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Justices To Decide Raisin Producers' Federal Takings Suit

The U.S. Supreme Court on Friday agreed to decide whether California raisin producers could bring a takings claim under the Fifth Amendment after refusing to comply with a federal program diverting part of their annual crop to a reserve, the case’s second trip to the high court.

Plaintiffs Marvin and Laura Horne asked the court to grant certiorari after the Ninth Circuit ruled in May that the U.S. Department of Agriculture’s diversion program, meant to steady the country’s raisin supply, was carefully written to ensure producers don't lose their property rights while it stabilizes marketing conditions.

The Hornes contested the Ninth Circuit’s finding that the takings clause affords less protection to personal property than to real property, and that the Hornes didn't lose all economically valuable use of their personal property because they received a share of potential profits from the raisins’ sale.

The plaintiffs argued precedent didn’t justify the distinction between real and personal property and that the program often didn’t pay raisin growers any money because profits were eaten up by administrative costs. The panel also treated the program as a use restriction on their raisins instead of a per se taking, they argued.

“Each of these errors has the effect of converting forced transfer of property ownership to the government into something less: a mere regulatory act, subject only to a weak balancing test,” the Hornes wrote.

“Under the panel’s reasoning, the government could structure virtually any taking, even an explicit confiscation of title and possession, as uncompensable regulation, effectively eviscerating the per se takings rule that has protected property rights in the United States for centuries,” the petition said.

The Hornes asked the court to decided whether the requirement to pay just compensation applied equally to real and personal property, if the government could avoid the requirement by giving property owners a contingent interest in that property, and whether mandates to give up specific property as a prerequisite to commerce was a per se taking.

The program, implemented as part of a marketing order established by the Agricultural Marketing Agreement Act of 1937, eases the raisin supply curve, bringing predictability to the market for producers and consumers, according to court papers. California producers of certain raisins are required to reserve a percentage of their crop, which varies depending on a given year's raisin output.

The Hornes argued the Supreme Court has never distinguished between real and personal property when government seizes ownership, citing its 2013 decision in Koontz v. St. Johns River Water Management District that found a denial of a development permit could be considered a taking of the landowner's property.

They also took issue with the Ninth Circuit’s holding that even appropriation of real property is a per se taking only if it deprives an owner of all property rights. That standard only applies in regulatory takings, when the owner still holds the title for the property, according to the petition.

“That has no bearing on how a court should treat a taking of actual ownership and possession,” the petition said. “If the government took one acre of a 100-acre parcel to build a post office, it could not avoid just compensation on the ground that it left the owner 99 of his acres.”

The Hornes came up with a nontraditional packing program in which they used their own equipment to clean, stem, sort and package raisins, believing they could evade the regulation, according to court filings.

The USDA disagreed in 2001, and they were slapped with a fine of roughly $695,000, according to court documents.

When the Ninth Circuit originally heard the case, it held that jurisdiction over the takings claim fell with the Court of Federal Claims instead of the district court. The Supreme Court reversed that ruling and remanded for a determination on the merits.

The U.S. Department of Justice declined to comment. An attorney for the plaintiffs did not immediately respond Friday to a request for comment.

The plaintiffs are represented by Michael W. McConnell, John C. O'Quinn, Stephen S. Schwartz and Devin A. DeBacker of Kirkland & Ellis LLP and Brian C. Leighton.

The U.S. is represented by Solicitor General Donald B. Verrilli Jr., Acting Assistant Attorney General Joyce R. Branda and U.S. Department of Justice attorneys Michael S. Raab and Joshua Waldman.

 The case is Marvin D. Horne et al. v. U.S. Department of Agriculture, case number 14-275, in the U.S. Supreme Court.