Horne v. United States Department of Agriculture

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MARVIN D. HORNE and LAURA R. No. 10-15270
HORNE, DBA RAISIN VALLEY
FARMS, a partnership, and DBA D.C. No.
RAISIN VALLEY FARMS MARKETING 1:08-cv-01549-
ASSOCIATION, AKA RAISIN VALLEY LJO-SMS
MARKETING, an unincorporated
association; MARVIN D. HORNE;
LAURA R. HORNE; DON DURBAHN, OPINION
and the ESTATE OF RENA DURBAHN,
DBA LASSEN VINEYARDS, a
partnership,
Plaintiffs-Appellants,
v.
UNITED STATES DEPARTMENT OF
AGRICULTURE,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of California
Lawrence J. O’Neill, District Judge, Presiding
Argued and Submitted
February 14, 2014—San Francisco, California
Filed May 9, 2014
2 HORNE V. USDA
Before: Stephen Reinhardt, Michael Daly Hawkins,
and Ronald M. Gould, Circuit Judges.
Opinion by Judge Hawkins
SUMMARY*
Taking
Following a reversal and remand from the United States
Supreme Court, the panel affirmed the district court’s
summary judgment in favor of the United States Secretary of
Agriculture in an action alleging that the Secretary’s
regulatory program for California’s raisin producers violated
the Takings Clause of the Fifth Amendment.
Pursuant to the Agricultural Marketing Agreement Act of
1937, the Department of Agriculture implemented a
“Marketing Order” to ensure orderly market conditions by
regulating raisin supply. The Secretary required California
producers of certain raisins to divert a percentage of their
annual crop to a reserve, and the Secretary could impose a
penalty on producers who failed to comply with the diversion
program. Plaintiffs, California raisin producers, alleged that
the Secretary worked a constitutional taking by depriving
raisin producers of their personal property, the diverted
raisins, without just compensation.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
HORNE V. USDA 3
As a threshold issue, the panel held that the plaintiffs had
standing to bring this constitutional challenge. Turning to the
merits, the panel held that the Marketing Order and its
penalties did not work a physical per se taking. The panel
concluded that the Marketing Order’s reserve requirements -
and the provisions permitting the Secretary to penalize the
plaintiffs for failing to comply with those requirements - did
not constitute a taking under the Fifth Amendment.
COUNSEL
Michael W. McConnell (argued), John C. O’Quinn and
Joseph F. Cascio, Kirkland & Ellis LLP, Washington, D.C.,
and Brian C. Leighton, Clovis, California, for Plaintiffs-
Appellants.
Stuart F. Delery, Acting Assistant Attorney General, Joshua
Waldman (argued) and Michael S. Raab, Attorneys,
Appellate Staff, Civil Division, United States Department of
Justice, Washington, D.C.; Benjamin B. Wagner, United
States Attorney, and Benjamin E. Hall, Assistant United
States Attorney, Fresno, California, for Defendant-Appellee.
OPINION
HAWKINS, Senior Circuit Judge:
To ensure stable market conditions, the Secretary of
Agriculture, administering a complex regulatory program,
requires California producers of certain raisins to divert a
percentage of their annual crop to a reserve. The percentage
of raisins diverted to the reserve varies annually according to
4 HORNE V. USDA
that year’s crop output. Subject to administrative and judicial
review, the Secretary can impose a penalty on producers who
fail to comply with the diversion program. The program’s
goal is to keep raisin supply relatively constant from year to
year, smoothing the raisin supply curve and thus bringing
predictability to the market for producers and consumers
alike. The diverted raisins are sold, oftentimes in
noncompetitive markets, and raisin producers are entitled to
a pro rata share of the sales proceeds less administrative
costs. In some years, this “equitable distribution” is
significant; in other years it is zero.
Eschewing any Commerce Clause or regulatory takings
theory, Plaintiffs-Appellants Marvin and Laura Horne (“the
Hornes”) challenge this regulatory program and, in particular,
the Secretary’s ability to impose a penalty for non-
compliance, as running afoul of the Takings Clause of the
Fifth Amendment.1 Specifically, the Hornes argue
Defendant-Appellee the Department of Agriculture (“the
Secretary”), charged with overseeing the diversion program,
works a constitutional taking by depriving raisin producers of
their personal property, the diverted raisins, without just
compensation. The Secretary defends the constitutionality of
the reserve requirement. Concluding the diversion program
1
Collectively referred to as “the Hornes,” the Plaintiffs-Appellants are
Marvin and Laura Horne, d/b/a Raisin Valley Farms (a California general
partnership), and d/b/a Raisin Valley Farms Marketing Association (a
California unincorporated association), together with their business
partners Don Durbahn and the Estate of Rena Durbahn, collectively d/b/a
Lassen Vineyards (a California general partnership).
HORNE V. USDA 5
does not work a constitutional taking on the theory advanced
by the Hornes, we affirm the judgment of the district court.2
FACTUAL AND PROCEDURAL BACKGROUND
A
Raisin prices rose rapidly between 1914 and 1920,
peaking in 1921 at $235 per ton. This surge in prices spurred
increased production, which in turn caused prices to plummet
back down to between $40 and $60 per ton, even while
production continued to expand. As a result of this growing
disparity between increasing production and decreasing
prices, the industry became “compelled to sell at less than
parity prices and in some years at prices regarded by students
of the industry as less than the cost of production.” Parker v.
