The federal government is increasingly a commercial actor, providing retail services directly through its own agencies and indirectly through private-sector contractors. Government involvement with and in the private sector is intended to capitalize on the expertise and efficiency of businesses, benefit taxpayers, and promote public ends. Yet this involvement also confers advantages that benefit the executive branch and its contractor allies at the expense of consumers and states. Our prior work in these pages examined how a muddle of doctrines that form a sovereign shield can be exploited by contractors and the executive branch to evade civil liability and regulatory oversight. It tied the expansion of this sovereign shield to the relative empowerment of the federal government at the expense of the states, the executive branch at the expense of the legislative branch, and the private sector at the expense of consumers. In developing a doctrinal response to the risks identified, this Article draws on the insights of scholars who have studied federal–state relations, contractor–agency relations, and business–consumer relations, and it bridges the gaps between these literatures into which the sovereign-shield phenomenon falls.
This Article argues that the solution to the sovereign-shield problem lies in redefining the question. In determining whether an actor enjoys the sovereign shield’s protection from liability and regulation, this Article proposes that the analysis should turn on the nature of the activity performed, not the identity of the actor performing it. If the activity is fundamentally commercial, the actor—whether a government agency acting on its own or through its contractor—should not be protected. This Article outlines a protocol for courts to implement such a proposal, drawing on well-established doctrines dating back to Supreme Court decisions from the early nineteenth century. Shifting to this activity-based approach would help preserve balances of power between states and the federal government, between the executive and legislative branches, and between businesses and consumers.
* Kate Sablosky Elengold is an Assistant Professor of Law, University of North Carolina School of Law. Jonathan D. Glater is a Professor of Law, University of California, Los Angeles. The Authors gratefully thank Jessica Bulman-Pozen, Kathleen Engel, Andy Hessick, David Marcus, Anne Joseph O’Connell, Christopher Odinet, and James Park for reading and offering helpful and detailed comments on drafts of this Article. We also benefitted greatly from conversations with Jon D. Michaels and Kathryn Sabbeth about the ideas addressed below, as well as from comments at faculty workshops at the University of California, Los Angeles School of Law, the University of North Carolina School of Law, the University of California, Berkeley School of Law, and the William & Mary Law School. We could not have done this work without critical research assistance from Thomas Walls, Brendan Morrissey, Mallory Morris, and Jared Church, or without the extraordinary editing of the Stanford Law Review editors and staff.