JURIST Guest Columnists Brian Hodges and Christopher Kieser discuss the recent ruling by the Supreme Court in Horne v. Department of Agriculture…
On June 22 2015, the Supreme Court of the United States ruled [PDF] in favor of Fresno-area raisin farmers Marvin and Laura Horne, concluding that a program requiring raisin growers to surrender up to half of their annual crop to the government violated the Takings Clause of the Fifth Amendment.
The dispute in Horne v. Department of Agriculture [PDF] arose from the government’s continued enforcement of a New Deal-era statute that had been designed to prop up the price of crops by preventing farmers from bringing their entire harvest to market—a law that Justice Elena Kagan labeled [PDF]“the world’s most outdated law” just two years ago on the case’s first trip to the court. Under the Agricultural Marketing Agreement Act of 1937 (AMAA), a government agency called the “Raisin Administrative Committee,” consisting of 46 raisin growers and packers and one “member of the public,” decides how many raisins should be kept off the market each year in order to keep the price of raisins artificially high. Raisin farmers like the Hornes are then ordered to surrender a portion of their annual crop to the committee as a condition of selling the remaining raisins on the free market.
The Hornes had been farming raisins in California’s Central Valley since 1969. They complied with the raisin committee’s demands for nearly thirty years, but they eventually grew disillusioned with a system they believed amounted to “involuntary servitude.” After having restructured their business in a way that they believed would excuse them from the committee’s demands, the Hornes balked at the government’s insistence that they forfeit up to 47% of their raisins without compensation. In response, the Department of Agriculture ordered the Hornes to pay $480,000 for the value of the withheld raisins and slapped them with a $200,000 penalty for failing to comply. After over a decade of litigation, including an initial trip to the Supreme Court in 2013 [PDF] to determine whether they even had a right to challenge the constitutionality of the government demands in a federal district court, the Hornes finally and fully prevailed with a near-unanimous decision from the Supreme Court. In the process, they struck several important blows for property rights and limited government.
Most significantly, the court’s two opinions in Horne provide more evidence that the Roberts Court is steadily marching toward simplicity and common sense in its analysis and resolution of property rights cases. In recent years, for example, the court has rejected rules that (1) hold that some temporary physical invasions (but not others) effect takings based solely on the means of appropriation (Arkansas Game & Fish Comm’n v. United States [PDF]) (2) hold that the transfer of property from the government is not subject to the same common law rules that apply to all other property sales (Marvin M. Brandt Revocable Trust v. United States[PDF]) and (3) hold that a permit condition demanding payment of money in lieu of a dedication is subject to the same rules as a property dedication (Koontz v. St. Johns River Water Mgmt. Dist.[PDF]).
Horne I – It Would Make Little Sense to Block a Takings Defense
It is a commonly-held belief that the only remedy for a taking by the federal government is for the owner to hand over his or her property, and then travel to Washington, D.C. to sue for just compensation in the Court of Federal Claims. Horne dispels that myth.
The Hornes appealed Agriculture’s order to pay penalties and fines to a California federal district court, arguing in part that the government’s demand for their raisins—or money in the form of penalties—violated the Takings Clause. The court ruled against them on the merits, and they took their appeal to the Ninth Circuit Court of Appeals. But the Ninth Circuit dismissed the Hornes’ constitutional claims for lack of jurisdiction—the court fell for the myth that the only remedy for a taking was to seek compensation (and the only court with jurisdiction to hear such compensation claims is the Federal Claims Court). Consequently, the court held that the Hornes would have to pay the penalties and fines before seeking reimbursement in the Claims Court. Until that time, their takings defense wouldn’t be ripe for review.
