IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 97-50047
_____________________
GORE, INC. d/b/a PURE MILK CO.,
Plaintiff-Appellant,
v.
DAN GLICKMAN, as Secretary of Agriculture,
United States Department of Agriculture,
Defendant-Appellee.
_________________________________________________________________
Appeal from the United States District Court
for the Western District of Texas
_________________________________________________________________
April 2, 1998
Before KING and JONES, Circuit Judges, and WERLEIN,*
District Judge.
WERLEIN, District Judge:
The sole issue in this appeal is whether Plaintiff-Appellant
Gore, Inc. is entitled to prejudgment interest on a refund it
recovered in Gore, Inc. v. Espy, 87 F.3d 767 (5th Cir. 1997)
(“Gore I”). In “Gore I” this Court held that Gore was entitled
to recover from the milk producer-settlement fund the sum of
$366,772.28 in payments that Gore had made into that fund
pursuant to an erroneous determination made by the Secretary of
Agriculture. We now hold that Gore is also entitled to recover
from the producer-settlement fund prejudgment interest on those
*
District Judge of the Southern District of Texas,
sitting by designation.
payments, and we therefore REVERSE the judgment of the district
court that denied prejudgment interest.
Background
The background of this lawsuit, and various policies
underlying the Agriculture Marketing Agreement Act of 19371
(“AMAA”), are set forth in “Gore I.” The details may be found
there of how Gore paid $366,772.38 into the producer-settlement
fund in 1990-91, and then successively sought -- as required by
law -- administrative review by the Secretary of Agriculture,
which review was conducted and decided by an administrative law
judge, further review and decision by the Secretary’s chief
judicial officer, and finally judicial review in the courts. Not
until this Court’s decision in July, 1996, which held that the
Secretary’s determination under 7 C.F.R. § 1126.4 was arbitrary,
capricious, and plainly inconsistent with the text of the
regulation, was Gore’s position finally vindicated. Thereupon,
this Court rendered judgment that Gore recover from the producer-
settlement fund a refund of the full sum, and remanded the case
for appropriate disposition.
The district court appropriately entered judgment in Gore’s
favor for the principal sum of $366,772.38, on November 7, 1996,
but later denied Gore’s motion to amend the judgment to add
prejudgment interest on the refund, which by then had been
withheld by the producer-settlement fund for approximately six
1
7 U.S.C. § 601 et seq. (1980 & Supp. 1997).
2
years. Gore now appeals from the judgment of the district court
that denied prejudgment interest.
Analysis
The availability of prejudgment interest under the AMAA is a
question of law, which is reviewed de novo. Carpenters Dist.
Council of New Orleans & Vicinity v. Dillard Dep’t Stores, 15
F.3d 1275, 1281 (5th Cir. 1994), cert. denied, 513 U.S. 1126, 115
S. Ct. 533 (1995) ("Questions of law are subject to de novo
review while findings of fact will be disturbed only if we find
that they are clearly erroneous.").
The AMAA does not expressly provide for or prohibit an award
of prejudgment interest in a refund case. Likewise, the
regulations of the Department of Agriculture promulgated under
the AMAA also are silent on the subject. It is provided,
however, that “[a]ny monies found to be due a handler from the
market administrator shall be paid promptly to such handler
. . . .” 7 C.F.R. § 1126.77 (1997).2
2
The “market administrator” is selected by the
Secretary, and heads the agency for the administration of a
federal milk marketing order. 7 C.F.R. § 1000.3 (1997). The
nation is divided into more than 40 marketing areas, and the
Secretary issues numerous marketing orders (a few of which apply
to more than one marketing area). 7 U.S.C. § 608c(5) (Supp.
1997). This case arises from events in the Texas marketing area,
which geographically consists of most of the State of Texas. See
7 C.F.R. § 1126.2 (1997).
The market administrator for the Texas marketing area is
required to establish and maintain “a separate fund known as the
`producer-settlement fund,’ into which he shall deposit the
payments made by handlers . . . .” 7 C.F.R. § 1126.70 (1997).
