Subject:  UNITED STATES v. GAUBERT, Syllabus



 
    NOTE: Where it is feasible, a syllabus (headnote) will be released, as
is being done in connection with this case, at the time the opinion is
issued.  The syllabus constitutes no part of the opinion of the Court but
has been prepared by the Reporter of Decisions for the convenience of the
reader.  See United States v. Detroit Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES


Syllabus


UNITED STATES v. GAUBERT


certiorari to the united states court of appeals for the fifth circuit

No. 89-1793.  Argued November 26, 1990 -- Decided March 26, 1991

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. MDRV 1464(a).  Pursuant to
the Act, the FHLBB and the Federal Home Loan Bank-Dallas (FHLB-D) 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. MDRV 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.

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. 5-8.

    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 discre
tionary 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 Ber kovitz v. United
States, 468 U. S. 531, supports Gaubert's and the Court of Appeals'
position that there is a dichotomy between discretionary functions and
operational activities.  Pp. 9-10.

    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 MDRV 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. 10-17.

885 F. 2d 1284, 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 the judgment.

------------------------------------------------------------------------------




Subject: 89-1793 -- OPINION, UNITED STATES v. GAUBERT

 


NOTICE: This opinion is subject to formal revision before publication in
the preliminary print of the United States Reports.  Readers are requested
to notify the Reporter of Decisions, Supreme Court of the United States,
Washington, D. C. 20543, of any typographical or other formal errors, in
order that corrections may be made before the preliminary print goes to
press.

SUPREME COURT OF THE UNITED STATES


No. 89-1793



UNITED STATES, PETITIONER v. THOMAS M.
GAUBERT


on writ of certiorari to the united states court of appeals for the fifth
circuit

[March 26, 1991]



    Justice White delivered the opinion of the Court.

    When the events in this case occurred, the Home Owners' Loan Act, 12 U.
S. C. 15 1461-1470, {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."  {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. 15 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 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
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 of ficers 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. {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. MDRV 2680(a). {6}
    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 Gran dense (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. ---  (1990), and now reverse.
II
    The liability of the United States under the FTCA is subject to the
various exceptions contained in MDRV 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. MDRV 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
536; see also Dalehite v. United States,  346 U. S. 15, 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 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 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 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," id., at 814, when properly
construed, the exception "protects only governmental actions and decisions
based on considerations of public policy."  Berkovitz, supra, at 537.
    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 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 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 815.  Actions taken in furtherance of the program were likewise
protected, even if those particular actions were negligent.  Id., at 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 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 542-543.  We then remanded the case for an
analysis of the remaining claims in light of the applicable regulations.
Id., at 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 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. {7}

