June 22, 2015

Supreme Court Decides Horne v. Department of Agriculture

On June 22, 2015, the Supreme Court decided Horne v. Department of Agriculture, No. 14-275, holding that the Fifth Amendment’s Takings Clause applies to personal property as well as real property, and a requirement that raisin growers provide a certain percentage of their crop to the government is a taking that requires the government to pay just compensation.

The Agricultural Marketing Agreement Act of 1937 (the Act) authorizes the Secretary of Agriculture to promulgate “marketing orders” to help maintain stable markets for particular agricultural products. For raisin growers, the marketing order requires them to give a percentage of their crop to the U.S. Government free of charge. The percentage allocation is determined by a Raisin Administrative Committee (the Committee) appointed by the Secretary of Agriculture. The Committee acquires title to the raisins allocated to it and uses them at its discretion; proceeds from sales are primarily used by the Committee, but raisin growers retain an interest in net proceeds from sales after deductions for certain subsidies and expenses.

Marvin and Laura Horne are raisin growers and handlers. They refused to set aside raisins for the Government as required, and were fined for the market value of the missing raisins plus a civil penalty for disobeying the Government’s order to turn over the raisins that they were required to set aside for the Government.

The Hornes sued in federal district court, asserting that the reserve requirement was a taking of their property under the Fifth Amendment, thus requiring the Government to pay them just compensation. The district court disagreed, and the Ninth Circuit affirmed, holding that the reserve requirement is a use restriction similar to a government condition on the grant of a land-use permit rather than a taking.

The Supreme Court reversed. The Court first held that the Takings Clause applies to personal property as well as real property, and that the Government is required to pay just compensation when it takes personal property, just as when it takes real property.

The Court then held that the Government could not avoid the duty to pay just compensation for a physical taking by giving the owner a contingent interest in a portion of the value of the property. The Act allows growers to retain the proceeds of the raisins that they give to the Government, net of expenses and subsidies paid to raising exporters, but the Court held that because the Government physically appropriates the property, it does not matter that the Government allows the owner to retain some value. In any event, the contingent value that the borrowers were entitled to receive was zero in some years.

Finally, the Court held that the Government’s mandate that the growers relinquish specific, identifiable property as a condition on the Government’s permission to engage in commerce was a per se taking under the Fifth Amendment. The Court rejected the Government’s argument that it is not a taking because growers voluntarily participate in the raisin market, and could always plant different crops or sell their raisins as grapes or for use in juice or wine. “Selling produce in interstate commerce, although certainly subject to reasonable government regulation, is … not a special governmental benefit that the Government may hold hostage, to be ransomed by the waiver of constitutional protection.”

The Court concluded that the Government was required to pay the Hornes the fair market value of their raisins (which the Government had already calculated), and that the Hornes were not required to first pay the fine and then assert the Takings Clause defense in their litigation with the Government.

Chief Justice Roberts delivered the opinion of the Court, in which Justices Scalia, Kennedy, Thomas, and Alito joined, and in which Justices Ginsburg, Breyer, and Kagan joined as to Parts I and II. Justice Thomas filed a concurring opinion. Justice Breyer filed an opinion concurring in part and dissenting in part, in which Justices Ginsburg and Kagan joined. Justice Sotomayor filed a dissenting opinion.

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