It is into this specific producer-settlement fund for the Texas
3
In a variety of situations the United States Supreme Court
has provided the principles for determining whether prejudgment
interest should be awarded when a specific statute is silent on
the subject. In Rodgers v. United States, 332 U.S. 371, 373, 68
S. Ct. 5, 7 (1947), the Court put it this way:
[T]he failure to mention interest in statutes which
create obligations has not been interpreted by this
Court as manifesting an unequivocal congressional
purpose that the obligation shall not bear interest.
Billings v. United States, 232 U.S. 261, 284-288, 34
S.Ct. 421, 425-427, 58 L.Ed. 596. For in the absence
of an unequivocal prohibition of interest on such
obligations, this Court has fashioned rules which
granted or denied interest on particular statutory
obligations by an appraisal of the congressional
purpose in imposing them and in the light of general
principles deemed relevant by the Court.
In City of Milwaukee v. Cement Div., Nat’l Gypsum Co., 515 U.S.
189, 194, 115 S. Ct. 2091, 2095 (1995), a unanimous Court (J.
Breyer not participating) stated:
Although Congress has enacted a statute governing the
award of post-judgment interest in federal court
litigation, see 28 U.S.C. § 1961, there is no
comparable legislation regarding prejudgment interest.
Far from indicating a legislative determination that
prejudgment interest should not be awarded, however,
the absence of a statute merely indicates that the
question is governed by traditional judge-made
principles.
marketing area that the market administrator was required to
deposit the payments erroneously ordered to be paid during 1990-
91.
4
See also Monessen Southwestern Ry. Co. v. Morgan, 486 U.S. 330,
336-337, 108 S. Ct. 1837, 1842-43 (1988); West Virginia v. United
States, 479 U.S. 305, 308-313, 107 S. Ct. 702, 705-707 (1987).
This Court also has held that in the absence of a specific
statute authorizing prejudgment interest, the courts look to
whether “an award of such interest would further the
congressional policies” of the specific statute at issue. Guidry
v. Booker Drilling Co., 901 F.2d 485, 488 (5th Cir. 1990); Hansen
v. Continental Ins. Co., 940 F.2d 971, 984 n.11 (5th Cir. 1991)
(“[A]n award of prejudgment interest under ERISA furthers the
purposes of that statute by encouraging plan providers to settle
disputes quickly and fairly, thereby avoiding the expense and
difficulty of federal litigation.”); see also, e.g., West
Virginia v. United States, 479 U.S. at 310-11, 107 S. Ct. at 706
(looking to the purpose behind the Disaster Relief Act to
determine if prejudgment interest is recoverable); Poleto v.
Consolidated Rail Corp., 826 F.2d 1270, 1274-75 (3d Cir. 1987)
(looking to purpose of FELA and history of cases interpreting it
to determine whether prejudgment interest is available).
In examining the purpose of a statute and applying
“traditional judge made principles,” the case law reflects that
those principles include “the relative equities between the
beneficiaries of the obligation and those upon whom it has been
imposed”, Rodgers, 332 U.S. at 373, 68 S. Ct. at 7; fairness,
Blau v. Lehman, 368 U.S. 403, 414, 82 S. Ct. 451, 457 (1962);
Hansen, 940 F.2d at 984 n.11; McLaughlin v. Lindeman, 853 F.2d
5
1307, 1306 (5th Cir. 1988); ensuring full compensation, City of
Milwaukee, 515 U.S. at 194, 115 S. Ct. at 2095; West Virginia v.
United States, 479 U.S. at 310 n.2, 107 S. Ct. at 706;
expeditious settlement, Hansen, 940 F.2d at 984 n.11; and the
need to conform to historical legislative and judicial precedent.
Monessen, 486 U.S. at 338-339, 108 S. Ct. at 1844.
Turning to the instant legislation, it is well recognized
that Congress enacted the AMAA to regulate the milk industry in
response to “intense competition in the production of fluid milk
products.” Block v. Community Nutrition Inst., 467 U.S. 340,
341, 104 S. Ct. 2450, 2452 (1984). To curb destabilizing
competition in the industry, Congress gave to the Secretary of
Agriculture the authority to issue milk market orders that
established “minimum prices that handlers (those who process
dairy products) must pay to producers (dairy farmers) for their
milk products.” Id.
The “essential purpose [of this milk market order
scheme is] to raise producer prices,” S.Rep. No. 1011,
74th Cong., 1st Sess., 3 (1935), and thereby to ensure
that the benefits and burdens of the milk market are
fairly and proportionately shared by all dairy farmers.
