Does the Supreme Court’s “raisin” case foreshadow the Koontz decision?

June 11, 2013 | By BRIAN HODGES

With so many high profile opinions forthcoming from the U.S. Supreme Court this month, it would be understandable if yesterday’s takings decision in Horne v. Department of Agriculture slipped by unnoticed.  It shouldn’t.  As Professor Ilya Somin notes on the Volokh Conspiracy, the decision in Horne may be “modest,” but it is “potentially significant” for property rights. What’s more, the decision “is the Obama administration’s third unanimous Supreme Court defeat in a property rights case in less than fifteen months, following on the heels of Sackett v. EPA and Arkansas Game & Fish Commission v. United States.”

The dispute in Horne arose from some questionable New Deal-era regulations designed to prop up the price of crops by preventing farmers from bringing their entire harvest to market. The Hornes, California raisin farmers, balked at Department of Agriculture demands that they forfeit up to 47% of their raisins without compensation. The Department was not pleased and ordered the Hornes to pay hundreds of thousands of dollars in fines and reimburse the government for the value of the raisins.

The Hornes appealed the order to a federal district court in California, arguing that order to pay for their own raisins in addition to fines violated the Takings Clause. That is where the case got interesting. You see, the Tucker Act generally requires that property owners file takings claims against the federal government in a specialized court, the Court of Federal Claims. The Horne decision, however, recognizes an exception to that rule. The Court concluded that it “would make little sense” to require a property owner to raise a takings challenge in a different court than the one in which he is required to file an appeal from an adverse agency decision. The potential breadth of the decision—whether it is limited to farmers challenging the New Deal-era regulations or all administrative appeals—will be tested in future litigation.

A couple of points struck me as particularly interesting while waiting for a decision in PLF’s takings case, Koontz v. St. John’s River Water Management District.  First, the Court rejected the argument that the Horne’s takings claim was premature because no property—either raisins or money—had actually changed hands. The Court reasoned that the Department’s order demanding a set amount of money was sufficiently concrete to establish the injury to the Hornes’ property interests. Thus, it was unnecessary for the Hornes to go through the formality of writing the government a check only to sue for its return.

As you may recall, a few Justices wrestled with a similar argument in Koontz. St. John’s River Water Management District denied Mr. Koontz’s permit applications because he had objected to the unconstitutional demand that he finance improvements to district-owned property miles away from his property. The government argued that it did not actually take Koontz’s property because the permit denial left him with his property intact (i.e., unusable and without any land use permits) and no money had changed hands. That argument seemed to catch traction with a few of the Justices. Others, however, seemed to find the requirement to formally transfer property meaningless where the District’s demand that Mr. Koontz fund improvements to public lands in exchange for a permit approval was perfectly clear. Will the reasoning in Horne tip the scales in favor of Mr. Koontz?

Another aspect of Horne that stood out was how comfortable the Court was with the suggestion that a demand for money—just like a demand for property—can violate the Takings Clause. That proposition is a major point of contention in Koontz. The District and its amici (state and federal governments) strenuously argued for the Court to adopt the dissent from a plurality decision, Eastern Enterprises v. Apfel, in which four Justices opined that a demand for money should never be subject to the protections of the Takings Clause except in very rare circumstances. The Court did not appear receptive to that argument at the Koontz oral argument. And it appears that, after Horne, that argument may be D.O.A. because the Court cited Eastern Enterprises as authority for the opposite conclusion:  that a government demand for money may indeed be compensable under the Takings Clause.

One final aspect of the decision worth noting was that the Court had no problem characterizing the Hornes’ takings claim as alleging a violation of the doctrine of unconstitutional conditions—the type of takings claim at issue in Koontz:

When the agency brought its enforcement action against petitioners, however, it did not seek to recover reserve-tonnage raisins from the 2002–2003 and 2003–2004 crop years. Rather, it sought monetary penalties and reimbursement. Petitioners could not argue in the face of such agency action that the Secretary was attempting to take raisins that had already been harvested and sold. Instead, petitioners argued that they could not be compelled to pay fines for refusing to accede to an unconstitutional taking.

While the decision in Horne does not resolve any of the questions in Koontz, it does shed some light on how the Court may be thinking about the issues. We will not know for sure until the Court delivers its opinion in the next couple of weeks.