the taking of private property, but instead places a condition on the exercise of that power. In other words, it is designed not to limit the governmental interference with property rights per se, but rather to secure compensation in the event of otherwise proper interference amounting to a taking. The U.S. Supreme Court emphasizes the role of the Takings Clause in barring government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.
Respondent oil company sued petitioner state officials, alleging that the cap on rent the company could charge to dealers leasing company-owned service stations under Haw. Rev. Stat. § 486H-10.4 (1998 ***. Supp.) was an unconstitutional taking. The oil company contended that § 486H-10.4, which was intended to control retail gasoline prices, did not actually reduce lessee-dealers' costs or retail prices. Thus, the company argued, the regulatory statute did not substantially advance a legitimate state interest and was therefore an unconstitutional taking. Upon the grant of a writ of certiorari, the officials appealed the judgment of the United States Court of Appeals for the Ninth Circuit which held that a taking occurred. The judgment finding that the statute accomplished an unconstitutional taking was reversed, and the case was remanded for further proceedings.
Is the "substantially advances" formula is an appropriate test for determining whether a regulation effects a Fifth Amendment taking?
The U.S. Supreme Court unanimously held, however, that whether the statute substantially advanced a legitimate state interest was not a valid method of identifying regulatory takings for which just compensation was required. Such a test did not address the magnitude or character of the burden imposed upon the oil company, nor did it assist in identifying those regulations whose effects were functionally comparable to government appropriation or invasion of private property. The effectiveness or ineffectiveness of the statute in furthering the state's goals had no bearing on the significance of the burden to the oil company. Further, a taking presupposes that the state acted in pursuit of a valid public purpose, and the underlying validity of the statute itself was a matter of due process rather than a measure of whether a taking occurred.