Raisins, personal property, and just compensation

So, as posted earlier, this the morning US Supreme Court handed down a fascinating takings decision in Horne v. Department of Agriculture. I think as both Logan and I work through the decision, we’ll do a series of posts. Logan had written about the case as it made its way through the courts (you can find those posts here and here).

Here are some of the highlights from Chief Justice Roberts majority opinion (all quotes come from the Horne Slip Opinion, which I’ll just identify as “Slip Opinion”):

The Court determined, contrary to the Government’s argument and a decision by the Ninth Circuit, that first, personal property is as protected as real property from being taken. To quote the Chief Justice, “The Government has a categorical duty to pay just compensation when it takes your car, just as when it takes you home” (Slip Opinion, p. 5).  There’s a lengthy discussion in the decision concerning the history of the takings clause and why agricultural crops, in particular, have featured in that history.

Toward the end of that historical discussion, Chief Justice Roberts writes,

“According to the author of the first treatise on the Constitution, St. George Tucker, the Takings Clause was ‘probably’ adopted in response to ‘the arbitrary and oppressive mode of obtaining supplies for the army, and the public uses by impressment, as was too frequently practiced during the revolutionary war, without any compensation whatever.’ [citing Blackstone’s Commentaries] (Slip Opinion, p. 6).

This brings the Chief Justice to the distinction between regulatory and physical takings, which for the majority is very important in this case. They see appropriation of raisins as a physical taking of private property rather than a regulatory taking. This matters because the constitutional rules around physical takings are pretty simple: if the government physically takes property, just compensation is due. However, it’s more complicated with regulatory takings, which Chief Justice Roberts says are more flexible and more forgiving than the jurisprudence around physical takings. Indeed, regulatory takings cases require, under Lucas v. South Carolina Coastal Council, a “total wipe-out” of value before they require just compensation.

Again, quoting from today’s decision:

Lucas, however, was about regulatory takings, not direct appropriations. Whatever Lucas had to say about reasonable expectations with regard to regulations, people still do not expect their property, real or personal, to be actually occupied or taken away. Our cases have stressed the ‘longstanding distinction’ between government acquisitions of property and regulations… The different treatment of real and personal property in a regulatory case suggested by Lucas did not alter the established rule of treating direct appropriations of real and personal property alike.”

The distinction provides the Court with the basis for overturning the Ninth Circuit’s opinion because the Ninth Circuit had used Lucas to decide Horne — and today, the Court says that this was the wrong line of precedents to apply in deciding a case involving the physical taking of personal property (i.e., the raisins).

There’s a few things that I find especially interesting in the decision: first, there’s a strong implication that the Supreme Court would have seen a regulation that limited production of raisins differently than a law that required the surrender of already produced raisins to the government. Chief Justice Roberts writes,

“A physical taking of raisins and a regulatory limit on production may have same economic impact on a grower. The Constitution, however, is concerned with means as well as ends. The Government has broad powers, but the means it uses to achieve its ends must be ‘consistent with the letter and spirit of the constitution.’ [citing McCulloch v. Maryland]”.

The issue that matters to the Court in Horne is that the raisins were actually physically taken from the owners. Or would have been, had the Hornes complied with the law (which they did not — and were fined the market value of the raisins ($438,000) plus an additional $200,000 for breaking the law by not surrendering the raisins — something the majority says they did not understand they were required to do).

That brings me to another interesting point: the Chief Justice mentions more than once that this program is mandatory and not voluntary. Chief Justice Roberts says that had it been voluntary, of course, there would be no taking. This is also interesting…  Between this and the language around a regulatory limit on production vs. a taking of produce, I wonder if there are not hints here concerning what the Court thinks would be an acceptable way to control the raisin market… But that’s just a thought that ran through my mind as I read through the case. There is no indication that the majority were sending such signals to Congress in the actual text.

While the 8-1 decision (Justice Sotomayor was the lone dissenter) on the issue of whether the raisins were taken seems to really hinge on the idea that the raisins are personal property that was physically taken away and is pretty straight forward, the decision becomes a little more complicated on the issue of just compensation. On the issue of determining what just compensation is, the Court split 5-4. In the minority, three of the four (Justices Breyer, Ginsburg and Kagan) wanted the case to be remanded back to the Ninth for an inquiry into whether the price of the raisins in the years that were of concern in the case would have yielded just compensation to the Hornes for the loss of their raisins. Chief Justice Roberts and four other members (Scalia, Kennedy, Thomas and Alito) decided, however, that in levying a fine of the market value of the raisins, the Government had already determined what the just compensation should be. That just compensation should be the market value of the raisins. Moreover, they were concerned because the value of the raisins is itself set by “the taker”, i.e., the Government. This was clearly an issue for the 5 who believed that the market value assessed by the Government was the best way to go. The implication, from my reading, is that they did not want to leave it to the Government to decide whether “just compensation” had been provided by the price of the raisins. I’ll go into that issue when I discuss the concurrence in another post. Therefore, the Supreme Court said today the Hornes do not owe the fine to the Government.

