Raisins in the Sun: Federal Government Trying to Leave Farmers Out to Dry

Thomas Warns*

The Supreme Court heard oral arguments last Wednesday in a case that seems almost too absurd to be true – Horne v. Department of Agriculture. The background facts, centering around a New Deal-era law, are hard to believe, but here they are:

The Agricultural Marketing Agreement Act of 1937 granted the U.S. Department of Agriculture the authority to regulate the sale of certain agricultural products, including California-grown raisins, through the use of "marketing orders." The marketing order specific to California-grown raisins directs the Raisin Administrative Committee, a branch of the USDA, to establish a yearly raisin tonnage reserve requirement. The idea was that during the Great Depression, low raisin prices were hurting farmers, who would benefit if prices were stabilized (and raised). The government aimed to achieve this price hike and stabilization by taking farmers’ raisins and adding them to the raisin reserve; lower supply meant higher prices, and the raisins would be sold or given away at a later date they believed was more appropriate.

Every year in February, raisin farmers are told what percentage of their crop is the "reserve requirement" they must turn over to the Committee; failure to do so results in fines and penalties. In 2002 and 2003, the Horne family refused to comply with the USDA’s demands and was fined over $700,000. This case was actually before the Supreme Court two years ago on different grounds (whether they could raise a takings claim before they actually paid the fine), but now is on the docket again on the merits, as a takings question. The federal district court and the Ninth Circuit Court of Appeals have found that there was no “taking” by the government.

The Supreme Court heard oral arguments last Wednesday, and will have to answer three questions: (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 only to real property and not to personal property; (2) whether the government may 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; 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.

The case looks like an easy win for the Horne family, and it should be. Further, they can take heart in the fact that court watchers found the Justices to be very skeptical of the idea that there was no taking.

The takings clause in the Fifth Amendment states that “nor shall private property be taken for public use, without just compensation.” Here, the government demanded the Horne family hand over their raisins, or pay enormous fines. How could this possibly be defended? The Ninth Circuit’s latest opinion on the case justified the government’s action by stating that the Takings Clause was meant to deal with takings of real property (i.e. land) and not personal property, and further that if it were a taking, the just compensation was the supposed stabilization and increase in price by the government.

Surely, the Fourth Amendment notion of property cannot be applied so narrowly that personal property is not protected – could the government also take one in every five cell phones that Samsung manufactures, without paying just compensation, because there was no "taking"? Doubtful. And in oral arguments, Justice Alito raised that very proposition. Theft does not become legal because the government engages in it. How come we have to pay taxes, you ask – isn’t the government “taking” our money? In the case of taxes, the Constitution explicitly permits Congress to levy them for the common defense and general welfare of the country under Article I.

The second proposition might be slightly stronger for the government – if it was a taking, the stabilized and elevated prices served as compensation. Justice Breyer hinted during oral arguments that the farmers may not have been hurt at all, or may have even been benefited beyond the value of their raisins, from the program. That may be the case, but it is hard to imagine the Horne family spending their time and money fighting this if the program was really such a great deal for them. Indeed, the Horne’s stated that in the year precipitating this legal battle, they surrendered 47% of their raisin crop; after the USDA sold the raisins (often they are sold to schools or prisons at a discount), the USDA took some money off the top for administrative expenses, and returned the Horne family with an amount lower than the total cost to produce the raisins. That does not sound like just compensation. Certainly at the very least, the Horne family could have sold their raisins to the schools and prisons without the compulsory middleman (who might also hurt the raisin farmers by conditioning that portion of the market to lay off market price raisins in favor of discounted ones from the government).

Another laughable defense raised in support of the program is that the government may condition entry into a market on having the ability to relinquish specific, identifiable property. Indeed, the 9th Circuit said that if the Horne family did not like the marketing orders of the USDA, they could plant another crop that was not regulated the same way. That not only ignores any number of personal reasons why the Horne family may prefer to grow raisins (their land is best suited for it, they have expertise from past experience, etc.), but it also destroys the personal autonomy we all ought to enjoy in a free country with a vibrant and open marketplace.

The Supreme Court did not even attempt to answer whether this is a public use. Public use has classically meant taking property so roadways or bridges or courthouses benefiting a whole city or state could be built, not taking raisins from farmers to keep prices higher for consumers. Indeed, if the stated goal of higher raisin prices has been achieved, then the program is benefiting private parties at the expense of the public – the exact opposite of a public use! Even the expansive (and heavily criticized) case on public use, Kelo v. City of New London, would be unlikely to bear such a definition of "public use". Fortunately, the Supreme Court has a chance to invigorate takings jurisprudence, even if it doesn't do so via a more robust "public use" analysis, and make keep us all safer from government’s intrusions.

Personal Note: I have thoroughly enjoyed writing for this blog for the last two years, but sadly my time on the Journal of Law & Liberty is nearing an end. I will graduate in May and hand over the position of Editor-in-Chief to my very capable replacement, Michael Stachiw. I hope to continue writing to the blog occasionally as a guest; however, this is likely to be my last post as a member of the Journal. For that reason, I would like to thank everyone who has been on the Journal the last two years. I have learned so much working with everyone on these blog posts, as well as all the articles we publish. I could not have asked for a better group of friends on the Journal, nor a more capable group of colleagues. To those who read the blog and have read my posts from time to time, thank you for your interest in our Journal, and please keep reading.


Tom Warns

* Thomas Warns is a J.D. Candidate in the Class of 2015 at New York University, and the Editor-in-Chief for the N.Y.U. Journal of Law & Liberty.