2015 in Review: An Ag Law Summary
As we store away the wrapping paper and pull out the New Years’ hats and horns, we thought it would be a good time to review the significant agricultural law developments of 2015. While this review is not comprehensive or intended to rank the topics in order of importance, it does demonstrate how much can change in a year. So, pour that last glass of egg nog and savor the last few hours of the year. If this list is any indication, it’s going to be a busy 2016.
The Clean Water Rule: Waters Rage
Water quality was a hot topic in agricultural law in 2015. The EPA and Army Corps unveiled their long-awaited final Clean Water Rule on May 27, 2015. Originally called the Waters of the United States Rule (or WOTUS), the controversial proposed rule had been pending for more than a year. The final rule, which made several changes and added several exemptions, did not allay the fears of its detractors. In fact, upon publication of the Rule on June 29, 2015. litigation immediately ensued.
The Rule is facing legal challenges on many fronts. In addition to the majority of States in the Union, many other plaintiffs—including farm groups, industry groups, and even environmental groups—have filed legal complaints challenging the Rule. Most plaintiffs are asking the courts to vacate the Rule in its entirety. Most of the lawsuits filed by states were initiated by the attorneys general of those states. In mid-November, Iowa Governor Terry Branstad joined the North Dakota lawsuit on behalf of the State of Iowa. Although the various complaints seek multiple forms of relief, they generally ask the courts to declare that the rule is unlawful because it:
1) exceeds the agencies’ statutory authority under the Clean Water Act;
2) violates the 11th Amendment of the Constitution and the Clean Water Act, which preserves the primary role of States in planning the development and use of local land and water resources; and
3) violates the Administrative Procedures Act.
The plaintiffs allege that the final version of the Rule varied substantially from the proposed one and that an adequate opportunity for comment was not provided. For their part, the agencies contend that the Rule is not an expansion of authority, but a “clarification” of policy. They argue that it brings more certainty to landowners. Of particular concern to the plaintiffs are the definitions of the terms “tributaries” and “adjacent waters.” Waters falling within these definitions are categorically jurisdictional, and the litigants argue that the Rule's new definitions will give the agencies jurisdiction over purely intrastate waters. As the Ohio complaint states, “In sweeping terms, [the Rule] purports to extend federal regulatory jurisdiction over broad swaths of the country, including vast areas within the States of Ohio and Michigan, that in no way constitute navigable, potentially navigable, or interstate waters—even in various instances reaching land that is typically dry.”
Although it became effective August 28, 2015, enforcement of the Rule is currently on hold nationwide. On the eve of its effective date, a North Dakota federal court issued a preliminary injunction to temporarily prevent the Rule from going into effect in the 13 states involved in the North Dakota litigation. Two other district courts (in West Virginia and Georgia) ruled that they did not have jurisdiction to consider the validity of the Rule because jurisdiction for such a determination rested only with the circuit courts pursuant to 33 U.S.C. § 1369(b)(1) of the Clean Water Act. Eighteen states, while arguing that the district courts had jurisdiction to hear their claims, filed protective petitions for review in their respective circuit courts. These cases were consolidated into the Sixth Circuit by order of the Judicial Panel on Multi-District Litigation.
On October 9, 2015, the Sixth Circuit issued a temporary nationwide stay of the Rule pending its determination of the jurisdictional issue. Oral arguments on this issue were held on December 8. As of this writing, no decision has been issued. If the Sixth Circuit rules that it has jurisdiction to decide the validity of the Rule, it will shift to considering the merits of the cases. Otherwise, the district courts will undertake the task. Most all agree that the United States Supreme Court will ultimately decide the question of the legitimacy of the Rule.
Although some opponents of the Rule had hoped that the recent omnibus package, the Consolidated Appropriations Act, 2016, would withhold funding from enforcement of the Rule, it did not. And though several attempts have been made, no legislation has been enacted to force the withdrawal of the Rule. In the meantime, the court wrangling will continue, into 2016 and most likely beyond.
