Marvin D. Horne, et al., v. Department of Agriculture

In 2002, California raisin farmers Marvin and Lena Horne (“Horne”) substantially reorganized their raisin business in order to handle the raisins that they produced to try to avoid the requirement under the Agricultural Marketing Agreement Act of 1937 (“AMAA”) to turn over a percentage of handled raisins to the government. After Horne’s failure to comply, the USDA brought an action against Horne according to the required AMAA procedure. Although the Ninth Circuit Court of Appeals initially ruled against Horne on his takings claim, the Ninth Circuit amended its opinion and determined that Horne’s takings claim was “unripe” because Horne had to raise his takings claim in the Court of Federal Claims pursuant to the Tucker Act. Horne and the USDA disagree over whether Horne’s takings claim is ripe for adjudication; the USDA believes that the claim is unripe until Horne pursues it in the Court of Federal Claims. Specifically, the USDA believes that the AMAA does not displace the Tucker Act’s otherwise-mandatory procedures, while Horne asserts that the AMAA’s comprehensive statutory scheme displaces the Tucker Act for all related claims. Horne states that such a requirement mandates costly, duplicative litigation, while the USDA counters that such a result is the desired outcome of the statutory scheme.

Questions as Framed for the Court by the Parties 

1. Whether the Ninth Circuit erred in holding, contrary to the decisions of five other Circuit Courts of Appeals, that a party may not raise the Takings Clause as a defense to a "direct transfer of funds mandated by the Government," Eastern Enterprises v. Apfel, 524 U.S. 498, 521 (1998) (plurality), but instead must pay the money and then bring a separate, later claim requesting reimbursement of the money under the Tucker Act in the Court of Federal Claims. 

2. Whether the Ninth Circuit erred in holding, contrary to a decision of the Federal Circuit, that it lacked jurisdiction over petitioners' takings defense, even though petitioners, as "handlers" of raisins under the Raisin Marketing Order, are statutorily required under 7 U.S.C. § 608c(15) to exhaust all claims and defenses in administrative proceedings before the United States Department of Agriculture, with exclusive jurisdiction for review in federal district court.

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Issue

May raisin farmers raise the Takings Clause as a defense to a USDA order requiring them to pay a monetary equivalent to a portion of their crop, or must they litigate non-takings defenses in the government enforcement action, pay the disputed amount to the government if liable, and then file suit in the Court of Federal Claims to recover their money?

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Facts

The Raisin Marketing Order, enacted in 1949 pursuant to the Agricultural Marketing Agreement Act of 1937 (“AMAA”), establishes reserve pools of raisins determined by each year’s crop yield, in order to remove surplus raisins from the market and regulate raisin prices. See Horne v. United States Dep’t of Agric., 673 F.3d 1071, 1075 (9th Cir. 2011) (“Horne 9th Circuit”). The Raisin Marketing Order requires that ownership of the reserve raisins must be transferred to the government; the government uses these raisins in “non-commercial” markets, such as school lunches, and ultimately returns a portion of its proceeds to raisin producers after deducting the administrative costs of the program. See id. at 1076. In the crop year covering 2002-03, raisin producers had to transfer 47 percent of their crop, and in 2003-04, raisin producers had to transfer 30 percent. See id. at 1077. The payment that raisin producers ultimately received from the government in 2002-03 was less than the cost of production, and for 2003-04, raisin producers received nothing. See Brief for Petitioner, Marvin D. Horne, at 2.

Marvin and Lena Horne, long-time raisin growers, reorganized their business to avoid using packers or distributors, believing that their business structure would exempt them from having to transfer raisin ownership to the government. See Horne 9th Circuit at 1076–77.Horne enlisted professional help in creating this plan, including “attorneys, university professors, and officials.” See Brief for Petitioner at 9. Horne then did not hold any raisins in reserve in the crop years 2002–03 and 2003–04. See Brief for Respondent, United States Department of Agriculture (“USDA”) at 10. During this period, the USDA repeatedly admonished Horne for his failure to comply with the Raisin Marketing Order. See id. at 9–10.

In 2004, the Administrator of the Agricultural Marketing Service started a disciplinary proceeding against petitioner. See Horne 9th Circuit at 1077 (9th Cir. 2011). The petitioners lost the proceeding and were ordered to pay nearly $700,000 in fines. See id. Petitioners then sought judicial review of the administrative proceeding in the Eastern District of California and lost, with the court determining that petitioners were “raisin handlers” per the Raisin Marketing Order and that transfer of ownership of the reserve tonnage does not constitute a taking. See id.