Brown, 317 U.S. 341, 364 (1943); see id. at 363–64 &
nn.9–10; see also Zuber v. Allen, 396 U.S. 168, 174–76
(1969) (describing market conditions). See generally Daniel
Bensing, The Promulgation of Implementation of Federal
Marketing Orders Regulating Fruit and Vegetable Crops
Under the Agricultural Marketing Agreement Act of 1937,
5 San Joaquin Agric. L. Rev. 3 (1995) (describing the history
of the AMAA and the structure of the regulatory program it
authorizes).
This market upheaval pervaded the entire agriculture
industry, prompting Congress to enact the Agricultural
Marketing Agreement Act of 1937, as amended, 7 U.S.C.
2
In doing so, we note the Court of Federal Claims has also upheld the
constitutionality of this regulatory program. See Evans v. United States,
74 Fed. Cl. 554, 558 (2006), aff’d, 250 F. App’x. 321 (Fed. Cir. 2007)
(unpub.).
6 HORNE V. USDA
§ 601 et seq. (“AMAA”), to bring consistency and
predictability to the Nation’s agricultural markets. Pursuant
to the AMAA, the Department of Agriculture implemented
the Marketing Order Regulating the Handling of Raisins
Produced from Grapes Grown in California, 7 C.F.R. Part 989
(“Marketing Order”), in 1949 in direct response to the market
conditions described in Parker.
The Marketing Order ensures “orderly” market conditions
by regulating raisin supply. 7 U.S.C. § 602(1). The Secretary
has delegated to the Raisin Administrative Committee
(“RAC”) the authority to set an annual “reserve tonnage”
requirement, which is expressed as a percentage of the overall
crop.3 See 7 C.F.R. §§ 989.65–66. The remaining raisins are
“free tonnage” and can be sold on the open market. The
reserved raisins are diverted from the market to smooth the
peaks of the raisin supply curve. Id. at § 989.67(a). To
smooth the supply curve’s valleys, reserved raisins are
released when supply is low. By varying the reserve
requirement annually, the RAC can adapt the program to
address changing growing and market conditions. For
example, in the 2002–03 and 2003–04 crop years at issue
here, the reserve percentages were set at forty-seven percent
and thirty percent of the annual crop, respectively.
The operation of the Marketing Order turns on a
distinction between “producers” and “handlers.” A
“producer” is a “person engaged in a proprietary capacity in
3
The RAC is currently comprised of forty-seven industry-nominated
representatives appointed by the Secretary, of whom thirty-five represent
producers, ten represent handlers, one represents the cooperative
bargaining association, and one represents the public. See 7 C.F.R.
§§ 989.26, 989.29, and 989.30.
HORNE V. USDA 7
the production of grapes which are sun-dried or dehydrated
by artificial means until they become raisins . . . .” 7 C.F.R.
§ 989.11. By contrast, included in the definition of a
“handler,” id. at 989.15, is any person who “stems, sorts,
cleans, or seeds raisins, grades stemmed raisins, or packages
raisins for market as raisins,” id. at 989.14.4 Raisin producers
convey their entire crop to a handler, receiving a pre-
negotiated field price for the free tonnage. Id. at § 989.65.
Handlers, who sell free tonnage raisins on the open market,
bear the obligation of complying with the Marketing Order by
diverting the required percentage of each producer’s raisins
to “the account of the [RAC].” Id. § 989.66(a). Handlers
must also prepare the reserved raisins for market, and the
RAC compensates them for providing this service. Id. at
§ 989.66(f).
The RAC tracks how many raisins each producer
contributes to the reserve pool. When selling the raisins, the
RAC has a regulatory duty to sell them in a way that
“maxim[izes] producer returns.” Id. at § 989.67(d)(1). The
RAC, which receives no federal funding, finances its
operations and the disposition of reserve raisins from the
proceeds of the reserve raisin sales. Whatever net income
remains is disbursed to producers, who retain a limited equity
4
Specifically, any person who “stems, sorts, cleans, or seeds raisins,
grades stemmed raisins, or packages raisins for market as raisins” is a
“packer” of raisins, and all packers are handlers. 7 C.F.R. §§ 989.14 &
989.15. These definitions apply only to activities taking place within “the
area,” which simply refers to the State of California. Id. at § 989.4.
Additionally, any producer who sorts and cleans his own raisins in
their unstemmed form is not a packer with respect to those raisins. 7
C.F.R. § 989.14.
8 HORNE V. USDA
interest in the RAC’s net income derived from reserved
raisins. See 7 U.S.C. § 608c(6)(E); 7 C.F.R. § 989.66(h).
B
Dissatisfied with what they view as an out-dated
regulatory regime, the Hornes set out to restructure their
raisin operation such that the Marketing Order would not
operate against them. Put another way, the Hornes came up
with a non-traditional packing program which, in their view,
the Secretary had no authority to regulate. Instead of sending
their raisins to a traditional packer, against whom the reserve
requirement of the Marketing Order would clearly operate,
the Hornes purchased their own handling equipment to clean,
stem, sort, and package raisins. The Hornes then performed
the traditional functions of a handler with respect to the
raisins they produced. The Hornes believed that, by cleaning,
stemming, sorting, and packaging their own raisins, they
would not be “handlers” with respect to the raisins they
produced. In addition, the Hornes performed the same
functions for a number of other producers for a per-pound
fee. Similarly, by not acquiring title to the raisins of other
producers but rather charging those producers a per-pound
fee, the Hornes believed they did not fall within the
regulatory definition of “handler” with respect to the third-
party producers’ raisins. With this set-up, the Hornes
believed the requirements of the Marketing Order would not
apply to them, relieving them of the obligation to reserve any
raisins.5
5
The government contends the Hornes lack standing to assert a takings
defense with respect to raisins they never owned, i.e., raisins produced by
third parties. The government concedes the Hornes have standing to
assert a takings defense with respect to raisins they produced themselves.