Des Moines Water Works Lawsuit: A Big Splash
This year also ushered in another contentious debate about water quality and proper enforcement of the Clean Water Act. On March 16, 2015, the Des Moines Board of Water Works Trustees (DMWW) filed a complaint against the Supervisors of Calhoun, Sac, and Buena Vista Counties in their capacities as trustees of Iowa drainage districts. Among its many demands, the complaint, which was filed in the United States District Court for the Northern District of Iowa, asks the court to order the drainage districts to cease "all discharges of nitrate that are not authorized by an NPDES or state operating permit." In addition to claims under the federal Clean Water Act and state water quality law, the complaint asserts claims of public nuisance, statutory nuisance, private nuisance, trespass, negligence, taking without just compensation, due process and equal protection. The lawsuit alleges that agricultural drainage tile, in its "normal and intended operation," is a nuisance and that drainage district supervisors are negligent in facilitating its operation. The lawsuit also alleges that the conduct of the drainage districts, together with the conduct of similarly situated districts, contributes to a single, indivisible harm
Point Source
Bottom line, the DMWW complaint is asking a federal court court to do what no other court or state or federal agency has done: declare farm drainage tile to be a “point source” subject to CWA regulation. Only “point source” discharges are subject to NPDES permit requirements. The CWA exempts from the definition of “point source” agricultural storm water discharges and return flows from agricultural irrigation. State and federal agencies have long considered discharge from farm drainage tiles to fall under these exemptions. No agency has created a permitting system for drainage districts. No agency has sought to regulate drainage tiles as point sources.
DMWW seeks to get around the agricultural stormwater exemption by arguing that the drainage from the tile system comprises groundwater, not stormwater runoff. Although this is not a well-tested theory, a federal court that recently addressed a similar claim disagreed. In 2013, the Federal District Court for the Eastern District of California ruled that farm drainage tiles were not point sources of pollution. The plaintiff, a fishermen’s association, sought to require the administrators of grasslands’ bypass project to obtain a permit to discharge pollutants into a river. The plaintiffs argued that although much of the land at issue was irrigated cropland, the “return flows from irrigated agriculture” exception did not apply to prevent the land’s drainage tiles from being point sources. Specifically, the plaintiff argued that the exception did not apply because the water tables were high without the irrigation and the tiles were not draining irrigation outflows, but “polluted groundwater.” The court dismissed the action, finding that Congress intended to “exempt drainage from farms practicing crop-production agriculture facilitated by irrigation, rather than focusing on what the components of a particular flow are on any given day.
Although this case is not precedential, it gives some indication of how a federal court may analyze the issue.iIt is also important to note that the Clean Water Rule itself exempts "groundwater, including groundwater drained through subsurface drainage systems" from its definition of jurisdictional water. Thus, DMWW's argument cannot be that the districts polluted the groundwater. Instead, it will have to be that the drainage districts polluted other jurisdictional waters using non-jurisdictional water as a conduit. That too is an interesting legal issue with little guiding precedent.
Tort Claims
In September, the drainage districts asked the court to enter partial summary judgment in their favor as to the tort claims. They argue that it is settled law in Iowa that tort claims cannot be maintained against drainage districts. Drainage districts—which are creations of statute—cannot be sued for money damages, the districts assert. Instead, they can be sued only to perform statutorily-delegated duties through an action in mandamus. In the words of the Iowa Supreme Court, “drainage districts are ‘merely an area of land.’” Among their many other arguments, the districts allege that DMWW does not have standing to bring a takings claim against another political subdivision.
In response, DMWW says that Iowa case law is “outdated,” that this is a “new day” and that the court should apply a “new rule of liability and responsibility for drainage districts concerning pollution.” Specifically, DMWW asserts that the doctrines set forth by the defendants are no longer applicable in light of “modern understanding.” DMWW states, “The nitrate problem in the watersheds from which DMWW obtains its water has been observed and studied for many years but there has been no adequate legislative, executive, or regulatory response.”
In their reply to DMWW’s arguments, the drainage districts state, “There is no allegation any drainage district in this case did anything other than exactly what the Legislature designed and created it to do. …Whether drainage districts should do what the Legislature compels them to do, however, is not a debate to be held with drainage districts that have no power to do anything other than what the Legislature requires them to do. It is a debate to be held with the Legislature.” The brief adds, "Nor can a court resolve whether the Legislature should deem it valuable to produce food by draining land or the relative value of nitrogen and the billions it saved from starvation compared to DMWW's costs to process water."
A hearing on the motion for partial summary judgment was held on December 21, 2015. A decision on this motion should be issued in early 2016, unless the court decides to certify questions of law to the Iowa Supreme Court. A bench trial date has been set for August 8, 2016. Given the complexity of this case, it seems quite unlikely the issues will be neatly resolved within that timeframe.
