General Publications July 6, 2015

“Raisins Reveal High Court’s Pro-Property Rights Position,” Law360, July 6, 2015.

Extracted from Law360

Last month, the U.S. Supreme Court decided Horne v. U.S. Department of Agriculture, familiarly known as “raisin case.” The decision expands the Takings Clause’s strong protections afforded to owners. That clause, found in the Fifth Amendment, provides that “private property [shall not] be taken for public use, without just compensation.”

Background

Horne arises out of a Depression-era law, the Agricultural Marketing Agreement Act of 1937. The law authorizes the secretary of agriculture to promulgate “marketing orders” that purport to maintain stable markets for agricultural products. The marketing order for raisins established a raisin administrative committee that requires raisin growers to set aside and deliver to the federal government — free of charge — a certain percentage of their crop. The government generally sells the raisins in noncompetitive markets or donates them, with any net proceeds left over after deducting program expenses distributed back to the growers.

Marvin Horne and his family are raisin growers who refused to comply with the reserve requirement, on the ground that it constituted an unconstitutional taking of their private property for public use without just compensation. The government responded by fining the Horne family both the raisins’ fair market value and civil penalties for failure to obey. Federal litigation over the constitutionality of the reserve requirement under the Takings Clause ensued, with the case going to the Supreme Court twice — the first time on jurisdictional grounds and the second time on the merits of the taking claim.

The Ninth Circuit had ruled against the Hornes. First, the court held that the requirement was not a per se physical taking of private property, because: (a) “the Takings Clause affords less protection to personal than to real property” and (b) growers still retain an interest in the proceeds from any sale of reserve raisins by the federal government. Second, the court held that the reserve requirement needed to be analyzed as a “use restriction” (i.e., a condition the government lawfully could impose on growers like the Hornes in exchange for the “benefit” enjoyed by them of an orderly raisin market).

Holdings and Dissent

The Supreme Court issued a fractured decision. In an opinion authored by Chief Justice John Roberts, and joined by seven other justices, the high court agreed on three key points.

First, where government takes physical possession of private property, there is a per se taking. The history and text of the Takings Clause do not afford any less protection to personal property than it does to real property. The Supreme Court concluded that “[t]he reserve requirement ... is a clear physical taking” subject to a per se taking analysis, because the government takes full possession and control of the reserve raisins for its own use and disposition.

Second, eight justices agreed that the government cannot “avoid the categorical 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, set at the government’s discretion.” Thus, it didn’t matter that the government would distribute to growers whatever net proceeds might exist in any given year after deducting program costs.

Third, eight justices agreed that “at least in this case” that “a governmental mandate to relinquish specific, identifiable property as a ‘condition’ on permission to engage in commerce effects a per se taking.” The justices rejected the government’s contention that growers voluntarily choose to participate in the raisin market and that, if they want to avoid the reserve requirement, they can “plant different crops.” As the justices colorfully explained, “’Let them sell wine’ is probably not much more comforting to the raisin growers than similar retorts have been to others throughout history.”

Five justices — Chief Justice Roberts along with Justices Antonin Scalia, Clarence Thomas, Samuel Alito and Anthony Kennedy — held that no remand for further proceedings was necessary. The remedy was for the Hornes simply to be relieved of their obligation to pay the fine and associated civil penalty they were assessed.

But, Justice Stephen Breyer, joined by Justices Ruth Bader Ginsburg and Elena Kagan, would have remanded the matter for a determination as to whether any compensation would have been due if the Hornes had complied with the reserve requirement. In their view, the entire regulatory scheme, which the government argued benefits all growers by artificially propping up prices, may afford just compensation for the taking of the raisins; if so, the requirement would not violate the Takings Clause.

Justice Thomas filed a concurring opinion observing it was not at all clear that the reserve requirement satisfied the “public use” criterion of the Takings Clause. Because the government sells or gives away the raisins it takes to exporters, foreign importers or foreign governments. The government does not, as the Takings Clause require, “actually use[] or give[s] the public a legal right to use the property.”

