REVISED JANUARY 23, 2003

UNITED STATES COURT OF APPEALS

FIFTH CIRCUIT

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No. 01-60573

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CHARLES DAVIDSON, doing business as Davidson Farms,

Plaintiff - Appellant,

versus

ANN VENEMAN, Secretary Department of Agriculture,

Defendant - Appellee.

Appeal from the United States District Court

For the Southern District of Mississippi

January 22, 2003

Before KING, Chief Judge, JONES and EMILIO M. GARZA, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

This is the second appeal to this court by the plaint iff Charles Davidson, doing bus iness as

Davidson Farms (Davidson). Davidson previously appealed a grant of summary judgment in favor

of the Farm Services Agency (FSA) that prohibited revision of his farm acreage report for 1994, thus

preventing him from receiving disaster assistance from the FSA. D avidson v. Glickman , 169 F.3d

996 (5th Cir. 1999). We vacated and remanded because the FSA based its position on a legislative

rule that did not meet the notice and comment requirem ent s of the Administrative Procedure Act-2-

(APA). I d. at 999. Davidson then filed a “motion for fees and other expenses and costs” in the

district court. In addition, both parties moved to have the case remanded to the FSA for a revised

administrative determination in light of our holding. The district court granted that motion and stayed

Davidson’s motion for fees and expenses pending the completion of the administrative proceedings.

On remand to the FSA, the a gency paid Davidson’s claims for 1994 Disaster Assistance

Program (DAP) payments based on the revised acreage report, but denied his request for attorney’s

fees and in t erest. Davidson next filed a “motion for summary judgment awarding interest” in the

district court, as well as a supplemental motion for attorney’s fees under the Equal Access to Justice

Act (EAJA). The district court denied Davidson’s motion for fees, holding that the Government’s

position was substantially justified, and Davidson appealed. While that appeal was pending, the

district court denied Davidson’s motion for summary judgment on the interest issue. The FSA did

not file a cross-motion for summary judgment on the interest issue and the district court did not enter

judgment for either party. In addition, Davidson did not file a second notice of appeal (NOA), but,

within thirty days, the parties filed a joint motion to stay the first appeal, supplement the record on

appeal, and revise the briefing schedule. The parties also sought appro val t o waive “any further

notice of appeal.” The clerk of this court granted the joint motion. The parties did not seek, nor did

the district court enter, a separate, final judgment on the interest issue.

After hearing oral argument, we held that we did not have jurisdiction over the interest issue

because the district court’s denial of Davidson’s “motion for summary judgment awarding interest,”

was not a final judgment under 28 U.S.C . § 1291. We then made a limited remand to the district

court, directing it to decide the interest issue and enter a final judgment. On remand, the district court

denied Davidson interest and rendered judgment for the Government on this issue. Now that the-3-

district court has disposed of all issues, and a final judgment has been entered, we have jurisdiction

under § 1291.

I

Davidson first appeals the district court’s denial of attorney’s fees. We employ an abuse of

discretion standard to review a district court’s decision under the EAJA that the Gov ernment’s

position was substantially justified, although un derlying conclusions of law are subject to d e novo

review and factual conclusions are reviewed for clear error. Aguilar-Ayala v. Ruiz , 973 F.2d 411,

416 (5th Cir. 1992) (citations omitted). After reviewing the circumstances of this case, we hold that

the district court did not abuse its discretion in finding the Government was substantially justified in

its position and we thus affirm the denial of attorney’s fees.

The EAJA, 28 U.S.C. § 2412(d)(1)(A), requires an award of attorney’s fees to a claimant

against the Government if: (1) the claimant is a “prevailing party”; (2) the Government’s position was

not “substantially justified”; and (3) there are no special circumstances making the award unjust. S ims

v. Apfel , 238 F.3d 597, 599-600 (5th Cir. 2001). As a threshold matter, a plaintiff is a “prevailing

party” under the EAJA “if [he] succeed[s] on any significant issue in litigation which achieves some

o f t he benefit [he] sought in bringing suit. I d. (citation omitted). In the present case, the FSA’s

administrative award to Davidson renders him a prevailing party.