Dakota Access Pipeline: The Waiting is the Hardest Part
As we close the year, the final chapter of a controversial proposed crude oil pipeline has yet to be written. On January 20, 2015, Dakota Access, LLC, a subsidiary of Dallas-based Energy Transfer Partners, filed a petition with the Iowa Board of Utilities seeking a hazardous liquid pipeline permit. The private Houston-based company wishes to build a pipeline to transport crude oil from the Bakken Shale Oil field to a refinery hub in Illinois. The 1134-mile pipeline would stretch from northwestern North Dakota to the Patoka Oil Terminal Hub in south-central Illinois. The plan includes 346 miles of pipeline—30 inches in diameter and 48 inches beneath the surface—across 18 Iowa counties. To build the pipeline, Dakota Access is seeking 50-foot-wide permanent easements and 100-foot-wide temporary construction easements across the property. At last check, owners of around 75 percent of the parcels that would be impacted by the pipeline had agreed to sell voluntary easements to Dakota Access. Easements for the remaining parcels would have to be acquired through eminent domain (assuming no voluntary agreement is reached).
To obtain the permit, Dakota Access must show that the project promotes the “public convenience and necessity.” There is little Iowa case law explaining the meaning of the phrase “promote the public convenience and necessity,” particularly in the context of a crude oil pipeline. This project could serve to create new Iowa law with respect to the meaning of this phrase. Iowa law provides that a pipeline company granted a pipeline permit “shall be vested with the right of eminent domain to the extent necessary” not exceeding 75 feet in width. Consequently, if the IUB determines that the Dakota Access pipeline promotes the “public convenience and necessity,” it must also decide the extent to which eminent domain would be necessary. If such a right is granted, the actual condemnation proceedings (to determine compensation only) would be handled in the impacted counties, outside of the jurisdiction of the IUB.
A multi-day hearing before the IUB began on November 12 with a session devoted to public comments. The IUB granted 210 people the right to speak publically for two minutes each. The selected speakers were split evenly between those supporting the project and those opposing it. Although a number of arguments were raised, common themes emerged. Persons opposing the project raised numerous environmental concerns and urged that the pipeline would permanently damage irreplaceable Iowa farmland. They also argued that it would be wrong to grant eminent domain power to a private company and that the Bakkan oil fields are losing economic viability. Proponents argued that the pipeline would create a large number of good-paying jobs for laborers and that the pipeline would be safer and more efficient than rail cars for transporting crude oil. They also argued that the pipeline would increase America’s energy independence. The IUB listened to the comments and included them in the public record.
The evidentiary portion of the hearing followed, with the testimony concluding December 7. The IUB has announced that it will likely issue its decision in February. To complete its project, Dakota Access must also obtain approval from regulators in North Dakota, South Dakota, and Illinois. South Dakota regulators approved a construction permit on November 30, and the Illinois Commerce Commission granted its approval on December 16. North Dakota regulators have announced that they should issue their decision in January.
Rock Island Clean Line Transmission Line: Code Blue, but Wait!
As much as 2015 was a year of traction for the Dakota Access crude oil pipeline project, 2015 was a year of lost steam for another energy project that, if approved, would also involve the taking of easements by eminent domain. Nonetheless, as 2015 comes to a close, interest in the Rock Island Clean Line project appears to be reigniting.
On November 6, 2014, Rock Island Clean Line (RICL) filed formal petitions seeking an electric transmission line franchise from the Iowa Utilities Board (IUB) to build a high voltage direct current line across Iowa. Like Dakota Access, RICL is a private Texas LLC operating as a subsidiary of a larger company. RICL is part of the larger Houston-based Clean Line Energy Partners. RICL’s proposed line would transport wind energy generated in northwest Iowa to Illinois. It would cross 16 Iowa counties and 1,540 parcels of land, impacting 2,295 different owners.
Negotiations for voluntary easements necessary to complete this project seemed to stall at the end of 2014 as RICL was reportedly unable to acquire more than 12.5 percent of necessary parcels from landowners. After an unsuccessful second attempt to bifurcate the franchise question from the eminent domain question, RICL asked the IUB to place the project on hold pending further review.
On November 30, 2015, that status changed as RICL filed a motion asking the IUB to issue a “procedural schedule” allowing the project to move forward. In its motion for a procedural schedule, RICL asks the board to divide the issues in the case into two parts: first, determination of the franchise and second, considerations of eminent domain. Opponents to the motion argue that this motion sounds very similar to the motion to bifurcate that was rejected by the IUB in February. Those resisting the motion note in their resistance filing that on February 15, 2015, RICL had secured and filed 172 voluntary easements in the 16 relevant counties. As of December 5, 2015, that number has only risen to 177. For its part, RICL argues that the proposed schedule would promote administrative efficiency and convenience.
