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Is Transmission of Electricity a “Governmental Function?” Thacker v. Tennessee Valley Authority

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10 May 2019
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May 10, 2019

Thacker v. Tennessee Valley Authority, 587 U.S. ___ (2019) (Kagan, J.).
Response by Richard J. Pierce, Jr.
Geo. Wash. L. Rev. On the Docket (Oct. Term 2018)
Slip Opinion | SCOTUSblog

Is Transmission of Electricity a “Governmental Function?” Thacker v. Tennessee Valley Authority

The Court concludes its unanimous opinion in Thacker v. Tennessee Valley Authority by remanding the case to the Eleventh Circuit with instructions to decide whether transmission of electricity is a governmental function or a commercial function.1 The Court views this as an easy task. It is not.

The case arose as a result of a boating accident. Plaintiffs were operating their pleasure boat at a high rate of speed on a section of a river that the Coast Guard had closed at the request of the Tennessee Valley Authority (“TVA”). The closure was motivated by the danger to navigation created by the TVA’s work on a transmission line across the river. Plaintiff’s boat collided with the partially submerged line, resulting in the death of one occupant and injury to another. The TVA had stationed two guard boats to warn recreational boats of the danger but neither of the guard boats could intercept the plaintiff’s boat prior to the collision because of the high rate of speed at which the plaintiff was operating his boat.

Plaintiff sued the TVA based on his claim that the TVA was negligent in providing inadequate training and supervision to the operators of the TVA guard boats. The district court granted the government’s motion to dismiss the complaint.2 The court held that it lacked jurisdiction to consider the complaint because the conduct at issue fell within the scope of the discretionary function exception to the Federal Tort Claims Act (“FTCA”).

When Congress enacted the FTCA in 1946 it waived the government’s sovereign immunity subject to an important exception. The discretionary function exception retains sovereign immunity for discretionary acts of the government that are based on policy considerations.3 Since there was no statute or rule that required the TVA to train and supervise its employees who operate guard boats in particular ways, the TVA’s decisions with respect to the scope and intensity of that training and supervision were discretionary. Since those decisions required the TVA to decide how to allocate its scarce resources, they were decisions based on policy considerations. The Eleventh Circuit applied longstanding circuit precedents and circuit interpretations of Supreme Court opinions as the basis to uphold the district court’s order granting the government’s motion to dismiss.4

The Supreme Court unanimously reversed the Eleventh Circuit. The Court held that Congress had waived sovereign immunity with respect to the TVA when it included a provision in the statute that authorized the TVA to “sue and be sued.”5 The Court also held, however, that the discretionary function exception does not apply to the TVA because Congress exempted the TVA from the FTCA and did not include the discretionary function exception in the statute that created the TVA and authorized it to “sue and be sued.”6

In prior opinions, the Court had described the discretionary function exception to the FTCA as an effort by Congress to further separation of powers values by anticipating and codifying the constitutionally-based limits that courts would apply to statutory waivers of sovereign immunity. Thus, for instance, in its 1984 opinion in United States v. S.A. Empresa de Viacao Aerea Rio Grandense (Varig Airlines), the Court said:

The legislative materials of the 77th Congress illustrate most clearly Congress’ purpose in fashioning the discretionary function exception. A Government spokesman appearing before the House Committee on the Judiciary described the discretionary function exception as a “highly important exception:”

“[It is] designed to preclude application of the act to a claim based upon an alleged abuse of discretionary authority . . . . It is neither desirable nor intended that the . . . propriety of a discretionary administrative act should be tested through the medium of a damage suit for tort. The same holds true of other administrative action . . . , such as the expenditure of Federal funds, the execution of a Federal project, and the like.
. . . .”

