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Nature of Suit Code: 891
Nature of Suit: Agricultural Acts
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 8, 2005 Decided February 7, 2006

No. 05-5067

HOLLY SUGAR CORPORATION, ET AL.,

APPELLEES

v.

MICHAEL JOHANNS, IN HIS OFFICIAL CAPACITY AS SECRETARY

OF AGRICULTURE AND AS CHAIRMAN OF THE COMMODITY

CREDIT CORPORATION,

APPELLANT

Appeal from the United States District Court

for the District of Columbia

(No. 03cv01739)

Alan Burch, Assistant U.S. Attorney, U.S. Attorney’s

Office, argued the cause for appellant. With him on the briefs

were Kenneth L. Wainstein, U.S. Attorney, and Michael J. Ryan,

Assistant U.S. Attorney. R. Craig Lawrence, Assistant U.S.

Attorney, entered an appearance.

Dale E. McNiel argued the cause for appellee. With him on

the brief was Erik S. Jaffe.

Before: TATEL, GARLAND, and GRIFFITH, Circuit Judges.

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Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge: Appellees, a group of sugar

processors, receive sugar loans from the federal government.

Until 1996, interest rates for all agricultural commodity loans,

including sugar, were set by regulations promulgated by the

agency charged with administering the loans, the Commodity

Credit Corporation (CCC). In that year, however, Congress set

the rate by statute, increasing it by one percentage point over the

regulatory rate. Six years later, in 2002, Congress exempted

sugar from the statutory rate, but the CCC kept the rate the

same. Believing that the 2002 statute required a lower interest

rate, the sugar processors filed suit, and the district court ordered

the CCC to reduce the rate. We reverse. Nothing in the 2002

statute sets an interest rate. Instead, it merely restores the

CCC’s rate-setting authority.

I.

The Commodity Credit Corporation runs the nation’s “sugar

program.” 7 U.S.C. § 7272 (creating sugar program), id.

§ 7991(a) (assigning it to the CCC). Federal loans to sugar

processors form the core of this program. For example, the

statute provides that “[t]he Secretary shall make loans available

to processors of domestically grown sugarcane at a rate equal to

18 cents per pound for raw cane sugar.” Id. § 7272(a); see also

id. § 7272(b) (analogous language for refined beet sugar with

rate at “22.9 cents per pound”). Secured by sugar produced by

the processors, these loans are nonrecourse, id. § 7272(e)(1),

meaning that if the processors default, the government’s only

remedy is to foreclose on the sugar. See 7 C.F.R. § 1435.105(b).

Thus, if the price of raw cane sugar falls below 18 cents per

pound, the processors simply default on the loan, in essence

selling their sugar to the government.

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For many years, the statute remained silent on the interest

rate for these loans, and the CCC set the interest rate for each

loan individually. In 1988, a CCC regulation set a uniform rate

for all agricultural loans at “the rate of interest charged by the

U.S. Treasury for funds borrowed by CCC.” Price Support

Loans and Purchases, Production Adjustment Programs, and

Other Operations, 53 Fed. Reg. 47,658, 47,659 (Nov. 25, 1988)

(codified as amended at 7 C.F.R. § 1405.1). The CCC issued

this regulation under its statutory authority to “make such loans

. . . as are necessary in the conduct of its business,” 15 U.S.C.

§ 714b(l), and to “[s]upport the prices of agricultural

commodities through loans, purchases, payments, and other

operations,” id. § 714c(a).

So things remained until the Federal Agriculture

Improvement and Reform Act of 1996 (FAIR) which, for the

first time, set the interest rate by statute:

Notwithstanding any other provision of law, the

monthly Commodity Credit Corporation interest rate

applicable to loans provided for agricultural

commodities by the Corporation shall be 100 basis

points greater than the rate determined under the

applicable interest rate formula in effect on October 1,

1995.

Federal Agriculture Improvement and Reform Act of 1996, Pub.

L. No. 104-127, § 163, 110 Stat. 888, 935 (codified as amended

at 7 U.S.C. § 7283(a)). Because the “applicable interest rate

formula” was the Treasury rate, the 1996 legislation effectively

set the interest rate at one percentage point above the Treasury

rate. The CCC amended its regulations to reflect this change.

Implementation of the Farm Program Provisions of the 1996

Farm Bill, 61 Fed. Reg. 37,544, 37,575 (July 18, 1996) (codified

at 7 C.F.R. § 1405.1).

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Up to this point, sugar loans carried the same interest rate

as all other agricultural loans. But Congress changed that in

2002 by appending the following language to section 7283, the

section that set the interest rate:

For purposes of this section [i.e., section 7283], raw

cane sugar, refined beet sugar, and in-process sugar

eligible for a loan . . . shall not be considered an

agricultural commodity.

Farm Security and Rural Investment Act of 2002, Pub. L. No.

