Horne v. Department of Agriculture (2015)

576 U.S. _

Case Year: 2015

Case Ruling: 8-1, Reversed

Opinion Justice: Roberts

FACTS

The Agricultural Marketing Agreement Act of 1937 authorizes the secretary of agriculture to develop marketing orders to help maintain stable markets for particular agricultural products. The secretary’s marketing orders for raisins created a Raisin Administrative Committee that imposed a reserve requirement obliging growers to set aside a certain percentage of their crop for the government’s use free of charge. The government makes use of those reserved raisins by selling them in noncompetitive markets, donating them, or disposing them of by other means consistent with establishing an orderly market. Any profits left over from this operation, less administrative costs, are returned to the growers. In 2002-2003, the reserve requirement was 47 percent of the raisin crop. In 2003-2004, it was 30 percent. Raisins retained by the growers after the reserved raisins are set aside (known as “free tonnage raisins”) may be used or sold by the growers.

Marvin and Laura Horne are raisin growers who refused to set aside any raisins for the government on the grounds that the reserve program constituted an unconstitutional taking without just compensation. The government fined the Hornes for the fair market value of the withheld raisins ($483,843.53) as well as civil penalties for failure to comply with the marketing orders ($200,000). The Hornes responded by suing the Department of Agriculture. The lower courts ruled against the Hornes holding that personal property is afforded less protection than real property under the Fifth Amendment and that the reserve requirement was a reasonable condition in exchange for the government benefit of providing an orderly raisin market.

CHIEF JUSTICE ROBERTS DELIVERED THE OPINION OF THE COURT.

The petition for certiorari poses three questions, which we answer in turn.

The first question presented asks “Whether the government’s ‘categorical duty’ under the Fifth Amendment to pay just compensation when it ‘physically takes possession of an interest in property,’ Arkansas Game & Fish Comm’n v. United States (2012), applies only to real property and not to personal property.” The answer is no.

There is no dispute that the “classic taking [is one] in which the government directly appropriates private property for its own use.” Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency (2002). Nor is there any dispute that, in the case of real property, such an appropriation is a per se taking that requires just compensation. See Loretto v. Teleprompter Manhattan CATV Corp. (1982).

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 Takings Clause provides: “[N]or shall private property be taken for public use, without just compensation.” U.S. Const., Amdt. 5. It protects “private property” without any distinction between different types. The principle reflected in the Clause goes back at least 800 years to Magna Carta, which specifically protected agricultural crops from uncompensated takings. Clause 28 of that charter forbade any “constable or other bailiff ” from taking “corn or other provisions from any one without immediately tendering money therefor, unless he can have postponement thereof by permission of the seller.”

The colonists brought the principles of Magna Carta with them to the New World, including that charter’s protection against uncompensated takings of personal property....

Nothing in this history suggests that personal property was any less protected against physical appropriation than real property. . . .

Prior to this Court’s decision in Pennsylvania Coal Co. v. Mahon (1922), the Takings Clause was understood to provide protection only against a direct appropriation of property—personal or real. Pennsylvania Coal expanded the protection of the Takings Clause, holding that compensation was also required for a “regulatory taking”—a restriction on the use of property that went “too far.” And in Penn Central Transp. Co. v. New York City (1978), the Court clarified that the test for how far was “too far” required an “ad hoc” factual inquiry. That inquiry required considering factors such as the economic impact of the regulation, its interference with reasonable investment-backed expectations, and the character of the government action.

Four years after Penn Central, however, the Court reaffirmed the rule that a physical appropriation of property gave rise to a per se taking, without regard to other factors. In Loretto, the Court held that requiring an owner of an apartment building to allow installation of a cable box on her rooftop was a physical taking of real property, for which compensation was required. That was true without regard to the claimed public benefit or the economic impact on the owner. The Court explained that such protection was justified not only by history, but also because “[s]uch an appropriation is perhaps the most serious form of invasion of an owner’s property interests,” depriving the owner of the “the rights to possess, use and dispose of” the property. That reasoning—both with respect to history and logic—is equally applicable to a physical appropriation of personal property. . . .

The reserve requirement imposed by the Raisin Committee is a clear physical taking. Actual raisins are transferred from the growers to the Government. Title to the raisins passes to the Raisin Committee. The Committee’s raisins must be physically segregated from free-tonnage raisins. Reserve raisins are sometimes left on the premises of handlers, but they are held “for the account” of the Government. The Committee disposes of what become its raisins as it wishes, to promote the purposes of the raisin marketing order.

Raisin growers subject to the reserve requirement thus lose the entire “bundle” of property rights in the appropriated raisins—“the rights to possess, use and dispose of ” them, Loretto,—with the exception of the speculative hope that some residual proceeds may be left when the Government is done with the raisins and has deducted the expenses of implementing all aspects of the marketing order. The Government’s “actual taking of possession and control” of the reserve raisins gives rise to a taking as clearly “as if the Government held full title and ownership,” as it essentially does. The Government’s formal demand that the Hornes turn over a percentage of their raisin crop without charge, for the Government’s control and use, is “of such a unique character that it is a taking without regard to other factors that a court might ordinarily examine.”

