Raisins, Regulations, and Politics in the Supreme Court

Posted in: Constitutional Law

Amidst the wall-to-wall coverage of the “big” cases decided by the Supreme Court in the final days of each Term, some smaller—but still interesting—cases can be easily overlooked. In the Term that concluded last month, Horne v. Dep’t of Agriculture was one such case. Although it addressed the seemingly esoteric question of whether a regulation requiring raisin growers to set aside a portion of their crop for the government constituted a “Taking” under the Fifth Amendment, the Court’s logic provides a window into how the Roberts Court understands its role with respect to economic regulation.

The Facts and Issue in Horne

Farming commodity crops has long been economically precarious. Even when demand for some commodity is relatively stable, supply may not be. An early or late thaw, a drought, or any of a number of other circumstances beyond any individual farmer’s control may greatly affect the total supply of the crop, and thus its price. But large fluctuations in price can make it difficult for a farmer to decide how much of the crop to plant. A farmer may be able to turn a profit growing romaine lettuce when it retails for $1.60 per pound but lose money if the price falls to $1.30 per pound; yet she must invest in planting and cultivating her lettuce long before the price at harvest will be known. As a consequence, governments often develop programs that aim to stabilize prices, sometimes by limiting supply.

A federal statute enacted during the Great Depression authorizes the Secretary of Agriculture to take this sort of action across a range of markets. The Horne case involved a Department of Agriculture marketing order respecting raisins. Each year, raisin growers must set aside a percentage of their crop for the government, which can then dispose of the raisins as it sees fit. Any net proceeds of the government’s disposition of the raisins (from, for example, selling them overseas) are rebated to the farmers on a pro rata basis.

In the two relevant years, the Hornes and other raisin growers were told to reserve, respectively, 30 percent and 47 percent of their raisins for the government. They refused, arguing that the government’s confiscation of their raisins was a Taking. The Fifth Amendment forbids the government from taking “private property . . . for public use, without just compensation.” If the government wanted to take their raisins, the Hornes said, it should have to pay for them.

The case went up to the Supreme Court twice. In 2013, the Justices unanimously agreed that the Hornes could raise their Taking claim as an affirmative defense to the government’s attempt to enforce its marketing order in federal district court in California, rather than having to first pay the government hundreds of thousands of dollars and then sue for a refund in a separate case in Washington, D.C.

In last month’s ruling, the Court again sided with the Hornes, this time on the merits. Although there was some disagreement about how to calculate the amount of money (if any) due the Hornes, eight Justices agreed that the marketing order itself was a Taking.

Rejecting the Regulation Category

To understand the Supreme Court’s opinion (written by Chief Justice Roberts), one must first understand how the cases deal with a basic question: how to determine whether a regulation is a Taking. Suppose that the government forbids a factory from dumping toxins in a river. The regulation will increase the cost of operating the factory, because its owner must now pay for some other means of disposing of the toxins. Nonetheless, no one would say that the anti-pollution regulation is a Taking. The government need not pay the factory owner not to pollute.

In Horne, the government characterized the raisin marketing order in similar terms. It cited cases in which the government had required the regulated entities to give up something of value in order to undertake some other activity. So long as there is a sufficient relation or “nexus” between the purpose of the regulation and the valuable thing forgone, those cases said, the regulation is not a Taking requiring just compensation.

In a portion of his opinion that garnered support from all but one of his colleagues, Chief Justice Roberts gave this argument the back of his hand. Those other cases involved the government granting people and firms permission to engage in otherwise hazardous activities. Referring to the government’s citation of the 1984 case of Ruckelshaus v. Monsanto Co., the Chief Justice declared: “Raisins are not dangerous pesticides; they are a healthy snack. A case about conditioning the sale of hazardous substances on disclosure of health, safety, and environmental information related to those hazards is hardly on point.”

The Real Danger of Lochnerism

That’s a pithy line but is it persuasive? The Chief Justice is correct that the government cannot reasonably limit the production of raisins on the ground that they are dangerous. A law banning the growing or marketing of raisins on this basis would likely be unconstitutional even under the extremely forgiving “rational basis” test. A government that permits—indeed, that subsidizes—the production and sale of unhealthy animal-derived foods and junk foods—could hardly be said to be acting rationally if it were to simultaneously restrict raisins on health grounds.

However, surely the Court realized that the Department of Agriculture’s raisin marketing order was not intended as a health measure. It was instead intended to combat a wholly different evil: the economic ill effects of price instability. Limiting supply as a means of supporting price has been a constitutionally acceptable tool of governmental regulation for nearly eighty years.

To be sure, one can reasonably think that the raisin marketing order in Horne was unwise economic policy. During the oral argument the first time the case was before the Supreme Court, Justice Kagan suggested that the real substantive issue was “whether th[e] marketing order is a Taking or it’s just the world’s most outdated law.”

Yet under the deferential test that the Court has applied to economic regulation since the mid-1930s, the fact that Justices find a law outdated or unwise does not render the law unconstitutional. As Justice Oliver Wendell Holmes, Jr. prophetically stated in his dissent from the infamous 1905 case of Lochner v. New York (which invalidated a maximum-hour law governing bakeries), “a constitution is not intended to embody a particular economic theory.”

In his dissent in Obergefell v. Hodges, Chief Justice Roberts compares the majority’s extension of the right to marry to same-sex couples to Lochner sixteen times. In doing so, he overlooks the bedrock principle of the so-called New Deal settlement that has governed constitutional law for nearly seven decades: By overruling Lochner, the late-New Deal Court signaled a retreat from aggressive judicial review of economic legislation, but as the ensuing civil rights era would make clear, the Court would remain engaged in protecting personal rights under the Constitution. Horne comes much closer to repeating the sin of Lochner than Obergefell does.

Does Horne therefore portend a new era of aggressive judicial scrutiny of economic regulation, one that could be accurately compared to the Lochner era? Almost certainly not. Relying on a 1982 case involving the placement of cable television equipment on New York buildings, the Court in Horne placed special emphasis on the fact that the regulation in Horne was a “physical appropriation” of the Hornes’ raisins. Most regulations do not work in quite that way.

Still, the logic of the Chief Justice’s opinion in Horne is at least tacitly Lochnerian. If the assertion that raisins are a healthy snack is anything but a non sequitur, it must be because the Court doubts the wisdom of government programs that aim to support commodity prices. But in the post-Lochner era, ill-advised or unwise economic regulations are only voidable by the courts on grounds of irrationality.

The Lochnerian logic of Horne has been largely overlooked, and, as noted, the Court itself is very unlikely to extend that logic beyond a subset of Takings cases. Nonetheless, the basic irony should not go unremarked. In a Term—indeed, in a single week—when four Justices were willy-nilly making unfounded accusations of Lochnering, eight Justices unwittingly embraced Lochner’s sin.

Posted in: Constitutional Law

Tags: Legal, SCOTUS