Id.
In achieving that overarching purpose of the AMAA, at least
two related objectives -- pertinent to this case -- are evident
from the legislative scheme. First, and of paramount importance,
is the requirement that handlers purchasing milk products
promptly remit to the producer-settlement fund the amounts
6
assessed by the Secretary in order that the producers can be
promptly paid for their milk products. Second, and as something
of a corollary to the first objective, the Act reflects a scheme
intended to achieve fairness also for the handlers.
Several provisions in the AMAA serve to compel prompt
payments by handlers. To begin with, federal district courts are
given jurisdiction
specifically to enforce, and to prevent and restrain any
person from violating any order, regulation, or agreement,
heretofore or hereafter made or issued pursuant to this
chapter. . . .
7 U.S.C. § 608a(6) (1980). In a landmark case, the Supreme Court
held that the Secretary of Agriculture was entitled under
§ 608a(6) to obtain a mandatory injunction commanding a handler
to comply with a milk order by paying into the producer-
settlement fund the sums alleged by the Secretary to be due to
the fund notwithstanding the handler’s contention that the sum
demanded had been based upon faulty inspection of the handler’s
accounts and improper tests of the handler’s milk and milk
products. United States v. Ruzicka, 329 U.S. 287, 67 S. Ct. 207
(1946). The Supreme Court in Ruzicka acknowledged that even
though errors are inevitable, which may call for payments by
handlers into the producer-settlement fund, “[t]he reliance of
the industry upon that Fund makes prompt payments into it
imperative.” Id. at 289, 67 S. Ct. at 208. Moreover, because
the handler in Ruzicka had not availed himself of the
7
administrative review process provided by § 608c(15)(A), he was
precluded from seeking judicial relief from the Secretary’s order
in defending the case that had been filed by the Secretary to
enforce the order. Id. The Court emphasized the congressional
purpose underlying the disparate authority conferred upon the
Secretary to obtain judicial enforcement of his possibly
erroneous order, while denying to the handler the right to seek
judicial protection from an invalid order until he had first
exhausted his administrative remedies:
In large measure, the success of this scheme revolves
around a “producers” fund which is solvent and to which
all contribute in accordance with a formula equitably
determined and of uniform applicability. Failure by
handlers to meet their obligations promptly would
threaten the whole scheme. Even temporary defaults by
some handlers may work unfairness to others, encourage
wider non-compliance, and engender those subtle forces
of doubt and distrust which so readily dislocate
delicate economic arrangements. To make the vitality
of the whole arrangement depend on the contingencies
and inevitable delays of litigation, no matter how
alertly pursued, is not a result to be attributed to
Congress unless support for it is much more manifest
than we here find. That Congress avoided such hazards
for its policy is persuasively indicated by the
procedure it devised for the careful administrative and
judicial consideration of a handler’s grievance. It
thereby safeguarded individual as well as collective
interests.
Id. at 293, 67 S. Ct. at 210.
In addition to providing the Secretary with preferred access
to the courts for enforcement of his orders, the statute includes
other incentives, both criminal and civil, to assure prompt
payments by handlers into the producer-settlement fund. Title 7
U.S.C. § 608c(14)(A) provides that any handler who violates any
8
provision of a milk order issued under § 608c shall, on
conviction, be fined not less than $50 or more than $5,000 for
each violation, and each day during which such violation
continues is deemed a separate violation. Similarly,
§ 608c(14)(B) imposes civil penalties not exceeding $1,000 for
each such violation, and each day the violation continues is
deemed a separate violation.3 The Secretary also has adopted a
regulation to require a handler to pay interest at the rate of
three-fourths of one percent per month on unpaid obligations to
the Texas area producer-settlement fund. 7 C.F.R. § 1126.78
(1997). Again, the economic compulsion reflected in the
statutory and regulatory scheme serves that important policy of
the Act to make certain that milk payments are promptly made in
order that the producers may be regularly paid in accordance with
the overriding statutory purpose.
Another objective of the AMAA, however, is that handlers be
treated with fairness. Thus, 7 U.S.C. § 608c(15) provides that
handlers have a right to administrative review of orders that
they challenge and, after exhausting administrative review, they
may have access to the federal judiciary to determine whether the
Secretary’s ruling was made in accordance with law.4 It is clear
3
There are exceptions in both subsections (A) and (B)
for administrative review petitions filed with the Secretary in
good faith and not for delay to challenge the Secretary’s orders.