We’ll be watching for a response from the IUB.
Syngenta: Billions at Stake
If you’re a corn farmer in Iowa, you’ve undoubtedly received numerous mailings or phone calls from attorneys seeking to represent you in massive litigation pending against Syngenta. The various lawsuits arising from thousands of plaintiffs across the country accuse Syngenta of prematurely commercializing a genetically-modified (GM) corn trait in their Viptera and Duracade seed. Although the product had been approved for sale in the United States and many other countries, it had not been approved for import into China at the time it was offered for sale in the U.S.
Syngenta had filed its application for approval with China in March of 2010, but China did not approve the GM trait for import until December of 2014. In November of 2013, China began rejecting the import of all U.S. corn, asserting that it was tainted with traces of the unapproved trait. The average price of corn per bushel dropped by more than half between the summer of 2012 and the fall of 2014. A number of corn exporters, handlers, grain elevators, and farmers alleged that the drop in price was largely due to China’s rejection of U.S. corn. They asserted that Syngenta wrongly marketed the product before China had agreed to accept it. They began filing lawsuits in 2014, alleging more than a billion dollars in damages. The lawsuits continue in 2015. Although the lawsuits assert many different federal and state law claims, most allege that Syngenta:
(1) violated the Lanham Act by misleading its stakeholders, the public, and government regulators about the status of its GM corn and its actions in releasing it to the market, and
(2) breached its duty of care to the plaintiffs by prematurely commercializing the GM corn trait without reasonable safeguards and by instituting a careless and ineffective “stewardship” program which ensured contamination of the U.S. corn supply.
In December 2014, many lawsuits (even many of those filed in state courts) were consolidated into multi-district litigation (MDL) in the United States District Court for the District of Kansas. Three “master” class action complaints remain pending in the MDL: One proposes to represent a class of corn farmers who did not plant Viptera or Duracade (the Syngenta GM corn at issue), another seeks to represent corn exporters, handlers, and grain elevators, and a third seeks to represent milo producers. The MDL action involves more than 300 cases. Thousands of individual lawsuits against Syngenta also remain pending in Minnesota. The Minnesota state court actions are pending in the Fourth Judicial District of Hennepin County. Other action are pending in Louisiana. The courts are working together to coordinate the proceedings.
For its part, Syngenta has argued that its marketing of seed containing the GM trait was consistent with industry expectations and recommendations: “This litigation constitutes an unprecedented effort to hold a company liable for selling a U.S.-approved product in the U.S., simply because the product was not yet approved by a foreign country like China that can increase both their productivity and their profitability.” Syngenta has argued that China wrongfully rejected the corn and that China’s unlawful actions were the cause of any harm to the plaintiffs. Syngenta has also filed counterclaims and a third-party complaint alleging that if there is any U.S. liability, it would rest with the grain elevators, transporters, and exporters who were in a position to separate GM corn from non-GM corn. In its third-party complaint, Syngenta states that the litigation is an “unprecedented attempt by Producer and Non-Producer Plaintiffs to assert that it was somehow a tort for Syngenta to sell a genetically modified corn seed called Viptera in the United States even though Syngenta had already received all required approvals from three U.S. federal regulatory agencies.” Syngenta continues:
If there is any judgment imposing liability based on the presence of Viptera in the corn supply and the alleged consequent loss of the Chinese market, any liability is placed where it should be: on the grain elevators, transporters, and exporters who indiscriminately commingled corn and corn grain as they purchased, stored, transported, resold, and exported corn, including by intentionally delivering commingled corn including a mixture of Viptera and non-Viptera corn (and corn by-products) into export channels.
Scheduling orders have been issued in the case, demonstrating that this litigation is not going away anytime soon. The courts have decided to proceed with bellwether trials, which are small trials designed to test the merits of the case. The court order states that the initial bellwether discovery pool will include the following groups of plaintiffs:
- The 5 non-producer plaintiffs who have filed suit (4 of whom are named class representatives);
- The 2 milo plaintiffs named in the milo master complaint;
- A sampling of 6 producer-plaintiffs from 8 of the 22 states at issue, with each side selecting 4 states on an alternating basis, with plaintiffs selecting first, and further with each side selecting 3 plaintiffs per state on a similar alternating basis; and
- The named class representative(s) in each of the 8 selected states.
