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Opinion analysis: When the federal government acts as a commercial enterprise, the courthouse doors open wider

In Thacker v. Tennessee Valley Authority, the federal government asked for broad policy immunity to shield choices by the Tennessee Valley Authority about the safety measures the TVA employed when stringing a power line across a river. In today’s decision, the Supreme Court unanimously refused to infer limits on the statutory authorization for suit against the TVA and emphasized the rather ordinary commercial nature of the TVA’s activity. The court reversed the dismissal by the U.S. Court of Appeals for the 11th Circuit of a tort suit brought by a recreational fisherman who was injured (and his passenger killed) when his boat struck a fallen power line that TVA employees were pulling up from the water.

Highlighting the TVA’s activities in generating and transmitting electric power as one of the nation’s largest power utilities, the Supreme Court ruled that the simple and unqualified statute allowing this government corporation to sue and be sued should be read liberally when the corporation is engaged in commercial rather than governmental conduct. The court refused the government’s invitation to engraft onto the TVA statute a broad policy exception for discretionary functions.

Under the doctrine of federal sovereign immunity, no one can sue the United States without its express statutory permission. In 1946, in the Federal Tort Claims Act, the federal government enacted a limited waiver of its sovereign immunity, allowing people to sue the United States in federal court for torts committed by agents of the federal government. The FTCA contains an explicit exception from liability, codified in 28 U.S.C. § 2680(a,) when a government employee exercises or performs “a discretionary function or duty.”

By contrast, the TVA is governed by its own statutory waiver of sovereign immunity, 16 U.S.C. § 831c, under which the TVA “[m]ay sue and be sued in its own corporate name,” with any judgment paid from TVA assets rather than the federal treasury.  In the 1940 case of Federal Housing Administration v. Burr, which addressed a similar statute for a New Deal mortgage insurance agency, the Supreme Court held that “[w]hen Congress launched a governmental agency into the commercial world and endowed it with authority to ‘sue or be sued,’” the clause should be “liberally construed.”

Nonetheless, the government insisted that something like the FTCA’s discretionary-function exception should be judicially inferred to prevent “judicial second-guessing” of TVA policy decisions. Citing Burr’s holding that courts should recognize implied limits on sue-and-be-sued clause authority when “necessary to avoid grave interference” with governmental functions, the government insisted that the TVA’s discretionary decisions should be protected from court review.

In an opinion by Justice Elena Kagan, the Supreme Court “balk[ed] at using Burr to provide a gov­ernmental entity excluded from the FTCA with a replica of that statute’s discretionary function exception.” The court explained that because “[t]he law … places the TVA in the same position as a private corporation supplying electricity,” “a suit challenging a commercial act will not ‘grave[ly]’—or, indeed, at all—interfere with the ‘governmental functions Burr cared about protecting.’”

However, as the court noted, “the TVA is something of a hybrid, combining traditionally govern­mental functions with typically commercial ones.” The TVA does engage in such quintessential governmental activity as exercising eminent domain to expand property holdings and appointing employees as law enforcement agents. If the TVA’s activities are “commercial—the kind of thing any power company might do—the TVA cannot invoke sovereign immunity.” But even if the conduct is governmental, it must be “clearly shown” that immunizing the TVA from suit is necessary to prevent a “grave interference” with a governmental function. This, the court cautioned, is a “high bar.” Because the lower courts had bypassed the “grave interference test,” the court sent the case back for reconsideration in light of this analytical framework.

This decision should affirm the breadth of tort liability not only for the TVA, but also for other government corporations and agencies that are subject to sue-and-be-sued clauses and that engage in commercial activities, such as the Federal National Mortgage Association (Fannie Mae) and Amtrak. Interestingly, the court in Thacker listed the Postal Service as a sue-and-be-sued agency that also engages in commercial ventures, but the court neglected to note that tort claims against the Postal Service are expressly covered by the FTCA, which contains an express discretionary function exception. The court’s ruling generally should blunt government defenses of policy immunity for government entities that “operate[] in the marketplace as private companies do” and thus should be “as liable as they are for choices and judgments.”

Moreover, the Thacker court thoroughly dismantled the government’s contention that constitutional separation-of-powers principles preclude second-guessing of any government entity’s discretionary choices. Significantly, the court rejected the government’s separation-of-powers argument, not only as applied to the commercial activity engaged in here by the TVA, but by holding more generally that Congress by statutory waiver may dispossess a government entity of policy immunity. “The right gov­ernmental actor (Congress) is making a decision within its bailiwick (to waive immunity) that authorizes an appro­priate body (a court) to render a legal judgment.”

Today’s decision draws into serious question decisions by the federal circuits that imply a discretionary-function exception into other statutory waivers of sovereign immunity, such as the Suits in Admiralty Act. The SIAA, which waives sovereign immunity for maritime claims against the United States, contains no explicit discretionary-function exception. Nonetheless, every circuit to address the issue has held that such an exception must be implicit by reason of separation-of-powers principles. In words that take on greater force after Thacker, Judge J. Michael Luttig of the U.S. Court of Appeals for the 4th Circuit wrote a rare dissent from the circuit’s importation of the discretionary-function exception into the SIAA, characterizing the approach as “breathtaking” and “mistakenly equating liability on behalf of the United States with infringement on the Executive’s power to execute the laws.” Now with the Thacker ruling that congressional waiver of discretionary-function immunity “raises no separation of powers problems,” importation of a discretionary function exception into the SIAA appears open for re-examination.

Recommended Citation: Gregory Sisk, Opinion analysis: When the federal government acts as a commercial enterprise, the courthouse doors open wider, SCOTUSblog (Apr. 29, 2019, 10:39 PM),