Next, the Government’s position is “substantially justified” if it is “just ified in substance or

in the main—that is, justified to a degree that could satisfy a reasonable person.” Id. at 602 (citing

Pierce v. Underw ood , 487 U.S. 552, 565, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988)). Substantial

justifi cat io n is a higher burden then that of sanctions for frivolousness; the Government’s position

must have a “reasonable basis both in law and fact.” P ierce

, 487 U.S. at 565, 108 S.Ct. 2541. This1 Davidson contends that, in order for the government to meet its burden o f substantial

justification, it must show: (a) a reasonable basis in truth for the facts alleged; (b) a reasonable basis

in law for the theory it propounded; and (c) a reasonable connection between the facts alleged and

theory propounded. H

anover Potato Prods., Inc. v. Shalala

, 989 F.2d 123, 128 (3d Cir. 1993). This

formal three-step system has not been adopted by this circuit. Rather, the government is t asked

simply with showin g reasonableness, as defined by P ierce

. S ee Aguilar-Ayala

, 973 F.2d at 416.

-4- standard is not overly stringent, however, and the position of the government will be deemed to be

substantially justified “if there is a ‘genuine dispute’ . .

. or ‘if reasonable people could differ as [to

the appropriateness of the contested action].’” 1 Id.

The burden of proving substantial justification falls to the Government. H erron v. Bowen, 788

F.2d 1127, 1130 (5th Cir. 1986). It must show, based on the record (including the record wit h

respect to the decisions of the agency upon which the civil action is based), that it acted reasonably

at all stages of the litigation. 28 U.S.C. § 2412(d)(2)(D); S EC v. Fox

, 855 F.2d 247, 248, 251-52

(5th Cir. 1988); Herron , 788 F.2d at 1130.

Davidson argues the district court’s denial of fees was error because the FSA’s refusal to

allow him to revise his farm acreage report was arbitrary and capricious, and thus not substantially

justified. In chief, he claims it was unreasonable for the Government to rely on an FSA Handbook

provision that it knew conflicted with the applicable regulation and had not been adopted pursuant

to the notice and comment requirements of the APA. A summary of the Government’s position is

necessary to evaluate this argument.

At the time Davidson sought the disaster relief payments at issue, the fed eral regulation

provided that reports of acreage could be revised “at any time for all crops and land uses.” 7 C.F.R.

§ 718.24 (1994). Rule 2-CP § 83 of the FSA Handbook, however, prohibited revisio n when the

farmer would benefit from the revised report, so the FSA denied Davidson’s request for d isaster2 Davidson contends that our reversal of the district court’s judgment in the first appeal shows

that the government’s position was arbitrary and capricious. Nowhere in our prior decision did we

hold that the governm

ent acted in an arbitrary and capricious manner. Moreover, even if we had

found the government’s actions to be arbitrary and capricious, this would not “necessarily mean that

the government acted without substantial justification.” Spawn v. W. Bank–Westheimer , 989 F.2d

-5- assistance. S ee Davidson

, 169 F.3d at 998. According to the Government, the regulation was

designed to allow prospective revisions of acreage reports but was not intended to allow farmers to

later reap the rewards of retrospective disaster assistance, and the Handbook provision was designed

to prevent this outcom e. Throughout the administrative appeal process and ensuing litigation, the

Government consistently argued for the rule in the Handbook because it was the only interpretation

that prevented farmers from receiving windfalls.

Davidson emphasizes that the Government did not cite any case holding that the Handbook

p revails in a conflict with a regulation. He reasons the Government knew the regulation was

do minant, and thus the Government could not have been substantially justified in enforcing t he

Handbook provision instead. In this regard, Davidson misunderstands the Government’s position.

