Swisher International, Inc. v. Schafer

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

________________________ FILED

U.S. COURT OF APPEALS

No. 07-15886 ELEVENTH CIRCUIT

DEC 3, 2008

________________________

THOMAS K. KAHN

CLERK

D. C. Docket No. 05-00871-CV-J-16-TEM

SWISHER INTERNATIONAL, INC.,

Plaintiff-Appellant,

versus

ED SCHAFER,

Secretary of Agriculture,

Defendant-Appellee.

________________________

Appeal from the United States District Court

for the Middle District of Florida

_________________________

(December 3, 2008)

Before ANDERSON, BARKETT and COX, Circuit Judges.

ANDERSON, Circuit Judge:

Swisher International, Inc. (“Swisher”) appeals the district court’s grant of

summary judgment in favor of Edward T. Schafer, Secretary of Agriculture (the

“Secretary”).1 Swisher alleged that the Fair and Equitable Tobacco Reform Act of

2004, 7 U.S.C. §518 et seq. (the “Act”) and its implementing procedures violate the

Takings and Due Process Clauses of the Fifth Amendment and Swisher’s

constitutional right to equal protection. The Act transforms the heavily regulated

and subsidized tobacco production system into a free market system. As part of the

transition process, the Act provides a buyout for tobacco farmers and tobacco quota

holders. The buyout is funded through quarterly assessments levied on tobacco

manufacturers and importers selling tobacco products in the domestic market.

Swisher believes that these assessments violate the Constitution. We have

determined that the Takings Clause does not apply to Swisher’s mere obligation to

pay an assessment. We hold that Swisher’s obligations under the Act do not

violate the Due Process Clause or Swisher’s equal protection rights. We affirm the

district court’s summary judgment in favor of the Secretary.

I. BACKGROUND

In 1938, Congress began regulating tobacco growers by establishing a

1

Edward T. Schafer has been substituted as the appellee because he replaced

former Secretary Mike Johanns, the named defendant in the district court opinion.

2

system of quotas and price supports. The price support system was managed by the

Commodity Credit Corporation (“CCC”). The type of tobacco used in the

production of cigarettes has been the historical focus of the price support system.

Swisher, as a cigar manufacturer, purchased less than one percent of its tobacco

through the price support system in 1999-2004, averaging 0.031% percent of the

total tobacco sold through the program in each year.

When the CCC began to sustain losses as a result of operating the program,

Congress required tobacco importers, buyers, and producers to make payments to a

fund that covered the losses. By the early part of this century, Congress determined

that the price support system was no longer in the best interest of the industry. In

2004, the President signed into law the Fair and Equitable Tobacco Reform Act, 7

U.S.C. § 518 et seq. The Act dismantled the tobacco quotas and price supports that

had been in place since 1938 and created a program to help tobacco farmers make

the transition to a free market system. The Act works as a buyout of tobacco

growers, taking place over ten years and financed by payments from tobacco

manufacturers and importers.2

2

The Act also relieves cigarette manufacturers of some of their liability under a

settlement agreement with 47 state attorneys general regarding recovery of health care costs

related to smoking. The settlement agreement provided that settlement payments would be

cancelled on a dollar-for-dollar basis if the federal government enacted an industry-funded

tobacco grower buyout.

3

Under the Act, the Department of Agriculture determines the assessments

owed by each manufacturer using a two-step process. First, the total yearly

assessment is divided among six classes of tobacco manufacturers (cigarettes,

cigars, snuff, roll-your-own, chewing tobacco, and pipe tobacco), based on their

market share in the preceding calendar year quarter. 7 U.S.C. §518d(b)(1), (e)(1).

The percentage of the total yearly assessment for which each class is responsible

was statutorily established for fiscal year 2005, but the Secretary has the authority

to adjust the percentages in subsequent years. Id. §518d(c)(1)-(2). The market

share for each class is determined by multiplying each class’s tobacco volume by

the excise taxes paid by that class in the prior year. 7 C.F.R. §§1463.3, 1463.4.

For all classes of tobacco except cigars, the actual excise tax rates are used to

calculate market share. Id. §1463.7(c). Because the excise tax rate for cigars

varies, the market share for cigar manufacturers is calculated using the maximum

excise tax rate and the number of units sold. Determination of the market share of

each tobacco class is referred to as “Step A.”

Once the market share for each class has been determined, the Secretary

allocates the percentage of the total assessment owed by each class among

individual manufacturers and importers. 7 C.F.R. §1463.7(d). For cigarette and

cigar sellers, the individual assessments are determined by the number of cigarettes

4

and cigars sold. 7 U.S.C. §518d(g)(3)(A). For the remaining classes of tobacco

products, the number of pounds of tobacco is used to determine the assessments.

Id. §518d(g)(3)(B). This determination is referred to as “Step B.”

Swisher paid $11 million in the first year of the program. Swisher

anticipates its total assessments over the ten years will be in excess of $100 million.

In 2005, Swisher filed suit against the Department of Agriculture, challenging the

constitutionality of the Act. The district court granted summary judgment in favor

of the Secretary, and Swisher now appeals.

