November 21, 2012
Yesterday the Supreme Court granted certiorari in one case of interest to the business community:
Takings Clause—Agricultural Producers—Government Enforcement Actions
The Takings Clause of the Fifth Amendment to the U.S. Constitution provides that private property shall not be taken for public use without just compensation. The Agricultural Marketing Agreement Act of 1937 (“AMAA”), 7 U.S.C. § 601 et seq., and its regulations, 7 C.F.R. Part 989, require “handlers” of raisins (i.e., those who process and pack raisins for distribution) to turn over to a federal entity a percentage of the raisins that they process in order to be allowed to sell the remainder on the open market. The AMAA also requires handlers to exhaust all claims and defenses in enforcement actions before the United States Department of Agriculture, with exclusive jurisdiction for review in federal district court. See 7 U.S.C. § 608c(15). Finally, the Tucker Act allows parties seeking compensation from the United States for a taking of their property to bring suit in the Court of Federal Claims. See 28 U.S.C. § 1491(a)(1).
Yesterday, the Supreme Court granted certiorari in Horne v. Department of Agriculture, No. 12-123, to resolve two related questions regarding the interaction among these provisions: (1) whether a party may raise the Takings Clause as a defense to a federal enforcement action seeking an order requiring the party to pay money to the Government, or must instead make the payment and then bring its takings claim by means of a separate action for return of the money under the Tucker Act in the Court of Federal Claims; and (2) whether the AMAA’s requirement that all claims and defenses be raised in the administrative proceedings and reviewable in the regular federal courts allows petitioners to raise their Takings Clause defense in the AMAA enforcement action.
Petitioners are raisin producers in California who object to the AMAA’s requirements as an improper confiscation of their property. Because those requirements apply to handlers only, not to producers, petitioners decided to bring their raisins to market without going through a traditional middle-man packer and without turning over to the Government the share of raisins arguably required by the regulations. The USDA responded by initiating an enforcement action, alleging that petitioners were acting as handlers and therefore had violated the AMAA, and seeking an order compelling petitioners to pay an amount equal to the value of the withheld raisins, plus penalties. In the ensuing administrative proceeding, petitioners raised as one of their defenses the contention that the regulation was invalid as an uncompensated taking of their property. A USDA hearing officer rejected the defense, found petitioners liable, and imposed more than $650,000 in assessments and penalties . Petitioners sought review in the federal district court, which granted summary judgment to the USDA. Petitioners then appealed to the Ninth Circuit, which initially rejected their Takings Clause defense on the merits. On rehearing, however, the Ninth Circuit issued an amended opinion that declined to reach the merits of the takings claim, holding instead that the exclusive method for asserting the Takings Clause defense would be for petitioners to pay the penalty and then file a separate action for reimbursement under the Tucker Act. Although the Ninth Circuit recognized that the AMAA requires handlers to exhaust all defenses in an enforcement action, it decided that because petitioners claim to be producers, not handlers, the AMAA’s exhaustion requirement does not apply to them and does not alter the applicability of the Tucker Act as their exclusive remedy on the Takings Clause claim.
Petitioners claim that the Ninth Circuit’s decision is contrary to the reasoning of a plurality of the Supreme Court in Eastern Enterprises v. Apfel, 524 U.S. 498, 521 (1998), and in conflict with the decisions of six other circuit courts.
The Supreme Court’s decision in this case will be important to agricultural producers who are subject to regulation under the AMAA, and is likely to have broader implications for any situation in which the Government seeks a monetary remedy that the defendant claims would constitute a taking of its property.
Absent extensions, amicus briefs in support of petitioners will be due on January 11, 2013, and amicus briefs in support of respondent will be due on February 11. Any questions about the case should be directed to Tim Bishop (+1 312 701 7829) in our Chicago office or Charles Rothfeld (+1 202 263 3233) in our Washington office.
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