F I L E D

United States Court of Appeals

Tenth Circuit

MAY 4 1999

PATRICK FISHER

Clerk

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

FRANKLIN SAVINGS

CORPORATION; FRANKLIN

SAVINGS ASSOCIATION,

Plaintiffs-Appellants, 

v.

UNITED STATES OF AMERICA;

FEDERAL DEPOSIT INSURANCE

CORPORATION, as successor-ininterest to the Resolution Trust

Corporation,

Defendants-Appellees. 

No. 97-3220

Appeal from the United States District Court

for the District of Kansas

(D.C. No. 95-CV-2100-GTV)

R. Pete Smith, (Jonathan A. Margolies with him on the brief), of McDowell, Rice,

Smith & Gaar, Kansas City, Missouri for Appellants.

Michael S. Raab, Attorney, Appellate Staff, Civil Division, U. S. Department of

Justice, Washington, D.C. (Mark B. Stern, Attorney, Appellate Staff, Civil

Division, U. S. Department of Justice, with him on the brief) for Appellees.

Before BALDOCK, KELLY, and MURPHY, Circuit Judges.
1The Federal Deposit Insurance Corporation (FDIC) is now a defendant as the

RTC’s successor-in-interest. See 12 U.S.C. § 1441a(m)(1).

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MURPHY, Circuit Judge.

This appeal concerns the breadth of the discretionary-function exception to

the waiver of sovereign immunity under the Federal Tort Claims Act (FTCA). 

Plaintiffs, who owned most of the stock of the Franklin Savings Association (FSA

or the Association), sued the United States and the Resolution Trust Corporation1

(RTC), seeking damages allegedly caused by the RTC’s conduct as FSA’s

conservator. Before any discovery, the district court dismissed the suit under

Federal Rule of Civil Procedure 12(b)(6) on the basis that plaintiffs’ claims fell

within the FTCA’s discretionary-function exception. This court has jurisdiction

of plaintiffs’ appeal under 28 U.S.C. § 1291.

Plaintiffs primarily argue that their claims arise not from the RTC’s

performance of a discretionary function, but from its violation of specific,

mandatory duties while managing FSA. Those duties include a specific dictate in

the order creating the conservatorship that the RTC conserve and not liquidate the

Association. Plaintiffs argue that the RTC nonetheless intentionally effected a de

facto liquidation of FSA under the guise of conserving it. They thus allege that

the RTC acted in subjective bad faith while performing acts which, viewed
2For a “generalized and simplified overview of the facts” leading to the

conservatorship, see Franklin I, 934 F.2d at 1133–35. For a more detailed

(continued...)

-3-

objectively, fall within the scope of a discretionary function. This poses the

question whether such allegations should bar dismissal under the discretionaryfunction exception. Because this court concludes that the exception’s purpose

compels dismissal of any claim whose ultimate resolution would require judicial

scrutiny of an official’s good faith or subjective decisionmaking, we AFFIRM .

II. PROCEDURAL AND FACTUAL BACKGROUND

This is the third appeal to this court and the seventh published opinion

involving disputes over the conservation and liquidation of the long-gone but not

forgotten Franklin Savings Association. See Franklin Sav. Ass’n v. Office of

Thrift Supervision , 740 F. Supp. 1535 (denying summary judgment), 742 F. Supp.

1089 (D. Kan.1990) (granting judgment after trial), rev'd , 934 F.2d 1127 (10th

Cir. 1991) [ Franklin I ]; Franklin Sav. Ass’n v. Office of Thrift Supervision , 821 F.

Supp. 1414 (D. Kan.1993), aff’d , 35 F.3d 1466 (10th Cir. 1994) [ Franklin II ];

Franklin Savings Corp. v. United States , 970 F. Supp. 855 (D. Kan. 1997)

(decision now on appeal) [ Franklin III ]. This court has distilled the following

summary of the litigation from Franklin II . See 35 F.3d at 1468.

In 1990 the Director of the Office of Thrift Supervision (OTS ) determined

that FSA was “in an unsafe and unsound condition to transact business” and

appointed the RTC as its conservator. 2

 FSA and its parent, Franklin Savings
2

(...continued)

account, see Franklin I, 742 F. Supp. at 1099–1124.

-4-

Corporation (FSC), filed suit under the Financial Institutions Reform, Recovery,

and Enforcement Act of 1989 (FIRREA) to remove the conservator. See 12

U.S.C. § 1464(d)(2)(E) (1989) (authorizing appointment and judicial review); see

generally 12 U.S.C. §§ 1461–1470 (1989). While the district court held the

appointment arbitrary and capricious, this court reversed, holding that review of

the decision to appoint a conservator is limited to the administrative record and

that said record supported the decision. See Franklin I , 742 F. Supp. at 1126,

rev’d , 934 F.2d at 1149. In 1992, after the first suit had been dismissed, the OTS

changed the RTC’s role from conservator to receiver. See 57 Fed. Reg. 41,969

(1992). FSA and FSC again sued. In 1994 this court affirmed the dismissal of

that suit on the ground the decision to appoint a receiver is not subject to judicial

review. See Franklin II , 821 F. Supp. at 1418–24, aff’d , 35 F.3d at 1469–71.

The present action, meanwhile, arose from plaintiffs’ 1993 filing of an

adversary complaint against the RTC in bankruptcy court, in a proceeding

concerning the estate of FSC. See Franklin III , 970 F. Supp. at 860. The

complaint sought damages under the FTCA based on the RTC’s acts as

conservator. See id. The district court withdrew the reference from the

bankruptcy court, and plaintiffs amended their complaint to name the FDIC, the
3Plaintiffs also added a claim under the Administrative Procedure Act (APA),

which the court also dismissed. See Franklin III, 970 F. Supp. at 860, 863–64. 

On appeal, plaintiffs advance no reason to reinstate that claim other than the

bankruptcy-code argument discussed infra at 7–9.

4Plaintiffs’ motion to supplement the record on appeal is granted.

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RTC’s successor-in-interest. 3 See id. The government moved to dismiss all

claims for lack of subject-matter jurisdiction. The court granted the motion, and

this appeal followed. 4

On appeal, plaintiffs primarily challenge the dismissal of their FTCA claim. 

They premise that claim on the RTC’s conduct in 1990–92, while it was acting

under an order appointing it “as conservator . . . not for the purpose of

liquidation.” Plaintiffs argue that the RTC disregarded that specific mandate,

ignored various narrower mandates in its own manuals governing

conservatorships, and breached its fiduciary duties as a conservator by

intentionally effecting a de facto liquidation of the Association.

Plaintiffs specifically decry four sets of transactions from which they infer

the RTC’s sub rosa intent to liquidate the Association. Three of these involve

allegedly precipitate, all-or-nothing sales of asset portfolios in saturated markets. 

The fourth involves an omission: before issuing reports on FSA’s capital, the

RTC did not exercise its statutory power to repudiate burdensome, high-interest

bonds issued by FSA. The capital reports, which reflected asset write-downs that

had decreased FSA’s equity, caused the bond trustee to defease the bonds,
5Plaintiffs sued in the names of both FSC and FSA. The Government disputed

their right to sue in either capacity. It argued that FSA had not filed an

administrative claim, as the FTCA requires. See Franklin III, 970 F. Supp. at

861 (citing 28 U.S.C. § 2675(a)). FSC had filed a claim, but the Government

argued that it could not bring either a shareholder-derivative suit, as it had not

first demanded that FSA’s directors file suit, or a direct claim, as its injuries were

derivative. See id. The district court agreed that FSA could not sue, and that

FSC could not sue directly. It held, however, that FSC could bring a derivative

claim, because it would have been futile to demand of the FDIC, which now

directs the Association, that it essentially sue itself. See id. at 861–63.