The Government thinks it “strange” and the dissent “baffling” that the Hornes object to the reserve requirement, when they nonetheless concede that “the government may prohibit the sale of raisins without effecting a per se taking.” But that distinction flows naturally from the settled difference in our takings jurisprudence between appropriation and regulation. A physical taking of raisins and a regulatory limit on production may have the 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 “consist[ent] with the letter and spirit of the constitution.” McCulloch v. Maryland (1819). As Justice Holmes noted, “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.” Pennsylvania Coal.

The second question presented asks “Whether the government may avoid the categorical duty to pay just compensation for a physical taking of property by reserving to the property owner a contingent interest in a portion of the value of the property, set at the government’s discretion.” The answer is no.

The Government and dissent argue that raisins are fungible goods whose only value is in the revenue from their sale. According to the Government, the raisin marketing order leaves that interest with the raisin growers: After selling reserve raisins and deducting expenses and subsidies for exporters, the Raisin Committee returns any net proceeds to the growers. The Government contends that because growers are entitled to these net proceeds, they retain the most important property interest in the reserve raisins, so there is no taking in the first place. The dissent agrees, arguing that this possible future revenue means there has been no taking under Loretto.

But when there has been a physical appropriation, “we do not ask . . . whether it deprives the owner of all economically valuable use” of the item taken. Tahoe-Sierra Preservation Council (“When the government physically takes possession of an interest in property for some public purpose, it has a categorical duty to compensate the former owner, regardless of whether the interest that is taken constitutes an entire parcel or merely a part thereof.”). For example, in Loretto, we held that the installation of a cable box on a small corner of Loretto’s rooftop was a per setaking, even though she could of course still sell and economically benefit from the property. The fact that the growers retain a contingent interest of indeterminate value does not mean there has been no physical taking, particularly since the value of the interest depends on the discretion of the taker, and may be worthless, as it was for one of the two years at issue here. . . .

The third question presented asks “Whether a governmental mandate to relinquish specific, identifiable property as a ‘condition’ on permission to engage in commerce effects a per se taking.” The answer, at least in this case, is yes.

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. In Loretto, we rejected the argument that the New York law was not a taking because a landlord could avoid the requirement by ceasing to be a landlord. We held instead that “a landlord’s ability to rent his property may not be conditioned on his forfeiting the right to compensation for a physical occupation.” . . .

The Government and dissent rely heavily on Ruckelshaus v. Monsanto Co. (1984). There we held that the Environmental Protection Agency could require companies manufacturing pesticides, fungicides, and rodenticides to disclose health, safety, and environmental information about their products as a condition to receiving a permit to sell those products. While such information included trade secrets in which pesticide manufacturers had a property interest, those manufacturers were not subjected to a taking because they received a “valuable Government benefit” in exchange—a license to sell dangerous chemicals.

The taking here cannot reasonably be characterized as part of a similar voluntary exchange. In one of the years at issue here, the Government insisted that the Hornes turn over 47 percent of their raisin crop, in exchange for the “benefit” of being allowed to sell the remaining 53 percent. The next year, the toll was 30 percent. . . 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. A case about conditioning the sale of hazardous substances on disclosure of health, safety, and environmental information related to those hazards is hardly on point. . . .

Finally, the Government briefly argues that if we conclude that the reserve requirement effects a taking, we should remand for the Court of Appeals to calculate “what compensation would have been due if petitioners had complied with the reserve requirement.” 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.” Indeed, according to the Government, the Hornes would “likely” have a net gain under this theory. . . .

The Government has already calculated the amount of just compensation in this case, when it fined the Hornes the fair market value of the raisins: $483,843.53. The Government cannot now disavow that valuation. . . . There is accordingly no need for a remand; the Hornes should simply be relieved of the obligation to pay the fine and associated civil penalty they were assessed when they resisted the Government’s effort to take their raisins. This case, in litigation for more than a decade, has gone on long enough.

The judgment of the United States Court of Appeals for the Ninth Circuit is reversed.

It is so ordered.

JUSTICE BREYER, WITH WHOM JUSTICE GINSBURG AND JUSTICE KAGAN JOIN, CONCURRING [EXCEPT ON THE ISSUE OF REMANDING THE CASE TO THE COURT OF APPEALS IN ORDER TO DETERMINE THE AMOUNT OF COMPENSATION DUE].

I agree with [most of] the Court’s opinion. However, I cannot agree with the Court’s rejection of the Government’s final argument. The Government contends that we should remand the case for a determination of whether any compensation would have been due if the Hornes had complied with the California Raisin Marketing Order’s reserve requirement. In my view, a remand for such a determination is necessary.

The question of just compensation was not presented in the Hornes’ petition for certiorari. It was barely touched on in the briefs. And the courts below did not decide it. At the same time, the case law that I have found indicates that the Government may well be right: The marketing order may afford just compensation for the takings of raisins that it imposes. If that is correct, then the reserve requirement does not violate the Takings Clause.

