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April 22 — A fiery U.S. Supreme Court debated April 22 how and whether the Fifth Amendment's takings clause applies to California raisins.
Both Michael W. McConnell of Kirkland & Ellis LLP, Washington, who argued for the Hornes, a family of California raisin handlers, and Deputy Solicitor General Edwin S. Kneedler, who argued for the Department of Agriculture, faced fierce questioning from an unusually skeptical bench.
Kneedler, however, seemed to face the toughest questioning.
In particular, his position that the program, which requires that raisin handlers reserve a certain percentage of their crop, was not a taking at all but in fact a regulatory condition on market entry seemed to fall on deaf ears.
Justice Antonin Scalia in particular referred to the reserve requirement as a taking on several occasions, strongly indicating that he favors reversing the ruling of the U.S. Court of Appeals for the Ninth Circuit below.
A “taking” under the Constitution must be for a public purpose, and property owners are entitled to compensation if there is a taking.
Scalia wasn't the only justice skeptical of the government's position. Chief Justice John G. Roberts Jr. and Justice Samuel A. Alito Jr. highlighted examples from the briefing that Alito described as “startling,” and which Roberts asserted could be justified under the same rationale as the government was advancing here.
Even traditionally liberal Justices Stephen G. Breyer and Elena Kagan, who might have been expected to support the government, expressed concerns with the program.
McConnell, too, faced difficult questions about what distinguished this particular program from other agricultural price support programs which arguably would have left the handlers worse off, and whether, if the reserve requirement really was a taking, whether the government had already paid the required just compensation through the increased raisin prices in the market.
Ultimately, however, Kneedler seemed unable to make any headway with his arguments, and McConnell's argument, which Kagan once referred to as “intuitive,” seemed more likely to carry the day.
Kneedler, arguing second, had a tough time getting going, and never seemed to recover. He began by arguing that the Hornes were attempting to isolate one portion of a program which operated for their benefit and with their approval.
“These plaintiffs are ingrates, right? You're really helping them?” Scalia interjected.
“The program was established on” that premise, Kneedler responded. When he tried to explain other features of the program—including that any amount left over after the sale of the reserve raisins, if any, was distributed to growers—Scalia again interrupted.
“There's no objection to having many features, but where one of them is a taking, you have to justify it by just compensation,” he said.
Kneedler objected that, in the government's view, it wasn't a taking, but a regulation on commerce.
Scalia objected that an uncompensated taking as a condition for putting something into commerce would still be unconstitutional.
Later Scalia asked if being allowed to put raisins into commerce was a “government benefit.” Kneedler responded that once you voluntarily enter into the market, the government can regulate the market.
Alito noted that there were “startling” examples of the results this could lead to if followed to its logical conclusion, such as allowing the sale of cell phones, as long as the manufacturer gave one phone in every five to the government, in order to stimulate demand. Kneedler objected that wasn't what is going on in this case, but Roberts responded that it would have the same rationale as the one the government was arguing for.
Kneedler also unsuccessfully appealed to the age and popularity of the program. Scalia noted that the petitioners here didn't like the program.
That “does not convert it into a taking,” Kneedler said. Scalia agreed, but said that the argument “doesn't carry much water.”
Persisting, Kneedler noted that the popularity of the program suggested that it was, in fact, for the benefit of producers.
“Central planning was thought to work very well in 1937”—the year the statute enabling the program here was enacted—“and Russia tried it for a long time,” Scalia said.
Later, Kagan seemed to take issue with the characterization of the program as “central planning,” asking Kneedler if the court could think the program ridiculous and still affirm. “You could,” Kneedler said.
“It doesn't help your case that it's ridiculous, though,” Scalia said.
“But this is a serious point, actually, because the ridiculousness or sensibleness of a program is not for us to decide,” Kagan responded.
Justice Anthony M. Kennedy asked if it was fair to characterize the government's position as, “Since we can do this other ways, what difference does it make?”
McConnell agreed that the government had said as much, but that the issue here was that it was a taking.
In fact, other ways of accomplishing the same goals were a recurring theme of the argument. Roberts twice wondered why the program at issue here had been structured as a reserve program, and not as a production limitation, which caps either the amount produced or the amount of acreage that may be dedicated to growing a commodity.
Justice Ruth Bader Ginsburg wondered why the Hornes would object to the program here if they didn't object to a pure limit, saying that if there's just a limit, the producer gets nothing for the foregone production, but with the reserve there's the possibility of getting something. McConnell suggested that limits might have raised prices as well.
Justice Sonia Sotomayor questioned whether the reserve amount could be likened to a tax, referring to the court's decision in Leonard & Leonard v. Earle, 279 U.S. 392 (1929), which found constitutional a requirement that fishermen return to Maryland 10 percent of the shells from oysters they had caught.
McConnell replied that oysters are animals, and that they belonged to the state. Kagan seemed unconvinced. “So you think that Leonard is an animals case as opposed to a ‘the state can tax your property' case?” she asked. McConnell agreed.
“That's not how it was applied by the court,” Sotomayor said.
Later, Alito asked Kneedler whether he thought Leonard mattered to the case, because the government had cited it, to his count, only once.
Kneedler called the case a “critical holding,” but noted that the proceeds of the sales from the reserve raisins don't go to the government, but to the raisin producers.
Breyer wondered if there wasn't another way to view the case. He suggested that the reserve requirement really was a taking, that required only just compensation.
The compensation, he suggested, could be the increased price generated by the decreased supply of raisins. Such a regime would require penalties to deter “free riders,” such as those levied on the Hornes here. “So how are you going to get by that part?” he asked.
McConnell responded that it was a per se taking, and that in-kind compensation, such as suggested by Breyer, would be relevant in an eminent domain hearing, but was not considered part of the value of the raisins under federal regulations.
The parties sparred over the effects of the program itself, and the potential effects of a ruling in this case.
McConnell argued that this program left the Hornes materially worse off. He noted that in the relevant years of the program, the price of raisins was $810 per ton, and that without the program the price would have been $747 per ton, according to the Secretary of Agriculture. That difference in price, however, would not have made up for the 30 percent and 47 percent of their crops that they would have had to reserve under the program, he argued.
Kneedler acknowledged that sometimes the government returned nothing to the growers, but noted that in one of the years at issue, the value returned for the reserve tonnage was $272 per ton. He also argued that in years near the relevant years, the program had returned tens of millions of dollars per year to the growers.
The court was concerned with the implications for its decision here in other situations, as well. In response to a question from Kagan, Kneedler said there were eight to ten price support programs structured like the one at issue here. This compared to “scores” that operate through production limitations.
Kagan also asked McConnell if a broad ruling here might apply to other programs where the government requests “stuff,” such as records. McConnell responded that the value in the records was the value of the information contained therein, not the records themselves.
Perhaps responding to a concern about the potential sweep of a broad ruling in this case, Roberts—interjecting on yet another attempt by Kneedler to explain that the program was a comprehensive program governing quality and conditions of sale, not merely the reserve amount—noted the particularity of this program, and said “[w]e are not going to jeopardize the Agriculture Department's marketing order regime.”
Perhaps surprisingly, the California Raisins, the popular advertising device of the 1980s, were only mentioned once, when McConnell mentioned, in connection with the Leonard discussion, that “raisins are not wild animals, even when they're dancing.”
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Transcript available at http://pub.bna.com/lw/14275Transcript.pdf.
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