One last interesting note: in deciding not to remand the case, the Chief Justice points out that the case had been nearly a decade in litigation, and that it was time for the matter to be settled. He should know a lot about takings cases that take a long time — he was the lawyer that argued Tahoe Sierra Preservation Council v. Tahoe Regional Planning Agency for the agency (i.e., the regulator — yes, he was a hired gun at one time in his life). In that case, which is cited more than once in today’s decision, the litigation had taken so long to make its way to the Supreme Court that many of the original land owners involved in the lawsuit had passed away and their heirs were left to see the litigation through. I’ve mentioned as well that sometimes these cases start to feel a bit like the situation that Charles Dickens wrote about in Bleak House with regard to yet another takings case, Palazzolo v. Rhode Island. There is, indeed, something be said to seeing the end of a case, particularly for the litigations and especially when the courts are already overburdened with litigation. Perhaps that is a discussion for another day, but it is worth noting that the Court seems to be paying attention to the timeline in these takings disputes.

Oral Arguments in Horne v. USDA

A few weeks ago, I wrote about an interesting takings case the Supreme Court was set to hear this term, Horne v. USDA. The Court heard oral arguments in this case on April 22, so this is the promised update now that I’ve had time to go through the transcript.

The short version of the story is: things don’t look good for the government.

Orals got underway with arguments from Michael McConnell, a renowned constitutional law scholar, who represented the Hornes. McConnell laid out the basics of the Hornes’ position – which is, essentially, that taking raisins from farmers is still a taking as far as the Constitution is concerned, even though raisins are personal, as opposed to real, property.

Several justices questioned McConnell’s claim that this case should be considered a per se taking as opposed to a regulatory taking. Justice Kagan asked several pointed questions about the limits of the Hornes’ claim: that is, what other sorts of government requirements might a ruling in their favor affect? Kagan asks “So how about just programs where the government says, give us – produce records for us. I’m sure that there are a lot of programs like that in the world. And there is something intuitive about your saying, well, the government is asking us to turn over stuff. …How would that fare under your argument?”

McConnell responded by drawing attention to an important distinction: in records (Kagan’s example), the value is not in the documents themselves, but in the information they contain – and in most cases, the individual forced to turn those records over does not herself lose that value (i.e. she does not lose the information). Thus McConnell implicitly argues that it is not the deprivation of a possessory interest that makes a taking, but rather the deprivation of the value of that possessory interest. These sorts of arguments are common – and often quite strong – in the world of regulatory takings, but are less common in physical takings cases, like this one.

Deputy Solicitor General Edwin Kneedler argued for the government. Kneedler didn’t even get through his opening remarks before Justice Scalia interjected “These plaintiffs are ingrates, right? You’re – you’re – you’re really helping them?” And Kneedler barely defended the claim that raisin farmers benefit from the program. This seems a strange move, as Kneedler emphasized that there is no taking in this case because the premise of the program is to benefit those farmers. That is, he argued no taking occurred because the program was intended to benefit raisin farmers – but he did not argue that the program actually benefits those farmers. Several of the justices appeared to be quite skeptical of these claims.

The justices pointed out that even if the property owners do in fact benefit from the program, that does not change the reality that a taking has occurred in the first place. Justice Alito, for example, argued that the government’s logic suggests that no taking when government takes personal property for any purpose which might potentially benefit the owner in some (conceivable) way: Alito asked “Could the government say to a manufacturer of cellphones, you can sell cellphones; however, every fifth one you have to give to us? Or a manufacturer of cars, you can sell cars in the United States, but every third car you have to give to the ­­ to the United States.”

A few minutes later, Justice Sotomayor weighed in, stating that she wondered, “like Justice Alito, about his every fifth telephone or whatever. Every fifth car or every fifth telephone you have to give to the government. You – I don’t know you’ve answered that question. Is that a taking or isn’t it?” Kneedler continued to evade the direct question, and continued to irk the justices in so doing.

Parts of Kneedler’s arguments were – to me at least – almost comical. He repeatedly stated the government’s position that this was not a taking though he did “concede that the government gets legal title.” At another point, he argued this was not taking, but just part of a comprehensive regulatory scheme. He then argued that the regulatory scheme was not a historical anomaly (as Chief Justice Roberts and Justice Kagan suggested), but in the next breath acknowledged that no other programs actively “reserve” (i.e. take) commodities. [I’m not the only one who found some of Kneedler’s problems amusing — laughter at some of the government’s claims are noted in the transcript, and has been discussed by other Court watchers.]

Perhaps the oddest argument Kneedler made in defending the Raisin Administrative Committee, was that “this is not a taking to begin with because the – the grower voluntarily submits the total amount of raisins to the handler” and the handler then hands over the required portion to the government [emphasis mine]. But recall from my earlier post on this case – the Act requires growers to turn over their crop – there is nothing voluntary about the program.

All told, Justices Breyer, Kagan, and Sotomayor, along with the Court’s five more conservative members, expressed considerable concern with government’s arguments. (If I had to bet, I would say that the final vote on the case will be 8-1 in favor of the Hornes with Justice Ginsburg dissenting—though I admit a 9-0 decision would not surprise me). The Court would most likely hold that this was indeed a taking, and then remand the case to a lower court to determine how much compensation would be owed.

If I’m right, the case on remand would be interesting in its own right, as the government argued repeatedly that the (alleged) benefits of the program to farmers amount to in-kind compensation, which might reduce any eventual cash compensation found to be due.

For those interested, you can read the full transcript of the oral arguments here.