HORNE V. USDA 9
C
The Secretary disagreed with the Hornes and applied the
Marketing Order to their operation with respect to the raisins
grown both by the Hornes and by third-party producers. At
the end of protracted administrative proceedings, a U.S.D.A.
Judicial Officer found the Hornes liable for numerous
regulatory violations and imposed a monetary penalty of
$695,226.92.6 The Hornes then sought review of that final
agency action in federal district court pursuant to 7 U.S.C.
§ 608c(14)(B). In district court, the Hornes alleged they were
not “handlers” within the meaning of the regulation and
further alleged the agency’s order violated the Takings Clause
and the Eighth Amendment’s prohibition against excessive
fines. The district court granted summary judgment in favor
We decline to decide what rights under California law a non-title
holder has to challenge the “taking” of property in his possession. See
Vandevere v. Lloyd, 644 F.3d 957, 963 (9th Cir. 2011) (holding that for
the takings claim “whether a property right exists . . . is a question of state
law”) (emphasis omitted). Here, it is enough to note the Hornes clearly
have standing to assert a taking defense with respect to the raisins they
produced themselves, entitling them to a decision on the merits for at least
that property. Because we rule against the Hornes on the merits, we need
not further address the standing issue.
6
The Judicial Officer ordered the Hornes to pay (1) $8,783.39 in
overdue assessments for the 2002–03 and 2003–04 crop years,
(2) $483,843.53 as the dollar equivalent for the raisins not held in reserve,
and (3) $202,600 as a civil penalty for failure to comply with the
Marketing Order. The overdue assessments in their entirety and $25,000
of the civil penalty were imposed for violations of the Marketing Order
unrelated to the reserve requirement. See, e.g., 7 C.F.R. § 989.73
(requiring handlers to file certain reports); id. at § 989.77 (requiring
handlers to allow the Agricultural Marketing Service access to records).
The balance of the penalty and assessments pertain directly to the Hornes’
failure to reserve raisins.
10 HORNE V. USDA
of the Secretary on all counts. See Horne v. U.S. Dep’t of
Agric., No. CV-F-08-1549 LJO SMS, 2009 WL 4895362
(E.D. Cal. filed Dec. 11, 2009).
The Hornes appealed to this court. We affirmed the
district court with respect to the Hornes’ statutory claims,
holding that even if the AMAA’s definitions of “handler” and
“producer” are ambiguous, the Secretary’s application of the
Marketing Order to the Hornes was neither arbitrary nor
capricious, and it was supported by substantial evidence.
Horne v. U.S. Dep’t of Agric., 673 F.3d 1071, 1078 (9th Cir.
2011) (“Horne I”). We also affirmed the district court’s grant
of summary judgment in favor of the Secretary on the Eighth
Amendment claim. Id. at 1080–82. And we held we lacked
jurisdiction over the Fifth Amendment claim. Specifically,
we held the Hornes brought their takings claim as producers
rather than handlers. Because the AMAA did not in our view
displace the Tucker Act with respect to a producer’s claim,
we held that jurisdiction over the takings claim fell with the
Court of Federal Claims rather than the district court. Id. at
1078–80.
The Hornes sought and the Supreme Court granted
certiorari with respect to the jurisdictional issue.7 Reversing
our judgment on that issue alone, the Supreme Court held (1)
7
Because the Hornes’ certiorari petition only challenged our disposition
of the Hornes’ Fifth Amendment claim, Horne I is the final judgment of
the Hornes’ Eighth Amendment and statutory claims. Accordingly,
because the statutory claims are no longer at bar, the Hornes concede they
no longer challenge the Judicial Officer’s imposition of $8,783.39 in
overdue assessments or the related $25,000 in civil penalties. The Hornes’
challenge is confined to the remaining dollar value equivalent and its
attendant civil penalty (hereinafter, “the penalty”), because these are
directly traceable to the Hornes’ failure to reserve raisins. See supra n.5.
HORNE V. USDA 11
the Hornes brought their takings claim as handlers, and
(2) the Hornes, as handlers, may assert a constitutional
defense to the underlying agency action in district court.
Horne v. Dep’t of Agric., 133 S. Ct. 2053, 2061, 2062 (2013).
(The Supreme Court reserved the question of whether the
Hornes could have sought relief in the Court of Federal
Claims, instead holding only that handlers could obtain
judicial review in district court. Id. at 1062 n.7.) The
Supreme Court remanded for a determination of the merits of
the Hornes’ takings claim, which, having received
supplementary briefing and additional oral argument, we now
decide.
STANDARD OF REVIEW
We review de novo a district court’s grant of summary
judgment in a case involving a constitutional challenge to a
federal regulation. Ariz. Life Coal., Inc. v. Stanton, 515 F.3d
956, 962 (9th Cir. 2008); Doe v. Rumsfeld, 435 F.3d 980, 984
(9th Cir. 2006).
STANDING
The Secretary contends the Hornes lack standing to
challenge the portion of the penalty attributable to the sale of
any raisins produced by third-party firms, then handled by the
Hornes (the “third-party raisins”). The Secretary argues the
Hornes never owned these raisins and so cannot challenge
their seizure.8 We find this argument unpersuasive.