The Takings Clause of the Fifth Amendment provides that “private property [shall not] be taken for public use, without just compensation.” The Clause means what it says: It “does not proscribe the taking of property; it proscribes taking without just compensation.” Williamson County Regional Planning Comm’n v. Hamilton Bank of Johnson City (1985). Under the Clause, a property owner “is entitled to be put in as good a position pecuniarily as if his property had not been taken,” which is to say that “[h]e must be made whole but is not entitled to more.” Olson v. United States (1934).

On the record before us, the Hornes have not established that the Government, through the raisin reserve program, takes raisins without just compensation. When the Government takes as reserve raisins a percentage of the annual crop, the raisin owners retain the remaining, free-tonnage, raisins. The reserve requirement is intended, at least in part, to enhance the price that free-tonnage raisins will fetch on the open market. And any such enhancement matters. This Court’s precedents indicate that, when calculating the just compensation that the Fifth Amendment requires, a court should deduct from the value of the taken (reserve) raisins any enhancement caused by the taking to the value of the remaining (free-tonnage) raisins. . . .

The Court has consistently applied this method for calculating just compensation: It sets off from the value of the portion that was taken the value of any benefits conferred upon the remaining portion of the property. . . .

. . . In my view, . . . the Takings Clause requires compensation in an amount equal to the value of the reserve raisins adjusted to account for the benefits received. And the Government does, indeed, suggest that the marketing order affords just compensation. Further, the Hornes have not demonstrated the contrary. Before granting judgment in favor of the Hornes, a court should address the issue in light of all of the relevant facts and law.

. . . I would remand the case, permitting the lower courts to consider argument on the question of just compensation.

JUSTICE SOTOMAYOR, DISSENTING.

The Hornes claim, and the Court agrees, that the Raisin Marketing Order effects a per se taking under our decision inLoretto v. Teleprompter Manhattan CATV Corp. (1982). But Loretto sets a high bar for such claims: It requires that each and every property right be destroyed by governmental action before that action can be said to have effected a per se taking. Because the Order does not deprive the Hornes of all of their property rights, it does not effect a per setaking. I respectfully dissent from the Court’s contrary holding. . . .

[W]e have held that the government effects a per se taking when it requires a property owner to suffer a “permanent physical occupation” of his or her property. Loretto. In my view, however, Loretto—when properly understood—does not encompass the circumstances of this case because it only applies where all property rights have been destroyed by governmental action. Where some property right is retained by the owner, no per se taking under Loretto has occurred.

This strict rule is apparent from the reasoning in Loretto itself. We explained that “[p]roperty rights in a physical thing have been described as the rights to possess, use and dispose of it.” A “permanent physical occupation” of property occurs, we said, when governmental action “destroys each of these rights.” When, as we held in Loretto, each of these rights is destroyed, the government has not simply “take[n] a single ‘strand’ from the ‘bundle’ of property rights”; it has “chop[ped] through the bundle” entirely. In the narrow circumstance in which a property owner has suffered this “most serious form of invasion of [his or her] property interests,” a taking can be said to have occurred without any further showing on the property owner’s part.

By contrast, in the mine run of cases where governmental action impacts property rights in ways that do not chop through the bundle entirely, we have declined to apply per se rules and have instead opted for the more nuanced Penn Central test. . . .

What our jurisprudence thus makes plain is that a claim of a Loretto taking is a bold accusation that carries with it a heavy burden. To qualify as a per se taking under Loretto, the governmental action must be so completely destructive to the property owner’s rights—all of them—as to render the ordinary, generally applicable protections of the Penn Central framework either a foregone conclusion or unequal to the task. Simply put, the retention of even one property right that is not destroyed is sufficient to defeat a claim of a per se taking under Loretto. . . .

The Hornes, however, retain at least one meaningful property interest in the reserve raisins: the right to receive some money for their disposition. The Order explicitly provides that raisin producers retain the right to “[t]he net proceeds from the disposition of reserve tonnage raisins” and ensures that reserve raisins will be sold “at prices and in a manner intended to maxim[ize] producer returns.” According to the Government, of the 49 crop years for which a reserve pool was operative, producers received equitable distributions of net proceeds from the disposition of reserve raisins in 42.

Granted, this equitable distribution may represent less income than what some or all of the reserve raisins could fetch if sold in an unregulated market. In some years, it may even turn out (and has turned out) to represent no net income. But whether and when that occurs turns on market forces for which the Government cannot be blamed and to which all commodities—indeed, all property—are subject. In any event, we have emphasized that “a reduction in the value of property is not necessarily equated with a taking,” that even “a significant restriction . . . imposed on one means of disposing” of property is not necessarily a taking, and that not every “injury to property by governmental action” amounts to a taking. Indeed, we would not have used the word “destroy” in Loretto. if we meant “damaged” or even “substantially damaged.” I take us at our word: Loretto’s strict requirement that all property interests be “destroy[ed]” by governmental action before that action can be called a per se taking cannot be satisfied if there remains a property interest that is at most merely damaged. That is the case here; accordingly, no per se taking has occurred. . . .

Because a straightforward application of our precedents reveals that the Hornes have not suffered a per se taking, I would affirm the judgment of the Ninth Circuit. The Court reaches a contrary conclusion only by expanding our per setakings doctrine in a manner that is as unwarranted as it is vague. I respectfully dissent.