II. STANDARD OF REVIEW

We review a district court’s grant of summary judgment de novo. Holloman

v. Mail-Well Corp., 443 F.3d 832, 836 (11th Cir. 2006). Summary judgment is

appropriate when the evidence, viewed in the light most favorable to the

nonmoving party, presents no genuine issue of fact and compels judgment as a

matter of law. Fed. R. Civ. P. 56(c); Holloman, 443 F.3d at 836.

III. DISCUSSION

Both parties rely upon Eastern Enterprises v. Apfel, 524 U.S. 498, 118 S. Ct.

2131 (1998). We agree that Eastern Enterprises and its progeny provide significant

guidance for this case. Thus, we first analyze that case to arrive at a rule of

decision for this case. Then we determine whether Swisher’s rights were violated

5

under the Due Process Clause of the Fifth Amendment. Finally, we determine

whether the methodology for apportioning the assessments violates Swisher’s equal

protection rights under the Fifth Amendment.

A. Analysis of Eastern Enterprises and Determination of a Rule of

Decision for this Case

In Eastern Enterprises, the Supreme Court considered challenges to the Coal

Industry Retiree Health Benefit Act of 1992 (“Coal Act”) under the Due Process

and Takings Clauses of the Constitution. 524 U.S. at 503-04, 118 S. Ct. at 2137

(plurality opinion). The Coal Act assigned retirees to previous employers

according to a statutory formula, requiring the employers to pay premiums into the

Combined Fund to cover benefits for the retirees. Id. at 514-15, 118 S. Ct. at 2141-

42. By 1965, Eastern had transferred all of its coal-related operations to a

subsidiary and was no longer involved in the industry. Id. at 516, 118 S. Ct. at

2143. Following the Coal Act’s enactment, Eastern was assigned the obligation for

premiums regarding over 1,000 retired miners who had worked for the company

before 1966, with the premiums for a 12-month period exceeding $5 million. Id. at

517, 118 S. Ct. at 2134. Eastern asserted that the Coal Act violated substantive due

process and constituted a taking of its property. Id.

1. Justice O’Connor’s plurality opinion concluded that application

of the Coal Act to Eastern violated the Takings Clause

6

The plurality applied the Takings Clause and concluded “that the Coal Act’s

allocation of liability to Eastern violates the Takings Clause, and . . . should be

enjoined as applied to Eastern.” Id. at 538, 188 S. Ct. at 2153. The case did not

involve a classic taking in which private property is taken by the government for its

own use. Id. at 522, 118 S. Ct. at 2146. Although not the traditional takings

model, the plurality asserted that economic regulation such as the Coal Act can

amount to a taking. Id. at 522-23, 118 S. Ct. at 2146. The party challenging a

governmental action as a taking has a heavy burden because government

regulations often curtail some use of private property, and not every destruction of

property is a taking in the constitutional sense. Id. at 523, 118 S. Ct. at 2146.

“[T]he process for evaluating a regulation’s constitutionality involves an

examination of the ‘justice and fairness’ of the governmental action.” Id. The

inquiry is essentially ad hoc and fact intensive, and the Court has found three

factors to have particular significance: “[T]he economic impact of the regulation,

its interference with reasonable investment backed expectations, and the character

of the governmental action.” Id. at 523-24, 118 S. Ct. at 2146 (alteration in

original). The plurality noted that its prior decisions give Congress a lot of leeway

to create economic legislation, including the power to impact contracts between

parties and to impose a certain degree of retroactive legislation. Id. at 528, 118 S.

7

Ct. at 2149. However, the plurality stated that its decisions “left open the

possibility that legislation might be unconstitutional if it imposes severe retroactive

liability on a limited class of parties that could not have anticipated the liability,

and the extent of the liability is substantially disproportionate to the parties’

experience.” Id. at 528-29, 118 S. Ct. at 2149.

The plurality determined—by applying the three factor test used in

regulatory takings analysis—that the Coal Act’s allocation scheme, as applied to

Eastern, constituted a taking. Id. at 529, 118 S. Ct. at 2149. In discussing the first

factor, economic impact, the plurality concluded that there was no doubt that the

Coal Act placed a significant financial burden on Eastern. Id. Eastern’s

cumulative payments under the Coal Act were estimated to be between $50 and

$100 million. Id. The plurality indicated “that an employer’s statutory liability for

multiemployer plan benefits should reflect some proportion[ality] to its experience

with the plan.” Id. at 530, 118 S. Ct. at 2149 (alteration in original) (internal

quotations omitted). Eastern’s liability under the Coal Act was based solely on its

previous employees from 30 to 50 years before the enactment of the Act, “without

any regard to responsibilities that Eastern accepted under any benefit plan the

company itself adopted.” Id. at 531, 118 S. Ct. at 2150.

