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.


Arkansas Game and Fish Commission v. US: Intentional Flooding & Judicial Power

A week or so ago, Ronald Rotunda wrote a brief piece looking at Supreme Court cases in which the Solicitor General’s position had been unanimously rejected by the Court. The Solicitor General represents the Government in Supreme Court litigation. It’s an interesting list, and well worth reading through. What caught my eye, however, was that the first case he describes is the takings case, Arkansas Game and Fish Commission v. United States decided by the US Supreme Court in 2012 (568 US __ (2012); see the Oyez.org page here for more details about the case. My citations below reference the Supreme Court’s Slip Opinion).

The case involved a forested area owned by the Arkansas Game and Fish Commission that was periodically flooded by the US Army Corps of Engineers. The repeated, temporary flooding damaged the trees and affected peak timber growing season. The Arkansas Commission filed a takings claim against the US Army Corps of Engineers. They claimed that the area had been damaged permanently by the Corps’ program of intentional flooding, and therefore the Commission was due compensation for their losses.

In her opinion, Justice Ginsburg points out that not only did the flooding adversely effect the growing season for the valuable trees; it changed the character of the terrain substantially. Those changes, she said, caused the state to engage in costly reclamation measures. While the case was remanded for further review (including investigating some claims made by the Government that had not been fully contemplated by lower courts), Justice Ginsburg made a very clear point in her opinion – and again, a unanimous decision – there is no “blanket temporary-flooding exception” in takings clause jurisprudence.

Why was it necessary for the Court to take a firm stand on this point? There was a precedent from 1924 that, according to the Government, established a rule that temporary flooding designed to protect the public interest was free of a takings examination in the courts. In short, they argued that the Government could indeed intentionally flood areas temporarily in order, for example, to facilitate flood control. In the Government’s understanding of this precedent, damage done to land was not compensable because it was done in the public interest of flood control (or other public works). Indeed, lawyers for the Government appear to have read one particular passage in the case as suggesting that, except when it could be shown that the flood was “the direct result of the structure,” and constituted a “permanent invasion of the land”, there could be no takings claim – whatsoever.

In reading the case law differently than the Government, Justice Ginsburg, intriguingly, points out that the precedent the Government relied on most heavily, Sanguinetti v. United States (264 US 316, 1924), predated cases that establish the contemporary jurisprudence on temporary takings (“Sanguinetti was decided in 1924, well before the World War II-era cases and First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 428 US 304 (1987), in which the Court first homed in on the matter of compensation for temporary takings. There is no suggestion in Sanguinetti that flooding cases should be set apart from the mine run of takings claims…” Slip Opinion, p. 2). This is intriguing because there is a long line of old precedents pre-dating contemporary jurisprudence that concern themselves specifically with flooding. Justice Ginsburg’s comment suggests that, perhaps, the Court would be willing to revisit others should industrious lawyers be able to argue that those cases are no longer in line with contemporary takings cases.

The Government also argued in their briefs that allowing takings claims in intentional flooding circumstances would result in the filing of takings claims that would make programs such as flood control difficult to implement. They suggested, as the Government often does, that accepting the plaintiff’s view would result in a slippery slope in which flood control and other programs would become all but impossible due to all of the takings claims made against them. Justice Ginsburg asserts that this is not the case:

“The slippery slope argument, we note, is hardly novel or unique to flooding cases. Time and again, in Takings Clause cases, the Court has heard the prophecy that recognizing a just compensation claim would unduly impede the government’s ability to act in the public interest,” (Arkansas Game and Fish Commission, Slip Opinion, p. 12). Indeed, citing a case in which the “slippery slope” argument was made in dissents, Justice Ginsburg pointedly comments, “The sky did not fall after Causby v. US (328 US 256, 1946) and today’s modest decision augurs no deluge of takings liability” (Slip Opinion, p. 12).

Why no deluge? Why wouldn’t the decision make flood control more difficult?

Well, first, takings clause cases are notoriously difficult to win. This is partly because, especially in instances where regulatory takings or temporary takings occur, it is very difficult to fully document what has been taken. This makes determining “just compensation” difficult. If the value of the land is completely wiped out, as required under Lucas v. South Carolina Coastal Council (505 US 1003), it becomes easier to calculate what must be compensated. But anything less than a total wipe-out becomes difficult.

The Supreme Court has said that temporary takings can be compensated (Causby v US), and they certainly recognize the possibility that while title in land may remain with the original owner a regulation can create a taking (multiple cases on this point, but look at Pennsylvania Coal Co. for the beginning of the contemporary doctrine). The Court has also said that the decision of whether a taking occurred will depend upon “a complex of factors” designed “to prevent the 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,’” (Palazzolo v. Rhode Island (533 US 606, 2001), quoting Armstrong v. US (364 US 40, 1960)). In the reality of takings litigation, this means that the amount of detail required in the presentation of facts makes winning a takings case difficult (but not impossible).

What the justices did — unanimously — in Arkansas Game and Fish Commission v. US was provide the opportunity for plaintiff-owners whose land is intentionally flooded to show that their claims rise to the level of a takings claim through this intensive litigation process. Put another way, the Court has provided owners an opportunity to show that the all the factors, taken together, support the argument that they have been “bearing burdens which, in all fairness and justice, should be borne by the public as a whole.”

It is a high bar to pass, but one that is possible. As I have written elsewhere, takings litigation takes years, sometimes even decades, as it did with Palazzolo v. Rhode Island. It requires a patient plaintiff and industrious lawyers. Given the costs associated with these types of cases (experts being necessary to prove/disprove the claims, there’s often scientific studies of effects on land/terrain and ecosystems, etc.), most owners are not likely to file lawsuits, and lawyers are unlikely to take them on. Lower courts will vet the lawsuits for threshold issues first, and then for all of the facts in order to determine whether that “complex of factors” exists. It’s not an easy process for anyone. The cases that will make their way to decisions by judges or juries, or find their way into appellate courts, will likely be complex and unique. But these characteristics – complexity and uniqueness – are the hallmarks of most cases that make their way to final decisions and appellate courts. “Typical” disputes end early. “Difficult” disputes take a lot longer.

However, this litigation will be a bit of a pain for government lawyers. Had the Government prevailed in Arkansas Game and Fish, the lawyers who defend takings cases in the Justice Department would not have to worry about intentional flooding cases. It would have removed a set of cases and claims from their docket, providing them an easy way of getting rid of complaining owners. That, in turn, would have sent a message to those administrators involved in flood control and other wetlands policies that they did not need to worry about a judicial check on their activities. In a sense, then, the Court maintained its power just a little bit by making it clear that, whether plaintiffs will prevail or not, takings cases will remain within their purview. Checks and balances are maintained by Arkansas Game and Fish by maintaining the Court’s ability to decide a certain type of case.