499 U.S. 315 (1991), 89-1793, United States v. Gaubert

• Citation: 499 U.S. 315, 111 S.Ct. 1267, 113 L.Ed.2d 335, 59 U.S.L.W. 4244
• Party Name: United States v. Gaubert
• Case Date: March 26, 1991
• Court: U.S. Supreme Court

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499 U.S. 315 (1991)

111 S.Ct. 1267, 113 L.Ed.2d 335, 59 U.S.L.W. 4244

United States

v.

Gaubert

No. 89-1793

United States Supreme Court

March 26, 1991

Argued Nov. 26, 1990

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Syllabus

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 [111 S.Ct. 1270] 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,

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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.

Held:

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. 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. 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

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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 [111 S.Ct. 1271] their actions' supervisory nature. Pp. 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. 334.

WHITE, J., lead opinion

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,^[1] provided for the

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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."^[2] In this case, the FHLBB and the Federal Home Loan Bank-Dallas (FHLB-D)^[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),^[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

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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.

I

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 [111 S.Ct. 1272] 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;

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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...