In a unanimous decision [PDF] written by Justice Clarence Thomas, the Supreme Court reversed. The court concluded that when a taking is raised as a defense to an administrative order, the court that has jurisdiction to hear the administrative appeal also has jurisdiction to consider the takings defense. In so ruling, the court recognized three common-sense principles that should aid property owners litigating takings claims. First, the issuance of an order imposing penalties constitutes a cognizable injury, even when the terms of the order have not yet been enforced. Second, the remedies available under the Takings Clause are not limited to just compensation—in some circumstances, an order invalidating a government action may be the appropriate remedy. And third, a property owner does not need to surrender his or her property as a prerequisite to seeking judicial review of an unconstitutional agency order. As the court recognized, “it would make little sense to require the party to pay the fine in one proceeding and then turn around and sue for recovery of that same money in another proceeding.”The Supreme Court remanded the case to the Ninth Circuit for a determination on the merits on whether the government’s demand that the Hornes fork over tons of raisins in order to sell their remaining crops on the open market violated the Takings Clause.
Horne II – Property Rights Cannot Be So Easily Manipulated
The remand proceeding went poorly for the Hornes. The Ninth Circuit concluded that the government’s raisin demand did not violate the Takings Clause because, in the court’s opinion, “the Takings Clause affords less protection to personal property than to real property.” Thus, according to the Ninth Circuit, the government would have to demand all of the Hornes’ raisins—not just almost half of them—before it would rise to the level of a compensable taking. Moreover, the Ninth Circuit noted that the Hornes could have mitigated the impact of the regulation. For example, the court suggested that they could have planted different crops to avoid the program altogether. Even if they continued to farm raisins, the court reasoned that they could reap indirect benefits from the seizure because the program’s aim was to inflate the price of raisins. And the government, after all, retained the discretion to pay the Hornes something (or not) depending on what it ultimately decided to do with the forfeited raisins. Because the Hornes retained some value in their harvests—no matter that it was significantly diminished—the court concluded that they could not advance a takings claim against the government. The Ninth Circuit, therefore, upheld the commission’s demands and all associated penalties and fines.
The Supreme Court systematically took apart the Ninth Circuit’s reasoning in an opinion [PDF] that will likely have far-reaching impacts on takings litigation for years to come. First, Chief Justice John Roberts, writing for an eight-justice majority, rejected the Ninth Circuit’s foundational premise that personal property is due lesser protection than real property. The Chief Justice wrote that the Takings Clause protects personal property, like raisins, to the same extent as real property—a point that the Court made explicit two years ago in Koontz.
The principle that “property” refers equally to real and personal property “goes back at least 800 years to Magna Carta, which specifically protected agricultural crops from uncompensated takings.” The government, therefore, “has a categorical duty to pay just compensation when it takes your car, just as when it takes your home.” Because the Hornes were required to hand over their raisins to the government, the court concluded that the government’s demand was as “clear [a] physical taking” as a government occupation of private land. Thus, the government’s demand for the Hornes’ raisins must be subject to the same analysis as a regulation requiring that an owner surrender land to the government—both acts will per se violate the Takings Clause under the 1982 case of Loretto v. Teleprompter Manhattan CATV Corp.
The court then rejected the government’s argument that it could avoid a taking by offering to pay the Hornes something in the future based on the government’s eventual use of the seized raisins. Loretto, the court pointed out, holds that the government is obligated to compensate an owner for a physical appropriation of property, “without regard to the claimed public benefit or economic impact to the owner.” Again, eight justices agreed that, because the raisin reserve requirement operated by physically taking the Hornes’ property in the first instance, the fact that the owners could later receive some benefit (or not) for the seized property was irrelevant to the question of whether a taking had occurred. In any case, the court noted that oftentimes raisin farmers, in fact, received nothing in return for “contributing” to the government’s raisin reserve. Thus, the court held that any residual value given to the Hornes could offset, at most, the amount of compensation due to the Hornes—but it could not change the fact that there was a taking.
