The U.S. Supreme Court has accepted cert in a takings case going back to Great Depression-era legislation in Horne v. Department of Agriculture.
In 1937, Congress enacted the Agricultural Marketing Agreement Act of 1937 (AMAA) to stabilize prices in an effort to insulate farmers from competitive market forces that it believed caused “unreasonable fluctuations in supplies and prices.” Under that act, and the secretary of agriculture’s California Raisin Marketing Order, raisin handlers (those who process or are engaged in the handling of covered commodities) are frequently required to turn over what can be a significant portion of their crop to the federal government.
Every year, the Raisin Administrative Committee (RAC) makes recommendations concerning reserve pools of raisins that are not to be sold on the open market. Under this scheme, a portion of each producer’s crop, called reserve-tonnage, is given to the government for the reserve pools; the producer is free to sell the remainder of his or her crop. The RAC may sell the reserve-tonnage to foreign markets or donate it to secondary, noncompetitive domestic markets such as school lunch programs. The proceeds from the reserve pool sales are used to defray the RAC’s administrative costs and, if there are remaining funds, the producers receive a pro-rata share of the balance. For many years, there have not been remaining funds to distribute to farmers.
The Hornes, as producers of raisins, objected to this scheme, which they viewed as antiquated. They devised a plan to bring their raisins to market without going through a traditional handler, purchasing equipment and creating a cooperative to process the raisins. They declined to set aside reserve-tonnage raisins. The U.S. Department of Agriculture (USDA) and the Administrator of the Agriculture Marketing Service, and later the administrative law judge, all concluded that the Hornes were handlers of raisins, subject to the marketing order, and in violation of it, assessing total penalties of over $650,000. The Hornes filed suit, seeking judicial review of a final agency decision. They raised a takings defense to the penalties, arguing that they were forced to turn over personal property to the government without payment of just compensation. The U.S. District Court granted summary judgment in favor of the government.
On appeal, the Ninth Circuit concluded that under the AMAA, the Hornes could not raise their takings claim as an affirmative defense to the enforcement action. Rather, the Court held, they had to separately proceed through the Tucker Act and with the Court of Federal Claims. In 2013, the U.S. Supreme Court granted review, holding that because the USDA and the District Court concluded that the Hornes were “handlers,” the Hornes could raise a “takings-based defense” in the context of an enforcement proceeding initiated by the USDA. The Supreme Court reversed and remanded the case back to the Ninth Circuit.
On remand, the Ninth Circuit ruled that the Hornes failed to establish a takings defense to the imposition of the penalty. The Court, applying Koontz v. St. Johns River Water Management District 133 S.Ct. 2586 (2013), and the ruling in that case that an exaction must pass the nexus and rough proportionality tests of Nollan v. California Coastal Commission, 438 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994), held that the Hornes faced a choice: “relinquish the raisins to the RAC or face the imposition of a penalty.” The Court then turned to the question of whether the imposition of the penalty for failure to comply with the reserve requirement constituted a taking and concluded that there was no categorical taking under Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982) because there was no permanent physical invasion of real property and that there was no categorical taking under Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992) because the regulation did not deprive the owners of all economically beneficial use of their property. Citing Lucas, the Ninth Circuit stated that the takings clause affords more protection to real than to personal property and declined to extend Loretto to controversies governing personal property.
The Ninth Circuit then analyzed the matter under Nollan and Dolan because, according to the court, the reserve requirement was akin to a use restriction applying to the Hornes because they chose to place their raisins into the stream of commerce. The court found that the reserve program furthered the end advanced and that the implementation of the regulation was tailored to the interest that the government seeks to protect, namely maintaining orderly marketing conditions for agricultural commodities.
On January 16, 2015, the U.S. Supreme Court granted the Hornes’ petition for writ of certiorari in Horne v. Department of Agriculture, 750 F.3d 1128 (9th Cir. 2014). The anticipated issues are (1) whether the government’s “categorical duty” under the Fifth Amendment to pay just compensation when it “physically takes possession of an interest in property” applies to personal property; (2) whether the government may avoid the duty to pay just compensation for a physical taking of property by reserving to the property owner a contingent interest in a portion of the value of the property; and (3) whether a governmental mandate to relinquish specific, identifiable property as a “condition” on permission to engage in commerce effects a per se taking. This is truly a case to decide whether the government can have its take and eat it too.
