United States v. GaubertAnnotate this Case
499 U.S. 315 (1991)
U.S. Supreme Court
United States v. Gaubert, 499 U.S. 315 (1991)
United States v. Gaubert
Argued Nov. 26, 1990
Decided March 26, 1991
499 U.S. 315
CERTIORARI TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
When the events in this case occurred, the Home Owners' Loan Act authorized the Federal Home Loan Bank Board (FHLBB) to proscribe rules and regulations providing "for the organization, incorporation, examination, and regulation" of federal savings and loan associations, and to issue charters, "giving primary consideration to the best practices of thrift institutions in the United States." 12 U.S.C. § 1464(a). Pursuant to the Act, the FHLBB and the Federal Home Loan Bank-Dallas (FHLBD) undertook to advise about and oversee certain aspects of the operation of Independent American Savings Association (IASA), but instituted no formal action against the institution. At their request, respondent Gaubert, chairman of the board and IASA's largest stockholder, removed himself from IASA's management and posted security for his personal guarantee that IASA's net worth would exceed regulatory minimums. When the regulators threatened to close IASA unless its management and directors resigned, new management and directors were recommended by FHLB-D. Thereafter, FHLB-D became more involved in IASA's day-to-day business, recommending the hiring of a certain consultant to advise it on operational and financial matters; advising it concerning whether, when, and how its subsidiaries should be placed into bankruptcy; mediating salary disputes; reviewing the draft of a complaint to be used in litigation; urging it to convert from state to federal charter; and intervening when the state savings and loan department attempted to install a supervisory agent at IASA. The new directors soon announced that IASA had a substantial negative net worth, and the Federal Savings and Loan Insurance Corporation (FSLIC) assumed receivership of the institution. After his administrative tort claim was denied, Gaubert filed an action in the District Court against the United States under the Federal Tort Claims Act (FTCA), seeking damages for the lost value of his shares and for the property forfeited under his personal guarantee on the ground that the FHLBB and FHLB-D had been negligent in carrying out their supervisory activities. The court granted the Government's motion to dismiss on the ground that the regulators' actions fell within the discretionary function exception to the FTCA, 28 U.S.C. § 2680(a). The Court of Appeals reversed in part. Relying on Indian Towing Co. v. United States,350 U. S. 61,
the court found that the claims concerning the regulators' activities after they assumed a supervisory role in IASA's day-to-day affairs were not "policy decisions," which fall within the exception, but were "operational actions," which do not.
1. The discretionary function exception covers acts involving an element of judgment or choice if they are based on considerations of public policy. It is the nature of the conduct, rather than the status of the actor, that governs whether the exception applies. In addition to protecting policymaking or planning functions and the promulgation of regulations to carry out programs, the exception also protects Government agents' actions involving the necessary element of choice and grounded in the social, economic, or political goals of a statute and regulations. If an employee obeys the direction of a mandatory regulation, the Government will be protected because the action will be deemed in furtherance of the policies which led to the regulation's promulgation; and if an employee violates a mandatory regulation, there will be no shelter from liability, because there is no room for choice, and the action will be contrary to policy. On the other hand, when established governmental policy, as expressed or implied by statute, regulation, or agency guidelines, allows a Government agent to exercise discretion, there is a strong presumption that the agent's acts are grounded in policy when exercising that discretion. Pp. 499 U. S. 322-325.
2. The Court of Appeals erred in holding that the discretionary function exception does not reach decisions made at the operational or management level of IASA. There is nothing in the description of a discretionary act that refers exclusively to policymaking or planning functions. Day-to-day management of banking affairs regularly requires judgment as to which of a range of permissive courses is the wisest. Neither Dalehite v. United States,346 U. S. 15; Indian Towing, supra, nor Berkovitz v. United States,486 U. S. 531, supports Gaubert's and the Court of Appeals' position that there is a dichotomy between discretionary functions and operational activities. Pp. 499 U. S. 325-326.
3. The Court of Appeals erred in holding that some of the acts alleged in Gaubert's Amended Complaint were not discretionary acts within the meaning of § 2680(a). The challenged actions did not go beyond "normal regulatory activity." They were discretionary, since there were no formal regulations governing the conduct in question, and since the relevant statutory provisions left to the agency's judgment when to institute proceedings against a financial institution and which mechanism to use. Although the statutes provided only for formal proceedings, they did not prevent regulators from supervising IASA by informal means, a view held by the FHLBB, FHLBB Resolution No. 82-381. Gaubert's
argument that the actions fall outside the exception because they involved the mere application of technical skills and business expertise was rejected when the rationale of the Court of Appeals' decision was disapproved. The FHLBB's Resolution, coupled with the relevant statutory provisions, established governmental policy which is presumed to have been furthered when the regulators undertook day-to-day operational decisions. Each of the regulators' actions was based on public policy considerations related either to the protection of the FSLIC's insurance fund or to federal oversight of the thrift industry. Although the regulators used the power of persuasion to accomplish their goals, neither the pervasiveness of their presence nor the forcefulness of their recommendations is sufficient to alter their actions' supervisory nature. Pp. 499 U. S. 327-334.
