U.S. Supreme Court grants cert in Horne v. U.S.D.A. aka The Raisin Takings Case

Good news. The Supreme Court announced today it will hear Horne v. U.S.D.A., a case challenging the Department of Agriculture’s arcane requirement that California raisin farmers turn over a portion of their crop to the government, every year, as a prerequisite to selling the rest of their crop. The Ninth Circuit held there was nothing wrong with this scheme—which one year required farmers to give up 48% of their crop—because it was a mere “use restriction” on the sale of raisins, and therefore, not an unconstitutional taking of private property.

This case raises a number of serious questions about the extent to which the Fifth Amendment protects entrepreneurs against the government seizure of private property under the guise of economic regulation. It also has the potential to draw new and important lines in takings jurisprudence. For those reasons, and because PLF urged the Court to accept the case by filing an amicus brief in support of the cert petition, we are very gratified by today’s news. Here is some more background on the case and these important legal issues:

Under the Agricultural Marketing Agreement Act of 1937, the USDA has authority to regulate the sale of certain agricultural products, including through the use of “marketing orders.” The marketing order specific to California-grown raisins directs the Raisin Administrative Committee, a branch of the USDA, to establish a yearly raisin tonnage reserve requirement. Every year in February, raisin farmers are told what percentage of their crop is the “reserve requirement” they must turn over to the Committee. Failure to comply results in fines and penalties.

The Committee then takes those “reserve” raisins and may give them to anyone it chooses, or may sell them overseas, to federal agencies, or to charities. It may also sell them back to the farmers for sale to export markets. In 2002, the Committee set the reserve tonnage rate at 47%, bringing in 22.1 million pounds of raisins. In 2003, it set the rate at 30%, and brought in 38.5 million pounds of raisins.

Marvin and Laura Horne, Fresno-area farmers whose family has been growing raisins for half a century, decided they’d had enough. After refusing to turn over their reserve requirement, the USDA fined them nearly $700,000. They appealed that decision through the agency’s administrative process and then in federal district court, arguing that the requirement to turn over their raisins was an unconstitutional taking of their private property.

After losing in the district court, they appealed to the Ninth Circuit, which held that the marketing order was not a taking of private property because it applied to the Hornes “only insofar as they voluntarily choose to send their raisins into the stream of interstate commerce.” When the Horne’s filed a petition for rehearing, the Ninth Circuit held, for the first time, that the court lacked jurisdiction to hear the takings claim, at all. It said the Hornes needed to pay the fee for failing to hand over their crop, and then sue in a separate court, the Court of Federal Claims, to try and get the money back on Fifth Amendment grounds.

The US Supreme Court granted cert on that decision and reversed. It held that the Hornes could raise their takings claim in the federal court and directed the lower courts to hear the claim on the merits. On remand, the federal district court held, once again, there was no taking. And the Ninth Circuit did the same.  So after having successfully litigated their claim all the way to the Supreme Court once, where their right to challenge the marketing order as a taking was vindicated, they are now back there again to litigate the merits of that claim.

While one might think that the Fifth Amendment’s proclamation—“nor shall private property be taken for public use without just compensation”—would obviously prevent the government from seizing your crop (or any other goods you might wish to sell on the open market), the Ninth Circuit disagreed. It echoed its prior ruling and stated that the reserve requirement was merely a “use restriction” on the Hornes’ choice to “voluntarily . . . send their raisins into the stream of commerce.” And that the reserve requirement was not a “forced seizure of the Hornes’ crops, but rather . . . a condition on the Hornes’ use of their crops.” As we pointed out in our amicus brief, under that line of reasoning, government could recast pretty much any seizure of private property as a mere “use restriction,” thereby swallowing the takings clause in its entirety.

The Ninth Circuit’s decision also made a bizarre distinction between real and personal property. It said that because raisins are personal property, as opposed to real property, and because the Hornes do not lose all economically valuable use of the raisins (because under the scheme they retain a minor, residual interest in the profits of the raisins the Committee sells) there is no categorical, or per se taking of their property. And therefore, the scheme should be analyzed under the Nollan and Dolan test that normally applies to unconstitutional permit conditions.

The court then went on to describe those cases as only requiring the government show that the means of a government program further the government’s own end. It said “there is a sufficient nexus [under Nollan and Dolan] between the means and ends of the Marketing Order” because “[t]he structure of the reserve requirement is at least roughly proportional to Congress’ stated goal of ensuring an orderly domestic raisin market.”

As readers of this blog will recognize, that is not what Nollan and Dolan require. If it did, every government scheme could be said to satisfy such a spineless standard. PLF’s brief urged the court to review this case in part to correct that misstatement of the law, and to vindicate the long-standing legal principle that physical appropriations of property are subject to a categorical takings test. And under that test, the Marketing Order fails constitutional muster.