107-171, § 1401(c)(2), 116 Stat. 134, 187 (codified at 7 U.S.C.

§ 7283(b)). The 2002 Act also required the CCC to promulgate

implementing regulations, which it exempted from the

Administrative Procedure Act’s notice and comment provisions.

Id. § 1601(c), 116 Stat. at 211-12 (codified at 7 U.S.C.

§ 7991(c)).

The sugar processors expected the interest rate, once freed

of the statutory requirement to exceed the Treasury rate, to

return to its pre-1996 level. The CCC’s response to the 2002

Act therefore must have come as quite a surprise. “The 2002

Act,” the CCC explained, “eliminates the requirement that CCC

add 1 percentage point to the interest rate as calculated by the

procedure in place in 1996 but does not establish a sugar loan

interest rate. CCC has decided to use the rates required for other

commodity loans.” 2002 Farm Security and Rural Investment

Act of 2002 Sugar Programs and Farm Facility Storage Loan

Program, 67 Fed. Reg. 54,926, 54,927 (Aug. 26, 2002). Having

decided the interest rate for sugar should remain at one

percentage point above the Treasury rate, the CCC made no

change to its interest rate regulation.

Seventeen sugar processors then filed suit in U.S. District

Court, arguing that the 2002 Act required the CCC to lower the

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sugar interest rate. They sought declaratory relief and an

injunction prohibiting the CCC from imposing an interest rate

other than the Treasury rate as well as restitution for interest

they had already paid in excess of the Treasury rate. The district

court granted their motion for summary judgment, explaining

that the CCC’s interpretation would render the 2002 Act

“meaningless” or “superfluous,” and ordered declaratory and

injunctive relief. Holly Sugar Corp. v. Veneman, 335 F. Supp.

2d 100, 107 (D.D.C. 2004), modified, 355 F. Supp. 2d 181

(D.D.C. 2005). Although the district court initially denied

restitution, 335 F. Supp. 2d at 108-10, it later changed its mind,

355 F. Supp. 2d at 190-96. The CCC now appeals, challenging

both the district court’s interpretation of the CCC’s statutory

mandate and its restitution award. We review the district court’s

grant of summary judgment de novo. Dunaway v. Int’l Bhd. of

Teamsters, 310 F.3d 758, 761 (D.C. Cir. 2002).

II.

As all parties agree, we consider the CCC’s interpretation

of a statute it administers under the two-part test of Chevron

U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S.

837 (1984). We ask first “whether Congress has directly spoken

to the precise question at issue.” Id. at 842. If it has, we end our

inquiry, giving “effect to the unambiguously expressed intent of

Congress.” Id. at 843. In determining whether a statutory

provision speaks directly to the question before us, we consider

it in context. FDA v. Brown & Williamson Tobacco Corp., 529

U.S. 120, 132-33 (2000). In addition, we must “exhaust the

‘traditional tools of statutory construction.’” Natural Res. Def.

Council, Inc. v. Browner, 57 F.3d 1122, 1125 (D.C. Cir. 1995)

(quoting Chevron, 467 U.S. at 843 n.9). If, having conducted

this analysis, we still find the statute silent or ambiguous on the

issue before us, we move on to Chevron’s second step, asking

“whether the agency’s answer is based on a permissible

construction of the statute.” Chevron, 467 U.S. at 843.

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Here, the parties dispute the meaning of the 2002 Act’s

provision exempting sugar from the statutory interest rate.

According to the CCC, this provision restored the rate-setting

authority it held before the 1996 Act first imposed a statutory

rate. The sugar processors contend that the provision restored

the interest rate in effect before the 1996 Act, and that the CCC

therefore has no authority to deviate from the Treasury rate.

Our analysis, of course, begins with the statute’s language.

Subsection (a), the portion of the statute enacted in 1996, sets an

interest rate for all agricultural commodities. Subsection (b), the

portion of the statute added in 2002, exempts sugar from that

generic interest rate. On their face, then, the two sections

together have no effect on sugar loans—subsection (b) exempts

sugar from subsection (a), the only provision that sets an interest

rate. It thus appears that the rate-setting authority for sugar has

reverted to the CCC under its authority to “make . . . loans.”

The processors insist that notwithstanding the statute’s

language, the CCC must impose the Treasury rate. Like the

district court, the processors find significance in the fact that

Congress enacted subsections (a) and (b) sequentially rather than

simultaneously. They label subsection (a)’s enactment the

“Interest Surcharge Act,” see Appellees’ Br. 3, and then

conclude that through subsection (b) Congress exempted sugar

from the “interest surcharge,” thereby expressing its intent to

restore the interest rate to its pre-1996 level. But “Interest

Surcharge Act” is the processors’ label, not Congress’s, and the

1996 Act could just as easily be called the “Statutory Interest

Rate Act” or even the “Strip the CCC of Authority Act.”

Exempting sugar from a provision described either of these two

ways would restore the CCC’s discretion, not the pre-1996

interest rate.