Finally, Justice Sonia Sotomayor was the lone dissent. She concluded that the reserve requirement did not effect a per se physical taking, because it did not destroy all of the Hornes’ property rights. In her view, their contingent interest in future proceeds from the government’s disposal of reserve raisins — however speculative and uncertain — nevertheless constituted the only relevant property right in this context, and the requirement preserved that right. As she explained, the Hornes do not use the raisins they give up to the government “by eating them, feeding them to farm animals or the like”; rather the Hornes value the reserve raisins “only because they are a means of acquiring money.”

Key Highlights

Horne is a win for property rights. It makes clear that, where the government takes physical possession of property, it doesn’t matter whether the property it takes is personal or real. The appropriation constitutes a per se taking, without regard to countervailing factors, such as allegedly retained contingent interests in the property taken. Faced with the costly prospect of having to pay just compensation even for takings of personal property, federal, state and local governments can be expected to avoid regulatory schemes, such as the one in Horne, that require businesses and individuals to set aside “the fruit of [their] labor.”

More generally, Horne marks just the latest in a string of important Supreme Court wins for private property rights over the last several terms.

In 2013, the Supreme Court decided Koontz v. St. Johns River Water Management District. A key question in Koontz was whether the Takings Clause applies to government appropriations of money in the land-use permit context. Like in Horne, the government argued that the Takings Clause applies only to real property (and therefore not to money). And, like in Horne, the high court rejected the government’s cramped reading of the Takings Clause. It held that a monetary condition imposed in the permit context might effect an unconstitutional taking of private property unless it satisfies heightened scrutiny.

Other pro-property rights decisions in recent Supreme Court terms include Marvin M. Brandt Revocable Trust v. United States (2014) (i.e., the “rails-to-trails” decision rejecting the federal government’s reversionary right to abandoned railroad easements crossing private property) and Arkansas Game & Fish Commission v. United States (2012), which held that government-induced recurrent floodings of property, even if temporary in duration, are subject to Takings Clause liability).

In sum, the Roberts court has developed a takings jurisprudence that is friendly to property rights, and Horne is just the latest example of that trend.

Horne also contains plenty of helpful language for owners of personal and real property. For instance, for the first time in recent memory, the Supreme Court explicitly held that the use of one’s property, whether personal or real, is a right — not, as the dissent argues, a “privilege.” Whether property use is a right or a privilege matters, insofar as it establishes the baseline for assessing the constitutionality of laws that regulate such use. If property use is merely a privilege that the government can grant or rescind at will, then government has far more leeway to constitutionally restrict or condition it — and even force its relinquishment.

Horne also clarifies that whatever incidental benefit an owner might derive from a government appropriation is irrelevant to the question of whether the appropriation is a taking under the Takings Clause. Instead, such a benefit goes to the constitutionally separate issue of just compensation. By bifurcating the question of liability (i.e., the “taking” issue”) from the question of just compensation (i.e., the “damages” issue), the Supreme Court makes it easier for takings plaintiffs to prove their claims.

Conclusion

Horne represents an important development in Takings Clause jurisprudence. Courts have applied the clause throughout most of its history to appropriations of land or other interests in real property. More recently, the Supreme Court has extended the clause’s application to government appropriations of personal property (i.e., Horne), including, in certain contexts, appropriations of money (i.e., Koontz). As a consequence, government agencies must tread more carefully than ever.

While government agencies remain free to pursue the same public ends as before, the means by which they do so must conform to the Takings Clause. After Horne, if a government agency wants to take physical possession of private property, whether personal or real, it must pay for it.

By guaranteeing that right to all property owners, Horne advances the purpose behind the Takings Clause, articulated in the oft-cited Supreme Court decision in Armstrong v. United States (1960) — namely, “to bar government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.”

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