It was believed that claims of the kind embraced by the discretionary function exception would have been exempted from the waiver of sovereign immunity by judicial construction; nevertheless, the specific exception was added to make clear that the Act was not to be extended into the realm of . . . discretionary administrative action.7

The Eleventh Circuit had long interpreted the dicta in those opinions to reflect the Court’s view that the discretionary function exception applies to all agencies, including the TVA.8 The Thacker Court ignored and implicitly rejected the Court’s prior descriptions of the discretionary function exception as anchored in the Constitution. Instead, the Court cited and relied on an interpretation of its 1940 opinion in Federal Housing Administration v. Burr.9

The Thacker Court interpreted Burr to hold that a “sue and be sued” clause waives sovereign immunity except in a situation in which immunity from tort liability is required to avoid “grave interference” with the performance of a governmental function.10 Thus, the Court remanded the case to the Eleventh Circuit to determine whether transmission of electricity is a government function, as opposed to a commercial function.11 If the circuit court determines that transmission of electricity is a government function, the court must then decide whether immunity from tort liability is required to avoid grave interference with the performance of that function.12

The pre-FTCA precedent the Thacker Court relied on as the basis for its instruction to courts to distinguish between governmental and commercial functions for tort law purposes involved the housing market of 1940. It was relatively easy for courts to distinguish the few uniquely governmental functions performed by the Federal Housing Administration (“FHA”) from the many commercial functions the FHA performed as a government-subsidized participant in an otherwise unregulated private housing market. Courts will find it extremely difficult to distinguish between governmental functions and commercial functions in the complicated context of the modern electricity market. The electricity market of 2019 bears no relation to the housing market of 1940. There are few, if any, functions that the TVA performs that are not also performed by the many privately-owned companies that participate in the electricity market of 2019. Yet, it is easy to characterize the functions performed by all of the participants in the electricity market as government functions.

The Thacker Court tried to illustrate the difference between government functions and commercial functions with two examples of government functions: “When the TVA exercises the power of eminent domain, taking landowners’ property for public purposes, no one would confuse it for a private company. So too when the TVA exercises its law enforcement powers to arrest individuals.”13 That statement and those two examples reflect a misunderstanding of the law governing the private companies that own and operate most transmission lines.

Like the private companies that own and operate utilities, oil pipelines and natural gas pipelines, the private companies that own and operate transmission lines regularly exercise the power of eminent domain.14 As Alexandra Klass and James Coleman explain in detail in a forthcoming article,15 the private companies that own gas pipelines and electricity transmission lines must exercise the power of eminent domain to perform their critical functions as the owners and operators of most of the pipeline network and the electricity transmission grid that supports provision of natural gas and electric service throughout the country.

The private companies that own and operate transmission lines also exercise law enforcement functions. They employ “special police” that have the same jurisdiction and powers as the police employed by the TVA, including the power to arrest.16 The functions of those special police are important both to the private companies and to national security. The transmission grid is a critical part of the U.S. infrastructure that is vulnerable to attack or sabotage by terrorists and by hostile countries.

The Thacker Court distinguishes the TVA functions that it believes to be governmental because it mistakenly believes that they are unique to the TVA from the functions that it characterizes as “commercial” because they are also performed by privately-owned companies. Thus, it refers to “other operations” in which “the TVA acts like any other company producing and supplying electric power.”17

The first task the circuit court must perform on remand is to decide whether the function that the TVA was performing at the time of the accident that gave rise to the tort action is “governmental” or “commercial.” The TVA function relevant to the tort action at issue in Thacker is transmission of electricity. In most countries it would be easy to characterize transmission of electricity as a governmental function. In most countries the transmission grid is owned and operated by the national government.

The United States is unique with respect to the ownership and operation of its transmission grid.18 There are three fully-integrated transmission grids in the United States—the eastern, western, and Texas interconnects. Ownership of the transmission lines that comprise each grid is divided among hundreds of entities, including the TVA, other federal agencies like the Bonneville Power Authority, municipally-owned utilities, rural electric cooperatives, and scores of privately-owned companies.

