As the federal government has come to rely increasingly on private companies to perform government functions, more businesses are testing the power of the resulting contractual relationships to shield themselves from liability, regulation, and oversight. Such nongovernmental entities seek the benefit of what we call the federal government’s sovereign shield by exploiting three doctrines: preemption, derivative sovereign immunity, and intergovernmental immunity. Because these contractors provide services supporting every conceivable government action, allowing them to act with impunity puts citizens at risk across myriad aspects of their lives.
This Article untangles the doctrines that extend the sovereign shield to private actors and exposes the alliance that such extension enables between the executive branch and businesses. We explain how this alliance shifts the balance of power in three ways: in favor of the federal government at the expense of the states, in favor of the executive branch at the expense of the legislature, and in favor of private enterprise at the expense of consumers. Using student-loan servicers as a case study, this Article lays bare how government contractors try to exploit the sovereign shield. And it sounds an alarm about the consequences of this particular alliance: injured consumers with no path to redress and destabilization of the principles of federalism and separation of powers.
* 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 would like to thank the faculties at Georgia State University School of Law and University of California, Irvine, for their helpful comments. This Article benefitted from feedback we received at the Consumer Law Scholars Conference at Berkeley Law, the AALS panel on Regulatory Abdication and Student Loans, a UNC scholarship workshop, and the UNC Festival of Legal Learning. We are grateful for the feedback we received from Leah Litman, Eric Biber, Will Corbett, Anne Joseph O’Connell, Seth Frotman, Craig Konnoth, Sarah Bloom Raskin, Nicholas Smith, Dan Zibel, Joseph Smith, Jr., Andy Hessick, David Rubenstein, Danielle D’Onfro, Angela Littwin, and Nirej Sekhon. We benefitted enormously from superb research assistance from Daniel Root, Winston Hanks, Kyle Kelly, Luke P. de Leon, Nina Benjamin, Mallory Morris, and Jared Church. We are enormously grateful to the editors and staff at the Stanford Law Review for their thoughtful and insightful editing.