With respect to the second factor, the plurality determined that “the Coal Act

8

substantially interfere[d] with Eastern’s reasonable investment-backed

expectations.” Id. at 532, 118 S. Ct. at 2151. “Retroactivity is generally disfavored

in the law . . . .” Id. The legislation reached back between 30 to 50 years to impose

liability on Eastern based on prior actions. Id. Although the Act only mandated

the payment of future benefits, it attached new liability based on an employment

relationship that had terminated long before the Act’s enactment. Id. Retroactive

legislation brings up “fundamental notions of justice” and issues of fairness

“because it can deprive citizens of legitimate expectations and upset settled

transactions.” Id. at 532-33, 118 S. Ct. at 2151. The Coal Act’s retroactive

liability is particularly far-reaching, “divesting Eastern of property long after the

company believed its liabilities under” its prior agreement had been settled. Id. at

534, 118 S. Ct. at 2152. Substantial questions of fairness are raised by reaching so

far into the past to impose liability. Id. Although Congress’ attempt to protect

miners was noble, “the Constitution does not permit a solution to the problem of

funding miners’ benefits that imposes such a disproportionate and severely

retroactive burden upon Eastern.” Id. at 536, 118 S. Ct. at 2153.

Regarding the third factor, the plurality determined that “the nature of the

governmental action in this case [was] quite unusual.” Id. at 537, 118 S. Ct. at

2153. Congress sought to find a legislative remedy to the major problem of

9

funding for miners’ benefits; however, the solution singled out Eastern based on its

conduct far in the past, and without any relationship to any commitment made by

the employers or any injury Eastern caused. Id. The governmental action was

problematic in regards to “fundamental principles of fairness underlying the

Takings Clause.” Id. The plurality concluded that, under the specific facts of the

case, application of the Coal Act to Eastern was an unconstitutional taking. Id.

The plurality acknowledged that there was a correlation between the analysis under

the Takings and Due Process Clauses, but O’Connor noted the Court’s “concerns

about using the Due Process Clause to invalidate economic legislation.” Id.

2. Justice Kennedy’s concurrence concluded that application of the

Coal Act to Eastern was unconstitutional under the Due Process

Clause

Justice Kennedy concurred in the judgment. Id. at 538, 118 S. Ct. at 2154

(Kennedy, J., concurring in the judgment and dissenting in part). However, Justice

Kennedy argued that the plurality was wrong to conclude that the Coal Act took

property because the regulation was without regard to property. Id. at 540, 118 S.

Ct. at 2154. The Coal Act did not operate on or alter an identified property interest,

and it was not measured by property interests. Id. “The law simply imposes an

obligation to perform an act, the payment of benefits,” and to the extent that the

regulation affects property interests, it is similar to many laws that have never

10

before been considered takings. Id. Kennedy reasoned that, because “the

constitutionality of the Coal Act appears to turn on the legitimacy of Congress’

judgment rather than on the availability of compensation, . . . the more appropriate

constitutional analysis arises under general due process principles rather than under

the Takings Clause.” Id. at 545, 118 S. Ct. at 2157 (citation omitted).

Justice Kennedy concluded that principles forbidding retroactive legislation

were sufficient to show that there was a violation of the Due Process Clause. Id. at

547, 118 S. Ct. at 2158. Although the Court has been hesitant to subject economic

legislation to due process analysis, the Court has been willing to look more closely

with regard to retroactive legislation. Id.

Due process analysis requires an inquiry into whether the legislature acted in

an arbitrary and irrational way in enacting the retroactive law. Id. Although

prospective legislation carries a presumption of constitutionality, that does not

mean that Congress can automatically legislate retroactively that which it could

have legislated prospectively. Id. at 547-48, 118 S. Ct. at 2158. “Both stability of

investment and confidence in the constitutional system . . . are secured by due

process restrictions against severe retroactive legislation.” Id. at 549, 118 S. Ct. at

2159.

Justice Kennedy concluded that the case represented “one of the rare

11

instances where the Legislature . . . exceeded the limits imposed by due process.”

Id. The remedy in the Coal Act, as applied to Eastern, “bears no legitimate relation

to the interest which the Government asserts in support of the statute.” Id. The

unprecedented scope of retroactivity was a significant determinant in the

unconstitutionality of the statute. Id. Liability of former employers has been

upheld when the statutes were remedial, but this statute was not remedial because

Eastern was not responsible for the expectation of lifetime health benefits for

retired miners. Id. at 550, 118 S. Ct. at 2159. The expectation of lifetime benefits

was created by agreements made long after Eastern had left the coal business. Id.

This case represented the rare instance in which the severe retroactive application

of legislation is so egregious as to violate the due process clause. Id.3

3. Is either the plurality opinion or Justice Kennedy’s

concurrence controlling?

As indicated above, the decision in Eastern Enterprises constitutes a

fragmented decision in which the five Justices concurring in the judgment did not

agree upon a single rationale to explain the result. In such a case, “the holding of

3

The four dissenters agreed with Justice Kennedy that due process, rather than

takings, was the appropriate framework for analysis. They held: “The Constitution’s Takings

Clause does not apply.” Id. at 554, 118 S. Ct. at 2161 (Breyer, J., dissenting). This is so,

according to the dissent, because the Takings Clause is primarily concerned not with “preventing

arbitrary or unfair government action, but with providing compensation for legitimate

government action that takes ‘private property’ to serve the ‘public’ good.” Id.

12

the Court may be viewed as that position taken by those Members who concurred

in the judgment on the narrowest grounds.” Marks v. United States, 430 U.S. 188,

193, 97 S. Ct. 990, 993 (1977).

