Tag: takings clause

Uncle Sam’s Vestigial Feudalism

In the feudal era, rulers funded their households by taking a share of the crops farmers in their territory produced. The lords called this tribute and the peasants would’ve called it extortion.

We like to think that we’ve come quite a ways since then. After all, taxes are now paid withmoney—or even a digital abstraction of money—and forms, not cartloads of grain. We can even feel good (well, sanguine) about paying taxes, because we know that we’re funding the government of our own choosing—a democratically elected leadership restrained by the Constitution—not just feeding the avarice of a local warlord.

Except if you’re a raisin farmer in California, a state responsible for 40% of the world’s and 99% of America’s raisins. If you’re a California serf raisin farmer, you’re required by federal law to hand over up to 47% of each year’s crop to the U.S. government so the government can control the supply and price of raisins under a New Deal-era regulatory scheme.

The Fifth Amendment says that “private property [shall not] be taken for public use, without just compensation,” however, so it’s hard to see how it would be constitutional for the government to take nearly half a farmer’s harvest without any payment—let alone “just compensation.” (To be clear, if you grow grapes for use in wine or juice, you’re fine. It’s only if you dry out those grapes that you have to watch your property rights evaporate.)

Yet the U.S. Court of Appeals for the Ninth Circuit has done just that, repeatedly. In 2012, the en banc court held that nobody could challenge this taking in federal court. The Supreme Court unanimously disagreed. (For more background and to read Cato’s merits brief in that case go here.)

Failing to take the hint, the Ninth Circuit has now held that the Fifth Amendment’s protection against state expropriation simply doesn’t apply to personal property (as opposed to real estate). To put it bluntly, that’s an arbitrary, unprecedented, and ahistorical distinction, so raisin farmers are once again forced to ask the Supreme Court to correct lower court’s failure to protect their rights.

Joined by the five other organizations, Cato has filed a brief urging the Court to take this case, thus insuring that the farmers’ constitutional rights aren’t left to wither on the vine. We argue that the Ninth Circuit’s distinction between real and personal property has no basis in the text and history of the Constitution, Supreme Court precedent, or a reasonable understanding of the English language.

The Fifth Amendment embodies the notion that property rights are central to a free people and a just government. It could not be more clear that property can’t be taken without “due process,” and that when it is taken, the government must pay “just compensation.” These guarantees reflect the many values inherent in private property, such as individual achievement, privacy, and autonomy from government intrusion.

By devaluing property rights of all sorts, the Ninth Circuit weakens the values of autonomy and reliance that undergird the Takings Clause and conflicts with the very foundations of our constitutional order.

Raisin farming ain’t easy; five pounds of grapes yield only one pound of raisins. Raisin farmers shouldn’t have to hand over half of that pound to the federal government.

The Supreme Court will decide whether to take Horne v. U.S. Dept. of Agriculture later this fall.

Cato legal associate Gabriel Latner co-authored this blogpost.

Connecticut, Drunk on Power, Uses Bottle Bill to Steal Money

For nearly 30 years, Connecticut beverage distributors received the unclaimed refund value of recycled bottles as part of the state’s Bottle Bill, which set up a refund system for used bottles as an attempt to encourage recycling. As in other states, the law requires beverage dealers to pay refunds for every bottle turned in.

Fiscal troubles in 2008 prompted Connecticut to amend the law, however, to require a “deposit account” from which distributors were to pay the refunds. This requirement was intended to aid the state environmental agency to study the rates of deposit payments and returns. The following year, the fiscal situation worsened, and the Bottle Bill was again amended, this time to require the remaining funds in the deposit accounts (after returns were paid out) to be paid to the state—retroactively including any unpaid remainder funds since the accounts went into effect in 2008.

A. Gallo & Co. and other beverage distributors in Connecticut saw this as an uncompensated taking of their property and sued the state. They took their case through the state court system, but even the Connecticut Supreme Court turned a blind eye, holding that beverage distributors never had a property right in the remainder funds in the first place. The distributors have now asked the U.S. Supreme Court to hear their case, and Cato joined the New England Legal Foundation, the Southeastern Legal Foundation, and the National Federation of Independent Business on a brief supporting their petition.