Fact depositions will begin with respect to the bellwether discovery pool. These depositions are to be completed by May 2, 2016. Class certification motions and briefing are to be completed by August 17, 2016, and the first bellwether trial is scheduled to begin in June of 2017.
This issue will no doubt garner more space in next year's ag law review.
Unmanned Aircraft Systems: They’re Really Taking Off
2015 could be called the year of unmanned aircraft systems (UAS). Although there remains a general ban on operating UAS for commercial purposes, the FAA has instituted a new streamlined exemption process that has allowed several thousand commercial UAS to legally get off the ground, even though new regulations have yet to be finalized.
On February 15, 2015, the FAA finally issued proposed regulations for small UAS. These proposed regulations were less restrictive than some had expected. For example, they propose requiring a new “unmanned aircraft operator certificate with a small UAS rating” requirement, rather than requiring a pilot’s license, for those wishing to fly UAS commercially. But the rules are far from final. Final rules may not be released until late next year.
So as an interim solution, the FAA has stepped up its exemption process, allowing many commercial UAS operators—including those using UAS for agricultural purposes—to begin operating on a widespread basis. The main barrier to flying UAS commercially is the requirement that all commercial aircraft possess an “airworthiness certificate.” This process is cumbersome, and the FAA has only issued special airworthiness certificates to certain experimental UAS and to UAS used for certain restricted operations in the Arctic. Congress has, however, granted FAA the authority to wholly exempt certain UAS from the airworthiness certificate requirement. Called a “Section 333 Exemption,” the FAA can grant this authorization to low-risk commercial UAVs. This exemption is appropriate where a UAS—because of its size, weight, speed, operational capability, proximity to airport and populated areas, and operation within visual line of sight—does not create a safety hazard.
FAA issued its first Section 333 exemption to a commercial UAV in September of 2014. As of January 2015, FAA had granted only 13 exemptions. The first exemption for an agricultural purpose was granted in January of 2015. In April of 2015, the FAA announced its new streamlined exemption process, and the number of Section 333 exemptions exploded. Under the streamlined process, the agency began issuing a “summary grant” for requests that are similar to a previously granted exemption. Under this new policy, FAA has granted 2,672 exemptions as of the writing of this article.
The Section 333 exemptions are aircraft-specific and require the operator to follow certain requirements. For instance, operators must conduct a pre-flight inspection, operate the aircraft with their visual line of sight (or that of a partnering visual observer), fly at 400 feet above ground or below, and not exceed the speed of 100 miles per hour.
Although 2015 can go down as the year when small commercial UAS got off the ground, it is likely that 2016 may be the year when a more permanent regulatory infrastructure is finally unveiled. Time will tell.
On a side note, the FAA issued a new rule on December 14, 2015, requiring the owners of all small UAS (hobby or commercial) to register their aircraft. Further information on this new requirement is available here.
Affordable Care Act: No Reimbursement for You!
Many farming operations have long relied on tax-preferred employer reimbursement plans to offer employees (often including their own family members) health care benefits. Because of market reforms implemented by the Affordable Care Act, many such plans were no longer permissible beginning in 2014. Employers who violate these rules are subject to steep penalties that can climb as high as $100 per day per employee.
In February of 2015, IRS issued new guidance and transitional relief regarding these employer reimbursement plans. This guidance is important to many small farming businesses.
Although affirming that employers could no longer reimburse employees for the cost of health insurance coverage they purchase on their own or on the Marketplace, the guidance provided that employers offering such plans would not be subject to penalties through June 30, 2015. No such transitional relief was offered to employers offering standalone HRAs (those not integrated with a group health care plan and offering more than excepted benefits such as dental and vision) or medical expense reimbursement plans.
The guidance also provided that “until any further guidance is issued and certainly through the end of 2015,” no excise tax will be asserted for any failure to satisfy the market reforms by a two-percent shareholder-employee healthcare arrangement.
Therefore, at least through 2015, employers could continue to offer a healthcare reimbursement arrangement to its two-percent shareholder-employees. They could not, however, offer the same plan to their employees who were not two-percent shareholders.
The Notice provided that tax preparers could continue to rely on Notice 2008-1 for the tax treatment of two-percent shareholder-employee healthcare arrangements “unless and until additional guidance provides otherwise.” As of this writing, no such additional guidance has been issued.
For more detailed information on this topic, read this article.
