On Raisins and Takings: Ninth Circuit Upholds USDA

The raisins so prominent in morning cereal and children's snacks are "heavily regulated" agricultural commodities under marketing orders promulgated by the USDA (United States Department of Agriculture) under the authority of the Agricultural Marketing Agreement Act (AMAA) of 1937, as amended, 7 U.S.C. § 601 et seq.   

In its opinion in Horne v. USDA, the Ninth Circuit upheld the imposition of civil assessments under the regulations and upheld the constitutionality of the regulatory scheme.   The central requirement at issue mandates that a certain percentage of a raisins be put in "reserve" each year - - - this fluctuates yearly and by controlling raisins on the market is a means of indirectly controlling prices.

The Hornes' administrative and statutory claim was that they had reorganized their raisin business and were no longer subject to the regulations because they were no longer "handlers" but only "producers."

Their major constitutional claim was that even if subject to the regulations, "the requirement that they contribute a specified percentage of their annual raisin crop to the government-controlled reserve pool constitutes an uncompensated per se taking in violation of the Fifth Amendment."  They also claimed that the penalities imposed for their “self-help” noncompliance (caused by their reorganization in an attempt to escape from the regulations) violated the Eighth Amendment's Excessive Fines Clause.

The Ninth Circuit panel opinion has an excellent rehearsal of regulatory takings doctrine, which clearly does not support the Hornes' claim.  However, as the opinion notes,the Hornes claim that the Ransin Marketing Order is a physical taking because there is an annual “direct appropriation” of their reserve-tonnage raisins.  The panel rejected this construction: "Though the simplicity of their logic has some understandable appeal—their raisins are personal property, personal property is protected by the Fifth Amendment, and each year the RAC “takes” some of their raisins, at least in the colloquial sense—their argument rests on a fundamental misunderstanding of the nature of property rights and instead clings to a phrase divorced from context."

Instead, as the panel reasoned,

the Raisin Marketing Order applies to the Hornes only insofar as they voluntarily choose to send their raisins into the stream of interstate commerce. Simply put, it is a use restriction, not a direct appropriation. The Secretary of Agriculture did not authorize a forced seizure of forty-seven percent of the Hornes’ 2002-03 crops and thirty percent of their 2003-04 crops, but rather imposed a condition on the Hornes’ use of their crops by regulating their sale.

The panel then cited a Ninth Circuit opinion from 1938 - - - Wallace v. Hudson-Duncan & Co., 98 F.2d 985 - - - rejecting a takings challenge to a reserve requirement under the walnut marketing order.  The panel therefore joined the Court of Federal Claims, which not long ago decided the same question under the Raisin Marketing Order, Evans v. United States, 74 Fed. Cl. 554 (2006), aff’d, 250 Fed. Appx. 321 (Fed. Cir. 2007); in accord with a smiliar case rejecting a challenge to the reserve program under the almond marketing order, Cal-Almond, Inc. v. United States, 30 Fed. Cl. 244 (1994).

On the Eighth Amendment claim, the panel applied the test from United States v. Bajakajian, 524 U.S. 321(1998), considering whether the assessment is imposed, at least in part, for punitive and not merely remedial purposes, and whether the fine is grossly disproportional to the gravity of the offense for which it is imposed.  Affirming the district judge, the panel found the fine was remedial and the infractions serious.  It also noted that the fines were not as "steep" as those authorized by the statute.

The panel's conclusion notes the Hornes' frustration with the raisin regulatory scheme, but observes that the judicial role "is limited to reviewing the constitutionality and not the wisdom of the current regulation."  The Hornes' remedy, the opinion suggests, is with the Secretary of Agriculture.

RR