Both parties appeal those rulings, but this court need not resolve those

issues. Our affirmance on the discretionary-function exception disposes of all of

plaintiffs’ claims, direct or derivative. Whether a suit falls within the exception

is a threshold question of subject-matter jurisdiction. See, e.g., Tippett v. United

States, 108 F.3d 1194, 1196-97 (10th Cir. 1997); Daigle v. Shell Oil Co., 972 F.2d

1527, 1537 (10th Cir. 1992). Neither party suggests that the inquiry differs if the

suit is direct or derivative. Only if this court were to hold that there is subjectmatter jurisdiction under the FTCA, or under another waiver of immunity, would

we have to decide whether Kansas law entitles plaintiffs to sue directly,

derivatively, or neither. This is true even if we also deem the latter questions

“jurisdictional.” See Arizonans for Official English v. Arizona, 520 U.S. 43,

66–67 (1997) (holding that court may assume standing, despite grave doubts, in

(continued...)

-6-

triggering large losses for FSA. Plaintiffs argue that the RTC engaged in such

conduct in order to deplete FSA’s capital and thereby retrospectively justify the

OTS’s appointment of a conservator. They allege that the RTC caused FSA to

lose some $500 million in potential profits, thus ensuring the Association’s future

liquidation rather than its conservation and eventual return to plaintiffs’ control. 

III. DISCUSSION

Plaintiffs’ complaint included two damage claims pertinent to this appeal:

one against the United States under the FTCA, and one against the FDIC at

common law. 5

 On appeal, the plaintiffs assert three ways the government has
5

(...continued)

order to decide mootness, as both questions concern Article III jurisdiction, not

the merits); Cross-Sound Ferry Servs., Inc., v. ICC, 934 F.2d 327, 341 (D.C. Cir.

1991) (“[C]ourts properly rest on one jurisdictional ground instead of another.”),

overruled in other part by Steel Co. v. Citizens for a Better Envir., 523 U.S. 83,

__, 118 S.Ct. 1003, 1012 (1998).

6Plaintiffs also briefly argue that dismissal before discovery was premature. They

develop this argument so superficially, however, as to waive it. See, e.g., Sports

Racing Servs., Inc. v. Sports Car Club of Am., Inc., 131 F.3d 874, 880 & n.9 (10th

Cir. 1997) (holding that party who noted issue and made “several broad,

conclusory statements” on appeal waived argument for failure to develop).

-7-

waived sovereign immunity: (1) under the Bankruptcy Code, 11 U.S.C. § 106;

(2) under the FTCA, because the discretionary-function exception does not apply;

and (3) under the RTC’s and FDIC’s sue-and-be-sued clauses. 6

A. Plaintiffs Have Waived Reliance on Bankruptcy Code § 106

Plaintiffs’ first argument is easily dispatched, for their complaint did not

allege Bankruptcy Code § 106 as a basis for subject-matter jurisdiction, and they

never sought leave to amend their complaint to do so, or in any way asked the

district court to assume jurisdiction under that provision. Plaintiffs address this

problem by invoking the long-established rule that defects in subject-matter

jurisdiction can never be waived and may be raised at any time on appeal. See

Mansfield, Coldwater & Lake Mich. Ry. v. Swan , 111 U. S. 379, 382 (1884); Fed.

R. Civ. P. 12(h)(3); and, e.g., Laughlin v. K Mart Corp. , 50 F.3d 871, 873 (10th

Cir. 1995). This court, however, has held that “our responsibility to ensure even

sua sponte that we have subject matter jurisdiction before considering a case
7Courts may also ignore a waiver “when manifest injustice would otherwise

result.” Daigle, 972 F.2d at 1539. Plaintiffs do not suggest that we must overlook their waiver of the § 106 argument in order to avoid “manifest injustice.”

8This court did note the lack of a fully developed record, but we relied equally on

Daigle’s failure to “undoubtedly demonstrate[] an unequivocal waiver of

(continued...)

-8-

differs from our discretion to eschew untimely raised legal theories which may

support that jurisdiction.” Daigle v. Shell Oil Co. , 972 F.2d 1527, 1539 (10th Cir.

1992); see also United States ex rel. Ramseyer v. Century Healthcare Corp. , 90

F.3d 1514, 1518 n.2 (10th Cir. 1996) (declining to consider sua sponte a basis for

jurisdiction not argued below or on appeal).

Plaintiffs attempt to distinguish Daigle . They acknowledge that this court

refused to consider a waived argument supporting jurisdiction of Daigle’s suit. 

They argue, however, that we did so because the argument involved disputed

factual issues on which the district court had made no findings. Plaintiffs assert

that their bankruptcy argument, by contrast, presents “a pristine legal question.”

Plaintiffs misread Daigle . This court held that we have no duty to consider

waived arguments supporting subject-matter jurisdiction. See 972 F.2d at 1539. 

We then noted our discretion to ignore a waiver, in any case, if “presented with a

strictly legal question the proper resolution of which is beyond doubt.” Id. 7

 In

declining to apply that exception, this court saw no need to “delve into an in depth

analysis” of the jurisdictional issue, instead simply noting that Daigle’s new

arguments “[did] not go unchallenged.” Id. at 1540. 8 The same is true here: 
8

(...continued)

sovereign immunity.” Id. at 1540.

9The district court thus did not consider two affidavits which the government

filed. See Franklin III, 970 F. Supp. at 861 n.4. It did, however, consider the

RTC manuals and directives which plaintiffs appended to and incorporated by

reference in their complaint. See id. at 865–66.

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plaintiffs argue plausibly that the government waives its discretionary-function

immunity by filing a claim in bankruptcy against the victim’s estate. The

government argues plausibly to the contrary. Plaintiffs may have shown that the

legal question they raise is “pristine,” but they have not shown, as they must, that

its “proper resolution . . . is beyond doubt.” Id. at 1539. This court thus declines

to overlook their waiver.

B. The Discretionary-Function Exception to the FTCA’s Waiver of

Sovereign Immunity

1. Standard of Review

The government moved to dismiss the FTCA claims under Rules 12(b)(1)

and (6), and the court treated the motion as one to dismiss for failure to state a

claim under Rule 12(b)(6). See Franklin III , 970 F. Supp. at 860–61. 9

 As the

court recognized, it must convert a Rule 12(b)(1) motion to one under Rule

12(b)(6), or for summary judgment, “‘[i]f the jurisdictional question is intertwined

with the merits of the case.’” Bell v. United States , 127 F.3d 1226, 1228 (10th Cir.

1997) (quoting Wheeler v. Hurdman , 825 F.2d 257, 259 (10th Cir. 1987)). 

Whether the discretionary-function exception applies is such a question. See id. ;
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Tippett v. United States , 108 F.3d 1194, 1196 (10th Cir. 1997). This court reviews

de novo a Rule 12(b)(6) dismissal. See Tippett , 108 F.3d at 1196–97.

2. Summary of Applicable Law

To avoid dismissal of an FTCA claim under the discretionary-function

exception, a plaintiff must allege facts that place its claim facially outside the

exception. See Kiehn v. United States , 984 F.2d 1100, 1105 n.7 (10th Cir. 1993). 

The district court held that plaintiffs’ claims fell within the exception, which this

court recently explained as follows:

Under the FTCA, the United States waives its sovereign immunity

with respect to certain injuries caused by government employees

acting within the scope of their employment. 28 U.S.C. § 1346(b). 

The FTCA contains an exception to this broad waiver of immunity,

however, for claims “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.” Id. § 2680(a). . . . “The

discretionary function exception . . . marks the boundary between

Congress’ willingness to impose tort liability upon the United States

and its desire to protect certain governmental activities from exposure

to suit by private individuals.” United States v. S.A. Empresa de

Viacao Aerea Rio Grandense (Varig Airlines) , 467 U.S. 797, 808

(1984). If the discretionary function exception applies to the

challenged governmental conduct, the United States retains its

sovereign immunity, and the district court lacks subject matter

jurisdiction to hear the suit. See Johnson v. United States Dep’t of

Interior , 949 F.2d 332, 335 (10th Cir. 1991). 

