There are few areas of law that fuel as much passion and debate as government takings. To understand the importance Americans place on property rights, one need only look at the outrage generated in the wake of Kelo v. City of New London (1) and the resulting political reaction at both the state and federal levels. (2) If property rights are indeed "the most basic of human rights," (3) it is the charge of the courts to defend them vigilantly. In Horne v. U.S. Department of Agriculture, (4) the Ninth Circuit failed to fulfill this duty when it determined that a New Dealera program requiring raisin farmers to hand over significant portions of their crops--sometimes over half--with little or no compensation (5) did not violate the Takings Clause. (6)
First, the court inappropriately applied a regulatory takings analysis (7) to what was best understood as a simple physical taking. Second, in finding that the Secretary of Agriculture was free to demand from farmers the (dried) fruits of their labor, the court made the troubling pronouncement that "the Takings Clause affords less protection to personal than to real property." (8) Third, the court unconvincingly argued that because the Hornes were free to choose a new profession other than raisin farming, thereby avoiding the regulatory program entirely, the Department of Agriculture's demand for raisins did not place an unconstitutional condition on the Hornes' right to possess their property. (9) Thus, in refusing to recognize that the Department of Agriculture's Marketing Order results in a de facto seizure--a physical taking--of private property, and instead applying the more lenient regulatory takings approach, the Ninth Circuit weakened property rights by creating a precedent that, if uncorrected, stands as the most troubling development in Takings Clause jurisprudence in years.
During the 1930s, the price of raisins, along with other crops, fell dramatically as supply outpaced demand. (10) In the spirit of the New Deal, Congress took action, passing the Agricultural Marketing Agreement Act of 1937. (11) The Act granted the Secretary of Agriculture the authority "to establish and maintain such orderly marketing conditions for agricultural commodities in interstate commerce." (12) The Secretary was to accomplish this through the Marketing Order Regulating the Handling of Raisins Produced from Grapes Grown in California. (13) Responsibility for implementing the order lies with the Raisin Administrative Committee (RAC), (14) which sets an annual "reserve tonnage requirement," (15) a percentage of a farmer's crop that can reach up to 62.5%. (16) Title to the reserve tonnage raisins transfers to the RAC, which sells the raisins in secondary, noncompetitive markets, (17) often to be used in animal feed, school lunch programs, and distilleries. (18) Though producers are entitled "to an equitable distribution of the net proceeds from the RAC's disposition of the 'reserve tonnage' raisins," (19) some years the "equitable distribution" is zero. (20)
The Marketing Order was designed to benefit producers and consumers by "smoothing the raisin supply curve and thus bringing predictability to the market." (21) In practice, the program disproportionately benefits big players in the industry while harming small farmers who cannot afford to forfeit half their yields. (22) Raisin farmers Marvin and Laura Horne, tired of losing large percentages of their harvests to the RAC with little or no compensation, ceased contributing. (23) After the Department of Agriculture assessed the couple a fine of $695,226.92 for their failure to submit to the Marketing Order, the Hornes challenged the reserve requirement, arguing that it constituted a violation of the Fifth Amendment and that the program deprived them of personal property without just compensation. (24) Following a lengthy journey through administrative proceedings and the federal court system, the Hornes finally found themselves before a Ninth Circuit panel with the opportunity to argue their claim on the merits. (25)
The Ninth Circuit affirmed the district court's ruling that the raisin Marketing Order did not constitute a taking in violation of the Fifth Amendment. (26) Writing for the court, Senior Circuit Judge Michael Daly Hawkins explained that the penalty assessed against the Hornes for their noncompliance with the Marketing Order gave the Hornes standing to challenge the reserve tonnage requirement as a taking. (27) However, the court refused to characterize the Marketing Order as a physical per se taking, applying instead a regulatory takings analysis. (28) Arguing that Loretto (29) and Lucas (30) were applicable to real property only, (31) the court settled on the Nollan-Dolan (32) regulatory takings analysis and determined that no taking occurred because the Hornes voluntarily submitted to the Marketing Order when they chose to participate in the interstate raisin industry. (33)