Country of Origin Labeling: Now You See It, Now You Don’t
Congress ended 2015 by amending the Agricultural Marketing Act to repeal country of origin labeling (COOL) requirements for beef and pork. This action was in response to the World Trade Organization’s December 7, 2015, ruling that Canada and Mexico could impose retaliatory tariffs on goods imported from the United States in an amount exceeding $1 billion. This retaliation was allowed because of the WTO’s earlier finding that U.S. country of origin labeling laws discriminated against producers from Canada and Mexico by treating imported meat less favorably than domestic meat. The Appellate Body made its final ruling on this issue in May of 2015.
Shortly after the law was passed, the USDA announced that it would no longer enforce “COOL requirements for muscle cuts of beef and pork, and ground beef and pork. Effective immediately, USDA is not enforcing the COOL requirements for muscle cut and ground beef and pork outlined in the January 2009 and May 2013 final rules."
2014 Farm Bill: Election Year
2015 saw the first signups for Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC) under the Agricultural Act of 2014. To facilitate maximum enrollment in the new programs, the USDA extended the deadline for these signups until April 7, 2015. The USDA reports that nationwide, 96 percent of soybean farms and 91 percent of corn farms elected ARC-County. Farmers who did not select a program by the deadline, were unable to receive a payment for the 2014 crop year and were automatically enrolled in PLC coverage for crop years 2015-2018.
On December 16, 2015, final rules were issued to define the term “actively engaged in farming” for the purpose of payment eligibility for various farm programs. Although the rules are designed to ensure that only active managers of farms that operate as joint ventures or partnerships will receive farm program payments, they will likely have little impact. This is because the rules (as required by Congress) do not apply to family farms or family farm entities. Consequently, it is estimated that the new rule will impact less than four percent of all farming operations.
Horne v. USDA: A Taking is a Taking
It's not every day the U.S. Supreme Court decides an agricultural law case. Horne v. USDA was that case for 2015. Despite the arguable obscurity of the 66-year-old marketing order at issue in Horne v. USDA, a June 22, 2015, United States Supreme Court opinion carved out important new Takings Clause jurisprudence The Court ruled in Horne that The Fifth Amendment requires that the Government pay just compensation when it takes personal property, just as when it takes real property.
The marketing order at issue in Horne was the Marketing Order Regulating the Handling of Raisins Produced from Grapes Grown in California, 7 C.F.R. Part 989 (Order). It was implemented in 1949, and sought to bring consistency and predictability to the nation’s agricultural markets. The 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 crop years 2002-03 and 2003-04, the RAC set the 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 and handlers who had warred with the government for more than a decade. In 2002, the plaintiffs refused to set aside any raisins for the government. They argued that that they were not legally required to do so. When the Government sent trucks to the growers’ property early one morning to pick up the set-aside raisins, the growers refused entry to the trucks. The Government responded by fining the growers $480,000, the “market value” of the reserve tonnage raisins the growers refused to relinquish. The Government also fined the growers $200,000 as a civil penalty for “disobeying” the marketing order. When the Government sought to collect the fine, the growers defended on the grounds that the reserve tonnage requirement was a taking without just compensation in violation of the growers’ Fifth Amendment rights.
The Ninth Circuit ruled that the reserve requirement was not a “per se taking” under the Takings Clause of the Fifth Amendment. Rather, the Ninth Circuit held that the Takings Clause affords less protection to personal property than to real property.
In its June 22, 2015, opinion, the United States Supreme Court rejected the Ninth Circuit’s primary reasoning by an 8-1 margin. The Court specifically ruled that the reserve tonnage requirement of the Order constituted a per se taking for which the growers were entitled to just compensation. Significantly, the Court ruled that the Takings Clause of the Fifth Amendment protects private property, without any distinction between real and personal property. Justice Roberts, writing for the majority, stated, “The Government has a categorical duty to pay just compensation when it takes your car, just as when it takes your home.” The Court reasoned that this principle was even reflected in the 800-year-old Magna Carta, which specifically protected farmer’s crops from takings without just compensation.
Given that the holding in this case rested upon the finding that the Order required an actual physical taking, the eventual impact of this case is uncertain. The raisin marketing order, as well as any similar marketing orders impacting commodities, could seemingly be restructured to accomplish the same purpose and the same ultimate restrictions, while still complying with takings law. But again, time will tell.
Well, that about does it for 2015. For more detailed information regarding these and other agricultural law developments, read our other posted articles and blog items. As always, we'll try to keep you posted. Happy 2016 to you and yours!