Tippett , 108 F.3d at 1196–97 (second omission in original).

In dozens of cases in the last decade, this court has determined whether

government conduct was within the exception by using a two-branch analysis
-11-

announced in Berkovitz ex rel. Berkovitz v. United States , 486 U.S. 531, 536–37

(1988). This court has summarized the analysis as follows:

First, we determine whether the governmental conduct at issue “is a

matter of choice for the acting employee.” [ Berkovitz , 486 U.S.] at

536. “[C]onduct cannot be discretionary unless it involves an element

of judgment or choice. Thus, the discretionary function exception

will not apply when a federal statute, regulation, or policy specifically

prescribes a course of action for an employee to follow.” Id. (citation

omitted). In such a situation, “the employee has no rightful option

but to adhere to the directive.” Id.

If the conduct at issue involves an element of judgment or

choice, Berkovitz requires us to “determine whether that judgment is

of the kind that the discretionary function exception was designed to

shield.” Id. Congress preserved governmental immunity for

discretionary functions 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

536-37. Therefore, the exception “protects only governmental actions

and decisions based on considerations of public policy.” Id. at 537.

Bell , 127 F.3d at 1228–29. This court has also noted the Supreme Court’s

modification of Berkovitz ’s second branch: “Only decisions that are ‘susceptible to

policy analysis’ are protected by the . . . exception.” Daigle , 972 F.2d at 1538

(quoting Gaubert v. United States , 499 U.S. 315, 325 (1991)); see infra at 22–23

(discussing distinction between decisions “based on” and “susceptible to” policy

analysis).
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3. Plaintiffs’ FTCA Claims

Plaintiffs’ general grievance is that the RTC violated the provision in the

OTS order that the appointment was “not for the purpose of liquidation.” 

Notwithstanding that dictate, plaintiffs claim, the RTC proceeded to liquidate

FSA. To add specific content to this most general claim, plaintiffs contend that

the RTC breached twenty specific, mandatory requirements detailed in several

agency manuals and directives which guided RTC employees in managing

institutions the RTC was appointed to conserve. 

a. Plaintiffs’ claims are not based upon the breach of any specific,

mandatory requirements contained in RTC manuals and directives.

The gravamen of plaintiffs’ complaint is that the RTC engaged in unwise

asset sales without considering all relevant factors. Plaintiffs contend the RTC

thereby impaired FSA’s franchise value and failed to maintain the value, or

maximize the sale price, of its assets. Plaintiffs ultimately contend that these

failures show that the RTC’s intent was never to conserve FSA, but was from the

start to liquidate it. In other words, the RTC’s decisions whether, when, and how

to sell or manage various assets are consistent with an intent to liquidate, and

inconsistent with an intent to conserve.

Day-to-day decisions in operating a financial institution involve discretion. 

Unless a regulation specifically mandates a particular action, such decisions satisfy

the first branch of Berkovitz . See Gaubert , 499 U.S. at 325–31 (1991) (applying
10The Court rejected the argument “that the challenged actions fall outside the

discretionary function exception because they involved the mere application of

technical skills and business expertise.” Gaubert, 499 U.S. at 331. That was

“just another way of saying that the considerations involv[ed in] the day-to-day

management of a business concern such as [a savings association] are so precisely

formulated that decisions at the operational level never involve the exercise of

discretion within the meaning of § 2680(a), a notion that we . . . reject[].” Id.

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Berkovitz to management of savings-and-loan). “Day-to-day management of

banking affairs, like the management of other businesses, regularly requires

judgment as to which of a range of permissible courses is the wisest.” Id. at 325. 

The Court found it “plain” that the actions at issue in Gaubert “involved the

exercise of choice and judgment.” Id. at 331. 10

To distinguish Gaubert , plaintiffs must identify regulations governing the

RTC’s day-to-day management of a savings association that are sufficiently

specific and mandatory to eliminate the discretion that such management

“plain[ly]” entails. After listing their twenty “specific and mandatory” provisions,

plaintiffs challenge the particular sets of transactions discussed supra at 5. They

focus on five requirements that the RTC allegedly violated in those transactions. 

i. Most of the requirements on which plaintiffs focus are not

specific and mandatory.

Four of the five requirements are to maintain asset values, avoid sales that

reduce franchise value, maximize value, and schedule sales based on various

concerns:
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C The RTC’s Asset Management and Disposition Manual has an assetmarketing section, whose “purpose . . . is to establish policy guidelines

for the packaging and sale of loans and other assets.” It declares a policy

of “tak[ing] the necessary steps to ensure that asset integrity and value

are maintained in order to maximize sales opportunities.”

C The above section also notes that “[a]sset sales should . . . occur quickly

after [a financial] institution is placed into conservatorship if the sale

does not negatively impact the franchise value of the institution.”

C The “Background” paragraph of a directive on selling and managing

securities says that the “RTC is charged with, among other things, the

maximization of value in the timely and efficient disposition of

securities.”

C The same directive also lists responsibilities of the RTC Capital Markets

Branch. It directs the Branch to “[m]anage and schedule timing of

securities sales based on needs of institutions, market conditions, type of

security, and ease of sale.”

None of the four constitutes a “specific and mandatory requirement” as this court’s

precedents define that term. Instead, they all state general goals, or sets of

objectives to balance, in precatory rather than mandatory language.

In Tippett this court held that a Park Service policy that “[t]he saving of

human life will take precedence over all other management actions” was “too

general to remove the discretion from [a Park Ranger’s] conduct” in a situation

that threatened human life. See 108 F.3d at 1197. In Daigle this court addressed a

statute defining environmental-remediation actions “necessary to prevent,

minimize, or mitigate damage to the public health or welfare.” The statute

specified that the actions should “attain a degree of cleanup . . . [which,] at a

minimum . . . [en]sures protection of human health and the environment.” See
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Daigle , 972 F.2d at 1540 (analyzing 42 U.S.C. §§ 9601(23) & 9621(d)(1)). It thus

specified minimum attainments without specifying a course of action to attain

them. This court held the statute did not contain “specific and mandatory

directives.” See id.

The four passages above are no more specific or mandatory than those in

Tippett and Daigle . The first, which refers to RTC “policy,” leaves it to

employees to decide which “steps” are “necessary.” The second mentions asset

sales that “negatively impact the franchise value of the institution” as an

unelaborated caveat to a provision encouraging sales. It does not mandate any

specific process or formula for determining which sales will have such an impact. 

The third describes “maximization of value” as one RTC duty “among other

things.” It neither elaborates that general command nor specifies how to perform

the discretionary task of balancing timeliness, efficiency, and return. The final

passage lists four broad considerations to balance, in an unspecified calculus,

without specifying a course of action for the complex task of managing asset sales.

ii. Plaintiffs failed to allege a damage claim for breach of a

specific, mandatory duty to prepare case memoranda.

The lone potentially troubling requirement among the five on which

plaintiffs have focused is found in the RTC’s Asset Management and Disposition

Manual. It directs employees preparing case memoranda, which are “formal

written document[s] used to request authorization to take . . . action on behalf of
11To allow plaintiffs to avoid the discretionary-function bar by alleging that RTC

employees breached a specific duty to report information, even though the

harmful decisions based on the information were themselves discretionary, would

be in tension with precedent. See Johnson v. United States, 949 F.2d 332, 339–40

(10th Cir. 1991) (rejecting attempt to base claim not only on discretionary

decision how to conduct rescue, but on allegedly nondiscretionary tasks of

gathering and communicating data about accident, as latter tasks are “inextricably

tied” to former, leaving “[n]o meaningful way . . . to consider [those tasks] apart

from the total rescue decision”). In Johnson, however, no specific, mandatory

requirement governed the information-gathering or communication. See 949 F.2d

at 340 n.10. Johnson thus does not foreclose an FTCA suit based on negligence

that did violate such a requirement.

