ArtIII.S2.C1.4.4.5 Suits Against Government Corporations

Article III, Section 2, Clause 1:

The Judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority;—to all Cases affecting Ambassadors, other public Ministers and Consuls;—to all Cases of admiralty and maritime Jurisdiction; to Controversies to which the United States shall be a Party;—to Controversies between two or more States; between a State and Citizens of another State; between Citizens of different States,—between Citizens of the same State claiming Lands under Grants of different States, and between a State, or the Citizens thereof, and foreign States, Citizens or Subjects.

The multiplication of government corporations during periods of war and depression has provided one motivation for limiting the doctrine of sovereign immunity. In Keifer & Keifer v. RFC, 1 the Court held that the government does not become a conduit of its immunity in suits against its agents or instrumentalities merely because they do its work. Nor does the creation of a government corporation confer upon it legal immunity. Whether Congress endows a public corporation with governmental immunity in a specific instance is a matter of ascertaining the congressional will. Moreover, it has been held that waivers of governmental immunity in the case of federal instrumentalities and corporations should be construed liberally. 2 On the other hand, Indian nations are exempt from suit without further congressional authorization; it is as though their former immunity as sovereigns passed to the United States for their benefit, as did their tribal properties. 3

Footnotes

  1.  306 U.S. 381 (1939).
  2.  FHA v. Burr, 309 U.S. 242 (1940). Nonetheless, the Court held that a congressional waiver of immunity in the case of a governmental corporation did not mean that funds or property of the United States can be levied on to pay a judgment obtained against such a corporation as the result of waiver of immunity. Id. at 250. Further, the Court recognized that under some circumstances, constitutional concerns might give rise to “implied exceptions” to “sue and be sued” clauses. Id. at 245. However, in Thacker v. Tennessee Valley Authority, the Supreme Court declined to read a constitutionally based objection into such a clause. 587 U.S. ____, No. 17-1201, slip op. at 7 (2019). The government had argued that allowing litigants to challenge the performance of “discretionary functions” would violate “separation-of-powers principles” by subjecting the agency to “judicial second-guessing.” Id. at 6 (internal quotation marks omitted). The Court rejected this argument, explaining that Congress holds the power to determine federal agencies’ immunity and that Congress’s exercise of that power, even though it may subject the government to the judicial process, “raises no separation of powers problems.” Id. at 7–8. The Court left open the possibility that in a future case, “suits challenging the [government] entity’s governmental activity”—as opposed to its commercial activity—“may run into an implied limit on its sue-and-be-sued clause.” Id. at 9. But the Court emphasized that this immunity would be available “only if it is ‘clearly shown’ that prohibiting the ‘type[] of suit [at issue] is necessary to avoid grave interference’ with a governmental function’s performance.” Id. (quoting Burr, 309 U.S. at 245).
  3.  United States v. United States Fidelity & Guaranty Co., 309 U.S. 506 (1940).