Supreme Court May Dump Raisin Price Controls

One of the pleasures of driving up Highway 99 is to stop in Selma, California at the Sunkist Raisin Store to buy the biggest and juiciest chocolate covered raisins on earth. But it seems that no all is copacetic in Sun-Maid Raisin land these days. The Supreme Court is beginning to review rules associated with a growers’ co-op that could spell the end of cartel management of raisin supply and pricing.

In a brief filed on behalf of 33 self-identified “independent raisin growers” against the Fresno-based Raisin Administrative Committee challenging the co-op’s right to control marketing of California raisins, growers object to a supply management program that has the power to require them to surrender part of their crops or pay a penalty in times of surplus production. The independents call this an illegal “taking,” and want the Court to ban the practice.

The Raisin Administrative Committee is a federal marketing order led by 47 growers, packers and a public member. The RAC was created in 1949 as a result of the Agricultural Marketing Agreement Act of 1937 and its rulemaking is directly overseen by the United States Department of Agriculture (USDA).

The marketing order under fire gives the Raisin Administrative Committee the power to regulate all California handlers, who pack and process the raisins. Among other provisions, the order requires that handlers may have to withhold part of their crop for a “reserve tonnage” managed by the Raisin Administrative Committee.

The order also allows the reserve to be sold to the U.S. government for purposes such as federal nutrition programs. Raisin handlers set aside 47 percent of their crops during the 2002-03 season and 30 percent for 2003-04. The reserve raisins for both years were then sold to the U.S. government, but at severe discounts to market prices.

Under the Fifth Amendment, government must pay “just compensation” when private property is “taken for public use.” One key legal question is whether crops counts as property, like real estate. Another question is whether the forced surrendering of raisins counts as a taking even though farmers might eventually be paid something for it.

Brian C. Leighton and Stanford Law School Professor Michael W. McConnell wrote in the independent growers brief, arguing that “When the government takes possession of property, it must pay the owner–full stop.”

The Obama Administration’s lawyers have defended the Agricultural Department initiatives. “The raisin marketing order challenge has been in effect and stabilized the raisin market for 65 years.” Federal attorneys added, “raisin farmers generally perceive themselves to be advantaged by the order’s stabilization of raisin prices.”

The Administration, represented by the legal team under Solicitor General Donald Verrilli Jr., claims it is noteworthy that only a few of the 3,000 California raisin growers have joined an amicus brief siding with the challengers. That seems somewhat disingenuous because legal briefs cost big money and many growers fear government.

The legal challenge fighting these government controls that undermine market prices have picked up dozens of supporting briefs from such diverse organizations as the State of Texas and the U.S. Chamber of Commerce in supporting the independent raisin growers’ efforts.

Texas Solicitor General Scott A. Keller, in an  amicus brief for Texas, Arizona and North Dakota stated: “Governments owe their citizens a duty to protect their private property interests.”

The lawsuit, named Horne v. Department of Agriculture opens up across-the-board challenges to the Great Depression-linked Agricultural Marketing Agreement Act of 1937 legislation that regulates farm incomes. “This case potentially has ramifications that extend far beyond the marketing order at issue,” according to lead attorney Jessica Ring Amunson, who represents the 33 independents.

Briefs for the Agricultural Department, the Raisin Administrative Committee, and the 47 growers that, as Board Members, are on the inside of the business decisions associated with the raisin marketing order must all be filed by the end of March for oral arguments scheduled for April 22.