On Monday the U.S. Supreme Court issued its decision in Horne v. Department of Agriculture, reversing the Ninth Circuit and declaring an agricultural marketing program dating back to the 1930s an unconstitutional takings. Chief Justice Roberts wrote the decision for the court, joined, predictably, by Justices Alito, Scalia, Kennedy and Thomas. Justice Breyer, joined by Justices Kagan and Ginsburg wrote a decision concurring in part, dissenting in part. And Justice Sotomayor wrote the sole dissenting opinion.

Before I offer an analysis and critique of the Court’s discussion of per se takings, a quick word about the facts would be useful. The Raisin Administrative Committee (“RAC”), a group primarily comprising private raisin growers appointed by the Secretary of Agriculture, has the authority to set an annual “reserve tonnage” requirement to ensure a stable price for raisins. The remaining raisins, the “free tonnage,” are sold by producers on the open market. The RAC sells the reserved raisins in secondary, non-competitive markets, but must do so in a way that “maximizes producer returns.” RAC operating costs are paid for out of the sale of the reserves (it receives no federal funding) and any remaining income is disbursed to producers, in keeping with their share of contribution to the reserve pool.

Over the years the annual reserve requirements have shifted based on fluctuating growing and market conditions. Chief Justice Roberts reminds us frequently throughout the decision that in 2002-2003 and 2003-2004, the years at the center of the case, the reserve requirements were relatively high—47% and 30%. And the net proceeds from the sale of the reserved raisins were low one year, nothing the next.

It was during these years that raisin farmers Marvin and Laura Horne decided they no longer wanted to give up a portion of their crops. They were assessed a fine equal to the value of the raisins and a civil penalty for disobeying the order to turn them over. The Hornes challenged the reserve requirement (and thus the fine) as an unconstitutional taking of their property.

Horne can be broken into four basic issues. The decision turns first and foremost on whether the appropriation of personal property, in this case raisins, is governed by the same per se rule that governs the physical appropriation of real property. Current takings law roughly divides government interference into use restrictions and physical interferences or appropriations. The former is (mostly) governed by the Penn Central Transp. Co. v. New York City (1978) balancing test, taking into account both the “character” of the government regulation and the extent of the interference with property. The latter category, physical appropriations, is governed by a simple non-balancing per se rule articulated in Loretto v. Manhattan Teleprompter CATV Corp. (1982)—any physical appropriation of real property without just compensation is an unconstitutional takings. End of inquiry. Chief Justice Roberts, untroubled by a string of cases that suggests there might be some reason to treat personal property differently than real property, concludes that both “history and logic” dictate that the per se rule “is equally applicable to a physical appropriation of personal property.”

While I’m not a fan of current takings analysis or the outcome of this case (for reasons I will share in a moment), I agree with the conclusion about the applicability of the Takings Clause to personal property. In a modern economy there does not seem to be any strong principled reason to treat real and personal property as distinct categories, and as Chief Justice Roberts notes, the historical evidence for such a distinction is lacking. Indeed, not a single member of the Court seems to want to argue otherwise. Justice Breyer’s opinion explicitly concurs on this aspect of the case and Justice Sotomayor’s opinion focuses on a completely different element—is there a complete physical appropriation?—implicitly accepting the applicability of Loretto’s per se approach to personal property. In short, those on the left (preferring a more balanced approach to takings analysis) and right (preferring stronger, more absolute protections for private property), appear to agree that this is not a wise place to draw distinctions.

The most commonly cited source for treating personal property and real property differently is none other than Justice Scalia. In Lucas v. South Carolina Coastal Council (1992), Justice Scalia explicitly stated that while the Takings Clause prohibits uncompensated regulatory interferences with real property that render the property completely valueless, this is not so for personal property. An owner of personal property “ought to be aware of the possibility that new regulation might even render his property economically worthless.” The difference between Lucas and Horne, according to Chief Justice Roberts, and again apparently agreed to by all the other Justices, is that Lucas was about interference with use, not a direct appropriation. Accordingly, the Penn Central balancing test (not Lucas or Loretto) would have applied if there was simply a cap on “the quantity of raisins that the Hornes can sell,” since that would have been a use restriction rather than a physical appropriation of personal property. Given the lack of meaningful distinction between the outcome in either case, a cap or a reserve, one wonders what purpose is served by having two distinct approaches under the Takings Clause. A single balancing test for use restrictions and physical appropriations, equally applicable to personal and real property, seems more rational and arguably simpler.

Horne’s second question focuses on whether the “government could avoid the categorical duty to pay just compensation… by reserving to the property owner a contingent interest in a portion of the value of the property.” Since there was a possibility of the RAC paying profits back to the raisin farmers, was the government released from its duty to compensate? Chief Justice Roberts disposes of this quickly, arguing that the sole focus should be on the physical appropriation. The possibility of some return or share in the profits  “goes, at most, to the question of just compensation,” not the duty to compensate.

It is on this issue that Justice Sotomayor focuses her dissent. She argues that Loretto’s per se rule is not applicable if the Hornes have retained any sort of interest in their property:

To qualify as a per se taking under Loretto, the governmental action must be so completely destructive to the property owner’s rights—all of them—as to render the ordinary, generally applicable protections of the Penn Central framework either a foregone conclusion or unequal to the task. Simply put, the retention of even one property right that is not destroyed is sufficient to defeat a claim of a per se taking under Loretto.

