WASHINGTON, June 22, 2015 – The U.S. Supreme Court dealt a blow to the Agriculture Department’s marketing order system by ruling that the agency must compensate farmers who are forced to turn over their crops in order to avoid oversupplies.
At issue is the marketing order for raisins that props up prices by requiring producers to put excess supplies into a “reserve pool” rather than selling them.
In an 8-1 decision Monday, the court agreed with California raisin producers Marvin and Laura Horne that the reserve requirement amounted to a government taking of their property.
“The Fifth Amendment applies to personal property as well as real property. The Government has a categorical duty to pay just compensation when it takes your car, just as when it takes your home,” Chief Justice John Roberts wrote in the majority opinion.
It was the second victory for the Hornes at the high court in two years. In 2013, the justices decided unanimously that federal courts had to hear the Hornes’ claim that the reserve requirement amounted to an unconstitutional “taking” of private property.
The Ninth U.S. Circuit of Appeals, which had originally ruled that the courts lacked jurisdiction to hear the takings claim, in 2014 denied Horne’s claim that the reserve requirement was unconstitutional.
The justices rejected the appeals court’s reasoning that farmers weren’t entitled to compensation because they received the benefit of “an orderly raisin market” in exchange for the reserve requirement, and that they could easily avoid the system by planting other crops.
USDA’s Agricultural Marketing Service oversees marketing orders for an array of fruits, vegetables and nuts, but many of them do not have the supply controls the raisin order has and are instead limited to standardizing quality and packaging. A 1937 law that authorized the marketing orders made it legal for the programs to control supplies through the reserve requirement.
“It made a lot of sense at the time but legally it was clearly a taking of property, and the court found that property is more than land,” said Gary Baise, an attorney with OFW law who was not involved in the raisin case.
The Hornes, who have been hit with fines of nearly $700,000 for refusing to comply with the reserve requirement, have been ordered to put as much as 47 percent of their crop into the reserve pool in one year, Roberts noted.
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USDA did not immediately respond to requests for comment on the ruling.
As a result of the ruling, raisin growers will be left without a way to prevent supplies from driving down prices, Baise said. “Raisins may go down substantially, but that is letting the marketplace rule rather than the government,” he said.
Sonia Sotomayor was the lone justice who dissented. She disagreed that the reserve requirement was a clear taking of the Horne’s property since farmers typically receive some money from the distribution of the reserve raisins.
"Granted, this equitable distribution may represent less income than what some or all of the reserve raisins could fetch if sold in an unregulated market. … But whether and when that occurs turns on market forces for which the Government cannot be blamed and to which all commodities — indeed, all property —
Three justices, Stephen Breyer, Ruth Bader Ginsburg and Elena Kagan, believed that the lower courts should have been allowed to consider whether any compensation would have been due if the Hornes had complied with the reserve requirement.