We argue that Connecticut’s budgetary troubles are no excuse for violating a longstanding property right without compensation. Moreover, by twisting its statutory interpretation to satisfy political pressures, the Connecticut Supreme Court has made itself complicit in the uncompensated taking. It’s bad enough when strapped-for-cash legislatures unfairly force public burdens onto the shoulders of private parties to feed their spending addictions, but when all three government branches – including the one entrusted with soberly interpreting the law, especially in times of fiscal emergency – get drunk on power and deny even the existence of a property right, it’s time for a Supreme Court intervention.

The Supreme Court will decide by winter’s end whether to take the case of A. Gallo & Co. v. Esty.

Luxury Mobile-Home Parks Don’t Need Rent Control

Contempo Marin isn’t your stereotypical mobile-home park. The park sits two miles from San Francisco Bay and offers tenants a pool, spa, clubhouse, and lagoon. Because of the location and amenities, these mobile homes—some of which offer vaulted ceilings, gas fireplaces, walk-in closets, and jetted tubs—can sell for over $300,000. That’s what makes the rent- and vacancy-control ordinance imposed on the park by the City of San Rafael in the name of “affordable housing” so outrageous.

The ordinance caps the amount that MHC Financing, the owner of Contempo Marin, may charge its tenants—who own their mobile homes but rent the land underneath—and mandates that the land be rented at the same price to each homeowner. The result isn’t lower costs for incoming tenants, but a redistribution of the value from the below-market rent directly to the mobile-home owners, whose homes now sell at a premium of nearly $100,000 above their pre-existing value. Thus far, the ordinance has transferred more than $95 million from MHC to its tenants.

MHC challenged the ordinance in federal court as an unconstitutional taking. The district court ruled in MHC’s favor, finding that the alleged public purpose of the ordinance—“affordable housing”—was merely a pretext, such that the ordinance violated the Fifth Amendment’s mandate that property only be taken for a “public use.” As Justice Kennedy clarified in Kelo v. City of New London (2005), “transfers intended to confer benefits on particular, favored private entities and with only incidental or pretextual public benefits, are forbidden by the Public Use Clause.”

The U.S. Court of Appeals for the Ninth Circuit, however, reversed the district court, holding that rent control generally, rather than the specific rent-control scheme at issue here, is “rationally related to a conceivable public purpose” and thus automatically meets the public-use requirement. MHC is now asking the Supreme Court to review that ruling and Cato has filed a supporting amicus brief, encouraging the Court to clarify the standard of review applied to pretextual takings claims and to confirm that the Takings Clause isn’t rendered inoperative when property is transferred.

The Ninth Circuit’s approach essentially bars future pretextual takings claims; any regulatory scheme viewed at its broadest theoretical level could have some “conceivable public purpose.” This evisceration of the Public Use Clause leaves the appropriate standard for determining if a government’s public-use justification is mere pretext in desperate need of Supreme Court clarification. The Ninth Circuit also undermined the Fifth Amendment by finding that no taking had even occurred because MHC had bought Contempo Marin after the rent- and vacancy-control provision had been enacted and therefore could have no investment-backed expectation as to the property value taken by the city. This decision directly conflicts with Palazzolo v. Rhode Island (2001), in which the Supreme Court held that buying property with knowledge of a regulation doesn’t preclude a takings challenge. The Ninth Circuit ignored the same precedent in Guggenheim v. City of Goleta in 2011—a case in which Cato also filed a brief supporting a petition for review—and the lower court’s continued misapplication of the law here reiterates the need for the Supreme Court to reaffirm that the Takings Clause has no “expiration date.” 

The Court will decide whether to take the case of MHC Financing LP v. City of San Rafael later this fall.

This blogpost was co-authored by Cato legal associate Lauren Barlow.

Raisin-Taking Claim Now Ripe for Consideration on the Merits

As Ilya noted, the Supreme Court yesterday cleared the procedural roadblocks for the Horne family, which grows and processes raisins in California, to challenge the operations of the USDA’s marketing order system as an unlawful taking of their property without compensation. The Hornes say that under the USDA’s California Raisin Marketing Order, the Raisin Administrative Committee demanded that they hand over 47 percent of their raisins to be disposed of in ways that do not compete with sales in the domestic retail raisin market, such as export programs and school lunches. 

47 percent! Back in January that figure reminded me of an earlier scale of government extraction: 

Max Boot, who has written a new book on the history of guerrilla movements, tells how Shamil, firebrand leader of a celebrated 19th-century Muslim insurgency in Chechnya and Dagestan, began to lose the allegiance of “many ordinary villagers who balked at his demands for annual tax payments amounting to 12 percent of their harvest.” Instead, they switched their allegiance instead to the rival Russian czar, whose demands were more modest.