Justice Sotomayor notes that the marketing order explicitly provides that raisin producers have an interest in the net proceeds of the reserved raisins and, according to Government testimony, growers have received an “equitable distribution” from the sale of the reserved raisins in 42 of the 49 years for which there was a reserve pool.  While the raisin order “infringes upon the amount of income it does not inexorably eliminate it.” And so long as the Hornes retain some use of their property (some potential income), there is no complete physical appropriation and the per se rule is inapplicable.

The third question for the Court is whether “a government mandate to relinquish specific … property as a ‘condition’ on permission to engage in commerce effects a per se taking.” Here again, Chief Justice Roberts holds firm to the per se rule, arguing that a constitutional violation cannot be ignored by simply suggesting the Hornes can find another use for their land or grapes: “‘Let them sell wine’ is probably not much more comforting to the raisin growers than similar retorts have been to others throughout history.” And here again Justice Sotomayor disagrees, arguing that the potential ability to retain the grapes for other purposes is another reason why this is not a complete physical appropriation.

Circling back to Chief Justice Roberts on this point, it’s here where he seems to be on particularly unstable ground. He distinguishes Ruckelshaus v. Monsanto Co. (1984)—a case concerning the relinquishment of trade secrets, very much a form of property, in exchange for permission to sell a range of pesticides—on the basis that “raisins are not dangerous pesticides…. A case about … hazardous substances … is hardly on point.” But there is no element of the per se rule that is concerned with whether the property is a “healthy snack” or a “dangerous chemical.” The whole point of the per se rule is that it applies regardless of the reasons for regulation; that’s what makes it a categorical, per se rule. It’s logically inconsistent to say any regulation that results in a physical appropriation of personal property is a per se takings, regardless of the broader context or purpose, unless the purpose of the regulation is regulating hazard substances.

Finally, there is the question of compensation. The Government argued that if there is a takings, the case should be remanded to determine what the compensation would have been if the raisins were taken, and that calculation should take into account “what the value of the reserve raisins would have been without the price support program,” along with other broader benefits from the regulatory program. In his final show of commitment to the simplicity of the per se rule, Chief Justice Roberts notes there is no support for an approach that takes into account the benefits of “general regulatory activity” when determining compensation—“market value of the property at the time of the taking” is all that matters. Note what this means. If the raisins were actually taken from the Hornes, they would receive the benefit of an inflated price for their free tonnage and apparently full compensation at the same inflated price (“market value of the property at the time of the taking”) for the reserved raisins, all at the expense of the raisin-buying, tax-paying public. Hardly seems right. Justice Breyer, in dissent on this point and concerned about the possibility of a significant windfall for the Hornes, takes the majority to task for granting judgment in favor of the Hornes without first addressing what, if anything, they have actually lost.

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Three quick final points: First, if there is one thing that emerges from this case, it’s that the per se rules have needlessly complicated rather than simplified takings analysis. While their intent was to provide clarity in the otherwise murky world of takings jurisprudence, instead they have simply expanded the number of possible tests and shifted the murkiness to the question of when the per se rules apply and how we factor in potential benefits or retained profits.

Second, if we take this decision at face value, it’s hard to know how to contain it. As Justice Scalia notes in Lucas, there are all sorts of ways in which the government messes with our personal property. Chief Justice Roberts seems to think we can distinguish between certain kinds of physical appropriations of personal property based on health and safety reasons—hazardous chemicals fall outside the per se rule, raisins don’t. But then it’s no longer a per se rule based on physical appropriation and we are back to making distinctions based on the purpose of the regulation (one of the elements in the Penn Central balancing test). I don’t mind this, but surely it is not in keeping with the whole spirit and intent of a per se rule.

Finally, Justice Thomas wrote an odd little concurrence in which he states that in addition to everything Chief Justice Roberts said, the raisin program might also fail the “public use” side of the takings analysis because “it takes the raisins of citizens and, among other things, gives them away or sells them to exporters, foreign importers, and foreign governments.” This ignores all the other ways in which the reserve raisins go directly to public programs, but he sort of has a point. Whatever one thinks of the raisin program, it was created at the behest of private raisin growers to more or less solve a collective action problem. The RAC is dominated by private agricultural interests, the reserve pool is often resold to other private interests, and, if there are any net profits, they are returned to the raisin farmers.  While all of this operates under the shadow of a federal agency, both government involvement in the taking and “public use” seem tenuous, unless having happy well-compensated raisin farmers is a public benefit. I’m not arguing there isn’t sufficient government involvement here to trigger the Takings Clause (of course there is), but I would have liked to see a little more attention paid to the private benefits at the heart of the raisin program.

Perhaps the raisin program has outgrown its usefulness and raisin farmers, including the Hornes, are happy to see it go. I have no problem with that. But I wish the court could have reached that outcome by balancing the true costs and benefits of the program, rather than resorting to a mechanical per se physical appropriation analysis that is disconnected from how we experience property (whether personal or real) and the markets that govern it.