885 F.2d 1284 (CA5 1989), reversed and remanded.
WHITE, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and MARSHALL, BLACKMUN, STEVENS, O'CONNOR, KENNEDY, and SOUTER, JJ., joined. SCALIA, J., filed an opinion concurring in part and concurring in the judgment,post, p. 499 U. S. 334.
JUSTICE WHITE delivered the opinion of the Court.
When the events in this case occurred, the Home Owners' Loan Act, 12 U.S.C. §§ 1461-1468c, [Footnote 1] provided for the
chartering and regulation of federal savings and loan associations (FSLA's). Section 1464(a) authorized the Federal Home Loan Bank Board (FHLBB)
"under such rules and regulations as it may prescribe, to provide for the organization, incorporation, examination, operation, and regulation"
of FSLA's, and to issue charters, "giving primary consideration to the best practices of thrift institutions in the United States." [Footnote 2] In this case, the FHLBB and the Federal Home Loan Bank-Dallas (FHLB-D) [Footnote 3] undertook to advise about and oversee certain aspects of the operation of a thrift institution. Their conduct in this respect was challenged by a suit against the United States under the Federal Tort Claims Act, 28 U.S.C. §§ 1346(b), 2671 et seq. (FTCA), [Footnote 4] asserting that the FHLBB and FHLB-D had been negligent in carrying out their supervisory activities. The question before us is whether certain actions taken by the FHLBB and
FHLB-D are within the "discretionary function" exception to the liability of the United States under the FTCA. The Court of Appeals for the Fifth Circuit answered this question in the negative. We have the contrary view, and reverse.
This FTCA suit arises from the supervision by federal regulators of the activities of Independent American Savings Association (IASA), a Texas-chartered and federally insured savings and loan. Respondent Thomas A. Gaubert was IASA's chairman of the board and largest shareholder. In 1984, officials at the FHLBB sought to have IASA merge with Investex Savings, a failing Texas thrift. Because the FHLBB and FHLB-D were concerned about Gaubert's other financial dealings, they requested that he sign a "neutralization agreement" which effectively removed him from IASA's management. They also asked him to post a $25 million interest in real property as security for his personal guarantee that IASA's net worth would exceed regulatory minimums. Gaubert agreed to both conditions. Federal officials then provided regulatory and financial advice to enable IASA to consummate the merger with Investex. Throughout this period, the regulators instituted no formal action against IASA. Instead, they relied on the likelihood that IASA and Gaubert would follow their suggestions and advice.
In the spring of 1986, the regulators threatened to close IASA unless its management and board of directors were replaced; all of the directors agreed to resign. The new officers and directors, including the chief executive officer who was a former FHLB-D employee, were recommended by FHLB-D. After the new management took over, FHLB-D officials became more involved in IASA's day-to-day business. They recommended the hiring of a certain consultant to advise IASA on operational and financial matters;
they advised IASA concerning whether, when, and how its subsidiaries should be placed into bankruptcy; they mediated salary disputes; they reviewed the draft of a complaint to be used in litigation; they urged IASA to convert from state to federal charter; and they actively intervened when the Texas Savings and Loan Department attempted to install a supervisory agent at IASA. In each instance, FHLB-D's advice was followed.
Although IASA was thought to be financially sound while Gaubert managed the thrift, the new directors soon announced that IASA had a substantial negative net worth. On May 20, 1987, Gaubert filed an administrative tort claim with the FHLBB, FHLB-D, and FSLIC, seeking $75 million in damages for the lost value of his shares and $25 million for the property he had forfeited under his personal guarantee. [Footnote 5] That same day, the FSLIC assumed the receivership of IASA. After Gaubert's administrative claim was denied six months later, he filed the instant FTCA suit in United States District Court for the Northern District of Texas, seeking $100 million in damages for the alleged negligence of federal officials in selecting the new officers and directors and in participating in the day-to-day management of IASA. The District Court granted the motion to dismiss filed by the United States, finding that all of the challenged actions of the regulators fell within the discretionary function exception to the FTCA, found in 28 U.S.C. § 2680(a). [Footnote 6] No. CA 3-87-2989-T (Sept. 28, 1988), App. to Pet. for Cert. 21a.