If only Washington were content with the czar’s less-than-12 percent. For more on regulatory takings, check out this testimony from way back in 1995 by Cato’s own Roger Pilon before the House Judiciary Committee.

U.S. Can’t Use Supreme Court’s Property Rights Ruling to Rewrite Takings Law

The Supreme Court ruled in December that a taking occurs when a government action gives rise to “a direct and immediate interference with the enjoyment and use of land,” thus allowing the Arkansas Game & Fish Commission to proceed with claims relating to the damage caused by government-induced flooding of a state wildlife management area. (The lower court had bizarrely held that while temporary physical invasions and permanent floods were subject to takings analysis, temporary flooding, even if repeated, was not.  For more background and links to Cato’s amicus briefs before the Supreme Court, see Roger Pilon’s commentary.)

On remand to the U.S. Court of Appeals for the Federal Circuit, however, the United States, relying on a single passage from the opinion, contends that the Supreme Court created a new multi-factor test applicable to all regulatory and temporary physical takings claims. Cato has now joined the Pacific Legal Foundation, National Federation of Independent Business, and National Association of Home Builders on a brief supporting the Commission and arguing that the passage upon which the government relies is both non-binding (“dicta” in legal terms) and in any event cannot be read to upset the distinction between regulatory and physical takings that the Court has consistently asserted.

It is well established in the Supreme Court’s takings jurisprudence that government intrusions on private property that permanently deprive the owner of a valuable property interest are to be subjected to the same test, regardless of whether the invasions are permanent or temporary. Under that test, courts are to consider the duration of the government intrusion, along with other information, to determine (1) whether the invasion is the direct cause of injury to the property and (2) whether the injury is substantial enough to subtract from the owner’s full enjoyment of the property and limit his exploitation thereof. If the injury to the property is substantial, it doesn’t matter whether the it was caused by an invasion of limited duration; once it is shown that the government invasion directly and substantially interfered with an owner’s property right, the government has a categorical duty to pay compensation.

In this case, the government’s intrusion permanently damaged significant property — valuable timber, from the destruction of trees — and is thus a compensable taking. The Supreme Court’s decision in Arkansas Game & Fish Commission didn’t modify or overturn the well-settled test for adjudicating physical takings claims, which remains distinct from the test that controls regulatory takings claims.

The Federal Circuit will hear argument in the case later this spring.

A Good Day for Property Rights

Property owners enjoyed a qualified win in the Supreme Court this morning when a unanimous Court (Justice Kagan recused) decided that “government-induced flooding temporary in duration gains no automatic exemption from Takings Clause inspection.” The case, Arkansas Game & Fish Commission v. United States, was brought by AGFC, which owns and operates 23,000 acres of land as a wildlife refuge and recreational preserve. Clearwater Dam, a federal flood control project, lies 115 miles upstream. Water is released from the dam in quantities governed by a pre-approved “management plan” that considers agricultural, recreational, and other effects downstream.

Between 1993 and 2000, the federal government released more water than authorized under the plan. AGFC repeatedly objected that these excess releases flooded the preserve during its growing season, which significantly damaged and eventually decimated tree populations. In 2001, the government acknowledged the havoc its flooding had wreaked on AGFC’s land and ceased plan deviations. By then, however, the preserve and its trees were severely damaged, requiring costly reclamation measures, so AGFC sued the government, claiming damages under the Fifth Amendment’s Takings Clause. Today, the Supreme Court agreed, reversing the U.S. Court of Appeals for the Federal Circuit.

Earlier, Cato had joined the Pacific Legal Foundation on an amicus brief urging the Supreme Court to take the case, which it did. We then joined the Pacific Legal Foundation and the Atlantic Legal Foundation with a second amicus brief urging the Court to uphold the Fifth Amendment rights of property owners whose land is destroyed by the federal government.