III
    In light of our cases and their interpretation of MDRV 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 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 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 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 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 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.
IV
    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 MDRV 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 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, MDRV 33.  In describing this presence,
the Amended Complaint alleged that the regulators "consult[ed] as to
day-to-day affairs and operations of IASA," id., at 14, MDRV 33a;
"participated in management decisions" at IASA board meetings, id., at 14,
MDRV 33b; "became involved in giving advice, making recommendations,
urging, or directing action or procedures at IASA," id., at 14, MDRV 33c;
and "advised their hand-picked directors and officers on a variety of
subjects", id., at 14, MDRV 34.  Specifically, the complaint enumerated
seven instances or kinds of objectionable official involvement.  First, the
regulators "arranged for the hiring for IASA of . . . consultants on
operational and financial matters and asset management."  Id., at 14, MDRV
34a.  Second, the officials "urged or directed that IASA convert from a
state-chartered savings and loan to a federally-chartered savings and loan
in part so that it could become the exclusive government entity with power
to control IASA."  Id., at 14, MDRV 34b.  Third, the regulators "gave
advice and made recommendations concerning whether, when, and how to place
IASA subsidiaries into bankruptcy."  Id., at 15, MDRV 34c.  Fourth, the
officials "mediated salary disputes between IASA and its senior officers."
Id., at 15, MDRV 34d.  Fifth, the regulators "reviewed a draft complaint in
litigation" that IASA's board contemplated filing and were "so actively
involved in giving advice, making recommendations, and directing matters
related to IASA's litigation policy that they were able successfully to
stall the Board of Directors' ultimate decision to file the complaint until
the Bank Board in Washington had reviewed, advised on, and commented on the
draft."  Id., at 15, MDRV 34e (emphasis in original).  Sixth, the
regulators "actively intervened with the Texas Savings and Loan Department
(IASA's principal regulator) when the State attempted to install a
supervisory agent at IASA."  Id., at 15, MDRV 34f.  Finally, the FHLB-D
president wrote the IASA board of directors "affirming that his agency had
placed that Board of Directors into office, and describing their mutual
goal to protect the FSLIC insurance fund."  Id., at 15-16, MDRV 34g.
According to Gaubert, the losses he suffered were caused by the regulators'
"assumption of the duty to participate in, and to make, the day-to-day
decisions at IASA and [the] negligent discharge of that assumed duty."
Id., at 17, MDRV 39.  Moreover, he alleged that "[t]he involvement of the
FHLB-Dallas in the affairs of IASA went beyond its normal regulatory
activity, and the agency actually substituted its decisions for those of
the directors and officers of the association."  Id., at 19, MDRV 55.
    We first inquire whether the challenged actions were discretionary, or
whether they were instead controlled by mandatory statutes or regulations.
Berkovitz, 486 U. S., at 536.  Although the FHLBB, which oversaw the other
agencies at issue, had promulgated extensive regulations which were then in
effect, see 12 CFR 15 500-591 (1986), neither party has identified formal
regulations governing the conduct in question.  As already noted, 12 U. S.
C. MDRV 1464(a) authorizes the FHLBB to examine and regulate FSLA's,
"giving primary consideration to the best practices of thrift institutions
in the United States."  Both the District Court and the Court of Appeals
recognized that the agencies possessed broad statutory authority to
supervise financial institutions. {8}  The relevant statutory provisions
were not mandatory, but left to the judgment of the agency the decision of
when to institute proceedings against a financial institution and which
mechanism to use.  For example, the FSLIC had authority to terminate an
institution's insured status, issue cease-anddesist orders, and suspend or
remove an institution's officers, if "in the opinion of the Corporation"
such action was warranted because the institution or its officers were
engaging in an "unsafe or unsound practice" in connection with the business
of the institution.  12 U. S. C. 15 1730(b)(1), (e)(1), (g)(1).  The FHLBB
had parallel authority to issue ceaseand-desist orders and suspend or
remove an institution's officers.  15 1464(2)(A), (4)(a).  Although the
statute enumerated specific grounds warranting an appointment by the FHLBB
of a conservator or receiver, the determination of whether any of these
grounds existed depended upon "the opinion of the Board."  MDRV 1464(6)(A).
The agencies here were not bound to act in a particular way; the exercise
of their authority involved a great "element of judgment or choice."
Berkovitz, supra, at 536.
    We are unconvinced by Gaubert's assertion that because the agencies did
not institute formal proceedings against IASA, they had no discretion to
take informal actions as they did.  Although the statutes provided only for
formal proceedings, there is nothing in the language or structure of the
statutes that prevented the regulators from invoking less formal means of
supervision of financial institutions.  Not only was there no statutory or
regulatory mandate which compelled the regulators to act in a particular
way, but there was no prohibition against the use of supervisory mechanisms
not specifically set forth in statute or regulation.
    This is the view of the FHLBB; for in a resolution passed in 1982, the
FHLBB adopted "a formal statement of policy regarding the Bank Board's use
of supervisory actions," which provided in part:

    "In carrying out its supervisory responsibilities with respect to
thrift institutions insured by the Federal Savings and Loan Insurance
Corporation (`FSLIC'), . . . it is the policy of the Federal Home Loan Bank
Board that violations of law or regulation, and unsafe or unsound practices
will not be tolerated and will result in the initiation of strong
supervisory and/or enforcement action by the Board.  It is the Bank Board's
goal to minimize, and where possible, to prevent losses occasioned by
violations or unsafe and unsound practices by taking prompt and effective
supervisory action. . . .
    "The Board recognizes that supervisory actions must be tailored to each
case, and that such actions will vary according to the severity of the
violation of law or regulation or the unsafe or unsound practice, as well
as to the responsiveness and willingness of the association to take
corrective action.  The following guidance should be considered for all
supervisory actions.
    "In each case, based upon an assessment of management's willingness to
take appropriate corrective action and the potential harm to the
institution if corrective action is not effected, the staff must weigh the
appro priateness of available supervisory actions.  If the potential harm
is slight and there is a substantial prob ability that management will
correct the situation, informal supervisory guidance and oversight is
appropriate.  If some potential harm to the institution or its customers is
likely, a supervisory agreement should be promptly negotiated and
implemented.  If substantial financial harm may occur to the institution,
its customers, or the FSLIC and there is substantial doubt that corrections
will be made promptly, a cease-and-desist order should be sought
immediately through the Office of General Counsel."  FHLBB Resolution No.
82-381 (May 26, 1982), reprinted in Brief for Respondent 4a-6a.