8
The Secretary concedes the Hornes have standing to challenge the
remainder of the penalty.
12 HORNE V. USDA
As the Supreme Court made clear, the injury suffered by
the Hornes is not the obligation to reserve raisins for the RAC
(which, of course, the Hornes did not do), but rather to pay
the penalty imposed for the Hornes’ failure to comply with
the Marketing Order. Horne, 133 S. Ct. at 2061 n.4. Thus,
the government’s contention that the Hornes would not have
standing to challenge a government seizure of the third-party
raisins (a seizure which, of course, never happened) is
irrelevant to the standing inquiry here.9
Instead, we analyze whether the Hornes have standing to
challenge the penalty. A monetary penalty is an actual,
concrete and particularized injury-in-fact. Sacks v. Office of
Foreign Assets Control, 466 F.3d 764, 771 (9th Cir. 2006)
(citing Cent. Ariz. Water Conserv. Dist. v. EPA, 990 F.2d
1531, 1537 (9th Cir. 2006)); see Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560 (1992). The need to pay a
penalty is obviously traceable to its imposition, and a
favorable merits determination in this litigation would redress
the Hornes’ alleged injury, thereby satisfying the Lujan
requirements. See Lujan, 504 U.S. at 560–61. We thus hold
9
Additionally, we doubt the government’s contention that the Hornes
would lack standing to challenge a seizure of property they held in
bailment. In an analogous situation, we have held that individuals lacking
an ownership interest in a given piece of property have standing to
challenge the seizure of that property. See United States v. $191,910 in
U.S. Currency, 16 F.3d 1051, 1057 (9th Cir. 1994) (“In order to contest
a forfeiture, a claimant need only have some type of property interest in
the forfeited items. This interest need not be an ownership interest; it can
be any type of interest, including a possessory interest.”), superseded on
other grounds by statute as stated in United States v. $80,180.00, 303 F.3d
1182, 1184 (9th Cir. 2002). In any event, because we hold the Hornes
have established standing as the subjects of the penalty, we need not
confront this question.
HORNE V. USDA 13
the Hornes have standing to bring this constitutional
challenge.
CONSTITUTIONAL CLAIM
The Takings Clause does not prohibit the government
from taking property for public use; rather, it requires the
government to pay “just compensation” for any property it
takes. U.S. Const. amend. V. Thus, a takings challenge
follows a two-step inquiry. First, we must determine whether
a “taking” has occurred; that is, whether the complained-of
government action constitutes a “taking,” thus triggering the
requirements of the Fifth Amendment. If so, we move to the
second step and ask if the government provided just
compensation to the former property owner. Brown v. Legal
Found. of Wash., 538 U.S. 216, 231–32, 235–36 (2003); First
English Evangelical Lutheran Church of Glendale v. Cnty. of
L.A., 482 U.S. 304, 314 (1987).
However, before turning to the first step of this formula,
we must address a threshold issue and identify precisely
which property was allegedly taken from the Hornes.
A
The Hornes declined to comply with the reserve
requirement of the Marketing Order; at no time did the
Hornes, either as producers or as handlers, ever physically
convey raisins to the RAC. Instead, the Secretary imposed
the penalty on the Hornes for their failure to comply with the
Marketing Order. In general, the imposition and collection of
penalties and fines does not run afoul of the Takings Clause.
See Koontz v. St. Johns River Water Management District,
133 S. Ct. 2586, 2601 (2013) (listing cases). Here, however,
14 HORNE V. USDA
the Hornes link the Secretary’s imposition of a penalty to a
specific governmental action they allege to be a taking. In
effect, the Hornes argue the constitutionality of the penalty
rises or falls with the constitutionality of the Marketing
Order’s reserve requirement.
We agree that the penalty cannot be analyzed without
reference to the reserve requirement, and we find Koontz
instructive on this point. In Koontz, a permitting agency
refused to grant a developer a building permit until the
developer funded offsite environmental impact mitigation
works. 133 S. Ct. at 2593. The developer sued, arguing the
permitting agency’s conditions for obtaining a permit violated
the “nexus and rough proportionality” rule of Nollan v.
California Coastal Commission, 483 U.S. 825 (1987), and
Dolan v. City of Tigard, 512 U.S. 374 (1994).10 The Supreme
Court of Florida declined to apply Nollan and Dolan, because
in those cases the permitting agencies granted the relevant
permit subject to a condition subsequent. The Florida court
did not believe Nollan and Dolan would apply to situations in
which the permitting agency refused to issue a permit until
the permittee met a condition precedent. The Supreme Court
reversed, holding the distinction between conditions
precedent and subsequent constitutionally irrelevant in this
context. See id. at 2596.
Relevant to this case, Koontz confronts the issue of how
to analyze a takings claim when a “monetary exaction,” rather
than a specific piece of property, is the subject of that claim.
Koontz distinguished Eastern Enterprises v. Apfel, 524 U.S.
498 (1988), by noting that in Koontz, “unlike Eastern
Enterprises, the monetary obligation burdened petitioner's
10
We discuss Nollan and Dolan in more detail in Section D.
HORNE V. USDA 15
ownership of a specific parcel of land.” Koontz, 133 S. Ct. at
2599; accord id. at 2600 (“The fulcrum this case turns on is
the direct link between the government’s demand and a
specific parcel of real property.”). This direct linkage
between the monetary exaction and the piece of land guided
the Court to invoke the substantive takings jurisprudence
relevant to the land for the purpose of determining whether
the related monetary exaction constituted a taking. Id.