On July 25, 2011, the United States Court of Appeals for the Ninth Circuit affirmed the Eastern District. See Horne v. United States Dep’t of Agric., 2011 U.S. App. LEXIS 15284. The Ninth Circuit issued an amended opinion on March 12, 2012, vacating its earlier opinion on the merits and holding that it did not have jurisdiction to hear Horne’s takings claim because that claim was “unripe.” See generally Horne 9th Circuit. As an additional matter, the Ninth Circuit panel held that Horne was a “producer-handler,” and that Horne must bring a takings claim as a producer, while litigating the other claims as handlers subject to the AMAA’s procedural requirements. See Horne 9th Circuit at 1080 (9th Cir. 2011). The Supreme Court granted certiorari on November 20, 2012. See Brief for Petitioner at 13.

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Discussion

The policy issues in this case center on the consequences of holding that the Court has no jurisdiction on the takings clause defense. Horne and amici contend that requiring multiple proceedings to recover funds from the government would be repetitive and unfair. They also argue that property owners should not be required to have their constitutional rights violated by a governmental taking before being able to vindicate those rights. The United States Department of Agriculture (“USDA”) and amici counter that there is nothing unusual about multiple forums for the same claim, so long as there is an opportunity to obtain compensation for a taking. They further argue that petitioner’s view of the takings clause would create a backdoor to takings claims and encourage breaking the law.

Multiple Proceedings on the Same Underlying Claim

Horne argues that requiring multiple proceedings for the same underlying claim would be costly, especially for small farmers. See Brief for Petitioner, Marvin D. Horne, at 26. The Cato Institute (“Cato”) further argues that the effect on small businesses and ordinary citizens would be even more burdensome, noting that many small business owners choose not to vindicate their legal rights in order to avoid the costs of litigation. See Brief of Amicus Curiae Cato Institutein Support of Petitioner at 14. The Chamber of Commerce of the United States of America (“Chamber of Commerce”) notes that litigation can take years, which adds even more costs to litigation. See Brief of Amicus Curiae Chamber of Commerce in Support of Petitioner at 24.

Horne also posits that by requiring multiple proceedings, the government may have to compensate property owners for takings that it would have otherwise forfeited. See Brief for Petitioner at 26–27. Horne notes that if there were a single action, the government could choose whether to pay or abandon its claim on property once the court rules there is a taking. See id. The State of Texas (“Texas”) points to its own takings scheme, where the entire claim is addressed in a single action, as evidence that a bifurcated scheme is not necessary. See Brief of Amicus Curiae Texas in Support of Petitioner at 8.

The USDA counters that bringing multiple proceedings to vindicate a Just Compensation Clause claim is the desired result of the statutory scheme. See Brief for Respondent, USDA, at 48. The USDA notes that the vehicle for obtaining monetary relief for a Just Compensation Clause claim is the Court of Federal Claims. See id. Therefore, the USDA argues, the presence of other claims or grounds for relief is irrelevant; Just Compensation Clause claims go to the Court of Federal Claims. See id. The USDA asserts that the government, through the Tucker Act, established “a reasonable, certain, and adequate procedure to obtain just compensation for an alleged taking,” and other claims have no bearing on that procedure. See id. at 48–49.

The USDA further argues that Congress intended the current scheme in order to benefit agricultural producers. See id. at 51. Marketing orders must be approved by two-thirds of the producers, and the Secretary of Agriculture must terminate marketing orders if a majority of producers favor termination. See id. Thus, Congress intended that a single disgruntled producer could not enjoin the reserve requirement by relying on a takings defense, while simultaneously receiving the benefits of the higher prices that result from a marketing order. See id. at 52.

Takings Clause Implications

Cato argues that a taking without just compensation occurs at the moment money is taken. See Brief of Amicus Curiae Cato in Support of Petitioner at 19. Therefore, when the government takes money, there is no intention to provide compensation through the Tucker Act, as that would merely nullify the action that led to taking the money. See id. Because the government would not collect a fine with the intention to return it, unlike seizing land with the intention to compensate the land owner, the taking of money is a constitutional violation. See id. at 20. Horne further notes that by raising a takings defense for a seizure of money, they are not attempting to receive just compensation, but instead opposing an “unconstitutional exaction.” See Brief for Petitioner at 20.

The International Municipal Lawyers Association (“IMLA”) counters by asserting that petitioner’s takings viewpoint would undermine the government’s ability to execute further taking. See Brief of Amicus Curiae IMLA in Support of Respondent at 20. The IMLA argues that there is no difference between taking raisins or property, such as houses, and therefore as long as the government serves a “public interest” and provides just compensation, the government can lawfully take the property. See id. They further claim that the view of takings forwarded by the petitioners would encourage law breaking, because if the financial penalty imposed on Horne were to be held a government taking, every financial penalty resulting from breaking federal laws or regulations could be challenged and enjoined, removing the incentive to comply with laws and regulations. See id. at 20–21.

