Having now had a chance to review in detail the U.S. Supreme Court's unanimous opinion in Horne v. U.S. Dep't of Agriculture, No. 12-123 (June 10, 2013), we were struck by how at least one of the reactions to the decision painted it as a "narrow, specialized ruling" that's more of a one-off, than a case with lasting impact. Maybe this is a natural result of the case being argued last of the three takings cases the Court considered this term. Or because it involves what Justice Kagan characterized at oral arguments as possibly "the world's most outdated law." Or because there are several very high-profile cases on the Court's docket that everyone's anticipating. Or maybe just because it's about raisins.
But we respectfully dissent from the viewpoint that sees Horne as the least important and interesting of the 2013 Takings trilogy, or a case that's just about raisins and obscure, labyrinthian federal regulatory schemes. On the contrary, we think it's a very important case, and here's why.
Let's start with what we think is the critical "take away" from Justice Thomas's opinion for the Court: a "takings" claim can be more than simply a claim for "just compensation." The main thrust of the Ninth Circuit's decision and the USDA's arguments in the Supreme Court was that the Hornes could not raise their affirmative defense that the USDA is prohibited from imposing the fines and penalties under the Agricultural Marketing Agreement Act of 1937 because doing so would violate the Takings Clause. As we noted in our preview of the case, it has become increasingly common to assume that the only remedy for a "takings" claim is the payment of just compensation. Horne instructs otherwise.
The Ninth Circuit concluded it lacked jurisdiction over this defense because "takings" claims seek to recover compensation, and the only court with jurisdiction to enter an award of just compensation against the federal government is the Court of Federal Claims. In the Ninth Circuit's and the government's view, the ripeness rules of Williamson County Regional Planning Comm'n v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985) meant the takings defense was premature, and the only procedure available was for the Hornes to pay the fines and penalties in the district court enforcement action, and then file a separate takings lawsuit in the CFC to get the money back, even if that meant the Horne's check to pay the penalties and the government's check for just compensation would figuratively cross in the mail.
The Court rejected the argument and this redundant process, holding that the Hornes could raise the takings defense in the district court. The AMAA contains a "comprehensive remedial scheme" which allows handlers to raise -- indeed, it may require them to raise -- any challenge to a marketing order in the district court challenge to the administrative determination:
Pursuant to §§608c(15)(A)–(B), a handler may file with the Secretary a direct challenge to a marketing order and its applicability to him. We have held that "any handler" subject to a marketing order must raise any challenges to the order, including constitutional challenges, in administrative proceedings. See United States v. Ruzicka, 329 U. S. 287, 294 (1946). Once the Secretary issues a ruling, the federal district court where the "handler is an inhabitant, or has his principal place of business" is "vested with jurisdiction . . . to review [the] ruling." 8 §608c(15)(B). These statutory provisions afford handlers a ready avenue to bring takings claim against the USDA. We thus conclude that the AMAA withdraws Tucker Act jurisdiction over petitioners’ takings claim. Petitioners (as handlers) have no alternative remedy, and their takings claim was not "premature" when presented to the Ninth Circuit.
Slip op. at 13-14 (emphasis added) (footnote omitted).
We emphasize the "must raise" language because we think that it really isn't an option. If you have takings arguments and are on the business end of an enforcement action, you really better raise them in the district court, or risk losing them. Because under preclusion principles, if you have claim and don't raise it, you well may be barred from raising it in a subsequent proceeding in the CFC. So here's what we suggest you consider: make your takings defenses in the district court, file your lawsuit in the CFC for just compensation to prevent the statute of limitations from running on you, then ask to stay the CFC action while you litigate the takings issues in district court. The CFC action may eventually be moot (i.e., if you win the district court claim, you'd have no need to pursue compensation, and conversely, if you were to lose your district court takings claim, you would be barred by issue preclusion from relitigating it), but given the state of takings law these days and the propensity for the lower courts to misunderstand things, it's better to preserve all of your options. See also slip op. at 13-15, where the Court held that in the AMAA, Congress "withdrew" Tucker Act jurisdiction.
[Update: thanks to an astute reader for pointing out something we should have: you should file your CFC action first, before asserting your takings defense in the district court, to avoid the Tohono trap and the "has pending" language in 28 U.S.C. § 1500. We should have pointed this out since we filed a brief in Tohono on this very point. By the way, did you read our disclaimer?]