In part , t he Go vernment maintained the FSA Handbook was not in conflict with the applicable

regulation because it was instead only an interpretation of that regulation. Such an interpretation was

practical and necessary, from the Government’s perspective, to prevent farmers from filing revisions

solely to qualify for disaster assistance. Moreover, interpretative rules are not required to meet the

notice and comment provisions of the APA, 5 U.S.C . § 553(b)(A), so the method by which the

Handbook was adopted does not undermine the Government’s position. While we did not accept the

Government’s argument that the Handbook provision w as int erpretative, that does not mean the

Government was unreasonable in its belief that there was no conflict between the Handbook and the

regulation. 2830, 840 (5th Cir. 1993) (quoting Griffon v. United States Dep’t of Health & Human Servs

. , 832

F.2d 51, 52 (5th Cir. 1987)). In fact, in S pawn

, we explicit ly rejected the argument that our

interpretation of

t he law o n appeal was dispositive on the issue of whether the Government was

substantially justified. Id. at 840.

-6- Likewise, the Government was unable to cite a case in support of its argument because the

issue was one of first impression, and therefore novel. This fact alone weighs in favor of substantial

justification. S ee Baker v. Bowen

, 839 F.2d 1075, 1081 (5th Cir. 1988); Herron

, 788 F.2d at 1132.

The substantial justification standard should not b e used t o prevent the government from making

novel arguments. Rather, the “standard was designed to allow the government to advance ‘in good

faith . . . novel but credible . . . interpretations of the law that often underlie vigorous enforcement

efforts.’” F

ox

, 855 F.2d at 252 (quoting Russell v. Nat’l Mediation Bd.

, 775 F.2d 1284, 1290 (5th

Cir. 1985)).

The Government’s success in the early stages of the dispute is also relevant. Although not

all the administrative rulings were in the Government’s favor, we note that at least two reviewing

off i cers found for the Government on the basis of the Handbook. In addition, the district court

granted the Government’s motion for a summary judgment on this issue. Davidson is correct in

arguing that the district court’s judgment in favor of the Government is not sufficient, in and of itself,

to show that the Government’s position was substantially justified. Nonetheless, the district court’s

ruling is a factor weighing in favor of the Government. Spawn , 989 F.2d at 840.

In sum, nothing in the record indicates that the district court abused its discretion in finding

the Government’s position was reasonable. Because we affirm the district court’s holding that the

government was substantially justified, we need not address the “special circumstances” prong of the

EAJA.-7- II

Davidson also challenges the district court’s denial of his motion fo r summary judgment

seeking an award of interest. We review a grant or denial of summary judgment d e novo

, using the

same criteria employed by the district court. M ongrue v. Monsanto Co.

, 249 F.3d 422, 428 (5th Cir.

2001). Summary judgment is proper if, drawing all inferences in favor of the non-moving party, there

is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.

Id. ; F ED

. R. C IV

. P. 56(c).

Interest is not recoverable in suits against the United States unless there is an express waiver

of sovereign immunity with regard to an award of interest. Gore, Inc. v. Glickman , 137 F.3d 863,

870 (5th Cir. 1998). The Prompt Payment Act, 31 U.S.C. § 3902, operates as such a waiver in

specific, enumerated circumstances. Under § 3902(h)(2)(A), a farmer is entitled to interest for any

delay of “a payment to which producers

. . . are entitled under the terms of an agreement entered into

under the Agricultural Act of 1949 (7 U.S.C. § 1421 et seq. ).” Davidson contends the 1994 DAP

payments he sought fall within this provision because the payments were authorized by the

Agricultural Act of 1949 (“the ‘49 Act”). It is undisputed that the source legislation for the payments

was the Agricultural Rural Development and Related Agencies Appropriations Act of 1995, Pub. L.

No. 103-330, 108 Stat. 2448 (1994) (“the ‘94 Act”). The ‘94 Act provides, in pertinent part:

[ s]uch sums as may be necessary from the Commodity Credit Corporation shall be

available, through July 15, 1995, to producers under the same terms and conditions

authorized in chapter 3, subtitle B , t it le XXII of Public Law 101-624 for 1994

crops . . . affected by natural disasters . . . .

108 St at . at 2448-49. The key inquiry is whether the ‘94 Act, through this language, creates a

payment to which Davidson is entitled “under the terms of an agreement entered into” under the ‘493 Davidson argues that the Government is precluded from arguing that the ‘49 Act does not

apply because it did not assert this argument at the administrative level. He cites C hristopher M. v.

Corpus Christi Indep. Sch. Dist. , 933 F.2d 1285 (5th Cir. 1991), to support this proposition. In

Christopher M.