From this statement it is clear that the regulators had the discretion to
supervise IASA through informal means, rather than invoke statutory
sanctions. {9}
    Gaubert also argues that the challenged actions fall outside the
discretionary function exception because they involved the mere application
of technical skills and business expertise.  Brief for Respondent 33.  But
this is just another way of saying that the considerations involving the
day-to-day management of a business concern such as IASA are so precisely
formulated that decisions at the operational level never involve the
exercise of discretion within the meaning of MDRV 2680(a), a notion that we
have already rejected in disapproving the rationale of the Court of
Appeals' decision.  It may be that certain decisions resting on
mathematical calculations, for example, involve no choice or judgment in
carrying out the calculations, but the regulatory acts alleged here are not
of that genre.  Rather, it is plain to us that each of the challenged
actions involved the exercise of choice and judgment.
    We are also convinced that each of the regulatory actions in question
involved the kind of policy judgment that the discretionary function
exception was designed to shield.  The FHLBB Resolution quoted above,
coupled with the relevant statutory provisions, established governmental
policy which is presumed to have been furthered when the regulators
exercised their discretion to choose from various courses of action in
supervising IASA.  Although Gaubert contends that day-to-day decisions
concerning IASA's affairs did not implicate social, economic, or political
policies, even the Court of Appeals recognized that these day-to-day
"operational" decisions were undertaken for policy reasons of primary
concern to the regulatory agencies:

"[T]he federal regulators here had two discrete purposes in mind as they
commenced day-to-day operations at IASA.  First, they sought to protect the
solvency of the savings and loan industry at large, and maintain the
public's confidence in that industry.  Second, they sought to preserve the
assets of IASA for the benefit of depositors and shareholders, of which
Gaubert was one."  885 F. 2d, at 1290.


Consequently, Gaubert's assertion that the day-to-day involvement of the
regulators with IASA is actionable because it went beyond "normal
regulatory activity" is insupportable.
    We find nothing in Gaubert's Amended Complaint effectively alleging
that the discretionary acts performed by the regulators were not entitled
to the exemption.  By Gaubert's own admission, the regulators replaced
IASA's management in order to protect the FSLIC's insurance fund; thus it
cannot be disputed that this action was based on public policy
considerations.  The regulators' actions in urging IASA to convert to
federal charter and in intervening with the state agency were directly
related to public policy considerations regarding federal oversight of the
thrift industry.  So were advising the hiring of a financial consultant,
advising when to place IASA subsidiaries into bankruptcy, intervening on
IASA's behalf with Texas officials, advising on litigation policy, and
mediating salary disputes.  There are no allegations that the regulators
gave anything other than the kind of advice that was within the purview of
the policies behind the statutes.
    There is no doubt that in advising IASA the regulators used the power
of persuasion to accomplish their goals.  Nevertheless, we long ago
recognized that regulators have the authority to use such tactics in
supervising financial institutions.  In United States v. Philadelphia
National Bank, 374 U. S. 321 (1963), the Court considered the wide array of
supervisory tools available to the Federal Deposit Insurance Corporation
and the Federal Reserve System in overseeing banks.  Noting the "frequent
and intensive" nature of bank examinations and the "detailed periodic
reports" banks were required to submit, the Court found that "the agencies
maintain virtually a day-to-day surveillance of the American banking
system."  Id., at 329.  Moreover, the agencies' ability to terminate a
bank's insured status and invoke other less drastic sanctions meant that
"recommendations by the agencies concerning banking practices tend to be
followed by bankers without the necessity of formal compliance
proceedings."  Id., at 330.  These statements apply with equal force to
supervision by federal agencies of the savings and loan industry.  More
than 30 years ago, the Court of Appeals for the Fifth Circuit made similar
observations in a case involving allegations that the FHLBB had improperly
pressured a savings and loan's directors to resign.  See Miami Beach
Federal Savings & Loan Association v. Callander, 256 F. 2d 410 (CA5 1958).
The court noted that "[w]hen a governmental agency holds such great powers
over its offspring, even to the point of appointing a conservator or
receiver to replace the management . . . , it is difficult to hold that an
informal request, even demand, to clean house would amount to an abuse of
the statutory powers and discretion of the agency."  Id., at 414-415.
Consequently, neither the pervasiveness of the regulators' presence at IASA
nor the forcefulness of their recommendations is sufficient to alter the
supervisory nature of the regulators' actions.
    In the end, Gaubert's Amended Complaint alleges nothing more than
negligence on the part of the regulators.  Indeed, the two substantive
counts seek relief for "negligent selection of directors and officers" and
"negligent involvement in dayto-day operations."  App. 17, 18.  Gaubert
asserts that the discretionary function exception protects only those acts
of negligence which occur in the course of establishing broad policies,
rather than individual acts of negligence which occur in the course of
day-to-day activities.  Brief for Respondent 39.  But we have already
disposed of that submission.  See supra, at 9.  If the routine or frequent
nature of a decision were sufficient to remove an otherwise discretionary
act from the scope of the exception, then countless policy-based decisions
by regulators exercising day-to-day supervisory authority would be
actionable.  This is not the rule of our cases.
V
    Because from the face of the Amended Complaint, it is apparent that all
of the challenged actions of the federal regu lators involved the exercise
of discretion in furtherance of public policy goals, the Court of Appeals
erred in failing to find the claims barred by the discretionary function
exception of the Federal Tort Claims Act.  We therefore reverse the
decision of the Court of Appeals for the Fifth Circuit and remand for
proceedings consistent with this opinion.
It is so ordered.


