The United States Supreme Court Holds Raisin Marketing Order Unconstitutional

The United States Supreme Court recently issued its opinion regarding the constitutionality of the raisin marketing orders in the Horne v. Department of Agriculture matter. The Agricultural Marketing Agreement Act of 1937 grants authority to the Secretary of Agriculture to issue “marketing orders” intended to stabilize markets for a variety of agricultural products. The marketing order for raisins created the Raisin Administrative Committee (RAC) and imposed a reserve requirement on growers, forcing growers to set aside a certain percentage of their crop each year for the government. The annual crop percentage to be set aside was determined by the RAC. In 2002 it was 47%, and in 2003 it was 30%. The government had the authority to do anything it felt best with the raisins it obtained from the set aside, including selling them in different markets around the world or throwing them away. Any excess proceeds generated from the sale of raisins were distributed back to growers.


Marvin and Laura Horne are raisin growers in California and refused to set aside any raisins on the grounds that the set-aside requirement was an unconstitutional taking of their property without just compensation. Because they did not comply with the set aside, the Department of Agriculture fined them the fair market value of the raisins they were supposed to set aside. The Hornes brought an action against the Department of Agriculture in federal court opposing the fine.


On appeal, the Ninth Circuit Court of Appeals held that the set-aside requirement was not a taking because (1) the Takings Clause does not afford as much protection to personal property as it does to real property and (2) the Hornes retained an interest in any proceeds generated by the government from the sale of the set-aside raisins. Thus, according to the Court of Appeals, the Hornes were not completely divested of their property and, consequently, there was no taking. According to the Ninth Circuit, if the Hornes wanted to avoid the set-aside requirement all they had to do was “plant different crops.”


However, the Supreme Court went in a different direction. Overturning the Ninth Circuit, the Supreme Court held that the set-aside requirement from the raisin marketing order did constitute a taking requiring just compensation under the Fifth Amendment. Writing for the majority, Chief Justice Roberts stated that personal property and real property are afforded the same protection under the Constitution, specifically noting that the government’s duty to pay just compensation is the same whether it takes your home or your car.


In the context of the raisin marketing order, the court held that the reserve requirement imposed by the RAC was a clear, physical taking requiring just compensation, citing the fact that raisins were physically moved from the growers to the government and title to the crops transferred to the government in the process. The court also noted that the fact that the growers were entitled to the net proceeds of the raisins sold by the government did not change the fact that a taking had occurred. Rather, the court noted that once a taking has transpired, the next question is whether just compensation has been paid. On that point, the court essentially said that any payment from the government back to the growers due to the fact that the growers retained an interest in the crops could only be characterized as the first step in the just compensation payment process. The court concluded by holding that the Hornes did not need to pay the fine and, instead, the Department of Agriculture needed to pay the Hornes just compensation for the raisins that were set aside.


This opinion has turned many heads in the agriculture industry, particularly those growing crops subject to similar marketing orders. Challenges to other marketing orders are likely on the horizon; however, given that not all marketing orders are created equally, it is unclear how this decision will impact other industry groups and growers.


If you have questions about this legal alert or other agricultural legal issues, please contact the attorneys of Smith Haughey’s Agriculture and Agribusiness Industry Team.