The unanimous decision was a defeat for Chevron USA, which argued that Hawai'i'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 — from residential rent control to environmental regulations and even minimum-wage requirements — on grounds they were an unfair "taking" of profits.

Hawai'i, which has 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 profits because it failed to "substantially advance" the state's goal of lowering retail gasoline prices. The Fifth 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 effectively stripped Chevron's property of much of its economic use.

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

Those states are: California, Colorado, Connecticut, Delaware, Illinois, Iowa, Kentucky, Maine, Maryland, Minnesota, Mississippi, Missouri, Montana, New York, Oklahoma, Oregon, Utah, Vermont, and Washington.

The case was one of three this term seeking to delineate the rights of property owners. The other two, which have not yet been decided, examine whether local governments may seize people's homes and businesses for private economic development; and whether property owners can bring their takings claims to federal court after losing in state court.

Today's case is Lingle v. Chevron USA, 04-163.