The King is Dead, Long Live the King!: Sovereign Immunity and the Curious Case of Nonappropriated Fund Instrumentalities

Abstract

Nonappropriated fund instrumentalities, or NAFIs, are neither wholly governmental nor wholly private; rather they incorporate characteristics of both private and governmental organizations. The primary benefit of this dual characterization attaches to the NAFIs themselves. Once an entity is determined by a court to be a NAFI it cannot be sued. In state and district court, NAFIs are held to be immune from suit because, as quasi-governmental entities, they partake of the sovereign immunity of the United States. However, the Court of Federal Claims, which normally has exclusive jurisdiction to hear suits against the United States for money damages, refuses to entertain suits against NAFIs as well.

This anomaly, that a suitor has no redress for a NAFI’s breach of contract, has drawn much criticism as a matter of policy. Policy considerations aside, however, the purpose of this article is to determine whether the NAFI doctrine has a basis in law. The article first traces the history of the NAFI doctrine from its origins to the present day, describing the changes that have taken place in NAFI doctrine jurisprudence during the sixty years of its existence. Looking at the NAFI doctrine through a historical lens will reveal the different legal bases that have been used to support the doctrine through the decades. Next, the article takes up each of these potential bases for the NAFI doctrine in turn, examining each to see if any of these bases stands up to legal scrutiny. After determining that the NAFI doctrine is compelled neither by statute nor Supreme Court precedent, the article proposes several ways of correcting this long-standing error.

Quoted in Slattery v. United States, 635 F.3d 1298, 1316 (Fed. Cir. 2011) (en banc).

Keywords: Sovereign Immunity, Government Contracts, Nonappropriated Fund Instrumentality, Tucker Act