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May 16, 2014

Ninth Circuit Gives Raisin Growers Sour Grapes

A New Deal raisin restriction wins the day; economy and raisin growers suffer.

In a capitalist economy, one is supposedly entitled to the fruits of one’s labors and may distribute them according to personal dictates. This was acknowledged by the Ancients. For example, Roman Law, the predecessor of the Napoleonic Code, assigned three characteristics to property ownership: usus, the right of the property owner to use the property; fructus, the right to enjoy the property’s fruits; and abusus, the right of alienation, to sell, give away or even destroy the property. (The word abuse is derived from abusus.)

Novelist and philosopher Ayn Rand famously drew inspiration from New Deal regulations of the 1930s for her opus “Atlas Shrugged.” One such real-life but Randian story of government interference in property ownership wound its way to the Supreme Court last year in the form of Horne v. Department of Agriculture. The villain of the piece is the Agricultural Marketing Agreement Act of 1937, a New Deal law designed to raise certain agricultural prices by controlling supplies; the heroes, California raisin farmers Marvin and Laura Horne.

The Act allows the USDA to issue orders forcing raisin “handlers” to reserve a certain percentage of their crop “for the account” of the government-backed Raisin Administrative Committee, enabling the government to control the supply and price of raisins on the market. The USDA hit the Hornes with a “marketing order” demanding that they turn over 47% of their crop without compensation. Believing that they were raisin “producers,” and therefore exempt, the Hornes failed to set aside the demanded tribute during the 2002-2003 and 2003-2004 growing seasons. The USDA disagreed and brought an enforcement action, seeking $438,843.53 (the approximate market value of the raisins that the Hornes allegedly owe), $202,600 in civil penalties, and $8,783.39 in unpaid assessments.

Needless to say, the Hornes lost administrative appeals in the lower federal courts. Thus the case landed before the Supreme Court, which remanded the case to the Ninth Circuit to determine whether the USDA order violated the Fifth Amendment’s Takings Clause by taking the Hornes’ property. On remand, the Ninth Circuit held it did not. In doing so, it ducked the larger issue.

The Court ruled, “While the Hornes’ impatience with a regulatory program they view to be outdated and perhaps disadvantageous to smaller agricultural firms is understandable, the courts are not well-positioned to effect the change the Hornes seek, which is, at base, a restructuring of the way government regulates raisin production. The Constitution endows Congress, not the courts, with the authority to regulate the national economy. … Instead, our role is to answer the narrower question of whether the Marketing Order and its penalties work a physical per se taking. We hold they do not.”

This case illustrates a number of problems, particularly over-regulation and property rights under the Constitution. It is also a poster child for advocates for sunset provisions, which would automatically terminate laws and regulation unless renewed by the legislature. If the Agricultural Marketing Agreement Act had a shelf life, the Hornes would not have found themselves in their Kafkaesque situation. More to the point, if Congress would stick to the Constitution when passing laws, it wouldn’t be interfering with raisin growers.

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