Defending against Enforcement Actions with the Takings Clause: Good News for Agriculture and Property Owners in U.S. Supreme Court

What's that, you say? The U.S. Supreme Court has just decided a second Takings Clause case this term, unanimously--and in the property owner's favor?

Indeed. In today's opinion by Justice Thomas, the Supreme Court again ruled favorably for property owners. Horne v. U.S. Department of Agriculture, No. 12-236 (June 10, 2013). Recall that this is the case where raisin producers raised the Takings Clause as a defense to the  imposition of fines for a New Deal agricultural marketing law. In response, the government argued that the raisin producers can try their hand at bringing a separate lawsuit but cannot use it as a weapon against government enforcement. The Ninth Circuit bought the government's argument, but the U.S. Supreme Court did not.

While carefully noting that it was not ruling on the merits of the raisin producers' takings claim, the Supreme Court held that a "takings-based defense may be raised by a handler in the context of an enforcement proceeding initiated by the USDA under §608c(14)." Slip Op. at 14. The practical result of this holding is that the raisin producers will get to assert their takings defense below. So, their saga continues, but as in a case decided last year, Sackett v. EPA, the good news is that landowners continue to open the door to judicial review of abusive government processes. That is, the takings clause has been strengthened as a weapon for the property owner to use when the government brings enforcement actions against the property owner.

There's no media coverage of the case yet, but I'll update you when it becomes available. In the meantime, to catch up on the background of this case, see my archives. Stay tuned. We're still waiting on a decision in Koontz v. St Johns River Water Management District, No. 11-1447 (argued Jan. 15, 2012), which has some theoretical similarities to Horne. Here's hoping property owners go three-for-three at the U.S. Supreme Court this term.

Your Raisins or Your Life: Recapping the Horne Oral Argument before the U.S. Supreme Court

Last week, the U.S. Supreme Court heard oral arguments in this term's third property rights case, which could have important implications for a variety of agriculture interests. Horne v. U.S. Department of Agriculture, No. 12-236 (argued Mar. 20, 2013). This is the case where raisin producers raised the Takings Clause as a defense to the government's imposition of fines for a New-Deal-era agricultural marketing law. The government, on the other hand, has argued that the raisin producers can try their hand at bringing a separate lawsuit but cannot use it as a weapon against government enforcement.

Lyle Denniston at SCOTUSblog recaps the strange and lively arguments:

A portentous constitutional issue hung in the air Wednesday as the Supreme Court examined government seizures of private property, and everybody seemed to want to have it decided. But it was almost totally lost in a fog raised by a perplexing array of minutiae about how the government tries to push up the price of raisins. The cloud was so thick that even a highly respected professor and former judge misspoke twice in describing his clients’ role.

***

In one of the points Wednesday when a bit of clarity seemed within reach, Justice Stephen G. Breyer (who often asks questions with multiple layers of complexity) suggested simply that the raisin program is either constitutional or it’s not, and “it rather seems to me that it is not a right fit for the Court of Claims. Am I wrong about that?”

The Wall Street Journal gets the implications right for the average Joe:

Taxpayers are wary of government programs that confiscate private property—witness outrage over the 2005 Supreme Court Kelo decision that let government take homes via eminent domain for private use. Now the High Court is considering another program that orders citizens to surrender their assets—or else.

U.S. raisin farmers have been required for nearly 80 years to turn over a share of their crops to the federal government every year, often at below-market prices. Last week the Supreme Court heard oral argument on whether, in the words of Justice Elena Kagan, this annual raisin heist is "a taking, or just the world's most outdated law." 

*** 

For small businesses, these routine confiscations are a special burden because so few can afford to defend their property rights. Similar federal marketing orders cover produce including apricots, avocados, kiwis and olives. The effect is to impose a tax on farmers. 

As Justice Antonin Scalia put it, so it's "your raisins or your life, right? . . . you don't have to pay the penalty if you give us the raisins." No, Mr. Palmore explained. "They have to give the raisins . . . It's not a choice." Which is why the Justices should find these takings to be unconstitutional.

Seems like The Onion picked a good case to parody, doesn't it?

Those who like to read the tea leaves would do best by checking out Robert Thomas's blow-by-blow analysis of the arguments. His prediction?