Here, the Secretary specifically linked a monetary
exaction (the penalty imposed for failure to comply with the
Marketing Order) to specific property (the reserved raisins).
The Hornes faced a choice: relinquish the raisins to the RAC
or face the imposition of a penalty. There is no question the
monetary exaction is linked to specific property because the
Judicial Officer’s order requires the Hornes to repay the
market value of the unreserved raisins (plus an additional
penalty for non-compliance). Because the Marketing Order
is structured in this way, we follow Koontz to analyze the
constitutionality of the penalty imposed on the Hornes against
the backdrop of the reserve requirement. If the Secretary
works a constitutional taking by accepting (through the RAC)
reserved raisins, then, under the unconstitutional conditions
doctrine, the Secretary cannot lawfully impose a penalty for
non-compliance. But if the receipt of reserved raisins does
not violate the Constitution, neither does imposition of the
penalty. See id. at 2596 (discussing the unconstitutional
conditions doctrine).11
11
Contrary to the Hornes’ suggestion, however, we read Koontz only to
say this much. The Hornes argue Koontz somehow substantively altered
the doctrinal landscape against which we evaluate takings claims. We
disagree. Koontz simply clarifies the range of takings cases in which
Nollan and Dolan provide the rule of decision. See 133 S. Ct. at 2598
16 HORNE V. USDA
B
We return to the task of determining whether the
imposition of the penalty for failure to comply with the
reserve requirement constitutes a taking. A “paradigmatic
taking” occurs when the government appropriates or occupies
private property. Lingle v. Chevron U.S.A., Inc., 544 U.S.
528, 537 (2005). Lingle gives as an example of this sort of
taking the government’s wartime seizure of a coal mine. Id.;
see United States v. Pewee Coal Co., 341 U.S. 114, 115–16
(1951). Because the government neither seized any raisins
from the Hornes’ land nor removed any money from the
Hornes’ bank account, the Hornes cannot—and do
not—argue they suffered this sort of “paradigmatic taking.”
Instead, we must enter the doctrinal thicket of the
Supreme Court’s regulatory takings jurisprudence. Since
Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1945), the
Court has recognized that “government regulation of private
property may, in some instances, be so onerous that its effect
is tantamount to a direct appropriation or ouster—and that
such ‘regulatory takings’ may be compensable . . . .” Lingle,
544 U.S. at 538. In general, regulatory takings are analyzed
under the ad hoc framework announced in Penn Central
Transportation Co. v. City of New York, 438 U.S. 104, 124
(1978). The Hornes, however, have intentionally declined to
pursue a Penn Central claim. Instead, they argue the
(declining to address merits of petitioner’s claim under Nollan and Dolan);
id. at 2602–03 (declining to alter or overrule the holdings of Nollan and
Dolan).
HORNE V. USDA 17
Marketing Order, though a regulation, works a categorical
taking.12
Since Mahon, the Supreme Court has identified three
“relatively narrow categories” of regulations which work a
categorical, or per se, taking. Each category has a
paradigmatic or representative case. Lingle, 544 U.S. at
538.13 The representative case of the first category, Loretto
v. Teleprompter Manhattan CATV Corp., 458 U.S. 419,
427–38 (1982), holds that permanent physical invasions of
real property work a per se taking. The second, represented
by Lucas v. South Carolina Coastal Council, 505 U.S. 1003,
1015 (1992), teaches that regulations depriving owners of all
economically beneficial use of their real property also work
a per se taking. The third line of cases, represented by Nollan
and Dolan, articulate a more nuanced rule. Together, Nollan
and Dolan hold that a condition on the grant of a land use
permit requiring the forfeiture of a property right constitutes
a taking unless the condition (1) bears a sufficient nexus with
and (2) is roughly proportional to the specific interest the
government seeks to protect through the permitting process.
12
Similarly, the Hornes concede the AMAA and Marketing Order fall
within Congress’s Commerce Clause authority. However, that a
governmental action is authorized by the Commerce Clause does not
immunize it from the requirements of the Takings Clause. Lingle, 544
U.S. at 543; Kaiser Aetna v. United States, 444 U.S. 164, 172 (1979).
13
We read Lingle to elevate the land use exaction cases to a third
category on par with permanent physical invasions and complete
economic deprivation regulations. 544 U.S. at 538 (“Outside these two
categories (and the special context of land-use exactions discussed below),
regulatory takings challenges are governed by Penn Central Transp. Co.
v. New York City.”) (citation omitted and emphasis added).
18 HORNE V. USDA
If those two conditions are met, then the imposition of the
conditional exaction is not a taking.
We must determine which analytical framework provides
the proper point of departure for our inquiry into whether a
taking has occurred here. The Hornes see a direct analogy
between Loretto’s occupation of land for the purpose of
installing an antenna and the Marketing Order’s reserve
requirement. The Secretary argues Nollan and Dolan provide
better guidance to evaluate the constitutionality of what the
Secretary characterizes as a use restriction on raisins. We
must first identify which of the categorical takings case lines,
if any, the Marketing Order implicates. Second, we must
apply that case line’s substantive law to determine whether a
taking has occurred.
C
Loretto applies only to a total, permanent physical
invasion of real property. Two independent reasons assure us
that the Marketing Order does not fall within the “very
narrow” scope of the Loretto rule, 458 U.S. at 441: First, the
Marketing Order operates on personal, rather than real
property, and second, the Marketing Order is carefully crafted
to ensure the Hornes are not completely divested of their
property rights, even with respect to the reserved raisins.