 
 
 
 
 

------------------------------------------------------------------------------
1
    Subsequent to the events at issue here, and in response to the current
crisis in the thrift industry, Congress enacted comprehensive changes to
the statutory scheme concerning thrift regulation by means of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Pub.
L. 101-73, 103 Stat. 183.  FIRREA abolished the FHLBB and the Federal
Savings and Loan Insurance Corporation (FSLIC), two of the agencies at
issue here, and repealed the statutory provisions governing those agencies'
conduct.  15 401, 407, 103 Stat. 354-357, 363.  At the same time, it
granted to the Federal Deposit Insurance Corporation (FDIC) and the newly
established Office of Thrift Supervision discretionary enforcement
authority similar to that enjoyed by the former agencies.  15 201, 301, 103
Stat. 187-188, 277-343.

2
    Section 1464(a) stated in full:
    "In order to provide thrift institutions for the deposit or investment
of funds and for the extension of credit for homes and other goods and
services, the Board is authorized, under such rules and regulations as it
may prescribe, to provide for the organization, incorporation, examination,
operation, and regulation of associations to be known as Federal savings
and loan associations, or Federal savings banks, and to issue charters
therefor, giving primary consideration to the best practices of thrift
institutions in the United States.  The lending and investment authorities
are conferred by this section to provide such institutions the flexibility
necessary to maintain their role of providing credit for housing."

3
    FHLB-D was one of the Federal Home Loan Banks (FHLB's) established by
the FHLBB pursuant to 12 U. S. C. MDRV 1423.  The FHLBB was specifically
empowered to authorize the performance by FHLB personnel of "any function"
of the FHLBB,  except for adjudications and the promulgation of rules and
regulations.  12 U. S. C. MDRV 1437(a).

4
    The FTCA, subject to various exceptions, waves sovereign immunity from
suits for negligent or wrongful acts of Government employees.

5
    Gaubert was required by statute to seek relief from the agencies prior
to filing an FTCA suit.  See 28 U. S. C. MDRV 2675.

6
    Citing 12 U. S. C. MDRV 1464, the court determined that the FHLBB had
broad discretionary authority to regulate the savings and loan industry.
Although acknowledging that most of Gaubert's allegations involved the
regulators' activity prior to the date of receivership, the court stressed
that had the regulators invoked their statutory authority to place IASA in
receivership earlier, all of the challenged actions would have fallen
within the exception.  The court also pointed out that had IASA and Gaubert
failed to cooperate with the regulators, receivership likely would have
followed sooner.  In the District Court's view, "[t]he fact that [Gaubert]
cooperated when he could have refused will not give [him] a cause of action
where he otherwise would have none."  App. to Pet. for Cert. 24a-25a.
Moreover, because the decision to place IASA in receivership involved the
exercise of discretion, the decision not to do so at an earlier date was
neces sarily discretionary as well.  The court viewed the decision to
supervise IASA's activities first by informal means as an extension of the
discretionary decision to postpone receivership.

