Thursday, June 25, 2015

A Takings Case Not About Land Use? Not Possible

Usually the crew here at land use profs is quick to jump on any big takings case that comes out, but we have all been hesitating a bit about the Horne case decided on Monday. This may have been because Horne is a case about personal property, not real property. As Matt Festa will tell you though, everything is really about land use (or at least has a land-use angle).

I could make some comment on agricultural regulation being about land use, something particularly on my mind after spending time visiting Fresno farmland last week (more on that in coming days), but really it isn't the facts of this case or even its major holding that make it a land use issue, but let's begin with those.

I first wrote about Horne in 2011 when Mike Burger convinced me to write up the section on 2011 takings cases for the ABA. (That was back before the case went to the Supreme Court the first time.) The facts aren't too complicated. Essentially a New Deal program to protect and promote the raisin market developed a system where raisin producers annually turn over a portion of their raisins to the federal government (explaining the exact details of sellers versus handlers and the myriad of things the government does with the raisins doesn't matter too much for our purposes). The government "takes" these raisins for the benefit for the raisin growers. Essentially, it holds on to some of the raisins and funnels them into different places to protect the raisin market and artificially make sure raisin growers get a good price for their product. Two important things to note from this admittedly crude description of the facts (1) yes, the federal government physically takes possession of a large amount of the raisins produced in this country (2) this program benefits raisin growers by elevating the prices for their remaining raisins.

The Hornes, raisin growers, didn't want the government to get their raisins. The sold all their raisins without turning over the government's standard share. The price they sold their raisins at was a price created by the government's program of obtaining raisins from all the other growers.

Okay, so let's walk through the takings/eminent domain discussion here. As I hopefully drill into my property students, the 5th amendment prohibits the taking of private property for public use without just compensation. We can break this down into three questions: (1) is this private property, (2) is the government putting that property to public use, and (3) has the owner been justly compensated. These days, most property textbooks seems to focus on that second question as being the most interesting or controversial. This case largely accepts that promotion of the raisin industry is a valid public use or goal and questions (1) and (3) are the tricky ones.

Note, however, this is the standard approach for eminent domain. But we have to add into the takings discussion, the issues of regulatory takings. Again let me give this an overly simplistic sketch: where we have a physical taking or acquisition of the property, the three questions above are the ones we need to address. Since Penn Coal v. Mahon, however, we know that there are some circumstances where the government doesn't actually physically appropriate your property but they put so many constraints on it that they might as well have just taken the whole thing --> regulatory takings.

Physical Appropriation or Regulatory Takings? The first debate of Horne, is whether we are in physical appropriation land and need to address issues (1), (2), and (3) above OR is this a regulatory taking and instead we turn to Penn Central and the per se takings rules of Lucas and Loretto? Then if it does seem like a regulatory taking, does it feel land-usey? should we be thinking about the heightened scrutiny of Nollan & Dolan?

Eight of the justices easily placed this in the physical appropriation category. The government here was physically taking possession of the raisins. It wasn't just setting rules about how and when you could sell the raisins, but was actually taking them for export or to stick in school lunches or just to make big piles of raisins to jump into or something. No Loretto. No Lucas. No Nolan/Dollan. Not even Penn Central balancing. The government took your raisins.

In her lone dissent, Justice Sotomayor says we haven't taken your raisins until we have taken away all the sticks in your raisin property rights bundle. She argues that the raisin growers didn't lose every raisin-related right because they still had the right to potentially receive some money for the raisins. That is, after the federal government sells the raisins at highly reduced prices in special programs it uses the funds to pay for the program's administration. Any remaining proceeding are equitably distributed to the raisin producers on a pro-rata basis. This is not usually a tremendous source of revenue for the growers and in most years does not appear to exceed the cost of growing the share of raisins that have been turned over to the government. But the amount doesn't matter to Justice Sotomayor, what matters to her is that you still have the right to that uncertain future amount of money.

How big is your stick? Other cases have held where you property has been regulated and some of your property rights removed, there is no 5th Amendment violation. My favorite example is always the Andrus v. Allard case about eagle feathers. Federal law prohibits owners of eagle feathers to buy, sell, or trade them. This is true even where the feathers were acquired before acquisition of such feathers was outlawed. This means anyone with a business selling eagle feathers (or "Indian artifacts partly composed of feathers") suddenly had no business. The Court said not a takings because you can still possess and use the feathers in other ways. You can gaze at them. You can create an eagle feather museum and charge other people to come gaze at them. Justice Sotomayor argues that Andrus and other cases show that you have to take all the property rights away before you can find that the government has committed a takings. The feathers differ from the raisins though because the federal government didn't physically confiscate the feathers. Can you leave the property owner a nonpossesory right? Is that adequate? How big must the stick you are left holding be for us to say no taking has occurred?

Because I can make everything about conservation easements, could you take a landowner's possessory rights away but leave her the nonpossessory conservation easement and suggest that she doesn't deserve compensation? Seems a little hard to swallow, but I am open to discussing it!