We're predicting a narrow ruling from the Court vacating the Ninth Circuit's amended opinion, holding that the issue is not "jurisdictional," and sending the case back to the Ninth Circuit for further consideration of the Hornes' request for en banc review. The multiple concessions from USDA's counsel are probably going to be too much to overcome, and a narrow remand would allow the Court to resolve the case without getting too far into the weeds about "handlers" and "producers," issues that no Justice seemed ready to tackle, and without getting into the merits of the takings issue.

In his preview of the Horne case, Robert Thomas did a good job of connecting Horne to a case that's near and dear to this author's heart, Koontz v. St Johns River Water Management District, No. 11-1447 (argued Jan. 15, 2012). I've written about the Koontz case many times, and as my readers know, I co-authored an amicus brief in support of the landowner-petitioner in that case. As I've discussed before, Horne, like Koontz, raises a fundamental question about the Takings Clause: does it have any power to prevent unconstitutional threats? Or must a property owner roll over to the government's extortion and only then go to court?

Horne Oral Argument Preview: The Takings Clause as a Weapon Against Government Enforcement Actions

On Wednesday, the U.S. Supreme Court will hear its third property rights case of the term, Horne v. U.S. Department of Agriculture, No. 12-236 (cert. granted Nov. 20, 2012). As I've explained, in this case, raisin producers raised the Takings Clause as a defense to the government's imposition of fines for a New-Deal-era agricultural marketing law. The government, on the other hand, has argued that the raisin producers can try their hand at bringing a separate lawsuit but cannot use it as a defense.

Lyle Denniston at SCOTUSblog always has insightful analyses, and he has done it again in this weekend's argument preview. He notes the tricky line in this case between jurisdiction and the merits of this case:

Although the bottom line of the case is about court jurisdiction, and about when a claim of “takings” is “ripe” for judicial review, the growers’ petition put a heavy emphasis on their argument that the government, by ordering them to make a cash payment to the government, had taken their property in violation of the Fifth Amendment. Any time the government imposes a penalty in the form of money damages, the petition contended, a “takings” claim is available because in demanding money, the government “had already determined that no ‘just compensation’ will be forthcoming.” So, at that very point, a claim of a “taking” should be allowed as a defense to the fine’s imposition, the growers asserted.

In his analysis, this case could have important implications:

This is another of those cases before the Court where the outcome may follow quite easily from the Court’s choice of which of two different theoretical boxes is the right one for this dispute. If it sees the case as a controversy over the government’s use of a “bait-and-switch” strategy to thwart a serious challenge to its marketing program enforcement, the growers could be well on their way to winning. The growers’ lawyers have done quite a good job of portraying this as a David-and-Goliath contest; here and there, the filings portray these vineyards as small parts of the raisin industry. 

But if the Court sees the case as one more in a lengthy line of pleas to relax its hard line against “premature” claims for just compensation under the Takings Clause, the Agriculture Department could be home free. The Court has steadfastly refused to budge on requiring those who claim a “taking” to go through the proper channels before they can mount a definitive claim for compensation. 

The case, as it was being readied for the Court, moved a considerable distance away from the legalities of the decades-long programs for shoring up agricultural prices. In fact, the back-and-forth categorization of the growers, as the controversy moved along, between “handlers” and “producers” is not likely to clarify legal responsibilities under these farm crop marketing schemes. In the end, the case began to appear, in some significant ways, as a case that turns on its special facts. 

But the larger potential of the case, to draw the Court deeply into the history and meaning of the Fifth Amendment Takings Clause, gives it the promise of producing a major new precedent. It could, indeed, clarify not only when claims under that Clause are, or are not, premature, but also determine whether there is anything to the growers’ quite novel argument that the Clause is a weapon against government enforcement actions through monetary fines.

This should be an interesting oral argument. Michael McConnell, a Stanford law professor and former federal appellate judge, will be arguing for the raisin producers. He and his team have done an excellent job of positioning this case as a David versus Goliath battle: “All we want to do is pack our raisins and sell them,” Mr. Horne has said. “The only thing I wanted, along with my group, was to be free.” 

Is it a Regulatory Taking if the Government Forces You to Hand Over Your Crops in Exchange for the Privilege of Entering the Marketplace?