, we si mply held that an amicus curiae cannot raise issues already waived by the

parties or issues not raised by either party unless exceptional circumstances existed. I d. at 1292-93.

Christopher M. is not apposite here.

-8- Act. 3

The district court found that Davidson was not entitled to summary judgment on this issue

because he failed t o est ablish that the DAP payments fell within the ‘49 Act, as required by the

Prompt Payment Act, and thus he was not entitled to interest as a matter of law. At this stage of the

proceedings, Davidson makes a variety of arguments, some new and some recycled, to support his

assertion that the ‘94 Act falls within the ‘49 Act, but we find none of t hem persuasive. First,

Davidson argues that the disaster relief payments fall under the ‘49 Act because the relevant disaster

relief statutes are cited in the notes to 7 U.S.C. § 1421, which is the init ial provision of the codified

version of the ‘49 Act. Davidson is correct that Congress officially designated various disaster relief

bills as notes to this provision (the statutes were not codified because of their temporary nature), but

it is unclear that Congress made that decision for anything other than organizational reasons and we

decline to take that designation as proof positive of legislative intent.

Next, Davidson suggests that an 1987 appropriations bill, Pub. L. No. 100-202, 101 Stat.

1329 (1987), supports his case because it notes that the Commodity Credit Corporati on (CCC) must

pay an interest penalty under the Prompt Payment Act on all payments for obligations incurred after

January 1, 1998. Davidson reasons that since the DAP payments are administered by the CCC and

were owed to him in 1994 , t hey necessarily fell within the Prompt Payment Act. This argument

ignores the actual language of the bill, however, which provides that the CCC “shall pay an interest4 Davidson cites two other cases, Doty v. United States , 109 F.3d 746 (Fed. Cir. 1997), and

Gutz v. United States

, 45 Fed. Cl. 291 (Fed. Cl. 1999), but they are also inapplicable and we decline

to discuss them in this opinion.

-9- penalty, determined on the basis of the provisions of the Prompt Payment Act , on . . . all payments

. . . .” 101 Stat. at 1329-336. This wording does not suggest that Congress intended to modify the

scope or conditions of the Prompt Payment Act; rather, it seems Congress was simply reiterating that

the CCC was only obligated to pay interest when the terms of the Prompt Payment Act were met.

Davidson also cites Doane v. Espy

, 873 F . Supp. 1277 (W.D. Wis. 1995), and H untsman

Farms, Inc. v. Espy , 928 F. Supp. 1451 (E.D. Ark. 1996), in support of his construction of the

relevant laws. Neither decision is applicable to this case. In D oane

, the court allowed interest under

the Prompt Payment Act for corn deficiency payme nts, but noted, i n d ictum

, that disaster relief

payments made pursuant to the Disaster Assistance Act of 1988, Pub. L. No. 100-387, 102 Stat. 924

(1988) (“the ‘88 Act”), were not covered by § 3902(h) of the Prompt Payment Act. In other words,

the court reasoned tha t at least some disaster relief payments are not covered by the very same

provision of the Prompt Payment Act at issue in this case because the payments do not fall under the

‘49 Act. D oane

, 873 F. Supp. at 1278-7 9. In Huntsman Farms , the payments at issue were

deficiency payments, a type of agricultural price support clearly covered by the Prompt Payment Act.

Huntsman Farms

, 928 F. Supp. at 1453-54, 1462; see also 31 U.S.C. § 3902(h)(2)(B)(vi) (referring

specifically to deficiency payments). 4

Likewise, the legislative history to the Prompt Payment Act Amendments of 1988, Pub. L.

