Horne v. Department of Agriculture

Government Taking of Personal Property Requires Just Compensation
United States Supreme Court, No. 14-275
Wednesday, July 22, 2015

In this case, the Supreme Court determined that a government “taking” of personal property, like real property, requires the payment of “just compensation.”

At issue here was the federal Agricultural Marketing Agreement Act of 1937, which required growers of raisins in certain years to give a percentage of their crop to the government, free of charge. To effectuate this requirement, the growers would ship their raisins to a handler, who would separate the raisins into “reserve raisins”—those due to the government—and “free tonnage raisins,” paying growers only for the free tonnage raisins. The federal “Raisin Committee” obtained title to the reserve raisins and was at liberty to dispose of the reserve raisins as it sees fit. Furthermore, federal regulations required the government to return any net proceeds of the reserve raisins to the growers—calculated by deducting expenses and subsidies for exporters from the sale price.

The plaintiffs, Marvin and Laura Horne, were both growers and handlers. As handlers, they were unlawfully paying other growers for all the raisins shipped, not just the reserve raisins. As growers, they refused to set aside their own reserve raisins. For their defiance, the government levied fines and penalties of over $500,000 against them. Instead of paying, the Hornes filed a lawsuit, arguing that the reserve requirement was an unconstitutional taking under the Fifth Amendment.

 The U.S. Supreme Court agreed with the Hornes, and addressed three separate questions in reaching its conclusion. First, the Court determined that the government does have a “categorical duty” under the Fifth Amendment to pay just compensation when it physically takes possession of an interest in property, including personal property: “The Government has a categorical duty to pay just compensation when it takes your car, just as when it takes your home.”

Second, the reserve requirement was a clear physical taking because actual raisins—and the title to them—are transferred from the growers to the government, leaving the Raisin Committee to dispose of the raisins how it pleases. Moreover, the government’s argument that it could avoid its “categorical duty” to pay by reserving the growers a contingent interest in a portion of the raisins’ value—set at the government’s discretion—did not succeed. The government argued that because the growers retained the most important property interest in the raisins—the net value—no compensation was due. However, under the law, once it is determined that a physical taking of property has occurred, just compensation must be paid, regardless of whether the owner retained some value from the taken property.

Finally, the Court determined that “a governmental mandate to relinquish specific, identifiable property as a condition on permission to engaged in commerce effects a per se taking”—at least in this case. This case was distinguishable from situations where the government is allowed to condition the receipt of a governmental benefit on the receipt of private property, such as where the government can require companies manufacturing pesticides to disclose health, safety, and environmental information of their products as a condition for receiving a permit to sell such products. The reserve requirement did not manifest the same sort of voluntary exchange because engaging in the “basic and familiar uses” of one’s property is not a “governmental benefit.” In other words, growers are not truly given a “choice” when their options are to either grow raisins and comply with the reserve requirements or not grow raisins at all.

Learn More in Court's Decision.