Thus, we think that Horne clarifies another unanimous Supreme Court takings opinion, Lingle v. Chevron USA, Inc., 844 U.S. 528 (2005), which concluded that takings actions are "designed not to limit the governmental interference with property rights per se, but rather to secure compensation in the event of an otherwise proper interference amounting to a taking." Id. at 536 (citing First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 314, 315 (1987) (emphasis original)). After Lingle, we heard more and more the idea that the Fifth Amendment only requires compensation when the government has taken property (either affirmatively, or de facto), which ignored the fact that it also is an affirmative limitation on the power of the government to undertake actions that take property without first condemning and paying compensation.
Horne's conclusion is really nothing new, because the district courts and regional circuits have long considered "takings" issues, just not cases in which compensation is sought as a remedy. See, e.g., Kaiser Aetna v. United States, 444 U.S. 164 (1979) (property owner raised argument in district court and Ninth Circuit that the imposition of a navigational servitude on a private marina would be a taking, and could not be accomplished unless the government first condemned and paid compensation).The Court in that case agreed, and wasn't bothered by the fact that the owner did not seek compensation. See id. at 180 ("if the Government wishes to make what was formerly Kuapa Pond into a public aquatic park after petitioners have proceeded as far as they have here, it may not, without invoking its eminent domain power and paying just compensation, require them to allow free access to the dredged pond"). But even though this is what we always believed the state of affairs was, it is nice to see a unanimous Supreme Court agree.
The Court ended the opinion by holding that that under the rationale of the plurality opinion in Eastern Enterprises v. Apfel, 524 U.S. 498 (1998), in the AMAA, Congress withdrew Tucker Act jurisdiction over the takings claim, freeing up those like the Hornes who are on the target end of similar regulatory schemes to object on takings grounds. The AMAA is a comprehensive statutory scheme (if you're in doubt see here) that "does not bar handlers from raising constitutional defesnese to the USDA's enforcement action." Slip op. at 14.
Finally some other thoughts:
- What was the property alleged to have been taken? This was a point of confusion sowed by the government and its amici (the raisins? the money?) which the Court resolved in the first page: "Petitioners sought judicial reivew, claiming that the monetary sanctions were an unconstitutional taking of private property." Slip op. at 1. The Court assumed that money is property, or at least didn't say it wasn't. Does this tell us something about how the Court might rule in Koontz?
- It looks like the Court -- or at least some of the Justices, and certainly the Chief Justice -- is losing patience with arguments in these cases where it looks like the government is playing games. At oral argument, the Chief pointedly questioned the government's counsel, and appeared irritated at its tactics ("I have to say -- I think it comes with less than good grace for you to criticize the other side for not having raised a particular argument."). Arguments designed to avoid the merits of takings cases that are too clever by half may work in certain lower courts, but perhaps the Supreme Court is growing tired of them, especially when they come from the Ninth Circuit, and particularly from judges known for their agendas. Two takings cases against the federal government this term, and both have been unanimous. Think that's mere happenstance?
- What to make of footnote 3, in which the Court wrote: "The Hornes wrote the Secretary and to the RAC in 2002 setting out their grievances: "[W]e are growers that will pack and market our raisins. We reserve our rights under the Constitution of the United States . . . [T]he Marketing Order Regulating Raisins has become a tool for grower bankruptcy, poverty, and involuntary servitude. The Marketing Order Regulating Raisins is a complete failure for growers, handlers, and the USDA . . . [W]e will not relinquish ownership of our crop. We put forth the money and effort to grow it, not the Raisin Administrative Committee. This is America, not a communist state.” App. to Pet. for Cert. 60a." Slip op. at 5 n.3. We wonder which Justice stuck that note there.
- While the Court neither revisited nor expressly revised Williamson County, it may be open to doing so in another case, as four Justices noted in their concurring opinion in San Remo.
As noted by Lyle Denniston in his SCOTUSblog summary "Opinion recap: Much more than raisins?," "reading between the lines" of Horne "would seem to be a signal that a wide array of businessess that live under government regulatory regimes will be able to bring constitutional 'takings' claims in response to the assessment of fines or civil penalties for disobeying those regimes." We also think that in addition to waiting for the enforcement action, a property owner may intstitute an affirmative declaratory action to resolve the issue, if the situation is concrete enought to present a case and controversy.
We shall see whether the lower courts see this clearly, or, like some courts' reaction to the Court's unanimous Arkansas Game and Fish ruling, look for ways to read Horne as narrowly as possible.