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Analysis

Both states and the federal government in the United States have sovereign immunity, which means that the government is immune from lawsuits except where it consents. Nevertheless, the federal government has waived this sovereign immunity for several kinds of claims. At issue here, the Tucker Act permits suits for money damages, including those arising under the Just Compensation Clause in the Fifth Amendment. Although the Tucker Act grants exclusive subject-matter jurisdiction, or the power to hear certain claims, to the Court of Federal Claims, Congress may withdraw that jurisdiction by statute. Here, Horne and the USDA sharply disagree on two related issues. First, Horne and the USDA disagree over whether Horne’s takings claim is ripe, i.e., that the facts are “mature” enough to allow the case to proceed. Second, Horne and the USDA disagree over the precise scope of the Tucker Act and thus whether the Ninth Circuit Court of Appeals had subject-matter jurisdiction over Horne’s takings claim.

Was Horne’s Takings Claim Ripe?

Horne offers two principal justifications for why his takings claim was ripe. Horne asserts his takings claim is “immediately ripe” for judicial action. See Brief for Petitioner, Marvin D. Horne, et al. at 17. As an initial matter, Horne argues that it is unreasonable to require a claimant to “resort to piecemeal litigation or otherwise unfair procedures” in order to raise a takings claim. See Brief for Petitioner at 18 (quoting MacDonald, Sommer, & Frates v. Yolo Cnty., 477 U.S. 340, 350 n.7 (1986)). Horne relies heavily on Eastern Enterprises v. Apfel, where a plurality on the Supreme Court held that, where the challenged statute mandates a direct payment to the government, the challenger need not follow the Tucker Act’s procedural requirements. See Brief for Petitioner at 19; 524 U.S. 498, 521–22 (1998). Horne argues that his claim, which would enjoin the government’s fine and not require the government to pay Horne any money, is different from cases where the government would have to pay money. See Brief for Petitioner at 20. In Horne’s view, because a free-speech claim is immediately ripe, his claim is equally ripe. See id.

As an additional matter, Horne emphasizes that the government brought the action against him and that he is the defendant. See generally Brief for Petitioner at 22–27. As a defendant, Horne asserts he is entitled to raise “any available legal defenses,” and that “[r]ipeness is [only] a shield to protect against premature litigation.” See id. at 23–24. Furthermore, Horne asserts that a finding of unripeness would thwart legislative intent and frustrate both defendants and the government-plaintiff. See id. at 26–27. For defendants, a holding of ripeness would avoid essentially duplicative legislation; for government-plaintiffs, such a holding, assuming the court finds a taking, would preserve the government’s choice between paying or abandoning the claim. See id. As a final matter, Horne asserts that equity, not ripeness doctrine, should determine whether a court will hear takings claims. See id. at 27. Horne asserts that courts have historically put the burden on the government to prove that the “availability of reasonable, certain, and adequate provision for obtaining compensation precluded plaintiff’s claim for an injunction.” See id. at 36; see generally id. at 27–47.

The USDA argues that the Horne’s case is unripe, countering Horne’s arguments and asserting the availability of the Tucker Act. First, the USDA stresses that, under the Just Compensations Clause, the government does not have pay at the time of taking or even immediately thereafter, so long as “reasonable, adequate, and certain provisions exist.” See Brief for Respondent, United States Department of Agriculture at 21–22 (quoting Blanchette v. Connecticut General Ins. Corporations, 419 U.S. 102, 124–25 (1974). The USDA then asserts that the property owner cannot assert a takings claim until the property owner has used those provisions. See Brief for Respondent at 22. Finally, because the Tucker Act constitutes such a “reasonable, adequate, and certain provision,” the USDA argues that any property owner that fails to use the Tucker Act procedures does not have a ripple claim. See id. at 23–24. As a final matter, the USDA argues that, if the Court of Federal Claims does not find a taking under the Tucker Act procedure, this binds the parties and precludes future suit in federal court. See id. at 24.  