1
The Marketing Order operates against personal, rather
than real, property. Because the Takings Clause undoubtedly
protects personal property, see Phillips v. Wash. Legal
Found., 524 U.S. 156, 172 (1998) (interest earned on
lawyers’ trust account is a protected private property); Brown,
HORNE V. USDA 19
538 U.S. at 235 (same); Ruckelshaus v. Monsanto Co.,
467 U.S. 986, 1001–04 (1984) (same for trade secrets), this
distinction does not mean the Takings Clause is inapplicable.
But, as the Supreme Court stated in Lucas, the Takings
Clause affords less protection to personal than to real
property:
[O]ur “takings” jurisprudence . . . has
traditionally been guided by the
understandings of our citizens regarding the
content of, and the State’s power over, the
“bundle of rights” that they acquire when they
obtain title to property. It seems to us that the
property owner necessarily expects the uses of
his property to be restricted, from time to
time, by various measures newly enacted by
the State in legitimate exercise of its police
powers; as long recognized, some values are
enjoyed under an implied limitation and must
yield to the police power. And in the case of
personal property, by reason of the State’s
traditionally high degree of control over
commercial dealings, he ought to be aware of
the possibility that new regulation might even
render his property economically worthless (at
least if the property’s only economically
productive use is sale or manufacture for
sale). In the case of land, however, we think
the notion pressed by the Council that title is
somehow held subject to the “implied
limitation” that the State may subsequently
eliminate all economically valuable use is
inconsistent with the historical compact
20 HORNE V. USDA
recorded in the Takings Clause that has
become part of our constitutional culture.
Lucas, 505 U.S. at 1027–28.
Lucas uses comparative language to make clear the
Takings Clause affords more protection to real than to
personal property. While the precise contours of these
differing levels of protection are not entirely sharp, Lucas
suggests the government’s authority to regulate such property
without working a taking is at its apex where, as here, the
relevant governmental program operates against personal
property and is motivated by economic, or “commercial,”
concerns. Indeed, it is clear the holding of Lucas is limited to
cases involving land. The sentence which rejects the State’s
contention that “the State may subsequently eliminate all
economically valuable use” of the Lucas’s property begins
with the phrase “[i]n the case of land” and is expressly
contrasted against commercial personal property, over which
the government exerts a “traditionally high degree of
control.” Id. at 1028.
The real/personal property distinction also undergirds
Loretto. Justifying its bright-line rule, Loretto states
“whether a permanent physical occupation has occurred
presents relatively few problems of proof. The placement of
a fixed structure on land or real property is an obvious fact
that will rarely be subject to dispute.” 458 U.S. at 437
(emphasis added). This example underscores the narrow
reach of Loretto. In reaching its decision, the Court discussed
the evolution of its takings jurisprudence, citing virtually only
cases pertaining to real property. See id. at 427–37. And
because the case unquestionably (and solely) concerned real
property, the Loretto Court did not have occasion to consider
HORNE V. USDA 21
the occupation of personal property. Given the Court’s later
discussion of personal property in Lucas, we see no reason to
extend Loretto to govern controversies involving personal
property. See also Wash. Legal Found. v. Legal Found. of
Wash., 271 F.3d 835, 854 (9th Cir. 2001) (en banc), aff’d sub
nom., Brown v. Legal Found. of Wash., 538 U.S. 216 (2003)
(“The per se analysis has not typically been employed outside
the context of real property. It is a particularly inapt analysis
when the property in question is money.”).
2
Equally importantly, the Hornes did not lose all
economically valuable use of their personal property. Unlike
Loretto, which applies only when each “‘strand’ from the
‘bundle’ of property rights” is “chop[ped] through . . . taking
a slice of every strand,” 458 U.S. at 435, the Hornes’ rights
with respect to the reserved raisins are not extinguished
because the Hornes retain the right to the proceeds from their
sale. See 7 U.S.C. § 608c(6)(E); 7 C.F.R. § 989.66(h). The
Hornes essentially call this right meaningless because the
equitable distribution may be zero.14 But, the equitable
distribution is not zero in every year, and even in years with
a zero distribution, there are gross proceeds from the sale of
the reserved raisins; it just so happens that in those years,
those gross proceeds are not greater than the operating
expenses of the RAC.
14
The parties dispute whether there was a distribution for the crop years
in question and, if so, the value of that distribution. We do not consider
this dispute material to the question of whether a taking occurred because
the distribution reflects net revenue. For the reasons we give, we focus on
the gross revenue generated by the reserve raisin pool.
22 HORNE V. USDA
Here, we pause to focus on the RAC’s structure and
purpose, as well as the benefits it secures for producers such
as the Hornes. The RAC is governed by industry
representatives including producers and handlers.15 Its
purpose is to stabilize market conditions for raisin producers.
Thus, the Hornes’ equitable stake in the reserved raisins, even
in years in which they are not entitled to a cash distribution
from the RAC, funds the administration of an industry
committee tasked with (1) representing raisin producers, such
as the Hornes, and (2) implementing the reserve requirement,
the effect of which is to stabilize the field price of raisins. In
light of this scheme, the Hornes cannot claim they lose all
rights associated with the reserve raisins. Indeed, the
structure of the diversion program ensures the reserved
raisins continue to work to the Hornes’ benefit after they are
diverted to the RAC, even in years in which producers
receive no equitable distribution of the RAC’s net profits.16
For these reasons, the Hornes’ reliance on Loretto is
unavailing. Loretto specifically preserves the state’s
“substantial authority” and “broad power to impose
appropriate restrictions upon an owner’s use of his property.”