We note that the Supreme Court has commented that the Marks inquiry “has

so obviously baffled and divided the lower courts.” Nichols v. United States, 511

U.S. 738, 746, 114 S. Ct. 1921, 1927 (1994); see also Grutter v. Bollinger, 539

U.S. 306, 325, 123 S. Ct. 2325, 2337 (2003). Courts of appeal have applied several

different formulations of the Marks rule. Although this Court has recently applied

one particular formulation, United States v. Robison, 505 F.3d 1208, 1219-22 (11th

Cir. 2007),4 we need not in this case apply any particular formulation. This is so

because Justice O’Connor’s opinion for the plurality in Eastern Enterprises would

not constitute binding authority (i.e., would not constitute the narrower ground)

under any of the several formulations of the Marks inquiry.5 We need not decide

4

In Robison, we addressed the “narrowest ground” of the five Justice majority

opinion in Rapanos v. United States, 547 U.S. 715, 126 S. Ct. 2208 (2006). The issue in

Rapanos and Robison involved the definition of “navigable waters” which in turn determined the

jurisdiction of the Clean Water Act. We held that the narrowest ground was the least far-

reaching: “The issue becomes whether the definition of ‘navigable waters’ in the plurality or

concurring opinions in Rapanos was less far-reaching (i.e., less restrictive of CWA jurisdiction).”

Robison, 505 F.3d at 1221. Because Justice Kennedy’s test would “classify a water as

‘navigable’ more frequently than Justice Scalia’s test,” we determined that Justice Kennedy’s test

constituted the “narrowest grounds,” the one less restrictive of the application of the federal

statute, and thus constituted the binding rule of decision for Robison. Id. at 1221-22.

5

Under the formulation applied in Robison, it is probable that Justice Kennedy’s

concurring opinion in Eastern Enterprises, and not Justice O’Connor’s plurality opinion, would

13

whether Justice Kennedy’s concurrence constitutes the narrower ground, because

we can assume arguendo that neither opinion constitutes the narrower ground, thus

leaving us without binding authority, and leaving us with the obligation to

be considered the narrower of the two standards. It is probable that his standard would be less

far-reaching, i.e., less restrictive of the application of the federal Coal Act legislation. In other

words, especially in light of the extremely high threshold that courts require before finding a

substantive due process violation, it is probable that Justice Kennedy’s standard would less

frequently result in a conclusion that the Coal Act was unconstitutionally applied. See Eastern

Enterprises, 524 U.S. at 542, 118 S. Ct. at 2155 (Kennedy, J., concurring in the judgment and

dissenting in part) (noting that the plurality’s opinion “would expand an already difficult and

uncertain rule to a vast category of cases not deemed, in our law, to implicate the Takings Clause.

. . . The plurality opinion would throw one of the most difficult and litigated areas of the law

into confusion, subjecting States and municipalities to the potential of new and unforeseen

claims in vast amounts.”). Whether or not Justice Kennedy’s concurrence is the narrower

ground under the Robison formulation, a matter that we need not and do not decide in this case,

we are confident that Justice O’Connor’s plurality opinion is not the narrower ground, and thus is

not binding precedent.

Other courts of appeal have held that neither Justice O’Connor’s plurality opinion nor

Justice Kennedy’s concurrence are binding, because neither can meaningfully be regarded as

“narrower” than the other, neither opinion being a logical subset of the other. Thus no common

denominator can be said to exist commanding the support of five Justices concurring in the

judgment. United States v. Alcan Aluminum Corp., 315 F.3d 179, 189 (2d Cir. 2003); Anker

Energy Corp. v. Consol. Coal Co., 177 F.3d 161, 169-70 (3d Cir. 1999); Ass’n of Bituminous

Contractors, Inc. v. Apfel, 156 F.3d 1246, 1254-55 (D.C. Cir. 1998). Under these cases, neither

opinion is binding, and thus under this formulation, Justice O’Connor’s plurality opinion would

of course not be binding.

Other courts of appeal have indicated that they are bound to follow the five Justices in

Eastern Enterprises who concluded that the takings analysis was not appropriate; therefore, those

courts applied substantive due process. Those courts of appeal rely upon the fact that Justice

Kennedy and the four dissenting Justices all indicated that a takings analysis was not appropriate.

See Commonwealth Edison Co. v. United States, 271 F.3d 1327, 1339 (Fed. Cir. 2001) (en

banc); Parella v. Ret. Bd. of R.I. Employees’ Ret. Sys., 173 F.3d 46, 58 (1st Cir. 1999). Of

course, this latter formulation is inappropriate in this circuit, the law of our circuit being clear

that a combination of five Justices, some in the majority and some in the dissent, does not

constitute binding precedent. See Robison, 505 F.3d at 1221. In any event, under none of the

foregoing formulations would Justice O’Connor’s plurality opinion in Eastern Enterprises

constitute binding precedent.

14

independently evaluate the case law and determine for ourselves which approach is

more consistent with the case law and more plausible. As elaborated below, our

independent evaluation leads us to conclude that the takings analysis is not

appropriate for this case.