Other circuits’ precedent is divided. Compare Fisher Bros. Sales v. United

States, 46 F.3d 279, 286–87 (3rd Cir. 1995) (en banc) (7–6) (barring such claims

absolutely) with Gray v. Bell, 712 F.2d 490, 515–16 (D.C. Cir. 1983) (barring

claim, but foreseeing exceptions to rule) (cited in Johnson, 949 F.2d at 340) and

Payton v. United States, 679 F.2d 475, 482 & n.6 (5th Cir. Unit B 1982) (en banc)

(similar, and similarly cited)). See also In re The Glacier Bay, 71 F.3d 1447,

1451–54 (9th Cir. 1995) (allowing comparable claim); General Dynamics Corp. v.

United States, 139 F.3d 1280, 1283–86 (9th Cir. 1998) (trying to harmonize

Fisher Bros. and Glacier Bay); id. at 1287–88 (O’Scannlain, J., dissenting). See

generally Richard H. Seamon, Causation and the Discretionary Function

Exception to the Federal Tort Claims Act, 30 U.C. Davis L. Rev. 691 (1997). 

Because plaintiffs’ claim is not actually based on a duty to report information, as

discussed in text, this court expresses no opinion on the legal viability of such a

claim.

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the RTC,” to compare the proposed action to available alternatives. It specifies

that “[a]ll the alternatives must be weighed comprehensively and objectively to

determine the course of action in the best interest of the RTC.” There is some

question whether that passage would qualify as a “specific and mandatory

directive.” 11 Even if it does, however, plaintiffs’ complaint was deficient because,

as discussed below, it did not identify the mere failure to physically prepare case

memoranda weighing alternatives as the cause of plaintiffs’ injuries.
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The government denies that this passage is specific and mandatory. It

argues that the passage simply “provides for alternatives to be ‘weighed . . .’” and

thus “implicitly granted RTC discretion to identify the pertinent options and

determine the weight to attribute to each.” This argument has force insofar as it

goes. But the passage does not only concern the discretionary and unquantifiable

mental process of weighing alternatives. It also concerns the arguably

nondiscretionary and definitely quantifiable physical process of drafting

memoranda which weigh alternatives. On review of this Rule 12(b)(6) dismissal,

this court must assume that RTC employees did not draft case memoranda seeking

authorization for the challenged transactions, or that, if they did, such memoranda

failed to identify and weigh alternatives.

While the government has ignored the potential significance of a

requirement not just to weigh alternatives but to record the process in writing,

plaintiffs have ignored it as well. Their complaint did not attribute any harm to

the breach of a specific mandate to draft memoranda, as opposed to a failure to

perform the discretionary function of weighing options. In that part of their

complaint listing specific, mandatory requirements, plaintiffs simply allege that

the RTC “failed to prepare Case Memoranda in the manner specifically mandated”

and “failed to comprehensively and objectively weigh the alternative actions

available to it as specifically mandated.” Their complaint then details three of the

four “liquidation transactions” on which plaintiffs focus on appeal. In describing
-18-

each transaction, the complaint perfunctorily and identically recites that the RTC

acted “without comprehensively and objectively weighing the alternative actions

available to it.” Nowhere else in their 28-page complaint or in their response to

the government’s motion to dismiss did plaintiffs allude in any way to the specific

duty to draft case memoranda.

After the bald assertion that the RTC failed to prepare memoranda weighing

alternatives, the only parts of the complaint which in any way linked that

requirement to any particular events or injuries simply alleged that the RTC did

not “comprehensively and objectively weigh the alternative actions available.” 

The complaint does not suggest that plaintiffs’ multi-million-dollar injuries flow

from a failure to perform the arguably nondiscretionary function of drafting

memoranda listing alternatives, and not from neglect of the discretionary function

of “comprehensively and objectively weigh[ing] the alternative actions available.” 

Most importantly, plaintiffs have not argued on appeal that the district court

should have read their complaint to allege that a failure to memorialize, as

opposed to a failure to weigh options, caused their injuries.
12This court agrees with the district court, for substantially the reasons stated in

its opinion, that plaintiffs have not shown that any of the remaining fifteen

requirements is both (a) specific and mandatory and (b) a basis for their claims. 

See Franklin III, 970 F. Supp. at 865–66. Plaintiffs’ brief on appeal merely

repeats verbatim the complaint’s list of those requirements.

-19-

iii. Conclusion .

Accordingly, as discussed above and in the district court’s opinion, 12 none

of the twenty provisions that the RTC allegedly violated can enable plaintiffs to

show that their asserted injuries are based upon nondiscretionary conduct. Those

provisions thus afford no basis for reinstating plaintiffs’ dismissed complaint.

b. Plaintiffs cannot avoid the discretionary-function bar by alleging the

RTC intentionally ignored its specific mandate to conserve and not

liquidate FSA.

Plaintiffs’ main argument is that “[t]he RTC as conservator was required to

. . . operate and preserve FSA. Instead, it liquidated FSA and failed to carry out

this nondiscretionary obligation.” Plaintiffs note that the OTS order appointed the

RTC “as conservator for the Association, not for the purpose of liquidation.” They

detail statutory provisions governing the RTC and reflecting a congressional intent

“that only receivers, and not conservators, have the power to liquidate.” Compare

12 U.S.C. § 1821(d)(2)(D) (conservator’s powers) with §§ 1821(c)(13)(B) &

(d)(2)(E) (receiver’s powers). Plaintiffs argue that, because their complaint was

dismissed under Rule 12(b)(6), this court must assume the truth of their factual

allegations, i.e., that the RTC intentionally chose to liquidate rather than conserve
13One challenged transaction was not an asset sale. Plaintiffs argue the RTC

failed to timely exercise its statutory authority to repudiate burdensome highinterest bonds before it issued reports on FSA’s capital which allegedly triggered

the bonds’ defeasance. See 12 U.S.C. § 1821(e)(1) (giving FDIC/RTC discretion,

as conservator, to disaffirm or repudiate any burdensome contract if repudiation

will promote orderly administration of institution’s affairs). The RTC thus had

statutory authority to perform the omitted act and discretion in exercising that

authority. See id. Plaintiffs do not argue that the failure to repudiate breached

any duty other than the general duty to conserve and not liquidate. That failure

thus raises no issues distinct from those raised by the asset sales.

-20-

the Association, in violation of the OTS order. If so, then the RTC consciously

violated the specific duty mandated by that order, stripping itself of the sovereign

immunity preserved by the FTCA’s discretionary-function exception.

The specific transactions that plaintiffs challenge as revealing the RTC’s

intentional violation of the order to conserve and not liquidate are mainly asset

sales. 13 The RTC’s broad authority specifically included power to sell assets of

institutions it was appointed to conserve. See 12 U.S.C. § 1821(d)(2)(G)(i)(II)

(authorizing FDIC/RTC as conservator to “transfer any asset or liability” of

institution). Plaintiffs do not dispute the discretionary character of asset sales,

beyond unsuccessfully invoking the RTC manuals. Two related questions,

however, must be resolved: (1) can plaintiffs avoid the discretionary-function bar

by alleging that RTC employees performed facially authorized acts with an intent

to liquidate; (2) are plaintiffs entitled to discovery to show that the sales were

meant not to conserve the Association, but to effect an intentional, de facto

liquidation?
-21-

i. The purpose of the discretionary-function exception.

At the Rule 12(b) stage, this court cannot simply disbelieve plaintiffs’

factual allegations about RTC officials’ intent, as the Government urges. 

Nonetheless, the purpose of the discretionary-function exception compels this

court to reject plaintiffs’ argument. The argument premises jurisdiction on an

allegation that RTC employees intentionally undertook the forbidden function of

liquidation rather than the mandated, discretionary function of conservation. The

Supreme Court has repeatedly insisted, as discussed below, that FTCA claims are

not vehicles to second-guess policymaking. That principle requires a federal court

to dismiss an FTCA claim if jurisdiction is so dependent on allegations about

government officials’ intent or decisionmaking process that resolving the claim

would require judicial inquiry into those subjective matters.