Real Property versus Personal Property? Now most people talking about Horne have focused on this aspect of it. Is this case earth-shattering because the Court explicitly stated that the 5th Amendment applies to personal property as well as real property? I am not so sure. I consistently tell my students that the government can use eminent domain to take personal property (usually with the example of a car or a boat) as well as land. I think that the idea that personal property is different than real property makes sense in the realm of regulatory takings, but not perhaps here where we have a physical appropriation of your property. Again, this is the Andrus distinction. The government can legitimately remove all market value of your personal property. Let's say a pharmaceutical or pesticide gets banned and the company is left with a bunch of stuff it can't sell or use. That is not a taking, because we understand that regulations may remove all economic value of your personal property. But if the government passes a law that removes all economic value of your real property (and frankly, I don't really see how that is possible, findings in Lucas aside), you have a per se takings under Lucas and the government must pay just compensation (or we prohibit enforcement of the law).

Although this may seem like a strange distinction, it makes some sense. This can get complicated though. Let's go back to our newly outlawed pesticide. If the government just says that the company can no longer sell (or give away the pesticide), no taking. BUT what if the government wants to make real sure that the pesticide never gets into the environment. Can it require that the company destroy the pesticide? This goes further than Andrus because the company really does lose all the property rights. It cannot sit and gaze at the pesticide and just enjoy its presence. It can't put it in a pesticide museum (although frankly I am nerdy enough to want to visit such a museum). Even so, I don't think many people would consider this to be a taking of the pesticide. This is what happens when you are in the pesticide business. BUT what if the government actually confiscated the pesticide because it was so worried about this dangerous product that it wanted to handle the disposal itself? Now it is starting to look less like a regulatory measure and more like a confiscation/appropriation. Should the government now have to compensate the company because it physically took control of the product? Hmm.. trickier than you thought. One answer might just be that we shouldn't get too worked up about declaring it a taking (via appropriation) because the fair market value of an unsellable pesticide is zero. Let's state we are using eminent domain and compensate them justly by paying them nothing. But not all government seizures are of property that would be worth zero dollars in the marketplace (e.g., seizures of vehicles used in commission of crimes). The Court did not speak to these issues or seem to contemplate what the implications of this rule regarding confiscation of personal property might mean outside the raisin context. As always, John Echeverria has some thoughtful words on  this.

Just Compensation? If we acknowledge that this was a taking of private property (and actually we didn't actually have that here because the government never got its grubby hands on the raisins, the issue arose as an affirmative defense), then we have to calculate how much money the government must pay to compensate. Here, is where I have a hard time swallowing the majority's reasoning. The Hornes were fined the market value of the raisins plus the civil penalty. Chief Justice Roberts said that the value set by the fine demonstrates that we know the value of the raisins. Err... really? I find this a little hard to swallow because the market value of those raisins was artificially high based on the actions of the federal government and the concessions of all the other raisin growers. It seems highly unjust to allow the Hornes to get this windfall. I think we should think of this portion of the opinion as dicta anyhoo because there was no need to calculate just compensation here. The Hornes aren't asking for compensation -- they never gave up their raisins.

The discussion immediately reminded me of United States v. Cors (a case about how pricey tugboats can become in wartime) and other cases where the property owners do not receive the increase in value created by the government exercising eminent domain. That is, if government demand for tugboats raises tugboat prices, you don't get to claim a high level of just compensation created by the government's demand. This can get more land usey too (to use a technical term). Where the government's actions increase the land value based on a planned or existing project for example, the government doesn't have to pay you that increased value. Seems just like raisins, no? If the government is the entity that made those raisins so lucrative, we should calculate just compensation based on what your raisins would be worth without government intervention.

Justice Breyer dissented on the just compensation issue (joined by Kagan and Ginsburg). Justice Breyer looked to cases calculating just compensation when only part of a person's property is taken. To simplify the argument, let's pretend that you have 2 acres that is currently worth $3million (or $1.5 million/acre for those of you bad at math). The government takes 1 acre and turns it from a smelly brownfield to an awesome nature preserve. Your remaining acre is now worth $2million because it is adjacent to this lovely place. What should the government pay you as just compensation? Should it pay you $1.5 million? Nope, the payment to you gets offset by the $500,000 that it increased the value of your remaining acre. So you get paid $1 million (and still get to live next to the awesome nature preserve-lucky you!). Now if the government project actually made your remaining acre with $2.5 million or more, it should owe you anything at all! Justice Breyer says, we need to remand to the lower court and figure out whether the government owes anything. He suggests that the value created in the raisins not taken is so high that when you do the math, the government won't owe anything. Makes sense to me... although there is a little voice in the back of my head wondering if that means the government can just take your property (for public use) without repercussions as long as it has created the value. Something we can chat about in the comments because this blog post is already nearly law review length ..

Okay I will end here but there is so much more that we could discuss! Like Justice Sotomayor's suggest that raisins are just like money and if we could make people pay money, we can make them pay in raisins. As long as I don't get my paycheck in raisins, I like this argument. Can the government choose the currency you have to pay in? Or what about the idea that the raisin payment is the price of engaging in the beneficial raisin market? This too may resonate with some readers.

Finally, I think you should all be grateful for all the puns I restrained myself from putting in the title from Horneing in on the action ...  Raisin the Roof ... Taking the Bull by the Horne.




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