Horne v. Department of Agriculture

The Supreme Court has agreed to hear a very interesting property rights case, Horne v. USDA, that concerns the taking of raisins.

Horne’s history begins all the way back in 1937, when Congress passed the Agricultural Marketing Agreement Act of 1937 (AMAA), which allows the Secretary of Agriculture to impose production quotas on products in an effort to protect farmers from fluctuations in the market. The production quotas are imposed on “handlers” – those who process and package the product for distribution to consumers. Such an order, “The Raisin Marketing Order of 1949”, required that a percentage of raisins must be turned over to the government every year to maintain a reserve tonnage. Yes, we have a strategic raisin reserve.

Fast forward a few decades, and we find Marvin and Laura Horne, who are raisin farmers in California. The Hornes were thus subject to the 1949 raisin marketing order. Under this order, a board of bureaucrats, the Raisin Administrative Committee, decides what the “proper yield” of raisins should be in order to meet a centrally agreed-upon price. The board estimates the size the annual crop, and then orders all raisin farmers to turn over a portion of their crop to the raisin handlers mentioned above. The handlers (also known as packers) then place the raisins reserve pool. These reserve raisins cannot be sold in the U.S., but the handlers can later sell them overseas at discounted prices, or into school lunch prices (there also a deeply discounted rate).

Under the AMAA, the farmers are supposed to receive a percentage of the money made from the sale of the reserve pool raisins. Profit margins dwindled over the years, however, and with them, the return to the farmers. 2003 marked a turning point in this story, when the farmers were forced to turn over forty-seven (47!) percent of their crop, and received a total of zero dollars in return.

The Hornes feared that their business couldn’t survive, giving up 47 percent of their produce for no money, so they reorganized their business. They began packing and selling their own raisins, hoping that doing so would allow them to circumvent the marketing order. [Many other raisin farmers followed the Hornes’ lead, and began to pack and sell their own raisins.] The government did not approve of this move. The USDA levied huge fines against the Hornes, and also charged them for the raisins that they had not surrendered. You can see a short (about 7 minute) video wherein the Hornes and their lawyer talk about the case, here.

The Hornes sued in federal court, alleging that the marketing order amounted to an unconstitutional taking in violation of the Fifth Amendment. The District Court in which the case was first heard, and then the Ninth Circuit on appeal both held that this was a matter of unpaid fines, and not a takings. The Supreme Court disagreed, holding (9-0) in Horne v. Department of Agriculture 569 U.S. ___ (2012) that there was a potential takings here, and the case could be adjudicated as such. In other words, the Takings Clause can be a valid defense in actions regarding government mandated transfers of funds. [To be very clear, the earlier case (decided in 2012) and the current case (to be heard on April 22, 2015) have the same name.]

By agreeing to hear the case again, this time on the merits (the substance of the dispute), the Supreme Court is agreeing to answer three important questions: first, does the recognized “categorical duty” under the Fifth Amendment to pay just compensation when “physically takes possession of an interest in property” apply to personal property, or only to real property? Second, can government avoid paying just compensation by “allowing” the owner to reserve a portion of the property’s value? And third, does a government mandate to hand over a specific property as a “condition” to engage in commerce amount to a per se taking?

These are very important questions – thus this is a very important case – for those of us interested in the politics and law of property. And the Court’s answer to these questions will reverberate far beyond the raisin farms of California, whichever way they decide. Oral arguments are scheduled for April 22, 2015. Tune in, as we’ll have commentary on the arguments as quickly as possible thereafter.

If you’re interested in hearing the arguments for yourself, you can find them here. If you’d like to read more about this case, SCOTUSBlog has some good coverage, and Oyez has a good summary of the 2012 decision.


Chicago, Burlington & Quincy RR v. Chicago, part 2

I recently wrote about a foundational case in takings doctrine, Chicago, Burlington & Quincy RR v. Chicago. Today, I’m going to talk briefly about Justice Brewer’s dissenting opinion in that case, and a little more about the case’s enduring importance in American constitutionalism.

Recall that the Supreme Court ruled 7-1 that the Due Process clause of the 14th Amendment requires a substantively just outcome, not mere attention to defined procedures. With regards to the specifics of the case, the Court held that the $1 award to the Chicago, Burlington and Quincy Railroad for its taken rights-of-way was in fact adequate to satisfy this requirement for substantive justice.

Justice Brewer dissented from the Court’s opinion CBQ RR v. Chicago. He argued that the due process clause does indeed require just compensation, but disagreed with the majority’s finding that the Railroad had in fact received such just compensation. Brewer wrote that “It is disappointing, after reading so strong a declaration of the protecting reach of the fourteenth amendment, and the power and duty of this court in enforcing it as against action by a state by any of its officers and agencies, to find sustained a judgment, depriving a party – even though a railroad corporation – of valuable property without any, or at least only nominal, compensation.”

So in the end, the Chicago, Burlington & Quincy Railroad won on principle, but lost in practice; the Court agreed that just compensation was due when property was taken, but also held that a nominal award could, at least, be considered “just.”

This case is tremendously important in American constitutional development because it is the first time that Supreme Court held a provision of the Bill of Rights to be enforceable against state and local governments. We call this “incorporation doctrine” – when a provision of the Bill of Rights is held by the Supreme Court to apply to the states it is said to be “incorporated.” Thus, Chicago, Burlington & Quincy RR v. Chicago marks the beginning of this major transformation in American constitutionalism.

Incorporation has been a long and uneven process, and is still going on today. The first provision incorporated was the subject of today’s post, in 1897. The next provision of the Bill of Rights to be incorporated was the freedom of speech (guaranteed by the First Amendmen), but it was not incorporated until 1925 (Gitlow v. New York). The most recent component of the Bill of Rights to be incorporated against the states was the right to bear arms (guaranteed by the Second Amendment), which was incorporated in McDonald v. City of Chicago in 2010. Moreover, several provisions have yet to be incorporated: freedom from quartering soldiers in peacetime (Amend. III), right to indictment by a grand jury (Amend. V), the right to a jury selected from the state and district where a crime was committed (Amend VI), right to a jury trial in civil cases (Amend VII), and protection against excessive fines (Amend VIII) are not presently incorporated.

Still, it is fair to say that most of major components of the Bill of Rights have been incorporated today. That is why individuals and groups can sue state or local governments in federal courts for many types of alleged rights violations – including violations of speech rights, religious liberty, protections for the accused, and property rights.

Chicago, Burlington  & Quincy Railroad Co. v. City of Chicago is an important case in the history of takings law, then, because it sets the stage for future battles over property rights in the federal courts. Many well-known modern cases, such as Hawaii v. Midkiff and Kelo v. New London would not have been heard in federal courts if the Takings Clause of the 5th Amendment had not been incorporated. It is because of CB&Q Railroad that we are able to talk about these more contemporary cases, which will be the subject of upcoming posts.

Suggested reading:

Ackerman, Bruce. 1998. We the People, Volume II: Transformations. Belknap Press of Harvard University Press.

Amar, Akhil Reed. 1998. The Bill of Rights. Yale University Press.

Chicago, Burlington & Quincy Railroad Corp. v. City of Chicago 166 U.S. 226 (1897)

Ely, James W. 2008. The Guardian of Every Other Right, 3rd ed. Oxford University Press.