The integrated transmission grids could not function effectively if each owner of a transmission line operated independently. Electrons pay no attention to any laws except the laws of physics. Electricity flows over a grid in inverse proportion to the impedance on each transmission line. Flow patterns on the grid change constantly as the supply and demand for electricity at each of hundreds of nodes changes. Thus, an outage of a transmission line in Tennessee can have effects that are felt from Maine to Florida and as far west as the Rocky Mountains.

The fragmented ownership of the transmission grid has only minor effects on the operation of the grid in most conditions. Control of the operation of the grid is divided in complicated ways among the owners of segments of the grid, Regional Transmission Operators (“RTOs”), Independent System Operators (“ISOs”), the North American Electricity Reliability Corporation (“NERC”), and the Federal Energy Regulatory Commission (“FERC”). The TVA’s other major role in the electricity market—as a generator and wholesale supplier of electricity—is necessarily integrated with the operation of the transmission grid since the ability of the grid to function effectively and efficiently depends critically on the instantaneous availability of generators with the appropriate operating characteristics at each of hundreds of nodes on the grid.

If the court on remand determines that transmission is a governmental function, it will then have to apply the second part of the test the Thacker Court announced. It will have to decide whether “prohibiting the ‘type[] of suit [at issue] is necessary to avoid grave interference’ with that function’s performance.”19 The type of suit at issue is a tort action based on the TVA’s performance of the transmission function.

It is easy to demonstrate the potential for tort actions based on performance of the transmission function to interfere gravely with the performance of the function. In January 2019, Pacific Gas & Electric Company (“PG&E”) filed for bankruptcy because of the massive tort liabilities it faces as a result of the catastrophic forest fires that afflicted parts of California in 2017 and 2018.20

PG&E can keep its tort liabilities within financially tolerable limits only by deactivating its transmission lines in areas that are vulnerable to forest fires during periods in which there is a high risk of forest fires and by asking the bankruptcy court not only to reduce its tort liability but also to excuse it from performing many of its contracts to purchase electricity from generators and to transmit electricity for third parties. Those actions will have effects that extend across the entire western interconnect. Transmission outages and changes in generator availability in California can have effects in every state west of the Rocky Mountains. The FERC is so concerned about the potential effects of the tort liability-based bankruptcy of PG&E that it initiated a separate proceeding to address the implications of the PG&E bankruptcy. FERC claims to have concurrent jurisdiction with the bankruptcy court.21

The complicated legal proceedings that have been triggered by the tort liability-induced bankruptcy of PG&E are in their early stages so it is too early to determine in detail the effects that tort liability will have on the performance of the transmission function. It is not too early, however, to predict with confidence that PG&E’s tort liability will “interfere gravely” with performance of the transmission function.

Exposing the TVA to tort liability based on its performance of the transmission function has the potential to “interfere gravely” with the TVA’s performance of that function. Whether it actually will have “grave” effects depends on variables like the details of the tort law regimes of the seven states in which the TVA performs the transmission function22 and the conditions in which the TVA will perform that function in the future. Those conditions have become particularly difficult to predict because of the difficulty of predicting the future effects of climate change. PG&E’s tort liability has soared as a result of climate change. The much longer periods in which California’s forests are subject to the combination of heat, drought, and winds that facilitate widespread forest fires have massively increased PG&E’s vulnerability to tort actions. No one can predict whether the TVA operating area will experience similar changes.

In its opinion in Thacker the Court replaced a legal regime that was easy to implement and that performed well in myriad contexts for decades with a new legal regime that will present major challenges to courts. If the courts are unable to interpret and apply that new legal regime in a pragmatic manner, it has the potential to produce adverse consequences for the entire eastern United States and for the millions of consumers of electricity who are dependent on the performance of the transmission grid east of the Rockies.

Professor Richard J. Pierce, Jr. is the author of over twenty books and 130 articles on administrative law, government regulation, and the effects of various forms of government intervention on the performance of markets. His books and articles have been cited in hundreds of judicial opinions, including over a dozen opinions of the U.S. Supreme Court.

