The Curious Case of Horne v. Department of Agriculture: Good Law, Bad Economics?
ABSTRACT: This paper uses economics to examine the facts and ruling in the recent case Horne v. Department of Agriculture. The paper argues that the Raisin Administrative Committee (RAC) is best viewed as a government-enforced cartel that has raised the domestic prices of raisins since its inception just after World War II. The plaintiff Horne is best viewed as a cartel defector who benefited from the supply restriction of the RAC and thus was most likely compensated for the taking of his raisins by the higher prices resulting from the RAC. The government in the defending the RAC chose not to stress this point, perhaps because there is little political support for such agricultural marketing orders today. The Court’s decision reiterated the rule that person as well as real property must be compensated if taken by the State. this decision is unlikely to have much impact on state eminent domain actions which are overwhelmingly involved with real property for the construction of roads, schools, and so on. The rule might, however, limit the ways in which the State can enforce cartels, and in this regard the ruling would be efficiency-enhancing.
In Horne v. Department of Agriculture, the U.S. Supreme Court ruled that the federal government was guilty of taking of private property without compensation when the Raisin Administrative Committee (RAC) ordered raisin grower Marvin Horne to surrender a portion of his crop to the National Raisin Reseve. As a result of this ruling the RAC is no longer able to require growers to contribute to the Raisin Reserve. The case was immediately hailed as a “victory for private property” against the power of the State. The plaintiff’s lead attorney was a well-known conservative law professor (Michael McConnell); and several conservative groups (e.g., Cato Institute, Mountain States Legal Foundation) wrote briefs in support of the plaintiff.
The Court was asked by the plaintiff to answer three questions (1) Does the Fifth Amendment apply only to real property and not personal property (e.g., raisins)?, (2) Can the government avoid the compensation requirement by reserving to the property owner a contingent portion of the value of the property?, and (3) Does a government mandate to relinquish property as a condition to engage in commerce imply a per se taking? Chief Justice Roberts wrote the majority opinion (joined in full by Alito, Kennedy, Scalia and Thomas; and in part by Breyer, Ginsberg, and Kagan) ruling that there is no distinction between real and personal property (so raisins count as property); that the government cannot avoid paying compensation by reserving a contingent portion of the property; and that the mandate to relinquish property is a per se taking which must be compensated. Justice Thomas, though concurring in full, also criticized the idea that there was a public use (as required by the Fifth Amendment) for the taken property. Justice Breyer (joined by Ginsberg and Kagan) concurred with parts I and II but dissented from part III, noting that the Hornes needed to show they were not compensated via higher prices and that “[t]he marketing order may afford just compensation for the taking of the raisins that it imposes.” Justice Sotomayor dissented, basically arguing that the RAC rules are a regulatory taking and thus not a taking working of compensation per se.