The Supreme Court has consistently relied on the purpose of the

discretionary-function exception in defining its scope. See Gaubert , 499 U.S. at

322–26; Berkovitz , 486 U.S. at 536–39; Varig , 467 U.S. at 807–10, 813–14;

Dalehite v. United States , 346 U.S. 15, 32–34 (1953). The Court has stressed that

the main congressional purpose in creating the exception was to prevent litigants

and courts from using FTCA actions as vehicles for “second guessing” executivebranch decisions based on public policy. See Gaubert , 499 U.S. at 323; Berkovitz ,

486 U.S. at 536–37; Varig , 467 U.S. at 814; see also H.R. Rep. No. 77–2245, at 10
14See Aragon v. United States, 146 F.3d 819, 823 (10th Cir. 1998); Bell v. United

States, 127 F.3d 1226, 1229 (10th Cir. 1997); Richman v. Straley, 48 F.3d 1139,

1147 (10th Cir. 1995); Black Hills Aviation, Inc. v. United States, 34 F.3d 968,

973 (10th Cir. 1994); Kiehn v. United States, 984 F.2d 1100, 1103 (10th Cir.

1993); Tinkler v. United States, 982 F.2d 1456, 1464 (10th Cir. 1992); Ayala v.

United States, 980 F.2d 1342, 1347 (10th Cir. 1992); Daigle, 972 F.2d at 1538;

Daniels v. United States, 967 F.2d 1463, 1464 (10th Cir. 1992); Johnson, 949

F.2d at 338; Redmon ex rel. Redmon v. United States, 934 F.2d 1151, 1156 (10th

Cir. 1991); Zumwalt v. United States, 928 F.2d 951, 956 (10th Cir. 1991); Allen v.

United States, 816 F.2d 1417, 1424 (10th Cir. 1987). The foregoing opinions all

quote or cite Berkovitz, 486 U.S. at 536–37, Varig, 467 U.S. at 814 or 820, or

both, or refer without attribution to “second guessing.”

-22-

(1942) (discussing exception). This court has repeated that statement of the

exception’s animating purpose in a dozen published opinions since Varig .

14

Under the test first established in Berkovitz , the government must show that

the challenged conduct involves discretion, and that the discretion is of the type

Congress intended to protect. Under Berkovitz , that meant an exercise of

discretion “based on considerations of public policy.” 486 U.S. at 537. In

Gaubert , the Court elaborated on Berkovitz , establishing a “strong presumption”

that an employee who exercised discretion did so in accord with the policy

considerations which led Congress or an agency to confer that discretion. See 499

U.S. at 324. The Court stressed that “[t]he focus of the inquiry is not on the

agent’s subjective intent in exercising the discretion conferred . . ., but on the

nature of the actions taken and on whether they are susceptible to policy analysis.” 

Id. at 325; see also Kiehn , 984 F.2d at 1105 (discussing Gaubert and holding that

“lack of record evidence of public policy factors in the . . . decision . . . is
-23-

immaterial” because “it is unnecessary for government employees to make an

actual ‘conscious decision’ regarding policy factors” (quoting Johnson , 949 F.2d

at 339)); Daigle , 972 F.2d at 1542 (applying presumption that exercise of

discretion was based in policy despite allegation that officials “‘rushed into

[action] without proper planning’”).

The Court’s modification of the second branch of Berkovitz to ask whether

an exercise of discretion was “susceptible to policy analysis” has lightened the

Government’s burden. The change has also served to emphasize that courts should

not inquire into the actual state of mind or decisionmaking process of federal

officials charged with performing discretionary functions. See, e.g., Bruce A.

Peterson & Mark E. Van Der Weide, Susceptible to Faulty Analysis: United States

v. Gaubert and the Resurrection of Federal Sovereign Immunity , 72 Notre Dame L.

Rev. 447, 464–69, 473 (1997) (counting pre- and post- Gaubert case outcomes to

show that eliminating inquiry into actual decisionmaking has made it much easier

to get FTCA claims dismissed); Richard H. Seamon, Causation and the

Discretionary Function Exception to the Federal Tort Claims Act , 30 U.C. Davis

L. Rev. 691, 708–10 (1997) (explaining how Gaubert has “made it even easier for

the government to satisfy the second part of the [ Berkovitz ] test”).

The en banc Third Circuit recently read Gaubert broadly to restrict all

inquiry into officials’ subjective decisionmaking. See Fisher Bros. Sales v. United
-24-

States , 46 F.3d 279, 285–87 (3rd Cir. 1995) ( en banc ) (7–6). Fisher Brothers

concerned a different type of challenge to a discretionary decision than this case,

but the court’s reasoning in determining the type of inquiry that Gaubert bars is

applicable. 

The case involved the FDA Commissioner’s indisputably discretionary

decision to bar Chilean grapes from the United States. See id. at 282. The

decision followed FDA scientists’ allegedly negligent testing of grape samples,

which falsely indicated cyanide. See id. at 282–83. The en banc court concluded

that Gaubert ’s rationale requires dismissal of FTCA claims if a protected exercise

of discretion immediately caused the damages. See id. at 282, 286–87. The

opinion requires dismissal even if plaintiffs disavow any challenge to the exercise

of discretion itself. It thus bars suit for negligent performance of nondiscretionary

data-gathering functions that preceded a discretionary decision, so long as the

decision itself immediately caused the harm. See id. at 286–87. See generally

Seamon, supra , at 722–52 (analyzing case).

Despite accepting plaintiffs’ version of the facts and conceding that their

claims were in a literal sense “based upon” the negligent testing rather than the

Commissioner’s decision, the court nonetheless rejected their theory of proximate

cause as “inconsistent with the purpose of the discretionary function exception.” 
15As a commentator has noted, there is in fact some difference in the “‘quality’”

of interference occasioned by judicial second-guessing if plaintiffs attack not the

discretionary decision itself, but data-gathering that preceded it. See Seamon,

supra, at 735–36 (quoting Fisher Bros., 46 F.3d at 286). In the latter case, a

court need not second-guess the decision’s wisdom; it need only examine the

decisionmaking process to determine whether the negligently produced data

affected it. See id.

-25-

Id. at 286. The court relied on Gaubert to define the range of inquiry which that

purpose forecloses:

[W]here the injury . . . is caused by a regulatory policy decision, . . .

there is no difference in the quality or quantity of the interference

occasioned by judicial second guessing, whether the plaintiff purports

to be attacking the data base on which the policy is founded or . . .

challeng[es] the policy itself.

If plaintiffs [could] . . . challeng[e] the manner in which the

underlying data was collected, federal courts, of necessity, would be

required to examine in detail the decisionmaking process of the

policymaker to determine what role the challenged data played in the

policymaking . . . . Without such an examination and all of the

discovery that would necessarily precede it, a plaintiff . . . would be

unable to prove a causal link between the alleged negligence and the

alleged injury. Yet this is precisely the kind of inquiry that the

Supreme Court sought to foreclose when it ruled out any inquiry into

an official’s “subjective intent in exercising the discretion conferred

by statute or regulation.”

Id. (quoting Gaubert , 499 U.S. at 325). 15

The court held that policy compelled it to read Gaubert as an affirmative bar

to any inquiry into officials’ subjective decisionmaking: “[t]he social cost of

permitting the inquiries required by the plaintiffs’ theory are prohibitive.” Id. The
-26-

majority identified three types of social cost: (1) large tort judgments against the

government; (2) demands on the time and attention of an agency’s “most valuable

human resources” when plaintiffs conduct discovery into the bases for officials’

decisions; and (3) the cost, as Seamon puts it, “of having an official’s exercise of

discretion skewed by her desire to avoid the first two kinds of costs.” Id. at

286–87; Seamon, supra , at 737. Those costs result whether a court examines the

wisdom of the discretionary decision, or merely determines if negligent datagathering affected it. See Seamon, supra , at 738–47; Fisher Bros. , 46 F.3d at

286–87.