4
To challenge an order of the Secretary, a handler must
file a verified petition with the Secretary. 7 C.F.R. § 900.52
(1997). A hearing is then held before an administrative law
judge, who issues a written decision. 7 C.F.R. §§ 900.60, 900.64
9
that a handler who desires to challenge a payment order must
first exhaust his administrative remedies. Id.; Alabama Dairy
Products Ass’n, Inc. v. Yeutter, 980 F.2d 1421, 1423-24 (11th
Cir. 1993). In Ruzicka the Supreme Court viewed this procedure
as providing to
an aggrieved handler an appropriate opportunity for the
correction of errors or abuses by the agency charged
with the intricate business of milk control. In
addition, if the Secretary fails to make amends called
for by law the handler may challenge the legality of
the Secretary’s ruling in court. Handlers are thus
assured opportunity to establish claims of grievances
while steps for the protection of the industry as a
whole may go forward.
Id. at 292, 67 S. Ct. at 209. The Court specifically found that
the provisions of the AMAA “taken in their entirety” constitute
“a means for attaining the purposes of the Act while at the same
time protecting adequately the interests of individual handlers.”
Id.
With these well-recognized policies and objectives of the
AMAA in mind, we turn to the specific question of whether an
award of prejudgment interest on a refund to a handler would
“further the congressional policies” of the Act. We conclude
that it would. Prejudgment interest, like any other interest, is
to compensate one for the time value of money. Brabson v. United
(1997). Thereafter, the administrative law judge’s decision can
be appealed to the chief judicial officer, who issues the
Secretary’s final decision on the issue. 7 C.F.R. §§ 900.65,
900.66 (1997). Only after those steps are taken may a handler
seek judicial review of the Secretary’s decision in federal
district court. 7 U.S.C. § 608(c)(15)(B) (1980).
10
States, 73 F.3d 1040, 1044 (10th Cir.), cert. denied, U.S.
, 117 S. Ct. 607 (1996) (prejudgment interest is designed
to “compensate the injured victim for the lost time value of
money”); Motion Picture Ass’n of Am., Inc. v. Oman, 969 F.2d
1154, 1157 (D.C. Cir. 1992) (“[I]nterest compensates for the time
value of money, and thus is often necessary for full
compensation.”); In the Matter of Continental Ill. Secs.
Regulation, 962 F.2d 566, 571 (7th Cir. 1992)(“The cost of delay
in receiving money to which one is entitled is the loss of the
time value of money, and interest is the standard form of
compensation for that loss.”).
It plainly is not an objective of the Act to require
handlers to pay into the fund monies that they do not actually
owe, nor to provide to producers windfalls to which they are not
entitled. To deny to handlers the time value of money that the
Secretary has wrongfully ordered them to pay, and from which the
producer-settlement fund has benefitted during the time that the
funds were withheld, would exacerbate the wrong and subvert the
companion objectives described above, namely, to assure prompt
compliance by handlers with the Secretary’s payment orders, even
before administrative and judicial review, while at the same time
treating the handlers with fairness.
As for the first of these objectives, if a handler may
recover prejudgment interest on a payment that he is wrongfully
ordered to pay, then the economic incentive upon the handler
promptly to make that payment is materially increased. In other
11
words, the handler’s alternatives of withholding the contested
payment and risking liability for substantial interest and
penalties if the contest fails, or paying the contested amount
in confidence of receiving prejudgment interest on the refund if
the contest succeeds -- coupled with no additional liability if
the contest fails -- additionally discourages a handler from
choosing not to comply even with contested orders to make
payments into the fund. This incremental financial pressure upon
the handler to pay into the fund an amount that he contests
thereby furthers the congressional policies of the Act and is in
full harmony with the legislative scheme.
As for the corollary objective to treat with fairness the
handlers, the statute’s administrative review procedure, 7 U.S.C.