Now that all the responsive briefs are have been submitted in Horne v. U.S. Department of Agriculture, No. 12-236 (cert. granted Nov. 20, 2012), I've had a chance to take a look. Recall that this is the third property rights case that the U.S. Supreme Court will hear this term. Recall that this is the raisins case, Horne v. U.S. Department of Agriculture, No. 12-236 (cert. granted Nov. 20, 2012), that has been compared to guerrilla warefare, and which is to consider whether a New Deal agricultural statute takes property of raisin growers without compensation. As I've written before, the issues is this: if the government takes you to court because you failed to pay something it required, can you defend against the government by arguing it is attempting to take your property without compensation?

In its response brief, the Department of Agriculture begins by continuing a recent theme in takings cases by naming the Takings Clause the Just Compensation Clause. Robert Thomas believes this move was to imply that the Hornes are seeking compensation, when in fact they are simply defending against government enforcement. The Department makes two main points:

1. The Hornes can attack the raisin confiscation through a claim for compensation through the federal Tucker Act, which authorizes the Court of Federal Claims to award compensation when it finds a taking has occured.
2. The Hornes engaged in a procedural "shell-game" in defending against government enforcement using the takings clause. The Department argues that the Hornes are defending in their statutory capacity as a "producer" of raisins rather than as a "handler."

As for the second point, the amicus brief of the Sun-Maid Growers of California makes the same argument. I ask: should the government really be able to shield itself when it takes property by erecting arbitrary statutory categories of property owners?

In the amicus brief of the International Municipal Lawyers Association, Prof. John Echeverria of Vermont Law School, who always resolves takings claims in favor of the government, argues:

Petitioners have needlessly complicated the vindication of their asserted rights under the Takings Clause of the Fifth Amendment by failing to file a straight forward claim for just compensation in the U.S.Court of Federal Claims. Petitioners have long participated in the raisin industry marketing program which they now believe results in a taking. Thus, they could easily have filed a claim for just compensation in the U.S. Court of Federal Claims based on this asserted taking. Instead, petitioners decided to disregard federal law requiring that they participate in the program and now seek to invoke the Takings Clause to defend against the sanctions imposed as a result of their illegal action.This effort should fail for three independent reasons. First, because the purpose of the Takings Clause is to provide compensation for takings, rather to stop takings from occurring, it would contradict the purpose and function of the Takings Clause to allow a party who has defied federal law and thereby blocked implementation of a federal program to defend his or her action by invoking the Takings Clause. Second, government seizures of private property for law enforcement purposes, such as forfeitures, are outside the scope of the Takings Clause. Third, government-imposed mandates to pay money in general, including but not limited to the kinds of monetary sanctions at issue in this case, are outside the scope of the Takings Clause.While it is unlikely the Court will reach the merits of the takings issue in this case, amici submit that the takings argument is meritless. The raisin marketing program is best viewed as involving a regulatory restriction on property rather than an appropriation of property, and therefore the Penn Central analysis should govern this claim. Given the modest (if any) net economic burden imposed by the raisin marketing program, and the modest (if any) interference with petitioners’ reasonable investment-backed expectations, the Penn Central claim should fail. Even if the alleged taking were analyzed under a per se test,the claim should fail because petitioners could not carry the burden of demonstrating that the program has imposed any net compensable injury on them.

Let's hope the U.S. Supreme Court doesn't have as much disdain for private property rights as Prof. Echeverria does! This case is scheduled for oral argument on March 20, 2013.

Raisins Takings Case at the U.S. Supreme Court: When Can You Defend Against a Government Enforcement Action with the Takings Clause?

Lest my readers think property rights are boring, Overlawyered has compared one of this term's takings cases to ... guerrilla warefare! Yep, this is the raisins case, Horne v. U.S. Department of Agriculture, No. 12-236 (cert. granted Nov. 20, 2012), which is to consider whether a New Deal agricultural statute takes property of raisin growers without compensation. Think of the case as basically answering this question: if the government takes you to court because you failed to pay something it required, can you defend against the government by arguing it is attempting to take your property without compensation?

The property owners' summary is excerpted below:

I. The panel erred in holding that it lacked jurisdiction to consider petitioners’ defense under the Takings Clause. That claim is immediately ripe for two independent reasons.  

A. First, under Apfel, a party may challenge a governmental demand for a cash transfer without going through the repetitive steps of paying a fine and then going to the Court of Federal Claims to get the same sum back in the form of compensation for the taking.Second, ripeness bars a lawsuit only in cases where the party seeks anticipatory relief against government action that has not yet taken place. It does not apply when a party seeks to interpose a constitutional defense to an enforcement action brought by the government at the time and in the forum of the government’s own choosing. 