Unlike a direct challenge to the exercise of a discretionary function, which

the FTCA plainly bars, plaintiffs’ theory would not require analysis of whether the

RTC was negligent or abused its discretion while trying to perform the function of

conservation. And unlike a Fisher Brothers –type claim, it would not require

analysis of whether any particular data had affected the exercise of discretion. 

Plaintiffs’ theory would instead require judicial inquiry into whether the RTC had

in fact tried to perform the discretionary function of conservation, or had instead

intentionally chosen to perform, sub rosa , the function of liquidation. While

differing from a direct or a Fisher Brothers –type challenge, plaintiffs’ theory

would thus still require a court to permit discovery and make factual findings

regarding RTC employees’ state of mind and intent in running the Association. 

This the discretionary-function exception does not allow.
-27-

ii. Analogous doctrines limiting inquiry into officials’

decisionmaking.

Other doctrines applicable to official conduct support a reading of Gaubert

as an affirmative bar to inquiry into officials’ subjective intent and

decisionmaking. One such doctrine is qualified immunity. See, e.g., Harlow v.

Fitzgerald , 457 U.S. 800, 813–19 (1982) (discussing official immunity from suits

seeking damages for constitutional torts).

In Harlow , the Supreme Court revised the standard for motions to dismiss

based on the doctrine of qualified immunity. See id. at 814–18. The Court noted

it had crafted the doctrine as a compromise between the need to redress

constitutional harms and the need to minimize disruption of officials’ duties. See

id. at 813–14. In so doing, it had assumed that qualified immunity “would permit

‘[i]nsubstantial lawsuits [to] be quickly terminated.’” Id. at 814 (quoting Butz v.

Economou , 438 U.S. 478, 507–08 (1978)). This would mitigate the costs to

society of frequent, unfounded claims against officials. Those costs include not

only direct expenses of litigation, but “diversion of official energy from pressing

public issues, . . . deterrence of able citizens from acceptance of public office . . .

[and] danger that fear of being sued will ‘dampen the ardor of all but the most

resolute, or the most irresponsible [public officials], in the unflinching discharge

of their duties.’” Id. (quoting Gregoire v. Biddle , 177 F.2d 579, 581 (2d Cir.
16The Court here used the term in its common-law sense, which distinguishes

“discretionary” from “ministerial” acts, and not in its distinct but related FTCA

sense.

-28-

1949) (L. Hand, J.)). The direct, diversionary, and dampening costs are the same

as those noted by the Fisher Brothers court in FTCA suits. See 46 F.3d at 286–87.

Before Harlow , qualified immunity depended on both the objective

reasonableness and subjective good faith of official conduct. See Harlow , 457

U.S. at 815 (discussing Wood v. Strickland , 420 U.S. 308, 322 (1975)). Good

faith, a factual issue, proved unamenable to summary judgment. See id. at 816 &

n.27. The Harlow Court thus concluded that “[t]he subjective element . . . has

proved incompatible with our admonition in Butz that insubstantial claims should

not proceed to trial.” Id. at 815–16. The Court further explained that “substantial

costs,” beyond simply prolonging insubstantial claims, “attend the litigation of the

subjective good faith of government officials.” Id. at 816. Such litigation had

proved peculiarly and broadly disruptive:

There are special costs to “subjective” inquiries of this kind. 

Immunity generally is available only to officials performing

discretionary functions. [16 ] In contrast with the thought processes

accompanying “ministerial” tasks, the judgments surrounding

discretionary action almost inevitably are influenced by the

decisionmaker's experiences, values, and emotions. These variables

explain in part why questions of subjective intent so rarely can be

decided by summary judgment. Yet they also frame a background in

which there often is no clear end to the relevant evidence. Judicial

inquiry into subjective motivation therefore may entail broad-ranging
17The Court has limited Mitchell, allowing immediate appeal only of denials of

immunity turning on questions of law, not sufficiency of evidence. See Johnson

v. Jones, 515 U.S. 304, 313 (1995), lim’d in turn by Behrens v. Pelletier, 516 U.S.

299, 312–13 (1996) (holding that genuine factual dispute does not preclude appeal

of discrete ruling on pure legal issue).

-29-

discovery and the deposing of numerous persons, including an

official's professional colleagues. Inquiries of this kind can be

peculiarly disruptive of effective government.

Id. at 816–17 (footnotes omitted). To limit such disruption, the Court adopted a

purely objective test for qualified immunity, holding that “bare allegations of

malice should not suffice to subject government officials either to the costs of trial

or to the burdens of broad-reaching discovery.” Id. at 817–18.

The Court has since emphasized that qualified immunity entails a right to

have suits dismissed at “the earliest possible stage of the litigation,” sparing

officials not only from liability but also from discovery and trial. See Anderson v.

Creighton , 483 U.S. 635, 646 n.6 (1987) (citing Mitchell v. Forsyth , 472 U.S. 511,

526 (1985) (making denial of qualified immunity immediately appealable, lest

right to avoid discovery and trial be lost)). 17 The Court recently held that the right

to be free from discovery is sufficiently important to entitle a defendant to

immediately appeal the denial of a Rule 12(b)(6) motion without sacrificing the

right to immediately appeal a later denial of a summary-judgment motion. See

Behrens v. Pelletier , 516 U.S. 299, 308 (1996) (rejecting one-appeal rule in part

because “ Harlow and Mitchell make clear that [qualified immunity] is meant to
18As illustrated by the opinion establishing that municipalities do not share their

employees’ qualified immunity from § 1983 liability, the analogy between

discretionary-function immunity, which limits governmental liability, and

qualified immunity, which limits officials’ personal liability, is imperfect. See

Owen v. City of Independence, 445 U.S. 622, 650–58 (1980). The Owen Court

declined to rely on qualified-immunity rationales to create a governmental

immunity. See id. at 653–56. It opined that governmental liability is less likely

than personal liability to “paralyz[e] the governing official’s decisiveness and

distort[] his judgment on matters of public policy.” Id. at 655–56.

Owen’s rejection of a qualified-immunity analogy in the § 1983 context is

nonetheless irrelevant in construing the discretionary-function exception for

several reasons. The Owen majority’s tentative empirical speculation that

governmental liability may not affect individual officials was dictum on which the

Court did not rely, perhaps because the four dissenting Justices soundly and

forcefully criticized the majority’s passing comment to that effect. Compare id.

at 656 (deeming “questionable” but not rejecting link between governmental

liability and official timidity); with id. at 668–69 (Powell, J., dissenting). Owen

ultimately relied not on an empirical rationale but a normative one: fear of

governmental liability under § 1983 should lead officials to alter their

decisionmaking to avoid infringing constitutional rights. See id. at 656. This

holding is irrelevant in construing the FTCA, which does not protect

constitutional rights that trump more mundane policy concerns. Cf. id. at 649–50

(rejecting analogy to municipal discretionary-function immunity as reason to

create qualified municipal immunity under § 1983 because, in § 1983 action,

court “does not seek to second-guess the ‘reasonableness’ of the city’s decision”

but only to determine if it violated federal Constitution or laws). The rule that

courts must construe § 1983 broadly to serve its remedial purpose, on which

Owen relied, has no parallel under the FTCA. Compare id. at 650 with Smith v.

United States, 507 U.S. 197, 203 (1993) (disavowing “varying [past] statements

as to how [the FTCA] should be construed” and adopting rule that courts “‘should

not take it upon ourselves to extend the waiver beyond that which Congress

intended . . . [or] narrow the waiver that Congress intended.’”) (quoting United

(continued...)