Our independent evaluation of the case law leads us to agree with Justice

Kennedy that the takings analysis is not an appropriate analysis for the

constitutional evaluation of an obligation imposed by Congress merely to pay

money. In the Supreme Court case, Eastern Enterprises challenged the power of

Congress to require that it contribute to the funding of heath care benefits for

retirees in the coal industry, a mere obligation to pay money. Similarly, in the

instant case, Swisher challenges the power of Congress to impose upon it

assessments under the Fair and Equitable Tobacco Reform Act as a contribution

toward the funding of the buyout of tobacco growers and the transition to the free

market system – again a mere obligation to pay money. As Justice Kennedy

pointed out, such an obligation

does not operate upon or alter an identified property interest, and it is

not applicable to or measured by a property interest. The Coal Act

does not appropriate, transfer, or encumber an estate in land (e.g., a

lien on a particular piece of property), a valuable interest in an

intangible (e.g., intellectual property), or even a bank account or

accrued interest. The law simply imposes an obligation to perform an

act, the payment of benefits.

15

Eastern Enterprises, 524 U.S. at 540, 118 S. Ct. at 2154 (Kennedy, J., concurring in

the judgment and dissenting in part).6

Swisher’s argument in this case challenges the very power of Congress to

impose the obligation at issue upon Swisher. In other words, Swisher asserts “a

substantive or absolute limit on the government’s power to act.” Id. at 545, 118 S.

Ct. at 2157. As Justice Kennedy points out, the Takings Clause, by its plain

6

In support of its position that the takings analysis is appropriate, Swisher relies

upon Phillips v. Washington Legal Foundation, 524 U.S. 156, 118 S. Ct. 1925 (1998), Webb’s

Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 101 S. Ct. 446 (1980), and Connolly v.

Pension Benefit Guaranty Corp., 475 U.S. 211, 106 S. Ct. 1018 (1986). Phillips and Beckwith

are readily distinguishable. Both involve specific, identifiable, property interests which were

invaded by the governmental action. Phillips involved the appropriation by the state of Texas of

the interest earned on IOLTA accounts (Interest on Lawyers Trust Account). 524 U.S. at 159-60,

118 S. Ct. 1927-28. Under that program in Texas, and other states, certain client funds held by

an attorney were deposited in bank accounts, and the statute provided that the interest generated

by such funds was to be paid to a foundation to finance legal services for lower income

individuals. Id. at 160, 118 S. Ct. at 1928. Similarly, in Beckwith, the state statute provided that

the clerk of each county court should invest funds deposited in the registry of the court (e.g., in

interpleader cases) in interest bearing bank accounts and that all interest accruing from such

monies shall be deemed the income of the office of the clerk. 449 U.S. at 156 n.1, 101 S. Ct. at

448 n.1. Thus, both Phillips and Beckwith involved an invasion of specific identifiable property.

In Connolly, appellants brought a Takings Clause challenge to a provision of the Multiemployer

Pension Plan Amendments Act of 1980 which required an employer withdrawing from a

multiemployer pension plan to pay a fixed and certain debt to the plan amounting to the

employer’s proportionate share of the plan’s unfunded vested benefits. 475 U.S. at 221-23, 106

S. Ct. at 1024-25. Although appellants did not emphasize their property interest, the case did

involve at least the semblance of a property interest. Prior to the enactment of the statute, an

employer’s sole obligation to the pension trust was to pay a fixed contribution required by the

collective bargaining agreement. Id. at 218, 106 S. Ct. at 1022. The agreement clearly stated that

the employer’s obligation for pension benefits was ended when the employer paid the specified

contribution. Id. Thus, Connolly is distinguished from the instant case in that there is no

semblance of a property interest involved in this case. Moreover, the takings analysis conducted

by the Supreme Court in Connolly merely reinforced the Court’s belief “that the imposition of

withdrawal liability does not constitute a compensable taking under the Fifth Amendment.” Id.

at 225, 106 S. Ct. at 1026.

16

language, does not operate as a substantive or absolute limit on the government’s

power; rather, it operates only as a conditional limitation, permitting the taking so

long as the government pays just compensation. As the Supreme Court stated in

1987:

As its language indicates, and as the Court has frequently noted, this

provision [the Takings Clause] does not prohibit the taking of private

property, but instead places a condition on the exercise of that power.

This basic understanding of the amendment makes clear that it is

designed not to limit the governmental interference with property

rights per se, but rather to secure compensation in the event of

otherwise proper interference amounting to a taking.

First English Evangelical Lutheran Church of Glendale v. County of Los Angeles,

482 U.S. 304, 314-15, 107 S. Ct. 2378, 2385-86 (1987) (citations omitted).

In addition to the plain language of the Takings Clause, the case law

following Eastern Enterprises supports the proposition that the takings analysis is

not an appropriate vehicle to challenge the power of Congress to impose a mere

monetary obligation without regard to an identifiable property interest. In Givens

v. Alabama Department of Corrections, 381 F.3d 1064 (11th Cir. 2004), we held

that an Alabama inmate had no private property interest in the interest earned on

the monies deposited in a bank account in the inmate’s name into which earnings of

the inmate pursuant to the work-release program were deposited. Id. at 1070.