7
    There are obviously discretionary acts performed by a Government agent
that are within the scope of his employment but not within the
discretionary function exception because these acts cannot be said to be
based on the purposes that the regulatory regime seeks to accomplish.  If
one of the officials involved in this case drove an automobile on a mission
connected with his official duties and negligently collided with another
car, the exception would not apply.  Although driving requires the constant
exercise of discretion, the official's decisions in exercising that
discretion can hardly be said to be grounded in regulatory policy.

8
    As explained above, the agencies at issue here have since been
abolished, although they have been replaced by agencies possessing similar
discretionary authority.  See n. 1, supra.

9
    We note that in a recent opinion by Judge Garza, who also wrote the
opinion at issue here, the Court of Appeals for the Fifth Circuit refused
to extend its decision in Gaubert to impose liability on the FDIC for
failure to institute statutory receivership proceedings against a thrift.
See Federal Deposit Insurance Corp. v. Mmahat, 907 F. 2d 546, 552 (CA5
1990).





Subject: 89-1793 -- CONCUR, UNITED STATES v. GAUBERT

 


    SUPREME COURT OF THE UNITED STATES


No. 89-1793



UNITED STATES, PETITIONER v. THOMAS M.
GAUBERT


on writ of certiorari to the united states court of appeals for the fifth
circuit


[March 26, 1991]



    Justice Scalia, concurring.
    I concur in the judgment and in much of the opinion of the Court.  I
write separately because I do not think it necessary to analyze
individually each of the particular actions challenged by Gaubert, nor do I
think an individualized analysis necessarily leads to the results the Court
obtains.

I
    The so-called discretionary function exception to the Federal Tort
Claims Act (FTCA) does not protect all governmental activities involving an
element of choice.  Berkovitz v. United States, 486 U. S. 531, 536-537
(1988).  The choice must be "grounded in social, economic, [or] political
policy,"  United States v. Varig Airlines, 467 U. S. 797, 814 (1984), or,
more briefly, must represent a "policy judgment,"  Ber kovitz, 486 U. S.,
at 537.  Unfortunately, lower courts have had difficulty in applying this
test.
    The Court of Appeals in this case concluded that a choice involves
policy judgment (in the relevant sense) if it is made at a planning rather
than an operational level within the agency.  885 F. 2d 1284, 1287 (1989).
I agree with the Court that this is wrong.  I think, however, that the
level at which the decision is made is often relevant to the discretionary
function inquiry, since the answer to that inquiry turns on both the
subject matter and the office of the decision maker.  In my view a choice
is shielded from liability by the discretionary function exception if the
choice is, under the particular circumstances, one that ought to be
informed by considerations of social, economic, or political policy and is
made by an officer whose official responsibilities include assessment of
those considerations.
    This test, by looking not only to the decision but also to the officer
who made it, recognizes that there is something to the planning vs.
operational dichotomy -- though the "something" is not precisely what the
Court of Appeals believed.  Ordinarily, an employee working at the
operational level is not responsible for policy decisions, even though
policy considerations may be highly relevant to his actions.  The dock
foreman's decision to store bags of fertilizer in a highly compact fashion
is not protected by this exception because, even if he carefully calculated
considerations of cost to the government versus safety, it was not his
responsibility to ponder such things; the Secretary of Agriculture's
decision to the same effect is protected, because weighing those
considerations is his task.  Cf. Dalehite v. United States, 346 U. S. 15
(1953).  In Indian Towing Co. v. United States, 350 U. S. 61 (1956), the
United States was held liable for, among other things, the failure of Coast
Guard maintenance personnel adequately to inspect electrical equipment in a
lighthouse; though there could conceivably be policy reasons for conducting
only superficial inspections, the decisions had been made by the
maintenance personnel, and it was assuredly not their responsibility to
ponder such things.  This same factor explains why it is universally
acknowledged that the discretionary function exception never protects
against liability for the negligence of a vehicle driver.  See ante, at 8,
n. 7.  The need for expedition vs. the need for safety may well represent a
policy choice, cf. Dalehite, supra, but the government does not expect its
drivers to make that choice on a case-bycase basis.
    Moreover, not only is it necessary for application of the discretionary
function exception that the decisionmaker be an official who possesses the
relevant policy responsibility, but also the decisionmaker's close
identification with policymaking can be strong evidence that the other half
of the test is met -- i. e., that the subject-matter of the decision is one
that ought to be informed by policy considerations.  I am much more
inclined to believe, for example, that the manner of storing fertilizer
raises economic policy concerns if the decision on that subject has been
reserved to the Secretary of Agriculture himself.  That it is proper to
take the level of the decisionmaker into account is supported by the phrase
of the FTCA immediately preceding the discretionary function exception,
which excludes governmental liability for acts taken, "exercising due care,
in the execution of a . . . regulation, whether or not such . . .
regulation be valid."  We have taken this to mean that regulations "[can]
not be attacked by claimants under the Act."  Dalehite, 346 U. S., at 42.
This immunity represents an absolute statutory presumption, so to speak,
that all regulations involve policy judgments that must not be interfered
with.  I think there is a similar presumption, though not an absolute one,
that decisions reserved to policy-making levels involve such judgments --
and the higher the policy-making level, the stronger the presumption.