-30-

give government officials a right, not merely to avoid ‘standing trial,’ but also to

avoid the burdens of ‘such pretrial matters as discovery . . ., as “[i]nquiries of this

kind can be peculiarly disruptive of effective government.”’” (quoting Mitchell ,

472 U.S. at 526 (quoting Harlow , 457 U.S. at 817))). 18
18(...continued)

States v. Kubrick, 444 U.S. 111, 117–18 (1979)). This court had at times said

before Smith that “[e]xceptions to the FTCA are to be narrowly construed.” 

Johnson, 949 F.2d at 336; see also Miller v. United States, 710 F.2d 656, 662

(10th Cir. 1983); First Nat’l Bank in Albuquerque v. United States, 552 F.2d 370,

376 (10th Cir. 1977); Smith v. United States, 546 F.2d 872, 877 (10th Cir. 1976). 

Such comments are no longer valid. Finally, Owen predated Harlow’s conclusion,

made after further experience with qualified-immunity litigation, that an immunity

doctrine must exclude “peculiarly disruptive” subjective inquiry if it is to protect

governmental efficiency. See 457 U.S. at 817.

-31-

A ban on FTCA actions which require inquiry into officials’ subjective

decisionmaking also finds support by analogy to a “central tenet of administrative

law.” See Seamon, supra , at 743–44. The tenet is that courts should not “‘probe

the mental processes’” of administrative officials in APA or comparable review. 

See United States v. Morgan , 313 U.S. 409, 422 (1941) (quoting Morgan v. United

States , 304 U.S. 1, 18 (1938)). In Morgan , Justice Frankfurter disapproved a

court’s decision to allow a party to interrogate a Cabinet Secretary “regarding the

process by which he reached the conclusions of [a challenged] order, including the

manner and extent of his study of the record and his consultation with

subordinates.” Id. The Court said that “the Secretary should never have been

subjected to this examination.” Id.; see also, e.g. , Franklin Savings Ass’n v. Ryan ,

922 F.2d 209, 211–12 (4th Cir. 1991) (discussing breadth of Morgan doctrine and

applying it to bar examination of former OTS Director regarding his decision to

appoint conservator for FSA). Like Harlow ’s purely objective test for qualified

immunity, the Morgan doctrine “allow[s] officials to perform their duties without
19The Morgan rule has a second, very narrow exception for cases in which a lack

of contemporary findings or other administrative record makes effective judicial

review impossible without examining the decisionmaker. See Community for

Creative Non-Violence v. Lujan, 908 F.2d 992, 997–98 (D.C. Cir. 1990) (citing

Overton Park, 401 U.S. at 420); see also Pension Benefit Guar. Corp. v. LTV

Corp., 496 U.S. 633, 654 (1990) (“Subsequent cases have made clear that

remanding to the agency [to explain its reasoning more fully] in fact is the

preferred course”).

-32-

fear of harassment from lawsuits.” Stephen G. Breyer & Richard B. Stewart,

Administrative Law and Regulatory Policy: Problems, Text, and Cases 868 (3d ed.

1992).

Unlike qualified immunity under Harlow , however, the Morgan rule has an

exception for cases involving “a strong showing of bad faith or improper

behavior.” See Community for Creative Non-Violence v. Lujan , 908 F.2d 992, 997

(D.C. Cir. 1990) (citing Citizens to Preserve Overton Park, Inc. v. Volpe , 401 U.S.

402, 420 (1971)). 19 At first blush, that exception may suggest that analogizing to

Morgan in the present case would support reversing the dismissal. A comparison,

however, of the purposes of and relief available under the APA and the FTCA

demonstrates that it is proper to allow judicial inquiry into subjective

decisionmaking in a small number of APA cases, but to preclude it in all FTCA

cases.

The APA’s purpose is to authorize judicial scrutiny of executive-branch

decisionmaking, with two narrow exceptions; it created a “basic presumption of
20See Act of June 11, 1946, ch. 324, 60 Stat. 237 (APA) (codified as amended at 5

U.S.C. §§ 701–706); Legislative Reorganization Act of 1946, Pub. L. No. 79–601,

tit. IV, 60 Stat. 812, 842 (1946) (FTCA) (codified as amended at 28 U.S.C.

§§ 1346(b), 2671–2680).

-33-

judicial review.” See Abbott Labs. v. Gardner , 387 U.S. 136, 140 (1967)

(construing 5 U.S.C. §§ 701–702). The FTCA’s purpose, by contrast, is to remove

sovereign immunity as a bar to compensating people hurt by federal employees’

garden-variety common-law torts. See Kosak v. United States , 465 U.S. 848, 855

(1984); Dalehite , 346 U.S. at 28; Seamon, supra , at 739 n.195. Its purpose is not

to facilitate judicial second-guessing of executive decisionmaking. Such secondguessing is, instead, the point of the APA, which Congress enacted in the same

year as the FTCA. 20 Given the statutes’ diametrically opposed yet complementary

purposes, it is sensible to allow judicial inquiry into bad faith and subjective

decisionmaking in a few exceptional cases under the APA, but to ban all FTCA

suits that necessitate that peculiarly disruptive inquiry. 

Treating bad-faith claims differently under the APA and FTCA also accords

with the divergent remedies under the two statutes. The APA presumptively

authorizes judicial review of almost all administrative acts. See Abbott Labs , 387

U.S. at 140; see also Block v. Community Nutrition Inst. , 467 U.S. 340, 349

(1984); Overton Park , 401 U.S. at 410. As a concomitant of that broad

applicability, Congress has limited the relief available under the APA by waiving

sovereign immunity only as to suits “seeking relief other than money damages.” 5
21Because review of bad faith may be available under the APA, moreover, a

refusal to permit such inquiry in FTCA suits will not leave all plaintiffs without

remedy. See Seamon, supra, at 741 & n.204.

-34-

U.S.C. § 702. The raison d’etre of the FTCA, by contrast, is to waive sovereign

immunity to suits seeking relief via money damages. 

The possibility of damage awards creates a strong incentive to bring FTCA

claims. See Ronald A. Cass, The Discretionary Function Exception to the Federal

Tort Claims Act , in 2 Administrative Conf. of the United States, Recommendations

and Reports 1503, 1519–27 (1987). This incentive, absent in APA suits, suggests

the need for a stricter limit on FTCA litigants’ ability to require federal courts to

scrutinize officials’ subjective decisionmaking. The discretionary-function

exception provides that limit. The exception must bar all suits dependent on

allegations of subjective bad faith if it is to serve its purposes: to protect the

separation of powers and executive-branch efficiency from the disruptive

discovery and judicial scrutiny that would result if large potential damage awards

produced numerous suits, and those suits could not be summarily dismissed

because of the factual nature of intent and good faith. Because the APA averts the

threat of numerous suits by excluding damages, the narrow bad-faith exception to

the rule against examining subjective decisionmaking poses no such risk. 21

 Both Harlow and Morgan thus support the view that Gaubert should bar any

FTCA claim for which jurisdiction necessarily depends on an employee’s bad faith
-35-

or state of mind in performing facially authorized acts. In this case, the RTC’s

statutory powers as conservator authorized all the acts which plaintiffs challenge

as a liquidation. Those acts, if done in good faith, entailed an exercise of

discretion. Without probing RTC officials’ intent and good faith, there is no way

ultimately to determine whether their acts constituted a covert, intentional

liquidation or an effort, perhaps negligent, at conservation.

Faced with the related question whether an official’s acts, if allegedly done

in bad faith, can still be within his or her scope of duty for purposes of official

immunity, the Supreme Court acknowledged the argument that “‘official powers,

since they exist only for the public good, never cover occasions where the public

good is not their aim, and hence . . . to exercise a power dishonestly is necessarily

to overstep its bounds.’” Barr v. Matteo , 360 U.S. 564, 572 (1959) (quoting

Gregoire , 177 F.2d at 581). After a “moment’s reflection,” the Court rejected that

theory in light of the immunity doctrine’s purpose:

“[T]hat cannot be the meaning of the [scope-of-duty] limitation

without defeating the whole [official-immunity] doctrine. What is

meant by saying that the officer must be acting within his power [to

enjoy official immunity for his acts] cannot be more than that the

occasion must be such as would have justified the act, if he had been

using his power for any of the purposes on whose account it was

vested in him.”