B. Recent cases applying a specialized “ripeness”doctrine to takings claims confuse ripeness with equitable principles regarding the propriety of is-suing an injunction. A review of the text, structure,and historical interpretation of the Takings Clause confirms that a party can obtain affirmative injunctive relief under the Clause or raise the Clause as a defense. The historical record shows that, from the earliest cases, a party could raise the Takings Clause as a defense to government enforcement action. During the Nineteenth Century, courts (including this Court) held that affirmative injunctive relief was also available under the Clause where a party lacked a“reasonable, certain, and adequate” monetary remedy. This rule paralleled the standard for obtaining affirmative injunctive relief under Ex parte Young, 209 U.S. 123 (1908). The availability of affirmative injunctive relief did not limit the ability of parties to raise the Takings Clause as a defense. Nor was this rule ever characterized as an aspect of “ripeness” or“subject-matter jurisdiction” doctrine. It was viewed as the standard for obtaining injunctive relief under the Clause — what would now be described as “choice of remedies.” Once the background legal rule is properly viewed (as an equitable principle regarding the availability of affirmative injunctive relief), it be-comes clear that the panel’s decision that it lacked jurisdiction because petitioners’ takings claim is “unripe” was erroneous. 

II. The review procedures of the AMAA withdraw the Tucker Act. The panel’s holding that those procedures were inapplicable because petitioners challenged the USDA order in their “capacity as producers” rather than “handlers” misunderstands the statutory scheme and contradicts the litigating posture of the government in this very case.The decision below should be reversed and the case remanded for consideration of petitioners’ takings defense on the merits.

Four amicus briefs have been filed in support of the property owners by the Cato Institute, the U.S. Chamber of Commerce, the State of Texas, and a group of constitutional law professors. For those interested, a minor California newspaper has an article with some background. Robert Thomas also has some good thoughts on each of the briefs over at his blog.

We'll see the government's brief and supporting amici's briefs soon. Oral arguments in the case have been set for March 20, 2013.

The Unintended Consequences of Land Use Controls

There's a good op-ed piece in the Wall Street Journal this week that would be funny--if it weren't so maddeningly true. Roger Kimball writes about his struggles with local land use agencies and FEMA in trying to rebuild after Hurricane Sandy:

In "The Road to Serfdom," Friedrich Hayek noted that "the power which a multiple millionaire, who may be my neighbor and perhaps my employer, has over me is very much less than that which the smallest functionnaire possesses who wields the coercive power of the state on whose discretion it depends whether and how I am to be allowed to live or to work." 

And how. But what makes the phenomenon so insidious is that many of the functionaries are as friendly as can be. It's just that they're cogs in a machine whose overriding purpose is not service but self-perpetuation and control. 

It is, as Alexis de Tocqueville saw, a recipe for a form of despotism peculiar to modern democracies. It does this, wrote Tocqueville, by enforcing "a network of small, complicated, painstaking, uniform rules" that reduces citizens "to being nothing more than a herd of timid and industrious animals of which the government is the shepherd." The sobering thought is that we're all complicit in that infantilization. After all, we keep voting for the politicians who put this leviathan in place.

My friends who read Austrian economics are probably thinking Kimball sounds a lot like Frédéric Bastiat:

In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

Why should it be so tough to rebuild after a natural disaster? The seen and the unseen, indeed.

U.S. Supreme Court to Hear Third Property Rights Case This Term, Consider New Deal Agriculture Statute

The U.S. Supreme Court announced earlier this week that it would hear its third property rights case this term. The case is Horne v. U.S. Department of Agriculture, No. 12-236 (cert. granted Nov. 20, 2012). In the case below, the Ninth Circuit held that it lacked jurisdiction to hear a takings claim:

Under a federal marketing program for California raisins, the government seeks to stabilize prices by taking some of the annual crop off the market. A federal committee each year recommends to the Agriculture Department the part of the crop that it believes should be held off the market. A packer or processor may buy raisins from the growers for the part of an annual yield that can be marketed, but the part ordered to be withheld must be kept in reserve. These so-called “reserve tonnage” amounts, though, can be sold in markets where competition does not exist, such as school-lunch programs. The proceeds from selling those raisins are used to pay the costs of running that part of the program. 