§ 608c(15), authorizes handlers to petition the Secretary for
agency review of the Secretary’s orders and thereby obtain relief
from obligations that are not in accordance with law. The right
of the handler ultimately to obtain judicial review is a
reinforcement of this statutory policy of fairness toward the
handlers. Administrative review of agency orders, moreover, is
generally intended to resolve disputes more quickly than may be
possible through judicial proceedings. The principle favoring
expeditious resolution of handler disputes is reflected in the
regulation that “[a]ny monies found to be due to a handler from
the market administrator shall be paid promptly to such handler
. . . .” 7 C.F.R. § 1126.77 (1997). Potential liability for
prejudgment interest would further encourage expeditious and
12
careful administrative review of contested orders and prompt
payments of refunds that are due. The free use of money, that
is, the right to order that payments be made into the fund
without risk of consequences, even including, as here, from an
order adjudged to have been based on an interpretation that was
“arbitrary, capricious, and plainly inconsistent with the text of
the regulation,” “Gore I” at 769, is a disincentive to prompt and
efficient administrative review. Conversely, the fund’s
potential liability for prejudgment interest would tend to impel
the Secretary to conduct timely and objective reviews of his
contested orders. This also advances the congressional purpose
that handlers be treated with fairness.
In the instant case years elapsed between Gore’s making of
the required payments into the fund in 1990-91 and the conclusion
of the administrative and judicial proceedings in Gore’s favor in
late 1996. To deny a handler prejudgment interest on money that
he did not owe in accordance with law but was required to pay by
reason of an arbitrary, capricious, and erroneous order of the
Secretary, which Order deprived the handler of his money for a
number of years, would mock the statutory objective of treating
handlers with fairness.
Interestingly, the Secretary has adopted a regulation to
collect interest on delinquent amounts not paid into the
producer-settlement fund by the handler. 7 C.F.R. § 1126.78
(1997). This, in effect, is prejudgment interest. The
Secretary’s implicit recognition of the time value of money if
13
the money is owed to the fund, but disregard of that principle if
the fund is obligated to refund the money to the handler,
reflects a serious inequity.5 Equitable considerations are also
considered in determining whether prejudgment interest should be
awarded. Rodgers, 332 U.S. at 373, 68 S. Ct. at 7.
We are also guided by the precedents of other courts. In
Abbotts Dairies v. Butz, 584 F.2d 12, 21 & n.18 (3d Cir. 1978), a
milk handler’s appeal was reversed in his favor with instructions
that the producer-settlement fund would “serve as the source for
the refund” and that the “district judge must also consider the
issue whether interest is recoverable and, if so, its amount.”
Other reported decisions have almost uniformly awarded
prejudgment interest to milk handlers on amounts ordered to be
refunded from producer-settlement funds. See Sani-Dairy v.
Yeutter, 935 F. Supp. 608, 610 (W.D. Pa. 1995), aff'd, 91 F.3d 15
(3d Cir. 1996); Kinnett Dairies, Inc. v. Madigen, 796 F. Supp.
515, 516 (M.D. Ga. 1992); Kreider Dairy Farms, Inc. v. Glickman,
1996 WL 472414, at *10 (E.D. Pa. Aug. 15, 1996); Cumberland
Farms, Inc. v. Lyng, 1989 WL 85062, at *3 (D.N.J. July 18,
5
This should not be taken to imply that the rate of
prejudgment interest for which the producer-settlement fund is
held liable must be equal to the rate that the Secretary imposes
upon handlers for delinquent accounts. The latter rate under the
Texas order is presently three-fourths of one percent per month.
It is unlikely that prejudgment interest on a refund owed to the
handler would exceed the postjudgment interest rate under 28
U.S.C. § 1961, which, for example, is currently only 5.407% per
annum. In any event, when prejudgment interest is due, it is
left to the sound discretion of the district court to set the
amount. United States v. Central Gulf Lines, Inc., 974 F.2d 621,
630-31 (5th Cir. 1992), cert. denied, 507 U.S. 917, 113 S. Ct.
1274 (1993); Hansen, 940 F.2d at 984-985.
14
1989).6 Moreover, notwithstanding the uniform precedents
awarding payments of prejudgment interest to milk handlers
receiving refunds from producer-settlement funds, Congress has
taken no action to bar this result. Congress’s “failure to
disturb a consistent judicial interpretation of a statute may
provide some indication that ‘Congress at least acquiesces in,
and apparently affirms, that [interpretation]’”. Monessen, 468
U.S. at 338, 108 S. Ct. at 1844 (quoting Cannon v. University of
Chicago, 441 U.S. 677, 99 S. Ct. 1946 (1979)).