458 U.S. at 441. Here, the reserved raisins are not
permanently occupied; rather, their disposition, while tightly
controlled, inures to the Hornes’ benefit. Coupled with
15
In fact, Mr. Horne has been an alternate member, though never a
voting member, of the RAC.
16
We must clarify that we do not hold the RAC’s market intervention
constitutes “just compensation” for a taking. Because we hold no taking
occurs, we do not conduct a just compensation inquiry. We discuss the
RAC’s purpose and organization solely to show that the Hornes’ rights to
the reserved raisins, even if diminished by the Marketing Order, are not
extinguished by it.
HORNE V. USDA 23
Lucas’s distinction between real and personal property, this
assures us the diversion program does not work a per se
taking.17
D
Instead of looking to Loretto for the rule of decision here,
the Secretary urges us to apply the “nexus and rough
proportionality” rule of Nollan and Dolan to this case, asking
us in essence to hold that the reserve requirement constitutes
a use restriction on the Hornes’ personal property and then
analogize that use restriction to the land use permitting
context. We believe this approach is the most faithful way to
apply the Supreme Court’s precedents to the Hornes’ claim.18
In Nollan, the California Coastal Commission conditioned
the grant of a permit to build a beachfront home on the
landowner’s surrender of an easement along the coastal side
of the property in order to link two public beaches by a
publically accessible path. 483 U.S. at 828. However, the
Commission’s proffered reason for imposing this condition
was to mitigate the diminished “visual access” to the ocean
17
Nor would the Hornes fare any better under a Lucas theory. Lucas
plainly applies only when the owner is deprived of all economic benefit
of the property. 505 U.S. at 1019 & n. 8. If the property retains any
residual value after the regulation’s application, Penn Central applies. Id.
The equitable stake, even in years where there is no monetary distribution,
is clearly not valueless, and thus Lucas does not apply.
18
We do not mean to suggest that all use restrictions concerning
personal property must comport with Nollan and Dolan. Rather, we hold
Nollan and Dolan provide an appropriate framework to decide this case
given the significant but not total loss of the Hornes’ possessory and
dispositional control over their reserved raisins.
24 HORNE V. USDA
from the non-coastal edge of the property caused by the
Nollan’s proposed improvement. Id. at 828–29. The
Supreme Court held there was no “nexus” between the
exaction-by-condition and the Commission’s asserted state
interest, then held that, absent such a nexus, the imposition of
the condition was a taking. Id. at 837.
Dolan provides us the analytical framework to apply in
cases where a legitimate nexus exists between the asserted
state interest and the proposed exaction. In Dolan, a
landowner sought permits to enlarge and improve her
commercial property. As in Nollan, the permitting agency
approved the permit subject to certain conditions. First, the
agency required the dedication of certain creek-side land for
the purpose of mitigating the increased water run-off that
could potentially occur as a result of the landowner’s plan to
pave a parking lot. Second, the agency required the
dedication of a 15-foot strip of land to be used for a
pedestrian and bicycle pathway, the purpose of which was to
mitigate the increased traffic flow spawned by the proposed
commercial development. 512 U.S. at 380. Dolan held there
was an appropriate nexus between the state’s legitimate
interests and the proposed exactions. Id. at 387–88.
But Dolan also held the proposed means and the ends in
question were not “roughly proportional[]” to each other and
thus the permit as issued constituted a taking. Id. at 391; see
id. at 394–96. While not reducible to mathematical certainty,
the Dolan “rough proportionality” requirement does require
a permitting agency to “make some sort of individualized
determination that the required dedication is related both in
nature and extent to the impact of the proposed
development.” Id. at 391. Thus, the distillate of the
Nollan/Dolan rule appears to be this: If the government seeks
HORNE V. USDA 25
to obtain, through the issuance of a conditional land use
permit, a property interest the outright seizure of which would
constitute a taking, the government’s imposition of the
condition also constitutes a taking unless it: (1) bears a
sufficient nexus with and (2) is roughly proportional to the
specific interest the government seeks to protect through the
permitting process.
We apply the Nollan/Dolan rule here because we believe
it serves to govern this use restriction as well as it does the
land use permitting process. At bottom, the reserve
requirement is a use restriction applying to the Hornes insofar
as they voluntarily choose to send their raisins into the stream
of interstate commerce. The Secretary did not authorize a
forced seizure of the Hornes’ crops, but rather imposed a
condition on the Hornes’ use of their crops by regulating their
sale. As we explained in a similar context over seventy years
ago, the Marketing Order “contains no absolute requirement
of the delivery of [reserve-tonnage raisins] to the [RAC]” but
rather only “a conditional one.” Wallace v. Hudson-Duncan
& Co., 98 F.2d 985, 989 (9th Cir. 1938) (rejecting a takings
challenge to a reserve requirement under the walnut
marketing order); see also Yee v. City of Escondido, 503 U.S.
519, 527–28 (1992) (holding municipal regulation of a
mobile home park owners’ ability to rent did not work a
taking where park owners voluntarily rented their land and
thus acquiesced in the regulation); cf. Ruckelshaus, 467 U.S.
986, 1070 (1994) (“a voluntary submission of data by an
applicant in exchange for the economic advantages of a
registration can hardly be called a taking”).