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We also disagree with the district court’s conclusion that the

CCC’s interpretation renders the 2002 Act “meaningless,” Holly

Sugar, 355 F. Supp. 2d at 188, or “superfluous,” id. at 189.

Under the CCC’s interpretation, the agency has now regained its

authority to set the sugar interest rate, authority it was given

only when Congress passed the 2002 Act and which it lacks for

all other agricultural commodities.

The processors also rely on the provision’s legislative

history. They emphasize most heavily a Senate report’s

statement that the 2002 Act “reduces the CCC interest rate on

sugar loans by 100 basis points.” S. Rep. No. 107-117, at 100

(2001). The House report, however, is far more equivocal. It

explains that the provision “reduces the CCC interest rate on

price support loans” without specifying how much. H.R. Rep.

No. 107-191, pt. 1, at 89 (2001). The conference report gives

the processors even less support. Mirroring the statute’s

language, that report states that the Act “makes section 163 of

the FAIR Act inapplicable to sugar.” H.R. Rep. No. 107-424, at

447 (2002) (Conf. Rep.). Taken together, these reports fall far

short of the “extraordinary circumstances” in which a statute’s

unambiguous language might not control. United States v.

Braxtonbrown-Smith, 278 F.3d 1348, 1352 (D.C. Cir. 2002)

(quoting Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469,

474 (1992)). Indeed, of the three reports, only the Senate’s

gives any inkling that Congress may have had a particular

interest rate in mind, and the conference report—to which we

ordinarily ascribe the most weight, see Moore v. District of

Columbia, 907 F.2d 165, 175 (D.C. Cir. 1990) (en banc) (“[the]

conference committee report is the most persuasive evidence of

congressional intent after [the] statutory text itself” (internal

quotation marks omitted))—gives no indication whatsoever that

Congress intended to restore the pre-1996 rate. 

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In short, contrary to the processors’ argument, the statute

sets no interest rate for sugar. Instead, it sets an interest rate for

all other commodities and specifically exempts sugar. By

removing sugar from the statutory rate, “Congress has directly

spoken to the precise question” of how the rate should be set,

namely, by the CCC. Chevron, 467 U.S. at 842. Thus agreeing

with the CCC that Congress unambiguously gave it discretion

over the sugar interest rate, we end our Chevron analysis at step

one.

III.

Because we disagree with the district court’s reasoning, we

must consider the processors’ claim that even if the CCC has

authority to set the rate, such authority does not extend to

imposing an interest rate above the Treasury rate. See EEOC v.

Aramark Corp., Inc., 208 F.3d 266, 268 (D.C. Cir. 2000)

(“[B]ecause we review the district court’s judgment, not its

reasoning, we may affirm on any ground properly raised.”). The

processors advance three arguments in support of this claim,

none persuasive.

The processors first argue that the CCC has never before

charged more than its estimated cost of borrowing, i.e., the

Treasury rate. True enough, but that doesn’t mean the CCC

lacks authority to do so. Whether it has such authority turns on

the meaning of the statutes we have been discussing, not the

agency’s past practices.

Next, the processors argue that the CCC has no explicit

power to charge interest, and that its implied power to do so

must be limited to furtherance of congressional policy.

Accordingly, the processors assert, the rate decision falls outside

the CCC’s authority because charging an interest rate higher

than the cost of borrowing creates a windfall for the CCC, a

result that is inconsistent with the policies associated with

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running a subsidy program. As the CCC points out, however,

Congress mandated such an interest rate for six years and

continues to mandate it for all other agricultural commodities,

so it is hard to see how the CCC’s rate conflicts with the

program’s goals.

Finally, the processors contend that the rate cannot be

defended as a form of user fee. But because the rate is an

interest rate, not a fee, this argument is irrelevant.

One last point. The processors nowhere argue that the

CCC, in lumping sugar in with other agricultural commodities,

acted arbitrarily and capriciously. Instead, they challenge only

the agency’s authority to set such a rate, not its decision to do

so. To be sure, they describe the agency’s explanation as

“deficient, to say the least,” Appellees’ Br. 19, but they make

this point only in support of their argument that the resulting

interest rate “is plainly not an outcome that Congress would

have sanctioned,” id. at 20 (emphasis added). As the processors

make no claim that the agency’s selection of a particular interest

rate was arbitrary and capricious, we need not address that

possibility. See Gen. Instrument Corp. v. FCC, 213 F.3d 724,

732 (D.C. Cir. 2000) (distinguishing between Chevron argument

and argument that “even assuming the statute did not foreclose

the [agency’s] policy, it was nevertheless unreasonable”).

Because the 2002 Act granted the CCC authority to set the

interest rate for sugar, we reverse the district court’s judgment.

Our conclusion that the CCC acted within its discretion

eliminates any need to consider the district court’s restitution

order.

So ordered.

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