    1. No. 17-1201, slip op. at 11 (U.S. Apr. 29, 2019).
    2. 188 F. Supp. 3d 1243 (N.D. Ala. 2016).
    3. For detailed discussion of the FTCA, the discretionary function exception and descriptions of cases interpreting and applying both, see 3 Kristin E. Hickman & Richard J. Pierce, Jr., Administrative Law Treatise § 22.4 (2019).
    4. 868 F. 3d 979 (11th Cir. 2017).
    5. Thacker, slip op. at 4–5 (quoting 16 U.S.C. § 831c(b)).
    6. Id.
    7. 467 U.S. 797, 809–10 (1984). See also Dalehite v. United States, 346 U.S. 15, 26–30 (1953).
    8. See e.g., Peoples Nat’l Bank v. Meredith, 812 F. 2d 682, 685 (11th Cir. 1987).
    9. 309 U.S. 242 (1940).
    10. Thacker, slip op. at 5–8.
    11. Id. at 10–11.
    12. Id.
    13. Id. at 10.
    14. The rich history of the conferral and use of the power of eminent domain by privately owned utilities, pipelines and transmission lines is described in detail in Alexandra B. Klass & Danielle Meinhardt, Transporting Oil and Gas: U.S. Infrastructure Challenges, 100 Iowa L. Rev. 947 (2015).
    15. James W. Coleman & Alexandra B. Klass, Energy and Eminent Domain, 104 Minn. L. Rev. (forthcoming 2019).
    16. Every state authorizes some owners of private property, invariably including universities, utilities, pipelines and transmission lines, to hire special police who have all of the typical powers of regular police, including the power of arrest. The details of the laws governing special police vary by state. A Westlaw search of the codes of the fifty states that I conducted on May 7, 2019, produced references to 765 provisions of state statutes that authorize special police and describe their jurisdiction, powers and regulation.
    17. Thacker, slip op. at 10.
    18. For general descriptions of the U.S. electricity market, see Richard J. Pierce, Jr., The Past, Present, and Future of Energy Regulation, 31 Utah Envtl. L. Rev. 291 (2011); Richard J. Pierce, Jr., The State of the Transition to Competitive Markets in Natural Gas and Electricity, 15 Energy L.J. 323 (1994). For detailed descriptions of the electricity market, visit the voluminous online library of the Harvard Electricity Policy Group.
    19. Thacker, slip. op. at 11 (quoting Burr, 309 U.S. at 245).
    20. See Zach Wichter, California’s Largest Utility Says It is Bankrupt. Here’s What You Need to Know., N.Y. Times (Jan. 29, 2019), https://www.nytimes.com/2019/01/29/business/pge-bankruptcy.html.
    21. A federal district court rejected FERC’s attempt to assert concurrent jurisdiction over the PG&E bankruptcy but FERC is likely to appeal that decision. Both FERC and the California Public Utilities Commission are determined to have a major voice in making the hundreds of decisions that the PG&E case will require of government institutions. See Christian Roselund, Courts Reject FERC’s Bid for Jurisdiction in PG&E Bankruptcy, PV Magazine (Mar. 12, 2019), https://pv-magazine-usa.com/2019/03/12/courts-reject-fercs-bid-to-intervene-in-pge-bankruptcy/.
    22. States vary greatly with respect to the criteria they apply in deciding whether a participant in the electricity market is liable in tort. I describe the state of the law generally in Richard J. Pierce, Jr., Regional Transmission Organizations: Federal Limitations Needed for Tort Liability, 23 Energy L.J. 63 (2002).

Recommended Citation
Richard J. Pierce, Jr., Response, Is Transmission of Electricity a “Governmental Function?” Thacker v. Tennessee Valley Authority, Geo. Wash. L. Rev. On the Docket (May 10, 2019), https://www.gwlr.org/is-transmission-of-electricity-a-governmental-function-thacker-v-tennessee-valley-authority.

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