Moreover, there are important parallels between Nollan
and Dolan on one hand and the raisin diversion program on
the other. All involve a conditional exaction, whether it be
26 HORNE V. USDA
the granting of an easement, as in Nollan; a transfer of title,
as in Dolan; or the loss of possessory and dispositional
control, as here. All conditionally grant a government benefit
in exchange for an exaction. And, critically, all three cases
involve choice. Just as the Nollans could have continued to
lease their property with the existing bungalow and Ms.
Dolan could have left her store and unpaved parking lot as
they were, the Hornes, too, can avoid the reserve requirement
of the Marketing Order by, as the Secretary notes, planting
different crops, including other types of raisins, not subject to
this Marketing Order or selling their grapes without drying
them into raisins. Given these similarities, we are satisfied
the rule of Nollan and Dolan governs this case.
1. The Nexus Requirement
We now turn to the nexus requirement and ask if the
reserve program “further[s] the end advanced as [its]
justification.” Nollan, 483 U.S. at 837. Unquestionably, the
AMAA aims to “establish and maintain . . . orderly marketing
conditions for agricultural commodities,” 7 U.S.C. § 602(1),
as well as to keep consumer prices stable, id. at § 602(2). By
reserving a dynamic percentage of raisins annually such that
the domestic raisin supply remains relatively constant, the
Marketing Order program furthers the end advanced:
obtaining orderly market conditions. The government
represents (and the Hornes do not dispute) that by smoothing
the peaks and valleys of the supply curve, the program has
eliminated the severe price fluctuations common in the raisin
industry prior to the implementation of the Marketing Order,
making market conditions predictable for industry and
consumers alike. On this basis, the Marketing Order satisfies
the Nollan nexus requirement.
HORNE V. USDA 27
2. The Rough Proportionality Requirement
Dolan does not require a “precise mathematical
calculation,” instead obliging the permitting agency only to
make an “individualized determination” that the condition
imposed is “related both in nature and extent to the impact”
of the permittee’s activity. Dolan, 512 U.S. at 391. The
Marketing Order meets this requirement. The percentage of
raisins to be reserved is revised annually to conform to
current market conditions. While Dolan does not require a
“mathematical calculation,” neither does it prohibit the RAC
from imposing a condition stated mathematically, i.e., as a
percentage. Indeed, here the RAC’s imposition of the reserve
requirement is not just in “rough” proportion to the goal of
the program, but in more or less actual proportion to the end
of stabilizing the domestic raisin market.19 By annually
modifying the “extent,” id., of the reserve requirement to
keep pace with changing market conditions, the RAC ensures
its program does not overly burden the producer’s ability to
compete while reducing to the producer’s benefit the potential
instability of this particular market.
Nor do we believe Dolan’s command that the condition
imposed be “individualized” presents a problem here. As
Dolan made clear, it was an adjudicative, not a legislative,
decision being reviewed. 512 U.S. at 835. Individualized
review makes sense in the land use context because the
development of each parcel is considered on a case-by-case
19
The Hornes do not challenge the adequacy or fairness of the RAC’s
decision to set the 2002–03 and 2003–04 reserve tonnage requirements at
forty-seven percent and thirty percent, respectively. In other words, the
Hornes’ challenge is to the program itself, not the details of its
implementation in the crop years at issue.
28 HORNE V. USDA
basis. But here, the use restriction is imposed evenly across
the industry; all producers must contribute an equal
percentage of their overall crop to the reserve pool. At
bottom, Dolan’s individualized review ensures the
government’s implementation of the regulations is tailored to
the interest the government seeks to protect. The Marketing
Order accomplishes this goal by varying the reserve
requirement annually in accordance with market and industry
conditions. Given that raisins are fungible (as opposed to
land, which is unique), we think this is enough to ensure the
means of the Marketing Order’s diversion program is at least
roughly proportional to its goals.20
CONCLUSION
While the Hornes’ impatience with a regulatory program
they view to be out-dated 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.
See United States v. Rock Royal Co-op, Inc., 307 U.S. 533,
572 (1939). Accordingly, it is to Congress and the
Department of Agriculture to which the Hornes must address
their complaints. The courts are not institutionally equipped
20
We reiterate that we analyze the Hornes’ challenge to the monetary
penalty through the lens of the Marketing Order’s reserve requirement
because the monetary penalty is pegged directly to the extent of the
Hornes’ non-compliance with the Order, as measured by the ton and
market value of the raisins. Accordingly, we hold the Secretary’s
imposition of the penalty satisfies any requirement Koontz may impose
that we independently analyze the monetary exaction under Nollan and
Dolan.
HORNE V. USDA 29
to modify wholesale complex regulatory regimes such as this
one.
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. There is a
sufficient nexus between the means and ends of the
Marketing Order. The structure of the reserve requirement is
at least roughly proportional (and likely actually proportional)
to Congress’s stated goal of ensuring an orderly domestic
raisin market. We reach these conclusions informed by the
Supreme Court’s acknowledgment that governmental
regulation of personal property is more foreseeable, and thus
less intrusive, than is the taking of real property. This,
coupled with our observation that the Secretary has
endeavored to preserve as much of the Hornes’ ownership of
the raisins as possible, leads us to conclude the Marketing
Order’s reserve requirements—and the provisions permitting
the Secretary to penalize the Hornes for failing to comply
with those requirements—do not constitute a taking under the
Fifth Amendment.
AFFIRMED.