Because “no recognized property interest is implicated here, . . . there is no

17

‘taking.’” Id. Similarly, in the post-Eastern Enterprises cases construing the Coal

Act, and in analogous contexts, several circuit courts of appeals have applied a

substantive due process analysis, rather than a takings analysis.7 Moreover, that the

7

See Unity Real Estate Co. v. Hudson, 178 F.3d 649, 659 (3d Cir. 1999) (“[W]e

believe that due process analysis encompasses the relevant concerns.”); see also Commonwealth

Edison Co. v. United States, 271 F.3d 1327, 1339-40 (Fed. Cir. 2001) (en banc) (holding that a

congressional imposition of an obligation to pay money does not constitute an unconstitutional

taking of property, in a case challenging the special monetary assessments on domestic utilities

for remediation of environmentally contaminated uranium processing facilities, the court rejected

a Takings Clause challenge to the Energy Policy Act of 1992, citing Eastern Enterprises as well

as previous Federal Circuit precedent); Parella v. Ret. Bd. of R.I. Employees’ Ret. Sys., 173 F.3d

46, 58 (1st Cir. 1999) (holding, in the context of a Takings Clause challenge to a Rhode Island

statute capping annual pension benefits of retired legislators, that plaintiffs must prove the

deprivation of a property right to support a Takings Clause claim, relying upon Eastern

Enterprises and previous First Circuit cases).

However, other post-Eastern Enterprises cases construing the Coal Act have analyzed the

claim employing both a Takings Clause analysis and a substantive due process analysis. Those

cases have held that neither Justice O’Connor’s opinion nor Justice Kennedy’s constitutes

binding precedent, and that the only binding aspect of the splintered decision is its specific result.

See United States v. Alcan Aluminum Corp., 315 F.3d 179, 189 (2d Cir. 2003); see also Ass’n of

Bituminous Contractors, Inc. v. Apfel, 156 F.3d 1246, 1254-55 (D.C. Cir. 1998). Incidentally,

all of the post-Eastern Enterprises cases construing the Coal Act have upheld the statute as

applied to the parties challenging same. See Bituminous Contractors, 156 F.3d at 1257 (“The

clear implication of each opinion in Eastern Enterprises is that employer participation in the 1974

and 1978 agreements [which agreements first gave rise to the reasonable expectation of lifetime

benefits] represents a sufficient amount of past conduct to justify the retroactive imposition of

Coal Act liability . . . .”).

On the other hand, the Fifth Circuit in United States Fidelity & Guaranty Co. v.

McKeithen, 226 F.3d 412 (5th Cir. 2000), did find a violation of the Takings Clause where a

Louisiana statute imposed severe retroactive liability on a class of insurers who had withdrawn

from (or substantially reduced their participation in) the Louisiana market prior to the passage of

the statute. However, the Fifth Circuit decision is not inconsistent with our decision today. The

Fifth Circuit noted that Justice Kennedy declined to apply a takings analysis because there was

no identifiable property interest at issue in Eastern Enterprises. Id. at 420. Because McKeithen

did involve an identifiable property interest, the Fifth Circuit concluded that Justice Kennedy’s

concern about the applicability of a takings analysis was moot in the Fifth Circuit case. Id.

Moreover, the Fifth Circuit concluded that Justice Kennedy’s reasoning was otherwise in

18

takings analysis is not appropriate in this case is supported by persuasive authority.

Five Supreme Court Justices have expressed the view that the Takings Clause does

not apply where there is a mere general liability (i.e., no separately identifiable

fund of money) and where the challenge seeks to invalidate the statute rather than

merely seeking compensation for an otherwise proper taking. Eastern Enterprises,

524 U.S. at 539-47, 118 S. Ct. at 2154-58 (Kennedy, J., concurring in the judgment

and dissenting in part); id. at 554-56, 118 S. Ct. at 2161-63 (Breyer, J., joined by

Stevens, J., Souter, J., and Ginsburg, J., dissenting).8

Accordingly, we conclude that it would be inappropriate in this case to apply

a takings analysis.9 This leaves only Swisher’s substantive due process challenge.

harmony with that of Justice O’Connor’s plurality opinion in Eastern Enterprises. Id.

8

We have held that there is no binding precedent when five Justices have expressed

a common view, when some are in the majority and some are in the dissent. Robison, 505 F.3d

at 1221. Although not binding precedent, the common view of five Justices obviously carries

persuasive authorities.

9

Indeed, to apply a Takings Clause analysis in the instant case would constitute an

even greater expansion of takings jurisprudence than Justice O’Connor’s plurality opinion in

Eastern Enterprises. There, at least there was some semblance of a property interest involved.

The collective bargaining agreement which Eastern did sign in 1950 provided for a fixed 30-

cents-per-ton royalty on coal produced as the contribution to be made by signatory operators.

Eastern Enterprises, 524 U.S. at 506, 118 S. Ct. at 2138 (plurality opinion). Moreover, the

contractual obligation to contribute expired with the expiration of the particular collective

bargaining agreement. Thus, in Eastern Enterprises, the statutory assessment might well have

been deemed to have been inconsistent with Eastern’s contractual obligation, and an impairment

of its property interest in that contract. By contrast, in the instant case, there is no semblance of

a property interest; there is no contract limiting Swisher’s obligations.

19

B. Whether the Obligation to Pay Assessments under the Act Violates

Swisher’s Due Process Rights

Having determined that a takings analysis is not appropriate in this case, we

turn to Swisher’s argument that the Act violates its right to due process because it

imposes retroactive liability that is disproportionate to Swisher’s participation in

the price support program. Economic legislation “come[s] to the Court with a

presumption of constitutionality.” Usery v. Turner Elkhorn Mining Co., 428 U.S.

