Under the Agricultural Marketing Agreement Act of 1937, the USDA has authority to regulate the sale of certain agricultural products, including California-grown raisins, through the use of “marketing orders.” The marketing order specific to California-grown raisins directs the Raisin Administrative Committee, a branch of the USDA, to establish a yearly raisin tonnage reserve requirement. Every year in February, raisin farmers are told what percentage of their crop is the “reserve requirement” they must turn over to the Committee. Failure to comply results in fines and penalties. In 2002 and 2003, the Horne family refused to comply and was fined over $700,000. In a 2013 decision, the United States Supreme Court unanimously held that regulated entities cannot be compelled to pay regulatory fines before they may contest their constitutionality, under the Fifth Amendment’s protection against uncompensated government seizure of private property (the Takings Clause). On remand in Horne, the federal district court and the Ninth Circuit Court of Appeals found that there was no taking. The Supreme Court heard oral arguments on April 22, 2015, and considered three questions: (1) Whether the government's “categorical duty” under the Fifth Amendment to pay just compensation when it “physically takes possession of an interest in property” applies only to real property and not to personal property; (2) 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; and (3) whether a governmental mandate to relinquish specific, identifiable property as a “condition” on permission to engage in commerce effects a per se taking.
- John Elwood, Partner, Vinson & Elkins LLP