The court next rejected the government’s argument that the raisin reserve requirement was a permissible condition on the right to sell raisins in the stream of commerce. In effect, the government had argued that the Hornes had voluntarily accepted that condition when they chose to enter a regulated field of commerce. The Chief Justice roundly criticized the government’s assertion that the Hornes could have avoided the taking by growing different crops or making wine. “‘Let them sell wine’ is probably not much more comforting to the raisin growers than similar retorts have been to others throughout history,” wrote the Chief Justice in reference to the famously tin-eared quip, “let them eat cake.” An owner’s ability to exercise his or her property rights “cannot be so easily manipulated.” And the right to sell a product on the open market is not a government benefit subject to unlimited government control—it is a constitutionally protected right. If it were otherwise, nothing would prevent a government agency from requiring a car manufacturer, for example, to give the government every fifth car that comes off its assembly line in exchange for the privilege of selling cars at all.
The justices divided 5-3-1 over the question of remedy. Five justices, led by the Chief Justice, concluded that the case could be finally decided on the record because the government had already determined the value of the raisins when it assessed penalties against the Hornes. There was therefore no need to send this decade-old case back for further litigation.
In a separate opinion written by Justice Stephen Breyer, three justices agreed with the majority’s takings analysis, but would have remanded this case to the lower courts for a calculation of compensation. In Justice Breyer’s view, the Hornes should have had to comply with the reserve requirement and then seek just compensation afterward. If it turned out that the reserve requirement was more beneficial to the Hornes than the value of the raisins they had to surrender, they may not be entitled to any compensation. But, as the majority wrote, there is no authority for the proposition that “general regulatory activity such as enforcement of quality standards can constitute just compensation for a specific physical taking.” Instead, just compensation, barring exceptional circumstances, is typically measured by a much simpler standard: “the market value of the property at the time of the taking.” The government had conceded that value when it ordered the Hornes to pay $480,000 for the raisins they refused to forfeit. Thus, the Hornes were entitled to an order invalidating the fines and penalties, effectively preventing the taking from occurring. They did not have to submit to Agriculture’s unconstitutional demand only to find out later if the regulatory program provided them with any benefits that could offset the government’s liability in a costly and time-consuming lawsuit.
The Horne II opinion strikes a chord for limited government in harmony with the Court’s recent property rights case law. Importantly, the Chief Justice noted that the Constitution is “concerned with means as well as ends. The government has broad powers, but the means it uses to achieve its ends must be consistent with the letter and spirit of the constitution.” The focus on means as well as ends marks a significant shift in regulatory takings jurisprudence, which had previously asked such questions as whether the greater power to deny a land use permit included the lesser power to impose near-ruinous restrictions, or whether the property was “fungible” (as if the ease of replacement mattered to the constitutional prohibition against uncompensated takings). Such considerations were aimed at excusing government appropriations based on a rationalized view of the ends, rather than looking at the process by which the government appropriated an interest in private property and the effect on the owner.
The Horne II decision ensures that governments must treat your personal property with the same respect as real property and soundly rejects the idea that selling crops on the open market is a privilege for which the government can force you to pay. Of particular importance to property owners, it shows that, at least in some circumstances, property owners may successfully prevent an unconstitutional taking altogether—bucking the outdated belief that compensation is the only remedy available when the government demands that someone hand over his or her private property.
Brian T. Hodges is a Principal Attorney at the Pacific Legal Foundation and the Managing Attorney of the Foundation’s Northwest Center. He concentrates his practice on representing property owners, with a focus on Takings and Due Process litigation. PLF filed an amicus brief in Horne v. Department of Agriculture. Hodges is the author of several articles concerning property rights. Christopher M. Kieser is a Fellow in the College of Public Interest Law at the Pacific Legal Foundation, focusing on property rights.
Suggested Citation:Brian T. Hodges and Christopher M. Kieser, Hornes v. Department of Agriculture: California Raisin Farmers Strike Blows for Property Rights and Limited Government, JURIST – Professional Commentary, July 11, 2015, http://jurist.org/professional/2015/Hodges-Kieser-Hornes-Agriculture.php.
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