1, 15, 96 S. Ct. 2882, 2892 (1976). To prove that a statute violates its due process

rights, the aggrieved party must demonstrate that the legislature has acted

arbitrarily and irrationally. Id. at 15, 96 S. Ct. at 2892. However, if the

government can show that the statute has a “legitimate legislative purpose furthered

by rational means,” due process is satisfied. Gen. Motors Corp. v. Romein, 503

U.S. 181, 191, 112 S. Ct. 1105, 1112 (1992). When a statute has a retroactive

effect, the government must also prove that the statute's retroactive application

furthers a legitimate legislative purpose. Pension Benefit Guar. Corp. v. R.A. Gray

& Co., 467 U.S. 717, 730, 104 S. Ct. 2709, 2718 (1984).

As is apparent from our discussion above summarizing Justice Kennedy’s

substantive due process analysis in Eastern Enterprises, the primary factor which

led to the holding that the Coal Act was unconstitutional was the fact that the Coal

20

Act imposed upon Eastern Enterprises a retroactive obligation “of unprecedented

scope.” 524 U.S. at 549, 118 S. Ct. at 2159. The crucial difference between the

instant case and Eastern Enterprises is that the obligation imposed upon Swisher in

the instant case is not retroactive. The Act provides:

The Secretary, acting through the Commodity Credit Corporation,

shall impose quarterly assessments during each of fiscal years 2005

through 2014, calculated in accordance with this section, on each

tobacco product manufacturer and tobacco product importer that sells

tobacco products in domestic commerce in the United States during

that fiscal year.

7 U.S.C. § 518d(b)(1). Under the plain meaning of the language of the statute,

every tobacco manufacturer and importer currently participating in the domestic

tobacco market is subject to the assessments. Accordingly, a new manufacturer or

importer would be subject to an assessment under the statute as a cost of doing

business in the industry. Contrary to Swisher’s argument, the plain language of

the statute clearly indicates that the assessments are not based upon the past

conduct of tobacco manufacturers or importers.10 Quite the contrary, the

assessment is based upon current participation in the market, such that new entrants

are assessed, as well as those who participated in the past.

10

It is true that a person must “demonstrate to the satisfaction of the Secretary that

the person is a tobacco quota holder” in order to be eligible to receive a contract payment under

the statute. 7 U.S.C. § 518a(b). However, the fact that recipients of the payments must show

they were quota holders does not imply that the obligation to pay assessments is based on past

participation in the quota system.

21

Stripped of its argument that the Act is retroactive, Swisher’s due process

challenge is readily disposed of as being wholly without merit. We note again that

congressional legislation “adjusting the burdens and benefits of economic life come

to the Court with a presumption of constitutionality, and . . . the burden is on one

complaining of a due process violation to establish that the legislature has acted in

an arbitrary and irrational way.” Turner Elkhorn, 428 U.S. at 15, 96 S. Ct. at 2892.

“Statutes may be invalidated on due process grounds only under the most egregious

of circumstances.” Eastern Enterprises, 524 U.S. at 550, 118 S. Ct. at 2159

(Kennedy, J., concurring in the judgment and dissenting in part). So long as

congressional legislation “is supported by a legitimate legislative purpose furthered

by rational means, judgments about the wisdom of such legislation remain within

the exclusive province of the legislative and executive branches.” R.A. Gray, 467

U.S. at 729, 104 S. Ct. at 2717-18.

Applying that deferential standard, we readily conclude that the Act easily

passes constitutional muster. The legitimate legislative purpose is apparent.

Congress obviously perceived problems in the industry, perceived a need to

eliminate the old subsidy system, and decided to move to a free market system.

However, Congress recognized that tobacco farmers and quota holders should be

provided some cushion for the transition. Seeing these economic problems in the

22

industry, Congress exercised its legitimate legislative powers to address same. We

also readily conclude that the means Congress chose to address these industry

problems were rational. Congress recognized that such a transition to a free market

system would benefit all current and future tobacco manufacturers and importers,

and thus devised a system of assessments to fund the transition to the free market

system – i.e., assessing all current tobacco manufacturers and importers, all of

whom would benefit from the transition to the free market system. Moreover,

tobacco manufacturers and importers currently engaged in the domestic market are

entities that are not only likely to benefit from the deregulation, but also are entities

best suited to pass such increased costs along to the ultimate consumers.11

We conclude that Congress exercised its powers to serve legitimate

legislative purposes. We also conclude that Congress chose rational means. Thus,

we conclude that Swisher has failed to show that the Act is arbitrary and irrational,

and has failed to demonstrate that the Act is unconstitutional as applied to

11

Incidentally, the system advocated by Swisher might have placed a competitive

burden upon the kind of tobacco that was previously subsidized by confining the assessments

only to those sellers of tobacco products who previously purchased subsidized tobacco. By

contrast, the system adopted by Congress places upon domestic tobacco producers no such

adverse competitive burden. Rather, the statute spreads the burden of the assessments amongst

all sellers of tobacco products in the domestic market (or more probably spreads such burden

amongst all consumers of such tobacco products because the sellers will probably pass the

burden through to the ultimate consumers).

