Raisin takings case oral argument goes badly for the government

Things did not go well for the federal government in today's oral argument in Horne v. US Department of Agriculture, the raisin takings case. Nearly all of the justices were highly skeptical of the government's claim that forcible confiscation of large quantities of raisins somehow does not qualify as a taking of private property that requires "just compensation" under the Fifth Amendment. The forced transfer is part of a 1937 program that requires farmers to turn over a large portion of their raisin crop to the government so as to artificially reduce the amount of raisins on the market, and thereby increase the price. Essentially, the scheme is a government-enforced cartel under which producers restrict output for the market so as to inflate prices.

The lower court decision by the Ninth Circuit held that this doesn't qualify as a taking because personal property (including raisins) is not protected by the Takings Clause, and because Hornes and other raisin farmers actually benefit from the program, which increases the price of the products they sell. There was virtually no sympathy for the former argument among the justices, and Deputy Solicitor General Edwin Kneedler barely even tried to defend it. At one point, he suggested that that argument "has not been our position," though later on he said a similar program targeting property rights in land would be a "fundamentally different" case. Kneedler was probably wise not to push this argument much, since both the text of the Fifth Amendment, the original understanding, and longstanding precedent all indicate that the Takings Clause protects all private property rights equally (which is why the text uses the general term "private property" without differentiating between real and personal property). The relevant history and precedent is covered in detail in an amicus brief I joined along with a number of other constitutional law and property scholars.

Kneedler put most of his emphasis on the argument that there is no taking because the Hornes and other raisin farmers actually benefit from the program that confiscates their raisins. In the words of Justice Antonin Scalia, the government's argument here is that the Hornes are actually "ingrates" who should be grateful for the government's largesse. As several justices emphasized, even if the Hornes really do benefit from the confiscation of their property, that does not change the reality that a taking has occurred. The fact that property owners benefit in some way from the taking of their property may affect the level of compensation they are owed. But it does not change the reality that a taking has occurred in the first place. Justice Samuel Alito noted that the government's logic leads to the conclusion that there is no taking in any situation where the government seizes personal property for purposes that might potentially benefit the owners in some way:

Could the government say to a manufacturer of cellphones, you can sell cellphones; however, every fifth one you have to give to us? Or a manufacturer of cars, you can sell cars in the United States, but every third car you have to give to the ­­ to the United States.

After all, reducing the number of cell phones or cars on the market is likely to raise the price of those products, thereby benefiting their manufacturers.

Michael McConnell, the prominent constitutional law scholar representing the Hornes, pointed out that his clients are probably still net losers from the program, even if you take into account the way in which they benefit from having a higher price. They would likely be better off if they could sell a larger quantity of raisins at the lower price that would prevail in a freer market, than by selling fewer raisins for a higher price under the cartel scheme. Deputy SG Kneedler claimed this was not true because the demand for raisins is so "inelastic" that consumers would not buy more of them if the price were lower. That claim goes against basic economics 101, and I highly doubt that the justices will buy it. In any event, even if it is true, it should only affect the amount of compensation paid, not the determination of whether a taking has occurred at all.

Several other justices expressed concerns similar to Alito's, including liberals Stephen Breyer, Elena Kagan, and Sonia Sotomayor, who are not usually sympathetic to constitutional property rights claims. At one point, Breyer suggested that the Court should rule that seizure of the raisins is indeed a taking, and then remand it to the lower court to determine how much compensation is owed to the Hornes (the amount could be reduced based on the extent to which the Hornes benefit from the program). If I had to predict, I would say this is the most likely outcome of the case, at least based on what we heard today.

Both Breyer and Lyle Denniston of SCOTUSblog suggest that maybe the program at issue in this case is not so bad because "everyone's better off" because of it, including raisin producers. That claim ignores the reality that consumers are harmed by the establishment of inflated prices for raisins and other agricultural products for which the federal government has established similar cartel systems. If private firms tried to establish an arrangement like that on their own, the government would bust them for a blatant violation of antitrust law.

In addition, some producers are differently situated from others, and might potentially be better off without the program than with it. The Hornes themselves likely fall into that category, for reasons articulated by McConnell in the oral argument, and in his reply brief.

UPDATE: It is worth noting that Horne is one of the rare cases that that has gone to the Supreme Court twice. In 2013, the justices unanimously rejected the federal government's claim that the property owners should not even be allowed to present their Takings Clause argument in federal court without first paying some $483,000 in fines and pursuing various likely futile administrative remedies.

UPDATE #2: I initially failed to include a link to the oral argument transcript. I have now added it to the first line of the post.

UPDATE #3: I have made a few minor stylistic changes to this post.