Id. (quoting Gregoire , 177 F.2d at 581). The same is true of the FTCA’s

requirement that an official be engaged in performing a discretionary function in
-36-

order to preserve sovereign immunity. What is meant by saying that the officer

must be performing a discretionary function cannot be more than that the

discretionary function would have justified the act, if the official had been

exercising discretion in good faith for any of the purposes on whose account that

discretion was vested in the official. Immunity doctrines can not function well if

mere allegations of bad faith will penetrate them and require trial, or at least

sufficient discovery to allow summary judgment, rather than dismissal under Rule

12(b)(6). Cf. Behrens , 516 U.S. at 508 (noting officials’ right to rely on Rule

12(b)(6) to avoid pre–summary judgment discovery, not just trial, in construing

qualified-immunity doctrine).

iii. Conclusion.

The inquiry necessary to decide whether this case involved “negligent,

good-faith conservation” or “intentional, bad-faith liquidation” would entail the

type of judicial second-guessing which led the Gaubert Court to hold that courts

need not consider officials’ actual decisionmaking in FTCA cases. See 499 U.S. at

325. Such an inquiry would impose the same social costs which the Court

presumably considered in Gaubert , which the Third Circuit discussed in extending

Gaubert to bar claims that require even noncritical examination of discretionary

decisionmaking, and which the Supreme Court discussed in adopting a purely
-37-

objective standard for qualified immunity. See Fisher Bros. , 46 F.3d at 286–87;

Harlow , 457 U.S. at 814–17. 

A rule requiring dismissal of FTCA claims which necessarily turn on

employees’ intent or subjective bad faith has one potentially troubling effect. It

amounts to an irrebuttable presumption that an employee ordered or required by

law to perform a discretionary function, and whose acts are facially consistent with

that function, did try in good faith to perform it. That irrebutable presumption will

inevitably compel dismissal in cases, hopefully rare, in which an official

intentionally ignored or subverted a duty, but not in a way discernible from his or

her objective acts or omissions. To note this unavoidable cost is to invoke

Learned Hand’s “classic statement of the rationale for official immunity”: 

“[A]n official, who is in fact guilty of using his powers to vent his

spleen upon others, or for any other personal motive not connected

with the public good, should not escape liability for the injuries he

may so cause; and, if it were possible in practice to confine such

complaints to the guilty, it would be monstrous to deny recovery. The

justification for [denying recovery] is that it is impossible to know

whether the claim is well founded until the case has been tried, and

that to submit all officials, the innocent as well as the guilty, to the

burden of a trial and to the inevitable danger of its outcome, would

dampen the ardor of all but the most resolute, or the most

irresponsible, in the unflinching discharge of their duties. Again and

again the public interest calls for action which may turn out to be

founded on a mistake, in the face of which an official may later find

himself hard put . . . to satisfy a jury of his good faith. There must

indeed be means of punishing public officers who have been truant to

their duties; but that is quite another matter from exposing such as
-38-

have been honestly mistaken to suit by anyone who has suffered from

their errors. As is so often the case, the answer must be found in a

balance between the evils inevitable in either alternative. In this

instance it has been thought in the end better to leave unredressed the

wrongs done by dishonest officers than to subject those who try to do

their duty to the constant dread of retaliation.” 

Richard H. Fallon, Jr., et al., Hart & Wechsler’s The Federal Courts and the

Federal System , 1165 (4th ed. 1996) (quoting Gregoire , 177 F.2d at 581).

c. The RTC did not engage in nongovernmental activity in commerce

barring a conclusion that it exercised the sort of discretion the

exception protects.

Plaintiffs’ final FTCA argument addresses the second branch of Berkovitz

by invoking the Supreme Court’s recent decision in United States v. Winstar

Corp. , 518 U.S. 839 (1996). Under Winstar , plaintiffs argue, the Government

ceases to exercise discretion of the sort protected by the FTCA, and thus forfeits

its sovereign immunity, when it enters commerce to perform such activities as

managing a savings-and-loan association. See id. at 895. Winstar , however,

concerns the United States’ contractual obligations, not its tort liability. It is thus

inapplicable. Winstar concerned thrifts’ attempts to enforce regulatory contracts

with the United States. Id. at 843–44. The Court observed that “‘[w]hen the

United States enters into contract relations, its rights and duties therein are

governed generally by the law applicable to contracts between private

individuals.’” Id. at 895 (quoting Lynch v. United States , 292 U.S. 571, 579
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(1934)). In a footnote the Court also quoted its ancient observation that “when the

United States ‘comes down from its position of sovereignty, and enters the domain

of commerce, it submits itself to the same laws that govern individuals there.’” 

Id. at 895 n.39 (quoting Cooke v. United States , 91 U.S. 389, 398 (1875)). That

footnote, however, did not change, direct, or compress the scope of the

discretionary-function exception for tort claims. Nor did it implicitly overrule the

central premise of Gaubert : oversight of financial institutions generally entails

discretion of the sort protected by the exception. See 499 U.S. at 324–25. 

C. The FTCA Bars Plaintiffs’ Tort Claims Asserted Directly Against the

FDIC.

The FDIC’s organic statute empowers the FDIC “to sue and be sued in its

corporate capacity.” 12 U.S.C. § 1441a(b)(9)(E). The district court rejected

plaintiffs’ theory that this section entitled them to bring tort claims directly against

the FDIC, regardless of the limits in the FTCA. See Franklin III , 970 F. Supp. at

868. The court aptly quoted the Supreme Court’s recent holding that, 

“In order to place torts of ‘suable’ agencies . . . upon precisely the

same footing as torts of ‘nonsuable’ agencies, Congress, through the

FTCA, limited the scope of sue-and-be-sued waivers such as that

contained in [the FDIC’s] organic statute.” Specifically, Congress

stated [in the FTCA]:

The authority of any federal agency to sue and be sued in

its own name shall not be construed to authorize suits

against such federal agency on claims which are

cognizable under [the FTCA, 28 U.S.C. § 1346(b)], and
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the remedies provided by [the FTCA] in such cases shall

be exclusive.

28 U.S.C. § 2679(a). “Thus, if a suit is ‘cognizable’ under § 1346(b)

of the FTCA, the FTCA remedy is ‘exclusive’ and the federal agency

cannot be sued ‘in its own name,’ despite the existence of a

sue-and-be-sued clause.”

Id. (quoting FDIC v. Meyer , 510 U.S. 471, 476 (1994) (first alteration in Meyer)

(citation omitted from Meyer)). The court further correctly explained that

plaintiffs’ suit is “cognizable” under § 1346(b): it is a straightforward State-law

tort suit. See id. (citing In re Cedar Vale State Bank , 894 P.2d 816 (Kan. 1995)

(recognizing claim against bank receiver)). The court also rejected the argument,

which plaintiffs repeat on appeal, that “if the tort claim against the United States

fails because of the discretionary function exception, it is not cognizable under

§ 1346(b) and the RTC is subject to the tort claim under its sue-and-be-sued

[clause].” See id. As the district court correctly noted, this argument would make

the discretionary-function exception a meaningless rule of pleading: “Litigants

could avoid the force of the statute merely by suing an agency directly.” Id.

Plaintiffs add no persuasive authority to their theory on appeal. This court affirms

the dismissal of their common-law tort claims against the FDIC for substantially

the reasons stated in the district court’s opinion.
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IV. CONCLUSION

This court AFFIRMS the dismissal of all claims for lack of subject-matter

jurisdiction.