23

Swisher.12

C. Whether the Act Violates Swisher’s Equal Protection Rights

Swisher also argues that the Act’s methodology for allocating the

assessments violates Swisher’s equal protection rights.13 This argument is without

12

Although we decided above that a takings analysis would not be appropriate in

this case, a close analysis of the rationale of Justice O’Connor’s plurality opinion in Eastern

Enterprises and Justice Kennedy’s concurrence reveals that the rationale employed in the two

opinions is strikingly similar. It is true that Justice O’Connor’s rationale proceeded under the

framework of the three factors of particular significance in regulatory takings: economic impact;

interference with reasonable investment backed expectations; and the character of the

governmental action. However, the factors she considered under that framework were virtually

identical to the factors considered by Justice Kennedy under the due process framework. In both

opinions, the crucial factor was the retroactivity of unprecedented scope. Both opinions focused

on the fact that the new statutory obligations bore no relationship to Eastern’s participation in the

1947 and 1950 agreements which predated the creation of any reasonable expectation on the part

of employees of lifetime benefits. Indeed, Justice O’Connor acknowledges that the “analysis of

legislation under the Takings and Due Process Clauses is correlated to some extent.” Eastern

Enterprises, 524 U.S. at 537, 118 S. Ct. at 2153 (plurality opinion). Similarly, Justice Kennedy

notes: “[I]t is no accident that the primary retroactivity precedents upon which today’s plurality

opinion relies in its takings analysis were grounded in due process.” Id. at 548, 118 S. Ct. at

2158 (Kennedy, J., concurring in the judgment and dissenting in part). Because the rationale

underpinning the two analyses is so similar, we strongly suspect that we would reach the same

result should we undertake the takings analysis described in Justice O’Connor’s opinion for the

plurality in Eastern Enterprises.

For example, Swisher complains vigorously that the imposition of the instant assessment

on it is out of proportion to its experience with the prior subsidy programs. The flaw in

Swisher’s argument is that, unlike the situation in Eastern Enterprises, the assessments in the

instant case are not based upon prior participation in the former subsidy programs. Quite the

contrary, the assessments imposed by this Act are expressly based upon an entity’s participation

in the current domestic market for tobacco products. In other words, the assessments in the

instant case are not retroactive at all.

13

The Equal Protection Clause of the Fourteenth Amendment does not apply

directly to the federal government; however, the principles of equal protection are applied to the

federal government through the Due Process Clause of the Fifth Amendment. Bolling v. Sharpe,

347 U.S. 497, 498-500, 74 S. Ct. 693, 694-95 (1954).

24

merit because the Act is economic legislation and Swisher is not a member of a

suspect class. “[E]qual protection is not a license for the courts to judge the

wisdom, fairness, or logic of legislative choices.” FCC v. Beach Commc’ns, Inc.,

508 U.S. 307, 313, 113 S. Ct. 2096, 2101 (1993). “In areas of social and economic

policy, a statutory classification that neither proceeds along suspect lines nor

infringes fundamental constitutional rights must be upheld against equal protection

challenge if there is any reasonably conceivable state of facts that could provide a

rational basis for the classification.” Id. (emphasis added). The rational basis test

demonstrates “the Court’s awareness that the drawing of lines that create

distinctions is peculiarly a legislative task and an unavoidable one,” and perfection

is not required in making the necessary classifications. Mass. Bd. of Ret. v.

Murgia, 427 U.S. 307, 314, 96 S. Ct. 2562, 2567 (1976).

Swisher contends that its equal protection rights are violated under Step A

of the assessment determination because the maximum excise tax rate on cigars is

used in determining the market share for the cigar industry, whereas the actual

excise rate is used to determine the market share for cigarettes and other tobacco

products. There is certainly a rational basis for choosing a unitary rate rather than

the actual excise rate because “large cigars” are the only class of tobacco products

that have a variable excise tax rate based on the price of the cigar. See 26 U.S.C. §

25

5701(a)(2). We readily conclude that it was not irrational for the Secretary to

determine that it would be administratively convenient to choose one tax rate for

calculating the market share for cigar manufacturers. Although the total share may

not be perfectly equal, the methodology the Secretary uses meets the rational basis

test.

Swisher also contends that its equal protection rights are violated under Step

B because Swisher’s intra-class share is determined by the number of cigars sold

without any difference based on the cost or size of the cigar, and Swisher primarily

produces less expensive, small cigars. Although the distribution of the intra-class

share may not be perfect, choosing to allocate the assessment owed by each cigar

manufacturer based on the number of cigars sold easily satisfies the highly

deferential rational basis test. We readily conclude that it was not irrational for the

Secretary to determine that basing this calculation on the volume of cigars sold

would be administratively convenient.

Because there was a rational basis for the Act’s methodology, we reject

Swisher’s equal protection challenge.

IV. CONCLUSION

For the foregoing reasons, we affirm the district court’s grant of summary

judgment in favor of the Secretary.

AFFIRMED.

26

COX, Circuit judge, specially concurring:

I concur in the judgment. I agree that the Act does not violate the Takings

Clause. I also concur in sections III.B. and III.C. of the opinion, holding that

Swisher’s due process and equal protection rights are not violated by the

obligations the Act imposes on Swisher.

27