The USDA counters Horne’s two principal justifications for why the claim is ripe. See Brief for Respondent at 22. First, the USDA carefully distinguishes the holding in Apfel, arguing that it only applies to alleged regulatory takings, not physical takings. See id. at 31. Here, the USDA asserts that Horne litigated this case as a physical taking of raisins. See id. at 31. Moreover, the USDA argues that the government payment in Apfel would equal, dollar for dollar, any potential takings claim recovery, but that Horne’s potential recovery would be a complex calculation based on econometric models, market conditions, and regulatory programs that benefit Horne. See id. at 35–36. Second, the USDA disputes Horne’s claim to entitlement to a takings clause defense. See id. at 39. The USDA asserts that there is no principled distinction between Horne’s defensive posture and an affirmative suit to enjoin the government’s regulatory policies under the AMAA. See id. at 41–42. Additionally, the USDA argues that the cases that Horne cites to support such a defense all involve situations where reasonable, adequate, and certain provisions, like the Tucker Act, did not exist. See id. at 42–43.

What is the Scope of the AMAA’s Withdrawal of Jurisdiction from the Tucker Act?

Although Horne and the USDA agree that the AMAA supersedes the Tucker Act for raisin handlers, but not raisin producers, Horne argues that the AMAA broadly displaces the Tucker Act. See Brief for Petitioner at 47–48; Brief for Respondent at 25. Horne concedes that he initially argued he was only a producer of raisins and that he lost that statutory argument. See Brief for Petitioner at 51. Consequently, Horne argues that he is now a handler of raisins, and that the USDA cannot argue that Horne is bringing his takings claim as a producer because the issue is res judicata. See id. Horne asserts that a thorough remedial scheme is “strong evidence” that the statute displaces the Tucker Act. See Brief for Petitioner at 48–49 (citing Hinck v. United States, 550 U.S. 501, 506 (2007)). Horne argues that the AMAA satisfies this test, noting that the AMAA provides the “full panoply” of remedies, including injunction, restitution, and traditional monetary damages. See Brief for Petitioner at 49–51. Horne finally notes that it is “unlikely . . . that Congress intended to establish such a chaotic regulatory scheme,” particularly because the AMAA entrusts an administrative law judge with expertise on these issues. See id. at 55 (quoting Int’l Paper Co. v. Oullette, 479 U.S. 481, 497 (1987)).

The USDA emphasizes that the AMAA’s displacement of the Tucker Act is narrow and only applies to claims brought by handlers of raisins, not to producers. See Brief for Respondent at 26. The USDA believes that 7 U.S.C. 608(c)(13)(B), which states that “[n]o order issued under this chapter shall be applicable to any producer in his capacity as a producer,” is dispositive. See id. at 26–27. The USDA asserts that the Ninth Circuit reasonably concluded that Horne brought his takings claim as a producer because Horne has no property interest in other farmers’ raisins that Horne handled; consequently, Horne can only bring a takings claim for the raisins that he himself produced. See id. at 27–28. The USDA asserts that such a distinction is not “sheer doubletalk,” as Horne contends, and that the AMAA “expressly recognizes that a single entity may function in several capacities.” See Brief for Petitioner at 51; Brief for Respondent at 28 (citing 7 U.S.C. 608(c)(13)(B)). As a result, the USDA believes that whether Horne is a handler or producer depends on “the nature of the claim,” and that for Horne’s takings claim, he is a producer because he is seeking just compensation for the raisins that he produced. See Brief for Respondent at 28.   

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Conclusion

In 2002, Horne’s substantial reorganization of his raisin business was scrutinized by the USDA as a violation of the Agricultural Marketing Agreement Act of 1937 (“AMAA”) to turn over a percentage of handled raisins to the government. While the USDA made numerous demands that Horne comply, Horne refused, believing that he was no longer subject to the AMAA as a producer-handler. Eventually, the Ninth Circuit Court of Appeals ruled against Horne on his takings claim. However, the Ninth Circuit later amended its opinion, vacated its ruling, and determined that Horne’s takings claim was “unripe” because Horne’s takings claim was subject to the Tucker Act and therefore had to be brought in the Court of Federal Claims. The central legal issue in this case is that Horne and the USDA disagree over whether Horne’s takings claim is ripe. On one hand, the USDA agrees with the Ninth Circuit and believes that the claim is unripe until Horne pursues it in the Court of Federal Claims. Specifically, the USDA believes that the AMAA does not displace the Tucker Act’s otherwise-mandatory procedures. On the other hand, Horne asserts that the AMAA is a comprehensive statutory scheme that displaces the Tucker Act for all related claims. Therefore, Horne believes that the AMAA procedure allows for a ruling on his takings claim outside the Court of Federal Claims. From a policy perspective, Horne states that a ruling for the USDA would mandate costly, duplicative litigation, while the USDA downplays such concerns and argues that the statutory scheme intends this outcome.

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