A group of grape vineyard operators in California were accused by the Department of setting up a program to evade the reserve pool requirement by processing their own grapes into raisins, then selling them. They countered that they were only producers, not processors, and so were not covered by the marketing order and its reserve set-aside. The Department sought to compel them to obey the marketing order, and the vineyards ultimately were ordered to pay $483,844 in civil penalties. 

The vineyards went to court, contending that the reserve set-aside requirement amounted to a “taking” of their private property without just compensation, as required by the Fifth Amendment. A federal district court judge ruled for the Department, finding that the vineyard operators were, in fact, functioning as processors or packers. Transfer of title to the reserve raisins was not a “taking,” the judge concluded. 

The Ninth Circuit Court ultimately ruled that it lacked jurisdiction to hear the “takings” claim, and that the vineyards should take that plea to the Court of Federal Claims under the so-called ”Tucker Act,” which allows lawsuits against the government seeking monetary compensation for taking private property for public use. The vineyards then took the issue of where they may sue to the Supreme Court, resulting in Tuesday’s grant of review.

My fellow bloggers are already noting that this situation sounds a lot like an exaction. This case has an interesting parallel with Koontz v. St Johns River Water Management District, No. 11-1447 (cert. granted Oct. 5, 2012). In both cases, the courts below held that the property owner needed to give in to the government's demand for their property before challenging the demand. With any luck, the Court will make clear two cases arising out of very different contexts that unlawful government demands for property may be challenged in court without giving in first. In that sense, the Court's ruling in either of these cases could end up seeming a bit like Sackett v. EPA, where the Court gave landowners the right to take EPA to court to challenge environmental compliance orders.

You can follow the case's progress over at SCOTUSblog. More background is available from the LA Times. The briefs from the petition for certiorari stage are below.

Why Free Enterprise Needs a Story

Last month, Arthur C. Brooks wrote an insightful article on the new culture war. Brooks believes the new culture war in America is not about the social struggles of the last two decades--"guns, gays or abortion." The new culture war is about competing visions for America's future. Will the country return to its free enterprise, capitalist roots? Or will it continue the drift to social democracy, to statism? This question should concern every American, not just those of us who are economy-first voters. The answer will touch every aspect of our lives. Consider that, in recent years, the pace of change has quickened, with quasi-nationalized health care, financial bailouts, and government-owned car manufacturers.

Despite these changes, Americans still overwhelming support free enterprise. Brooks points to a Gallup poll describing how Americans feel about various terms describing the political economy. 86% of those polled felt positively about "free enterprise," and 61% felt positively about "capitalism." He also points to a Pew Research Study reporting that 70% of Americans believe that, generally, people are better off in a free-market economy.

Yet, if these studies are accurate, why have even liberals been wondering if we are drifting towards social democracy? To me, the problem is clear: free enterprise needs a story.

Marxists, communists, and socialists have the clear advantage here, as they can easily blend elements of ideology, mythology, and even spirituality. We've all heard the ridiculous stories about Kim Jong Il. More seriously, much scholarship has discussed the Soviet mythologies, and the Chinese are still taught glorified stories of the communist party's early days.

A principled, perhaps even moral, approach is the first step, as Brooks suggests: supporters of free enterprise "must come together around core principles: that the purpose of free enterprise is human flourishing, not materialism; that we stand for equality of opportunity, not equality of income; that we seek to stimulate true prosperity rather than simply treat poverty; and that we believe in principle over power."

But the problem has never been that free enterprise and capitalism lacked proponents with a principled personal philosophy. People need stories and myth precisely because they illustrate those principles. President Obama is a master of illustrating his personal philosophy with semi-mythical American characters. Those of us who believe in free enterprise need to begin doing the same. At the very least, we need to make our beliefs more accessible because many Americans are economically illiterate.

Russ Roberts pushes in the right direction in today's Wall Street Journal, "[Friedrich] Hayek understood that the opposite of top-down collectivism was not selfishness and egotism. A free modern society is all about cooperation. We join with others to produce the goods and services we enjoy, all without top-down direction. The same is true in every sphere of activity that makes life meaningful--when we sang and when we dance, when we play and when we pray. Leaving us free to join with others as we see fit--in our work and in our play-is the road to true and lasting prosperity."

That's at least a start.