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Monday, June 22, 2015

Supreme Court: Government Has to Pay if It Takes Your Stuff

Down with the Raisin Administrative Committee!

California raisin farmers Laura and Marvin Horne will finally get paid for the 600,000 pounds of raisins the feds tried to steal from them over 10 years ago.

The Supreme Court delivered its opinion today in the case of Horne v. Department of Agriculture, and it is a big win for property rights and stinging rebuke of the government.

The story starts with something called the “Raisin Administrative Committee” (a surreal government agency that sounds like it belongs next to the Ministry of Silly Walks in a Monty Python sketch).

The Raisin Committee was created by a law passed during Great Depression meant to jack up the price of food crops.

In 2002, the committee tried to seize nearly half of the Hornes’s raisins and pay them even less than what it cost to grow them. The next year, it ordered them to hand over a third of their raisins in exchange for… nothing.

A brief filed by the Cato Institute explains:                                        

Thus, a New Deal program whose raison d’être was to lift prices above “the cost of production” now forces raisin farmers to fork over the (dried) fruits of their labor with no hope of even covering their expenses.

Year in and year out, the Committee takes farmers’ crops without providing just — or sometimes any — compensation.

The Hornes refused to obey the orders, thinking that, well, this is America and the government can’t just steal your stuff.

The Department of Agriculture sent trucks to their farm one morning intending to confiscate their raisins, but the Hornes refused to let them in. The USDA was not happy. It claimed that not only can it take your property without paying you for it, it can also make you pay for not handing it over — and the Hornes were slapped with almost $700,000 in fines.

The Hornes sued under the 5th Amendment, which clearly states “nor shall private property be taken for public use, without just compensation.”

The 9th Circuit Court of Appeals ruled against the Hornes, arguing two absurd things: first, that the government physically picking up the raisins, putting them in trucks, and carting them away doesn’t count as a “taking.” Instead, it was just a “use restriction” on “interstate commerce.”

Second, the 9th Circuit claimed that the Constitution gives less protection to “personal” property (i.e., things) than it does to “real” property (i.e., land). Combined with the fact that the government might, at some future date, decide to pay something for the raisins it took, this meant that the Hornes might not lose all of the value of their crop, and so it wasn’t really a “taking.”

The Supreme Court finally ruled on the merits, voting 8-1 for the Hornes and utterly repudiating the government and 9th Circuit’s arguments.

The first question before the Court was “whether the government’s ‘categorical duty’ under the Fifth Amendment to pay just compensation … applies only to real property and not to personal property.”

Writing for the majority, Chief Justice Roberts responded bluntly: “The answer is no.”

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 reserve requirement imposed by the Raisin Committee is a clear physical taking. Actual raisins are transferred from the growers to the Government.

Roberts wrote that “the speculative hope” that the government might someday give the Hornes something for their raisins did not in any way change the fact that the government was depriving them of their “rights to possess, use and dispose of” their property.

The second question was whether the government could escape its duty to pay just compensation by giving the property owner a “contingent interest” in a “portion of the value of the property, set at the government’s discretion.”

Roberts: “The answer is no.” The fact that property owners might get back some tiny portion of the economic value of their property if the government decides to sell it does not mean the government can get out of paying them just compensation for it.

The third question was whether it still counts as a “taking” under the 5th Amendment if the government requires businesses to hand over their property as a “condition” of engaging in commerce.

Roberts: “The answer, at least in this case, is yes.” The government has to pay you for taking your property, even if it’s taking property under the excuse of regulating commerce.

The Government contends that the reserve requirement is not a taking because raisin growers voluntarily choose to participate in the raisin market. According to the Government, if raisin growers don’t like it, they can “plant different crops,” or “sell their raisin-variety grapes as table grapes or for use in juice or wine.”

“Let them sell wine” is probably not much more comforting to the raisin growers than similar retorts have been to others throughout history. In any event, the Government is wrong as a matter of law.

Finally, the government tried a last ditch argument: that if the Court rules that they have to pay the Hornes for their raisins, they should have to go through yet another court case to calculate what the value of the raisins would have been without the government raisin program.

The Government contends that the calculation must consider what the value of the reserve raisins would have been without the price support program, as well as “other benefits … from the regulatory program, such as higher consumer demand for raisins spurred by enforcement of quality standards and promotional activi­ties.” …

The best defense may be a good offense, but the Government cites no support for its hypothetical-based approach, or its notion that general regulatory activity such as enforcement of quality standards can constitute just compensation for a specific physical taking.

Instead, our cases have set forth a clear and administrable rule for just compensation: “The Court has repeatedly held that just compensation normally is to be measured by ‘the market value of the property at the time of the taking.’”

Justices Ginsburg, Kagan, and Breyer disagree with the majority opinion that the government should have to pay the market value of the raisins, saying the Hornes should have to prove what the price of raisins would be if the government wasn’t distorting the market by seizing half of the raisin crop. 

But eight of the nine justices agreed with the basic points: that “personal property” counts the same as land under the 5th Amendment, and that seizing the raisins requires “just compensation,” even if it is just a “condition” of selling raisins in the market.

This decision is a body blow to one of the most idiotic government programs left over from the New Deal; let’s hope Congress pays attention and abolishes the Raisin Administrative Committee entirely. 

But the ruling also has large ramifications for property rights and free markets generally. It utterly refuted the government’s claims about the power of the Commerce Clause and the limits of the Takings Clause, and it should be viewed as a resounding victory for the rights to property and to business.

  • Daniel Bier is the executive editor of The Skeptical Libertarian.