Horne v. Department of Agriculture is About More than Just Raisins and Free Markets

Condemnation law can be a tricky affair. But, until recently, there was one solid rule you could rely on: if the government physically takes possession of someone’s property, it’s generally a taking, and the government  has to pay the owner.

You will notice we noted “until recently.” The United States Supreme Court will soon have the opportunity to determine how much of that historic rule remains intact. Today, appeal attorneys present oral argument at the Supreme Court in Horne v. Department of Agriculture, or, as it is popularly known around the internet, the “California Raisins Case.”  

The case arose several years ago when the Department of Agriculture issued an order requiring that the Hornes (who had broken no law) surrender up to 47 percent of their raisin crop to the federal government as part of a federal program to regulate the supply and price of raisins. If the Hornes refused to surrender their property, they could be subject to thousands of dollars in penalties.

Unfortunately, the  outright extortion the Hornes were subjected to was not the isolated act of a rogue government agent. It was part of a larger federal price-fixing scheme authorized by the  Agricultural Marketing Agreement Act of 1937. (MAA) Under the Act , the federal government attempts to control the price of raisins by controlling their supply. In high production years the government will force farmers to surrender a certain percentage of their crops to the government to be placed in a sort of “raisin bank.” Ideally, this will artificially reduce the supply of raisins that year, thus keeping raisin prices high. In lean years, the government will sell raisins from the raisin bank in order to increase the overall supply of raisins and, ideally, stabilize prices at the arbitrary level that the department of agriculture has deemed appropriate.

Putting aside the obvious economic problems with a federal agency attempting to tinker with the market in such a way,  the biggest problem with this scheme is that it is essentially government authorized theft. Generally speaking, the Fifth Amendment requires the government to pay for private property that it takes, even when the government has a good reason for the taking. Yet, under the MAA the government can essentially come in on harvest-day and walk away with nearly half of a farmer’s raisin crop without having to pay for it.

Thus, when the Hornes received an order demanding that they surrender their raisins, they sued, claiming that the order demanding that they surrender their raisins, without pay, amounted to a taking without just compensation. Surprisingly, the Ninth Circuit Court of Appeal disagreed.

Departing from well established precedent, the court held that the physical acquisitions of raisins by the government under the MAA was not a per se taking; it was merely a regulation.  The requirement that the Hornes surrender half their crop was nothing more than a condition placed on the right to sell raisins.  To put it another way, surrendering half of your raisins to the government is just part of the cost of doing business–no different than paying for building permit before you build a hotel.

It goes without saying, that if such a ruling is allowed to stand it could have dramatic implications for property rights jurisprudence across the country. Let’s hope that the Supreme Court takes Horne v. Department of Agriculture as an opportunity to re-invigorate the once-clear rule that when the government physically takes possession of property, it must justly compensate owners.