The Hornes Had Standing to Challenge the Marketing Order as a Taking
The court rejected the Secretary of Agriculture's contention that the Hornes could challenge only the portion of the fine that corresponded to the raisins they actually owned and could not challenge the portion of the fine that corresponded to raisins they processed for other farmers. (34) Reiterating the Supreme Court's findings, (35) the court explained that the injury suffered by the Hornes was not the loss of raisins (indeed, the Hornes never surrendered their raisins) but rather the fine imposed by the Department of Agriculture. (36) Because the requirement to pay a penalty was traceable to the penalty's imposition, and because a favorable determination by the court on the takings claim would have redressed the Hornes' injury, the Hornes had standing to sue. (37)
A Regulatory Rather than Physical Takings Analysis Was Appropriate
The court next determined that because no "paradigmatic taking" (38) occurred--meaning that the government never physically appropriated the Hornes' raisins--the court could not evaluate the fine assessed by the Secretary of Agriculture as a physical per se taking. (39) Instead, the court reasoned, it was forced to enter the "doctrinal thicket" of regulatory takings jurisprudence. (40) Relying on Lingle v. Chevron U.S.A., Inc., (41) the court explained that per se regulatory takings fall into three categories: Loretto, (42) where the government causes a total, permanent physical invasion of real property; Lucas, (43) where a government regulation deprives a property owner of all economically beneficial use of his real property; and Nollan-Dolan, (44) where the government grants a benefit in exchange for an exaction. Regulatory takings that do not fall under any of these categories instead require application of the Penn Central balancing test, (45) an alternative argument the Hornes declined to advance. (46)
The court found both Loretto and Lucas inapplicable for two reasons. First, unlike Loretto, which involved the physical occupation of an apartment building, (47) or Lucas, which involved a statute forbidding all development on a beachfront parcel of land, (48) the Marketing Order regulates personal rather than real property. (49) The Takings Clause, the court explained, "affords less protection to personal than to real property," especially when the government program in question "is motivated by economic, or 'commercial/ concerns." (50)
The second reason the court found Loretto and Lucas inapplicable was that the Hornes were not completely divested of their property rights with respect to the reserve raisins. (51) The Hornes were not deprived of all economic benefit even in years when the Hornes received no monetary return because the equitable stake in the reserve raisins was not valueless: "[T]he reserved raisins continue to work to the Hornes' benefit" in that they fund the RAC, which in turn represents raisin producers (such as the Hornes) and helps to stabilize raisin prices. (52)
The Marketing Order Did Not Constitute a Taking Under Nollan-Dolan
Agreeing with the Secretary of Agriculture, the court determined that the "nexus and rough proportionality" analysis of Nollan-Dolan was the most appropriate legal framework because the reserve requirement was a use restriction, analogous to those imposed in the land-use permitting context. (53) Applying the Nollan-Dolan analysis, the court determined that the reserve tonnage requirement did not constitute a Fifth Amendment taking. The reserve program "furthered] the end advanced as [its] justification" (54) by aiming to establish "orderly marketing conditions" and stabilizing prices, thus satisfying the Nollan "nexus" requirement. (55) Additionally, the Marketing Order satisfied Dolan's "rough proportionality" requirement. (56) Indeed, the court claimed that the reserve requirement might have been in "actual proportion to the end of stabilizing the domestic raisin market." (57) By annually modifying the percentage, the court reasorted, the RAC did not overly burden producers. Dolan's requirement that the conditions being imposed be "individualized" (58) was less relevant in the Hornes' context because raisins, unlike parcels of land, are fungible. Although individualized consideration is necessary when the government imposes conditions on a unique parcel of land, it is not required when the property at issue is a commodity and the burden is "imposed evenly across the industry." (59)
Finally, as in Nollan and Dolan where the government conditioned the bestowal of a benefit on the forfeiture of a property interest, the reserve tonnage requirement was best thought of as a "conditional exaction": Instead of granting an easement (as in Nollan), or transferring title to real property (as in Dolan), the Hornes were asked to assume "the loss of possessory and dispositional control" of their raisins in exchange for the "government benefit" of...