Real Estate and Land Use

The California Raisins Strike Back

Author: Michael Berger

Horne v. Department of Agriculture, No. 14-275 (U.S. June 22, 2015)

Why It Matters: In a pro-property rights opinion, the U.S. Supreme Court applies Fifth Amendment “takings” analysis to a federal program that confiscated a farmer’s raisin crop and orders payment of just compensation for the taking of private property. This decision is the sixth U.S. Supreme Court decision since 2012 that has ruled in favor of private property rights.

For the second time in recent memory, the U.S. Supreme Court delved into a remnant of New Deal legislation designed to prop up agricultural prices—specifically, raisins. The particular statute involved here authorized the Secretary of Agriculture to issue orders to maintain stability in various markets. Here, the order established the Raisin Administrative Committee (RAC), which was authorized to order raisin growers to set aside a percentage of their crop. The raisins were segregated after production and delivered to or held for the federal government. The Government was free to do as it wished with the raisins and put them to a variety of uses: school lunch programs, overseas sales, sales into noncompetitive markets or almost anything else. If the raisins were sold, and if there was anything left after paying the expenses of administering the program, the remainder was split among the raisin growers.

The set-aside percentage varied from year to year. In the 2002-2003 growing year, a Fresno area farmer named Marvin Horne and his wife rebelled. The RAC ordered growers to set aside 47% of their crops. The following year, the RAC demanded 30%. The Hornes refused. The Government then did what governments do: it fined the Hornes. First it fined them $483,843.53—the value of the raisins they refused to turn over—and then it fined them another $202,600 as a penalty. And then the Government took the position that the Hornes could not defend against the penalties as unconstitutional exactions without first paying the penalties as their ticket into the courthouse.

That set the stage for the Hornes’ first trip to the Supreme Court. The Ninth Circuit initially agreed with the Government but, on rehearing, decided that the case was not ripe and ought to be tried in the Court of Federal Claims. The Supreme Court wasted no time concluding that the case was ripe and sent it back to the Ninth Circuit (notwithstanding Justice Ginsburg’s prescient comment at oral argument that they already knew what the Ninth Circuit would do with the case on the merits because it had initially decided the case on the merits).

As everyone suspected, the Ninth Circuit again ruled in favor of the Government. First, it made the startling holding that the Fifth Amendment’s guarantee against uncompensated takings of property applied only to real property, not personal property (an argument that the Government had not made, did not defend and affirmatively disavowed in the Supreme Court). (See Nixon v. U.S., 978 F.2d 1269 [D.C. Cir. 1992] [Presidential papers belong to the President, not the country, and cannot be confiscated without violating the Fifth Amendment].) Second, purporting to apply the unconstitutional conditions doctrine as explained in Nollan v. California Coastal Commn., 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994), the court held that fining the Hornes more than $700,000 was appropriately “proportional” to what they had done.

Certiorari was again granted. The Government’s primary argument was that the Hornes brought any trouble they were experiencing on themselves by choosing to transform their grapes into raisins and sell them. The Government urged that it was proper to place a tariff on the Hornes’ “election” to enter the stream of commerce. The Supreme Court would have none of it. You had a feeling during oral argument that things were not going the Government’s way when Justice Alito asked why raisins should be treated differently than other items entered into the stream of commerce. Why, he asked, couldn’t the same logic result in having cell phone manufacturers donate every third phone to the Government, or car manufacturers donate every fifth car?

In a very workmanlike opinion by the Chief Justice, this New Deal relic was dismantled.

The first question was whether the Fifth Amendment applies only to real, and not personal, property. “The answer is no.” The Court traces the protection of private property back 800 years to Magna Carta and moves forward from there, showing that the early state laws were equally concerned with protecting personal property and that the history since then had not varied. Here, the issue dealt with a real, concrete problem: actual title and possession of private property was transferred involuntarily to the Government. A civics lesson seemed in order: “The Constitution . . . is concerned with means as well as ends.”

The second question was whether the Government could avoid its “categorical duty to pay just compensation for a physical taking of property” by creating a system in which an ephemeral, contingent interest remained in the property owners because maybe, someday, they might get some return. “The answer is no.” Physical appropriation requires compensation. Period.

On the first two questions, the vote was 8-1. Only Justice Sotomayor disagreed with the entire majority opinion.

The third question was the only controversial one. It asked whether a mandate to relinquish specific property as a condition to engage in commerce effects a per se taking. “The answer, at least in this case, is yes.” Five Justices were wholly unimpressed with the Government’s argument that the Hornes could have done something else with either their farmland or their grapes. “ ‘Let them sell wine’ is probably not much more comforting to the raisin growers than similar retorts have been to others throughout history.” The majority hewed to its conclusion that a physical taking is a per se taking, regardless of what kind of property is involved.

Justices Breyer, Ginsburg and Kagan would have remanded to the lower courts to determine how much the commandeered grapes were worth. That was their only disagreement. No need, said the other five. The Government has already conceded the value of the raisins. Remember? It fined the Hornes $483,843.53 as the market value of the grapes that they refused to surrender. “The Government cannot now disavow that valuation.” Besides, said the Court, “this case, in litigation for more than a decade, has gone on long enough.”

This is the sixth time since late 2012 that the Supreme Court has decided a takings case, and the sixth time it has ruled in favor of the property owners. Its message of constitutional protection should be getting clear.

Manatt, Phelps & Phillips filed an amicus curiae brief in this case on behalf of the Institute for Justice in support of the raisin growers.



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