United States Supreme Court Requires Payment of Just Compensation for Taking of Personal Property
SCOTUS held that an act regulating the commercial market for raisins in part by requiring farmers to deliver a portion of their crop to the government constitutes a taking requiring payment of just compensation, notwithstanding any interest that the farmer retains in the sale of those raisins or the benefits that the farmers receive through the regulation of the raisin market. In doing so, SCOTUS refused to recognize a distinction between the public’s interest in personal versus real property. SCOTUS also reasserted that physical appropriations of private property by the government are more readily proven to be takings than regulatory takings.
The United States Supreme Court (“SCOTUS”) issued Horne v Department of Agriculture, 576 US ____ (2015) on June 22, 2015. Horne recognized that a Department of Agriculture (“USDA”) order constituted a taking requiring payment of just compensation pursuant to the Fifth Amendment of the United States Constitution. The holding refused to countenance government activity that results in the actual transfer of ownership of personal property.
“Under the United States California Raisin Marketing Order, a percentage of a grower’s crop must be physically set aside in certain years for the account of the Government, free of charge. The Government then sells, allocates, or otherwise disposes of the raisins in ways it determines are best suited to main¬taining an orderly market.” The Hornes, who are raisin farmer, “refused to set aside any raisins for the Government, believing they were not legally bound to do so…. The Government then assessed against the Hornes a fine equal to the market value of the missing raisins—some $480,000—as well as an additional civil penalty of just over $200,000 for disobeying the order to turn them over.”
The Ninth Circuit Court of Appeals denied that a taking occurred, deeming personal property to be less worthy of protection than real property. SCOTUS disagreed. “There is no dispute that the ‘classic taking [is one] in which the government directly appropriates private property for its own use.’ … Nor is there any dispute that, in the case of real property, such an appropriation is a per se taking that requires just compensation…. Nothing in the text or history of the Takings Clause, or our precedents, suggests that the rule is any different when it comes to appropriation of personal property. The Government has a categorical duty to pay just compensation when it takes your car, just as when it takes your home.” SCOTUS reached this holding after reviewing everything from the English Magna Carta through Revolutionary War complaints about military acquisitions of livestock. SCOTUS continued a line of holdings viewing actual appropriations of title to property, whether real or personal, to be a taking regardless of whether regulations could have the same or similar impacts. Whatever “reasonable expectations with regard to regulations, people still do not expect their property, real or personal, to be actually occupied or taken away.” Thus, the majority recognized that a “physical taking of raisins and a regulatory limit on production may have the same economic impact on a grower” but deemed that point to be irrelevant.
SCOTUS also confirmed that “the government may [not] 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.” The majority confirmed that, unlike regulatory takings, “’we do not ask . . . whether it deprives the owner of all economically valuable use’” because “’ [w]hen the government physically takes possession of an interest in property for some public purpose, it has a categorical duty to compensate the former owner, regardless of whether the interest that is taken constitutes an entire parcel or merely a part thereof.’”
Finally, SCOTUS held that “a governmental mandate to relinquish specific, identifiable property as a ‘condition’ on permission to engage in commerce effects a per se taking.” The government essentially argued that if the Hornes did not like the regulations, they could grow something else to do something with their grapes other than turning them into raisins. “Selling produce in interstate commerce, although certainly subject to reasonable government regulation, is similarly not a special governmental benefit that the Government may hold hostage, to be ransomed by the waiver of constitutional protection.” In reaching this holding, SCOTUS distinguished a prior decision requiring companies manufacturing pesticides, fungicides, and rodenticides to disclose health, safety, and environmental information about their products as a condition to receiving a permit to sell those products. While such information included trade secrets in which pesticide manufacturers had a property interest, those manufacturers were not subjected to a taking because they received a “valuable Government benefit” in exchange—a license to sell dangerous chemicals.”
While Horne addresses taking under the Fifth Amendment of United States Constitution, it applies equally to the states. While the states may enact constitutions that grant more rights than are required by the federal constitution, they must abide by the minimum requirements found in federal law. In addition, SCOTUS refused to adopt the stricter standards that must be met when claiming a taking through regulations when evaluating actual appropriations of private property.
The full decision can be read here.