The Court of Appeals for the Fifth Circuit affirmed in part and reversed in part. 885 F.2d 1284 (1989). Relying on this Court's decision in Indian Towing Co. v. United States,350 U. S. 61 (1955), the court distinguished between "policy decisions," which fall within the exception, and "operational actions," which do not. 885 F.2d at 1287. After claiming further support for this distinction in this Court's decisions in United States v. S.A. Empresa de Viacao Aerea Rio Grandense (Varig Airlines),467 U. S. 797 (1984), and Berkovitz v. United States,486 U. S. 531 (1988), the court explained:
"The authority of the FHLBB and FHLB-Dallas to take the actions that were taken in this case, although not guided by regulations, is unchallenged . The FHLBB and FHLB-Dallas officials did not have regulations telling them, at every turn, how to accomplish their goals for IASA; this fact, however, does not automatically render their decisions discretionary and immune from FTCA suits. Only policy-oriented decisions enjoy such immunity. Thus, the FHLBB and FHLB-Dallas officials were only protected by the discretionary function exception until their actions became operational in nature, and thus crossed the line established in Indian Towing."
885 F.2d at 1289 (citations and footnote omitted).
In the court's view, that line was crossed when the regulators "began to advise IASA management and participate in management decisions." Id. at 1290. Consequently, the
Court of Appeals affirmed the District Court's dismissal of the claims which concerned the merger, neutralization agreement, personal guarantee, and replacement of IASA management, but reversed the dismissal of the claims which concerned the regulators' activities after they assumed a supervisory role in IASA's day-to-day affairs. We granted certiorari, 496 U.S. 935 (1990), and now reverse.
The liability of the United States under the FTCA is subject to the various exceptions contained in§ 2680, including the "discretionary function" exception at issue here. That exception provides that the Government is not liable for
"[a]ny claim based upon an act or omission of an employee of the Government, exercising due care, in the execution of a statute or regulation, whether or not such statute or regulation be valid, or based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused."
28 U.S.C. § 2680(a).
The exception covers only acts that are discretionary in nature, acts that "involv[e] an element of judgment or choice," Berkovitz, supra, at 486 U. S. 536; see also Dalehite v. United States,346 U. S. 15, 346 U. S. 34 (1953); and "it is the nature of the conduct, rather than the status of the actor," that governs whether the exception applies. Varig Airlines, supra, at 467 U. S. 813. The requirement of judgment or choice is not satisfied if a "federal statute, regulation, or policy specifically prescribes a course of action for an employee to follow," because "the employee has no rightful option but to adhere to the directive." Berkovitz, 486 U.S. at 486 U. S. 536.
Furthermore, even "assuming the challenged conduct involves an element of judgment," it remains to be decided "whether that judgment is of the kind that the discretionary
function exception was designed to shield." Ibid.See Varig Airlines, 467 U.S. at 467 U. S. 813. Because the purpose of the exception is to
"prevent judicial 'second-guessing' of legislative and administrative decisions grounded in social, economic, and political policy through the medium of an action in tort,"
Where Congress has delegated the authority to an independent agency or to the executive branch to implement the general provisions of a regulatory statute and to issue regulations to that end, there is no doubt that planning-level decisions establishing programs are protected by the discretionary function exception, as is the promulgation of regulations by which the agencies are to carry out the programs. In addition, the actions of Government agents involving the necessary element of choice and grounded in the social, economic, or political goals of the statute and regulations are protected.
Thus, in Dalehite, the exception barred recovery for claims arising from a massive fertilizer explosion. The fertilizer had been manufactured, packaged, and prepared for export pursuant to detailed regulations as part of a comprehensive federal program aimed at increasing the food supply in occupied areas after World War II. 346 U.S. at 346 U. S. 19-21. Not only was the cabinet-level decision to institute the fertilizer program discretionary, but so were the decisions concerning the specific requirements for manufacturing the fertilizer. Id. at 346 U. S. 37-38. Nearly 30 years later, in Varig Airlines, the Federal Aviation Administration's actions in formulating and implementing a "spot-check" plan for airplane inspection were protected by the discretionary function exception because of the agency's authority to establish safety standards for airplanes. 467 U.S. at 467 U. S. 815. Actions taken in furtherance of the program were likewise protected, even if those particular actions were negligent. Id. at 467 U. S. 820. Most recently, in Berkovitz, we examined a comprehensive regulatory
scheme governing the licensing of laboratories to produce polio vaccine and the release to the public of particular drugs. 486 U.S. at 486 U. S. 533. We found that some of the claims fell outside the exception, because the agency employees had failed to follow the specific directions contained in the applicable regulations, i.e., in those instances, there was no room for choice or judgment. Id. at 486 U. S. 542-543. We then remanded the case for an analysis of the remaining claims in light of the applicable regulations. Id. at 486 U. S. 544.
