The United States Supreme Court is today hearing oral arguments in a raisin growers’ case raising important Fifth Amendment questions. The key questions, which stem from the operation of a 66-year-old USDA marketing order, include: (1) Whether a governmental mandate to relinquish specific, identifiable property as a "condition" to engage in commerce effects a per se taking and (2) Whether the Fifth Amendment requirement that the government pay just compensation for the taking of property applies only to real property or also to personal property.

The Marketing Order Regulating the Handling of Raisins Produced from Grapes Grown in California, 7 C.F.R. Part 989 was implemented in 1949 to bring “consistency and predictability” to the nation’s agricultural markets. The marketing order, which is administered by the USDA, grants a Raisin Administrative Committee (RAC) the authority to set an annual “reserve tonnage” requirement, a set percentage of a raisin producer’s crop that it must divert from the market to the control of the RAC. In the crop years at issue in this case, 2002-03 and 2003-04, the RAC set this reserve percentages at 47 percent and 30 percent respectively. The RAC, which is funded solely through the proceeds of the reserve raisin sales, sells the diverted raisins (often in noncompetitive markets such as schools) and gives the producers their pro rata share of the proceeds after administrative costs are deducted. In some years this “equitable share” is significant. In other years, it is zero.

The plaintiffs were raisin growers who believed that the exaction of a percentage of their raisin crop each year constituted an unconstitutional taking without just compensation in violation of the Fifth Amendment. In response, they restructured their operation in an attempt to make the marketing order inapplicable to them. After lengthy administrative proceedings, the USDA ruled that the marketing order applied to the plaintiffs and fined them $695,226.92 for their noncompliance.

The plaintiffs challenged the fine, alleging among many claims that it violated the Takings Clause’s prohibition against excessive fines. After years of procedural litigation, the United States Supreme Court ruled that the federal district court did have jurisdiction over the action. Subsequently, the United States District Court for the Eastern District of California granted summary judgment for the USDA, and the Ninth Circuit affirmed. The Ninth Circuit found that the exaction of the raisins by the USDA was not a per se taking and did not require compensation. The growers again appealed, and the case is before the Supreme Court for the second time in two years.

Specifically, the Ninth Circuit ruled that the marketing order constituted a “use restriction,” not a taking and that the categorical compensation rule for seizures of property applied only to real property, not personal property.

The ruling in this case will likely offer some necessary refinement to current takings law. We will update you when the opinion is released.

The case briefs (many amicus briefs were filed) are available here.