A farmer who refused to hand over half his raisin crop to the government as part of a New Deal-era price-support program won a major victory before the U.S. Supreme Court, as it decided the constitutional prohibition against uncompensated seizures extends to agricultural produce.
The court's decision in Horne v. Dept. of Agriculture could threaten schemes that require farmers to turn their crops over to the government in exchange for the promise of greater price stability. However, as Justice Sonia Sotomayor noted in dissent, the government can still regulate production by enforcing quotas that prohibit farmers from selling their crop to anyone.
She called the majority opinion "baffling." Justice Stephen Breyer, joined by Ruth Bader Ginsburg and Elena Kagan, agreed that the seizure was a taking requiring compensation, but argued for sending the case back to the Ninth Circuit Court of Appeals to determine how much the plaintiffs were owed after taking into account the value of price supports.
The case involved the Horne family of California, who refused to turn over their raisin crop in 2002 to a Raisin Administrative Committee formed under the Agricultural Marketing Agreement Act of 1937. The committee holds excess raisins and sells them in non-competitive markets or gives them away, distributing net proceeds later to the farmers. For defying the government, the Hornes were ordered to hand over the $480,000 market value of the raisins plus a $200,000 fine. The Ninth Circuit Court of Appeals upheld the penalties, after first rejecting the case entirely and being ordered by the Supreme Court in 2013 to take it up again.
This time, the Supreme Court relieved the Hornes of all charges, which was "significant enough," said John O'Quinn, a partner with
"The right to pursue your livelihood and engage in traditional forms of commerce is not a government benefit,” for which the government can demand property in return, O'Quinn told me.
The government and Sotomayor argued the Hornes weren't really being asked to part with their property, because they could keep the residual value in the raisins and get valuable price support from the program. But Chief Justice John Roberts, writing for a conservative majority, said that reasoning glosses over the essential fact that the government takes title to the raisins and determines the ultimate value of the crop.
Roberts also rejected the Ninth Circuit's opinion that the Constitution's Takings Clause covers only real estate.
Nothing in the text or history of the Takings Clause, or our precedents, suggests that the rule is any different when it comes to appropriation of personal property. The Government has a categorical duty to pay just compensation when it takes your car, just as when it takes your home.
The principle is grounded in the Magna Carta, Roberts wrote, and was imported by the colonists to the U.S. and enshrined in the Constitution after both sides in the Revolutionary War appropriated private property indiscriminately.
The Court expanded the Takings Clause beyond a physical taking in a 1922 coal case, leaving it up to courts to determine when a regulation goes “too far.” The court reaffirmed that actual physical takings require compensation in Loretto v. Teleprompter Manhattan, a 1982 decision upholding a property owner’s refusal to allow the installation of a cable TV box on her roof even if it promised public benefits.
Roberts differentiated the price-support program from regulations that have the effect of reducing the value of property without physically seizing it from the owner. He rejected comparisons to a 1984 decision requiring Monsanto and other chemical companies to disclose the ingredients in pesticides, for example, even if that meant disclosing trade secrets, which are a form of property, in exchange for selling them on the interstate market.
Selling produce in interstate commerce, although certainly subject to reasonable government regulation, is similarly not a special governmental benefit that the Government may hold hostage, to be ransomed by the waiver of constitutional protection. Raisins are not dangerous pesticides; they are a healthy snack.
Another case requiring oyster harvesters to give the state 10% of their shells isn’t comparable either, Roberts wrote, because the oysters were grown on state property.
Sotomayor also cited Loretto, the cable-TV case, but said it “sets a high bar” requiring all of a property owner’s rights to be extinguished. The farmers still could get some economic benefit from their crop even if they were required to set it aside for the government, she wrote. But Roberts disagreed, saying not just the ends but the means must be consistent with the Constitution. He cited Justice Oliver Wendell Holmes from a 1922 decision: “A strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way.”
Breyer agreed with the first parts of the opinion but cited a string of cases in favor of the idea the government doesn't have to pay full market value whenever it seizes property. Previous decisions have made it clear a property owner might be entitled to less if part of his land is taken for a highway that makes the rest more valuable, for example.
The government also argued the Hornes weren't forced to participate in the raisin price-support program. They could grow other crops, or they could turn their grapes into wine.
“`Let them sell wine’ is probably not much more comforting to the raisin growers than similar retorts have been to others throughout history,” Roberts wisecracked.
The case may have limited impact on farm subsidies and price supports since most such programs rely on quotas instead of physically taking crops from farmers. The raisin program may have been unique in this regard, said O'Quinn of Kirkland & Ellis.
A second decision today featured yet another unusual flip-flopping of traditional roles at the court, as the conservatives argued for overturning precedent and the liberals, led by Kagan, voted in favor of stare decisis.
In Kimble v. Marvel Entertainment, the court declined to overturn a decades-old decision prohibiting patent holders from collecting royalties beyond the length of their patent term, rejecting the claims of an inventor of a Spider-Man gadget.
Or at least that's what the 1964 case, Brulotte v. Keyes, purports to say. As Kagan noted, patent holders have devised a number of ways around that decision, including negotiating lengthy license periods with "discounted" rates in the early years that are "amortized" in later years.
While the economic theory that motivated Brulotte is largely discredited by now -- it's a close cousin to tying theories in antitrust that are held by only a few diehard believers -- Kagan said Congress has had ample opportunity to correct the mistake and refused. If this were an antitrust case, she said, the court might more easily overturn Brulotte, as it has done by adopting modern economic theory to reverse a line of cases that held the main purpose of antitrust law was to protect small merchants against large. The law changed as courts realized consumers can realize benefits from lower prices and greater supply if companies consolidate.
“Respecting stare decisis means sticking to some wrong decisions,” Kagan said, however, especially when it involves the interpretation of a statute. “Then, unlike in a constitutional case, critics of our ruling can take their objections across the street, and Congress can correct any mistake it sees.”
Justice Samuel Alito dissented, joined by Roberts and Clarence Thomas.
“The Court employs stare decisis, normally a tool of restraint, to reaffirm a clear case of judicial overreach,” he wrote. Brulotte wasn't statutory interpretation, he wrote, but bold-faced policymaking based on bad economics. Patent holders and licensees should be free to negotiate whatever terms they want, Alito wrote, and "the need to avoid Brulotte is an economic inefficiency in itself.”
“We do not give super-duper protection to decisions that do not actually interpret a statute,” Alito wrote.
Today's decisions leave the blockbusters of the season still in the air, including Burwell, the Obamacare subsidies challenge, and Obergefell v. Hodges, over the constitutionality of gay-marriage bans.
