History of Policy « Disasters, Property, and Politics

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.

So far in this series of posts I’ve discussed the various protections for property in the Constitution and the Bill of Rights, and the Supreme Court’s first important decision touching on property. As I noted in that last post on Barron v. Baltimore, the primary enduring importance of Barron lies in the Court’s holding that the protections found in the Bill of Rights only limit the federal government, and not the states.

This all changed after the Civil War, when the Republican Congress made it a condition for the rebellious states’ reentry into the Union that they assent to certain amendments to the Constitution. These amendments, among other things, abolished slavery, declared that all people born in the United States are citizens (thus overturning the Court’s decision in Dred Scott v. Sanford), and stated that all citizens should equally enjoy the liberties and privileges that citizenship promises. [The full text of these amendments can be found here.] Today we’ll focus on the 14^th Amendment, which has been central to the development of constitutional law and practice since its ratification.

Section 1 of the 14^th Amendment reads, “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

These provisions fundamentally altered the nature of federalism in the United States – especially the Privileges or Immunities Clause, the Due Process Clause, and the Equal Protection Clause. These clauses each asserted in their own way that the federal government would in fact protect the rights, privileges, and immunities of citizens in the United States – even against infringement from States. That is, these clauses seem to suggest that the federal constitution would henceforth protect individuals’ rights to speech, religion, bearing arms, voting, etc. from abuse by state and local governments.

In a series of important Supreme Court decisions in the decades after Reconstruction, including The Slaughterhouse Case, The Civil Rights Cases, and Plessy v. Ferguson, the reach of these Amendments was significantly limited. In these decisions, the Court held that the Privileges and Immunities Clause was basically null (Slaughterhouse), that segregation was admissible under the Equal Protection Clause so long as the separate facilities were “equal” (Plessy), and that racial discrimination by private individuals was beyond the reach of the 14^th Amendment (Civil Rights Cases). These decisions have far-reaching implications though they don’t directly touch on our main interests here at DPP (if you’re interested, see the suggested reading below).

What is important here, without going into undue detail, is that 14^th Amendment purported to extend significant federal power over states’ ability to infringe on individuals’ rights (especially the rights of newly freed slaves) – but the Supreme Court interpreted these new amendments in such a way as to mostly negate their immediate impact. Still, the 14^th Amendment set the stage for the federalism revolution that the first Reconstruction Congress sought to affect. How this affected the law governing property rights will be the subject my next several posts in this series.