Justices Side With Raisin Farm In Federal Takings Dispute

California raisin producers who were fined for refusing to comply with a federal program that would divert part of their annual crop to a reserve are entitled to just compensation by the government for not only real property, but personal property as well, the U.S. Supreme Court said Monday.

In reversing a ruling by the Ninth Circuit, the Supreme Court held that Marvin and Laura Horne can pursue a takings claim against the federal government under the Fifth Amendment for the loss of personal property, which in this case took the form of raisins that the U.S. requires producers to set aside under the Agricultural Marketing Agreement Act of 1937.

“The government has a categorical duty to pay just compensation when it takes your car, just as when it takes your home,” the court said.

Justices Antonin Scalia, Anthony Kennedy, Clarence Thomas and Samuel Alito joined Chief Justice John Roberts’s majority opinion, which said there was nothing in history as far back as the Magna Carta to suggest that lawmakers afforded any less protection for physical property.

The Ninth Circuit agreed with the U.S. Department of Agriculture that marketing orders requiring raisin growers to give a percentage of their crop to the government couldn’t be a taking per se because the raisin producers were entitled to a portion of the money made from selling off the reserve raisins collected from the Hornes and others.

The circuit court said the Hornes were on the hook for a $695,000 fine that included the $480,000 market value of the grapes they withheld when they refused to allow government trucks onto their property.

On Monday, Justice Sonia Sotomayor accepted the Ninth Circuit’s reasoning in her dissenting opinion, stating that the court’s decision in Loretto v. Teleprompter Manhattan CATV Corp. set a high bar for a per se taking: the destruction of all property rights due to a government action.

Justice Sotomayor said that that the Hornes had clearly maintained one meaningful property interest in the reserve raisins because they stood to receive some compensation, and said it didn’t matter whether the marketing order was ever a good idea or intrudes on property rights.

“The order may well be an outdated, and by some lights downright silly, regulation. It is also no doubt intrusive,” she said. “But whatever else one can say about the order, it is not a per se taking if it does not result in the destruction of every property right.”

The majority opinion countered that the Hornes’ right to some proceeds or indeterminate value doesn’t mean there was not a physical taking, especially since the amount of their compensation was up to the government and was in fact zero for one of the two years at issue in the case.

The court rejected the government’s assertion that the market order seizing some raisins wasn’t a taking because the Hornes voluntarily participated in the raisin market and could have avoided the order if they chose to plant different crops, sold fresh grapes or used their grapes for wine.

“‘Let them sell wine’ is probably not much more comforting to the raisin growers than similar retorts have been to others throughout history,” Justice Roberts said.

With the exception of Justice Sotomayor, all of the other justices agreed that a taking had occurred, but there was a more sizeable split on the matter of just compensation for the Hornes.

Justices Stephen Breyer, Ruth Bader Ginsburg and Elena Kagan concurred with the majority opinion in large part but said it wasn’t clear whether the marketing order had fairly compensated the Hornes.

That trio said that the government had argued that it provided just compensation under the Fifth Amendment’s Takings Clause, and that the Hornes didn’t prove otherwise.

The U.S. said that court should determine what the value of the reserve raisins would have been without the benefit of the price-support program and other benefits it provides, but the majority opinion said that fairness is based on market value.

“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,” the court said.

That conclusion was particularly important according to Kirkland & Ellis LLP’s John O’Quinn, who represents the Hornes.

“I think it’s important because it reaffirms that the right to pursue your livelihood without that being treated as a government benefit may be one of the lasting implications of this decision,” O’Quinn told Law360 on Monday.

The U.S. Department of Justice declined to comment, but a USDA spokesman said the agency will provide guidance based on the decision "in the near future."

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.

REPRINTED WITH PERMISSION FROM THE JUNE 22, 2015 EDITION OF LAW360 © 2015 PORTFOLIO MEDIA INC. ALL RIGHTS RESERVED. FURTHER DUPLICATION WITHOUT PERMISSION IS PROHIBITED. WWW.LAW360.COM