The Incredible Raisin Heist

The Incredible Raisin Heist

A property-rights challenge to federal marketing orders hits the Supreme Court.

From the Wall Street Journal

Stealing is illegal, unless the government is the thief. On Wednesday the Supreme Court will hear a case on whether the government can seize a chunk of a business’s product to regulate prices. This is a big one.

Like much government mischief, Horne v. USDA has its roots in the Great Depression and federal programs to prop up the price of goods by controlling supply. To create raisin scarcity, the government established a Raisin Administrative Committee that manages the supply of raisins through annual marketing orders. Raisin handlers must set aside a portion of their annual crop, which the feds may then give away, sell on the open market, or send overseas.

Among the targets were Fresno, California raisin farmers Marvin and Laura Horne, who have been in the business for decades. In 2003-2004 the family farm was required to give some 30% of its raisin crop to the government—some 306 tons—without compensation. The previous year they had to hand over 47%, and they were paid less than the raisins cost to produce.

The Hornes refused to participate, and in a letter to the Agriculture Department they called the program “a tool for grower bankruptcy, poverty, and involuntary servitude.” The raisin police were not amused. The Raisin Administrative Committee sent a truck to seize raisins off their farm and, when that failed, it demanded that the family pay the government the dollar value of the raisins instead.

The Hornes say this raisin toll is an unconstitutional seizure of their property. Under the Fifth Amendment’s Takings Clause, “private property” shall not “be taken for public use, without just compensation.” That clause is typically understood to make it illegal for the government to grab houses, cars or even raisins.

A three-judge panel of the Ninth Circuit Court of Appeals had a different view, ruling in 2011 that “the Raisin Marketing Order applies to the Hornes only insofar as they voluntarily choose to send their raisins into the stream of interstate commerce.” In other words, if you don’t want your raisins seized, you always have the option of going out of business.

After the Hornes sought rehearing en banc, the Ninth Circuit three-judge panel withdrew its opinion and replaced it with one that said the Hornes would first have to pay the fines and then appeal to the Court of Federal Claims. In June 2013 a unanimous Supreme Court overturned that decision and remanded it to the Ninth Circuit to decide on the merits. The court should “figure out,” Justice Elena Kagan said, “whether this marketing order is a taking, or just the world’s most outdated law.”

Hearing the case again, the Ninth Circuit went on another legal flight, ruling that the Takings Clause was meant to address the seizure of land, not other personal private property. And even if the government did take raisin farmers’ property, the confiscation created raisin scarcity which raised raisin prices, so the Hornes were compensated for their property in that way.

This is rewriting the Fifth Amendment. Under the Ninth Circuit’s logic, why couldn’t the government demand that an auto company hand over 20% of the cars off its production line to give to the poor or sell overseas? How about pharmaceuticals or iPhones to maintain stable prices or serve another regulatory purpose?

The Ninth Circuit’s defense of the seizure is that the Hornes could have avoided paying the toll “by planting different crops, including other types of raisins, not subject to this Marketing Order or selling their grapes without drying them into raisins.” But that’s tantamount to assessing a 30% toll on a small business for the privilege of participating in a given market.

The Federal Circuit, which hears many takings cases, as well as the Fifth, Sixth, Seventh, Tenth and D.C. Circuit Courts of Appeal have all held that the full protection of the Takings Clause does apply to the government seizure of personal property. A farmer should have no less right to the raisins growing on his land than he does to the land itself.

The Horne case is one of the most significant property rights cases in years—probably since the Court’s infamous 5-4 ruling in 2005 in Kelo v. New London, which allowed the government to take Susette Kelo’s home so a developer could replace it with condos and stores near a Pfizer Corp. office. The majority Justices in Kelo have a lot to answer for. This is a chance to make partial amends.