No. 100-496, 102 Stat. 2455 (1988), does not clearly support Davidson’s position. Although

Congress refers to “payments under the various support programs of the CCC” and the “various

agricultural support programs administered by the CCC,” there is no clear indication that this general-10-

lan guage enco mpasses disaster relief payments. S ee H.R. R EP

. N O

. 100-784, at 21, 36 (1988),

reprinted in 1990 U.S.C.C.A.N. 3036, 3049, 3064. In fact, if any meaning can be taken from this

statute, the result cuts against Davidson’s position. Prior to 1988, § 3902(h) of the Prompt Payment

Act, the provision at issue here, did not exist. During the amendment process, Congress added this

section, as well as specific provisions, codified at 31 U.S.C. § 3902(h)(2)(B)(i)-(vii), governing the

calculation of interest for various types of agricultural price support p ayment s. Land diversion

payments, deficiency payments, and loan agreements are all explicitly mentioned, among others, but

there is no provis io n go verning the calculation of interest for DAP payments or any other type of

disaster relief payment . To co mpensate for this gap, Davidson asserts that his period of interest

should be governed by § 3902(h)(2)(B)(vi), which governs “deficiency payments,” but offers no

explanation as to why that is the appropr iat e provision. “Deficiency payments” are not simply

unt imely, or otherwise lacking, payments by the Government, but are a specific type of farm support

payment, discussed in part at 7 U.S.C. § 1445j. We see no obvious connection between deficiency

payments and disaster relief payments. To the extent Congress did no t provide a formula for

calculating interest on such ad hoc disaster relief payments, the obvious conclusion is that no such

interest was intended.

Finally, Davidson cites 7 C.F.R. Part 777 , noting that it refers to the ‘49 Act as the

authorizing legislation for implementation of a USDA Disaster Payment Program. For example, 7

C.F.R. § 777.1 states that it implements

a Disaster Payment Program for the 1990 crop year provided by section 201(k) of the

A gricultural Act of 1949, as amended, and Dire Emergency Suppl emental

Appropriations Act for Fiscal year 1990. The purpose of the program is to make

disaster payments to eligible producers

. . . who have suffered a loss of

production . . . as the result of a natural disaster in 1989.-11-

Id. This language mirrors the language of the authorizing statute, the Dire Emergency Supplemental

Appropriation and Disaster Assistance Spending Act of 1990, Pub. L. No. 101-302, 104 Stat. 213,

214 (1990) (“the ‘90 Spending Act”), and it does give us pause. Section 201(k), the provision of the

‘49 Act referred to, was originally created by the Food Security Act of 1985, Pub. L. No. 99-198,

99 Stat. 1354 (1985) (“the ‘85 Act”), and was codified at 7 U.S.C. § 1446(k). While it is clear that

the ‘85 Act explicitly amended the ‘49 Act, the terms of the ‘85 Act only applied to the 1985 to 1990

crop years, not the 1994 crop at issue here. And the ‘90 Spending Act did nothing more than

designate appropriations for this limited purpose and time period. Indeed, 7 U.S.C. § 1446(k) was

dropped from the Code after it expired in 1990.

Furthermore, the ‘90 Spending Act is not a precursor of the ‘94 Act at issue in this case. The

‘94 Act, cited supra

, refers explicitly to the Food, Agriculture, Conservation, and Trace Act of 1990,

Pub. L. No. 101-624, 104 Stat. 3359 (1990), which, in turn, states in § 2244 that disaster payments

are available “to the extent that assistance was not made available under the Disaster Assistance Act

of 1989.” 104 Stat. at 3967. The relevant provisions of the Disaster Assistance Act of 1989, Pub.

L. No. 101-82, 103 Stat. 564 (1989) (“the ‘89 Act”), including § 104, do not refer to any previous

legislation, and, in particular, give no indication that they amend or supplement the ‘49 Act. In sum,

the ‘90 Spending Act seems to fall outside of a chain of disaster relief legislation passed during that

period, and we are unable to conclude that any of the links in that chain are substantively connected

to the ‘49 Act.

In the absence of a clearer connection between the ‘49 Act and the DAP payments at issue

here, we hold that the payments fall outside the limited terms of the Prompt Payment Act, as-12-

embodied in 31 U.S.C. § 3902(h). We cannot award interest unless there is an express waiver of

sovereign immunit y, and we find no such waiver for this type of payment. To conclude otherwise

would be beyond our judicial authority.

For the foregoing reasons, we find that the district court properly ruled that Davidson was

not entitle d t o attorney’s fees under the EAJA or interest under the Prompt Payment Act and we

AFFIRM.