As is so often the case with the Court’s property rights jurisprudence, however, today’s decision was not an unqualified win for property owners. Because there is “no magic formula” for determining whether a particular government action constitutes a taking of property, Justice Ruth Bader Ginsburg wrote for the Court, “the Court has recognized few invariable rules in this area.” It has drawn some bright lines: regulations that constitute a permanent physical occupation of property or that require an owner to sacrifice all economically beneficial uses of his property will be ruled a taking. But in other cases, the Court will weigh several “factors.” Here, for example, in deciding whether the temporary flooding was a taking and hence compensable under the Takings Clause, the Court weighed the duration of the flooding, the degree to which the flooding was an intended or foreseeable result of the government’s action, the character of the land at issue, the severity of the interference, and—drawing from its infamously opaque Penn Central opinion—the owner’s “reasonable investment-backed expectations.”

Thus, the case is not over yet. Because the government had challenged several of the trial court’s fact-findings, including those relating to causation, forseeability, substantiality, and the amount of damages, the Court remanded the case for further proceedings. Still, the basic principle was settled: temporary government-induced flooding enjoys no automatic exemption from Takings Clause inspection. And that’s a win.

I Heard It Through the Grapevine That the Government Was Violating Property Rights

This blogpost was co-authored by Cato legal associate Kathleen Hunker.

Property owners shouldn’t be made to suffer a needless, Rube Goldberg-style litigation process to vindicate their constitutional rights. Yet that is exactly what the U.S. Department of Agriculture seeks to impose on independent raisin farmers Marvin and Laura Horne when they protested the enforcement of a USDA “marketing order” that demanded that the Hornes turn over 47 percent of their crop without compensation.

The marketing order—a much-criticized New Deal relic—forces raisin “handlers” to reserve a certain percentage of their crop “for the account” of the government-backed Raisin Administrative Committee, enabling the government to control the supply and price of raisins on the market. The RAC then either sells the raisins or simply gives them away to noncompetitive markets—such as federal agencies, charities, and foreign governments—with the proceeds going toward the RAC’s administration costs.

Believing that they, as raisin “producers,” were exempt, the Hornes failed to set aside the requisite tribute during the 2002-2003 and 2003-2004 growing seasons. The USDA disagreed with the Hornes’ interpretation of the Agricultural Marketing Agreement Act of 1937 and brought an enforcement action, seeking $438,843.53 (the approximate market value of the raisins that the Hornes allegedly owe), $202,600 in civil penalties, and $8,783.39 in unpaid assessments.

After losing in that administrative review, the Hornes brought their case to federal court, arguing that the marketing order and associated fines violated the Fifth Amendment’s Takings Clause. Having litigated the matter in both district and appellate court, the government—for the first time—alleged that the Hornes’ takings claim would not be ripe for judicial review until after the Hornes terminated the present dispute, paid the money owed, and then filed a separate suit in the Court of Federal Claims.

The San Francisco-based U.S. Court of Appeals for the Ninth Circuit proved receptive to the government’s about-face. Relying on Williamson County v. Hamilton Bank (1985)—the Supreme Court case that first imposed ripeness conditions on takings claims—the court ruled in a revised opinion that the Tucker Act (which relates to federal waivers of sovereign immunity) divested federal courts of jurisdiction over all takings claims until the property owner unsuccessfully sought compensation in the Court of Federal Claims. In conflict with five other circuit courts and a Supreme Court plurality, the Ninth Circuit also concluded that the Tucker Act offered no exception for those claims challenging a taking of money, nor for those claims raised as a defense to a government-initiated action.

The ruling defies both law and common sense. It stretches the Supreme Court’s ripeness rule beyond its moorings and forces property owners to engage in utterly pointless, inefficient, and burdensome activities just to recover what should never have been taken in the first place.

Cato has thus filed an amicus brief, joined by the National Federation of Independent Business, Center for Constitutional Jurisprudence, and Reason Foundation, supporting the Hornes’ request that the Supreme Court take the case and correct the Ninth Circuit’s overbroad reading of Williamson County. We argue that an unjustified monetary order is inherently a taking without just compensation and that a ruling to the contrary imposes a pointless burden on property owners, particularly when the government initiated the original proceeding.

We also encourage the Court to reconsider Williamson County, noting that the text and history of the Takings Clause don’t permit the government to defer compensation—that indeed the most natural reading of the Takings Clause demands that compensation be offered as a prerequisite to government action. Just as the Court wouldn’t permit the government to seize property without some prior “due process of law,” it shouldn’t permit the government to seize property without prior “just compensation.”

The Court has no reason to treat takings claims with less deference than rights anchored in other constitutional provisions. It will decide this fall whether to address that issue in the case of Horne v. U.S. Dept. of Agriculture.