Finally, the Secretary argues that an award of prejudgment
interest, in the absence of specific statutory authority, would
infringe on the sovereignty of the United States. In oral
arguments the Secretary relied on Wileman Bros. & Elliott, Inc.
v. Espy, 58 F.3d 1367, 1385 (9th Cir. 1995), rev’d sub nom on
other grounds Glickman v. Wileman Bros. & Elliott, U.S. ,
117 S. Ct. 2130 (1997). In Wileman Bros., the Ninth Circuit had
held that the Secretary’s nectarine and peach marketing orders
imposing upon handlers assessments to be used for generic
advertising violated the handlers’ First Amendment rights. The
court of appeals held that the handlers’ refund claims for the
6
The only arguable exception to this line of cases is
Lawson Milk Co. v. Freeman, 358 F.2d 647 (6th Cir. 1966), in
which the court applied a specific regulation contained in the
milk marketing order for the Cleveland marketing area, and held
that the refund paid to the handler was not an “overdue account”
and did not have a “due date” when the Secretary paid the refund,
and therefore interest was not owed on the account under the
specific language of the regulation. The Texas marketing area
order does not contain such a provision applicable to refunds
paid by the Secretary.
15
dollars spent on generic advertising were not barred by sovereign
immunity because they were equitable claims for the return of
improper assessments. The court of appeals also held that the
handlers’ additional claims for money damages from the United
States based upon the alleged violation of their First Amendment
rights, distinct from the refund claims, were barred unless the
United States waived its sovereign immunity. Applying that
holding to the instant case, the Secretary argues that an award
of prejudgment interest would be tantamount to a judgment for
money damages against the United States in violation of sovereign
immunity.
The Supreme Court reversed the Ninth Circuit’s decision in
Wilemon Bros. on the First Amendment liability question, and thus
the circuit court’s discussion of the relief to which the
handlers were or were not entitled was rendered moot.
Nonetheless, a reading of the Ninth Circuit’s opinion reflects no
consideration, no discussion, and no holding on whether the
handlers were entitled to recover from the fund prejudgment
interest on a properly awarded refund. It is true, of course,
that “[i]n the absence of express congressional consent to the
award of interest separate from a general waiver of immunity to
suit, the United States is immune from an interest award.”
Library of Congress v. Shaw, 478 U.S. 310, 314, 106 S. Ct. 2957,
2961 (1986). This proposition of law would govern the parties’
dispute over prejudgment interest if the case were indeed a claim
against the United States, and if an award of prejudgment
16
interest were to be paid from the “public treasury or domain, or
interfere with public administration.” Bank One, Texas, N.A. v.
Taylor, 970 F.2d 16, 33 (5th Cir. 1992), cert. denied, 508 U.S.
906, 113 S. Ct. 2331 (1993) (citations omitted). But unlike
Wileman Bros., Gore sought no money damages against the United
States. The parties agree, in fact, that the producer-settlement
fund for the Texas marketing area, from which an award of
prejudgment interest would be paid, contains no federal funds.7
The fund contains only payments made by milk handlers together
with whatever earnings the fund receives from the market
administrator’s prudent management. 7 C.F.R. § 1126.70 (1997).
Moreover, the Secretary of Agriculture, to whom Congress has
delegated responsibility for administration of the Act, and the
market administrator, who is selected by the Secretary, 7 C.F.R.
§ 1000.3 (1997), are acting here simply as administrators of the
Act and as managers of the producer-settlement fund. A judgment
for prejudgment interest in this case, therefore, will impact
only the milk producer-settlement fund into which Gore’s payments
were deposited in 1990-91 pursuant to the Secretary’s erroneous
order. The judgment will not operate against the Treasury of the
United States, and will not infringe on the sovereign immunity of
the United States.
7
Appellee’s counsel at oral argument conceded that he
had no reason to dispute that an award of prejudgment interest
would be paid from the producer-settlement fund.
17
The judgment appealed is therefore REVERSED, and the matter
is REMANDED to the district court to amend the judgment by adding
an appropriate award of prejudgment interest.
18