Gore Incorporated v. Glickman

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