II
    Turning to the facts of the present case, I find it difficult to say
that the particular activities of which Gaubert complains are necessarily
discretionary functions, so that a motion to dismiss could properly be
granted on that ground.  To take but one example, Gaubert alleges that the
regulators acted negligently in selecting consultants to advise the bank.
The Court argues that such a decision, even though taken in the course of
"day-to-day" management, surely involves an element of choice.  But that
answers only the first half of the Berkovitz inquiry.  It remains to be
determined whether the choice is of a policymaking nature.  Perhaps one can
imagine a relatively high- level government official, authorized generally
to manage the bank in such fashion as to further applicable government
policies, who hires consultants and other employees with those policy
objectives in mind.  The discretionary function exception arguably would
protect such a hiring choice.  But one may also imagine a federal officer
of relatively low level, authorized to hire a bank consultant by applying
ordinary standards of business judgment, and not authorized to consider
matters of government policy in the process.  That hiring decision would
not be protected by the discretionary function exception, even though some
element of choice is involved.
    I do not think it advances the argument to observe, ante, at 16, that
"[t]here are no allegations that the regulators gave anything other than
the kind of advice that was within the purview of the policies behind the
statutes."  An official may act "within the purview" of the relevant policy
without himself making policy decisions -- in which case, if the action is
negligent (and was not specifically mandated by the relevant policy, see
Dalehite, 346 U. S. at 36), the discretionary function exception does not
bar United States liability.  Contrariwise, action "outside the purview" of
the relevant policy does not necessarily fail to qualify for the
discretionary function defense.  If the action involves policy discretion,
and the officer is authorized to exercise that discretion, the defense
applies even if the discretion has been exercised erroneously, so as to
frustrate the relevant policy.  See 28 U. S. C. MDRV 2680(a) (discretionary
function exception applies "whether or not the discretion involved be
abused.").  In other words, action "within the purview" of the relevant
policy is neither a necessary nor a sufficient condition for invoking the
discretionary function exception.
    The present case comes to us on a motion to dismiss.  Lacking any sort
of factual record, we can do little more than speculate as to whether the
officers here exercised policymaking responsibility with respect to the
individual acts in question.  Without more, the motion would have to be
denied.  I think, however, that the Court's conclusion to the contrary is
properly reached under a slightly different approach.  The alleged misdeeds
complained of here were not actually committed by federal officers.
Rather, federal officers "recommended" that such actions be taken, making
it clear that if the recommendations were not followed the bank would be
seized and operated directly by the regulators.  In effect, the Federal
Home Loan Bank Board (FHLBB) imposed the advice which Gaubert challenges as
a condition of allowing the bank to remain independent.  But surely the
decision whether or not to take over a bank is a policy-based decision to
which liability may not attach -- a decision that ought to be influenced by
considerations of "social, economic, [or] political policy," Varig
Airlines, 467 U. S., at 814, and that in the nature of things can only be
made by FHLBB officers responsible for weighing such considerations.  I
think a corollary is that setting the conditions under which the FHLBB will
or will not take over a bank is an exercise of policymaking discretion.  By
establishing such a list of conditions, as was done here, the Board in
effect announces guidelines pursuant to which it will exercise its
discretionary function of taking over the bank.  Establishing guidelines
for the exercise of a discretionary function is unquestionably a
discretionary function.  Thus, without resort to item-by-item analysis, I
would find each of Gaubert's challenges barred by the discretionary
function exception.
------------------------------------------------------------------------------