Under the applicable precedents, therefore, if a regulation mandates particular conduct, and the employee obeys the direction, the Government will be protected, because the action will be deemed in furtherance of the policies which led to the promulgation of the regulation. See Dalehite, supra, at 346 U. S. 36. If the employee violates the mandatory regulation, there will be no shelter from liability, because there is no room for choice, and the action will be contrary to policy. On the other hand, if a regulation allows the employee discretion, the very existence of the regulation creates a strong presumption that a discretionary act authorized by the regulation involves consideration of the same policies which led to the promulgation of the regulations.
Not all agencies issue comprehensive regulations, however. Some establish policy on a case-by-case basis, whether through adjudicatory proceedings or through administration of agency programs. Others promulgate regulations on some topics, but not on others. In addition, an agency may rely on internal guidelines, rather than on published regulations. In any event, it will most often be true that the general aims and policies of the controlling statute will be evident from its text.
When established governmental policy, as expressed or implied by statute, regulation, or agency guidelines, allows a Government agent to exercise discretion, it must be presumed that the agent's acts are grounded in policy when exercising that discretion. For a complaint to survive a motion to dismiss, it must allege facts which would support a finding
that the challenged actions are not the kind of conduct that can be said to be grounded in the policy of the regulatory regime. The focus of the inquiry is not on the agent's subjective intent in exercising the discretion conferred by statute or regulation, but on the nature of the actions taken and on whether they are susceptible to policy analysis. [Footnote 7]
In light of our cases and their interpretation of § 2680(a), it is clear that the Court of Appeals erred in holding that the exception does not reach decisions made at the operational or management level of the bank involved in this case. A discretionary act is one that involves choice or judgment; there is nothing in that description that refers exclusively to policymaking or planning functions. Day-to-day management of banking affairs, like the management of other businesses, regularly require judgment as to which of a range of permissible courses is the wisest. Discretionary conduct is not confined to the policy or planning level.
"[I]t is the nature of the conduct, rather than the status of the actor, that governs whether the discretionary function exception applies in a given case."
Varig Airlines, supra, at 467 U. S. 813.
In Varig Airlines, the Federal Aviation Administration had devised a system of "spot-checking" airplanes. We held that not only was this act discretionary, but so too were the acts of agency employees in executing the program, since they had a range of discretion to exercise in deciding how to carry out the spot-check activity. 467 U.S. at 467 U. S. 820. Likewise, in
Berkovitz, supra, although holding that some acts on the operational level were not discretionary, and therefore were without the exception, we recognized that other acts, if held to be discretionary on remand, would be protected. 486 U.S. at 486 U. S. 545.
The Court's first use of the term "operational" in connection with the discretionary function exception occurred in Dalehite, where the Court noted that
"[t]he decisions held culpable were all responsibly made at a planning, rather than operational, level and involved considerations more or less important to the practicability of the Government's fertilizer program."
346 U.S. at 346 U. S. 42. Gaubert relies upon this statement as support for his argument that the Court of Appeals applied the appropriate analysis to the allegations of the Amended Complaint, but the distinction in Dalehite was merely description of the level at which the challenged conduct occurred. There was no suggestion that decisions made at an operational level could not also be based on policy.
Neither is the decision below supported by Indian Towing. There the Coast Guard had negligently failed to maintain a lighthouse by allowing the light to go out. The United States was held liable not because the negligence occurred at the operational level, but because making sure the light was operational "did not involve any permissible exercise of policy judgment." Berkovitz, supra, at 486 U. S. 538, n. 3. Indeed, the Government did not even claim the benefit of the exception, but unsuccessfully urged that maintaining the light was a governmental function for which it could not be liable. The Court of Appeals misinterpreted Berkovitz's reference to Indian Towing as perpetuating a nonexistent dichotomy between discretionary functions and operational activities. 885 F.2d at 1289. Consequently, once the court determined that some of the actions challenged by Gaubert occurred at an operational level, it concluded, incorrectly, that those actions must necessarily have been outside the scope of the discretionary function exception.
We now inquire whether the Court of Appeals was correct in holding that some of the acts alleged in Gaubert's Amended Complaint were not discretionary acts within the meaning of § 2680(a). The decision we review was entered on a motion to dismiss. We therefore "accept all of the factual allegations in [Gaubert's] complaint as true," and ask whether the allegations state a claim sufficient to survive a motion to dismiss. Berkovitz, supra, at 486 U. S. 540.
The Court of Appeals dismissed several of the allegations in the Amended Complaint on the ground that the challenged activities fell within the discretionary function exception. These allegations concerned "the decision to merge IASA with Investex and seek a neutralization agreement from Gaubert," as well as "the decision to replace the IASA Board of Directors with FHLBB approved persons, and the actions taken to effectuate that decision." 885 F.2d at 1290. Gaubert has not challenged this aspect of the court's ruling. Consequently, we review only those allegations in the Amended Complaint which the Court of Appeals viewed as surviving the Government's motion to dismiss.
These claims asserted that the regulators had achieved "a constant federal presence" at IASA. App. 14,