Supreme Court hears argument in raisin takings case

April 23, 2015 | By CHRIS KIESER

The Supreme Court yesterday heard oral argument in the “raisin takings case,” Horne v. United States Department of Agriculture. As we have previously explained, the Department of Agriculture brought an enforcement action against California raisin farmers Marvin and Laura Horne when they refused to transfer a significant portion of their raisins to the Raisin Administrative Committee, a branch of the Department. Under a depression-era law, raisin farmers must turn over a certain percentage of their crop, a raisin “reserve requirement,” to the Committee every year, in order to sell the remainder of their crop on the open market. For the relevant years in question, 2002 and 2003, the Hornes had to surrender 30% and 47% of their crop, respectively. When the Hornes refused to give up their raisins, the Department sought to collect nearly $700,000 in fines and penalties. The Hornes argued that the Department violated their Fifth Amendment rights by taking their raisins without paying them just compensation.

During the argument, the Court seemed skeptical of the government’s position. The Department’s counsel did not defend the Ninth Circuit’s conclusion that the Constitution does not protect personal property (like raisins) to the same extent as real property. Instead, he argued that because the reserve requirement benefits raisin producers by driving up the price of raisins, and because it is an integral part of a comprehensive regulatory scheme, it cannot be a taking. The Department also argued that the reserve requirement was a reasonable condition on the Hornes’ placement of raisins into the market.

Many of the justices pushed back on the Department’s arguments. Chief Justice John Roberts and Justice Antonin Scalia were both skeptical that the government could require raisin farmers to turn over some of their raisins in return for entrance into the market. In response to the Department’s lawyer saying that the Hornes could have avoided the regulations by not selling raisins, the Chief Justice remarked “[t]hat’s a pretty audacious statement. If you don’t like your regulations, do something else.” To prove the point, Justice Samuel Alito asked whether the government could require car manufacturers to hand over one out of every five cars they made to the government as a condition of selling cars on the open market. Justice Anthony Kennedy, often the deciding vote in close cases, also seemed sympathetic to the Hornes’ position. He pointed out that the government commits a physical taking when it takes valuable objects and holds them indefinitely.

The fact that the Court focused on whether or not the raisin reserve was a physical taking is a good sign for the Hornes. Several Supreme Court cases establish that when the government physically occupies private property, it commits a taking, even if the occupation is very slight. Several justices, particularly Justice Scalia, focused primarily on the fact that the Raisin Administrative Committee takes actual possession and legal title to the raisins. Much of the argument dealt with whether the government could have accomplished the same objective by restricting the Hornes’ use of their raisins (for example, by saying they could only sell a certain amount of their crop) rather than taking possession of them. So long as the justices are focused on the fact that the Department actually takes the Hornes’ raisins, the farmers should prevail.

PLF’s amicus brief to the Court agreed that the reserve requirement is a physical taking of raisins. It specifically addressed the Ninth Circuit’s erroneous conclusion that the requirement is a reasonable condition on the decision to sell raisins. To reach that outcome, the lower court misapplied and misinterpreted the Supreme Court’s exactions cases, including PLF’s cases Nollan v. California Coastal Commission and Koontz v. St. Johns River Water Management District. Those cases, along with Dolan v. City of Tigard, say that governments cannot condition land-use permits on a property owner’s agreement to give up valuable property rights unless the condition is related, in both nature and extent, to impacts of the property owner’s proposed use of property on public resources. The Ninth Circuit not only incorrectly failed to apply the physical takings standard, but also transformed the robust exactions cases into a near rubber stamp on government action. Fortunately, since the justices did not ask any questions about the exactions cases, it does not appear that the Supreme Court will fall into the same trap.

This case could have important implications beyond raisin farmers. As Justice Alito suggested, if the Ninth Circuit’s decision stands, there would be little to prevent the government from “say[ing] to a manufacturer of cellphones, you can sell cellphones; however, every fifth one you have to give to us.”

The Supreme Court’s decision is expected by late June. PLF’s preview of the oral argument was published on Tuesday in the San Francisco Daily Journal.