In the case of Correctional Services Corporation v. John E. Malesko, the U.S Supreme Court ruled in 2001 that private corporations operating under federal contracts could not be sued for constitutional violations committed while carrying out government duties. The plaintiff, John E. Malesko, was a former inmate who suffered a heart attack after being forced to climb five flights of stairs due to an elevator malfunction at his halfway house operated by Correctional Services Corporation (CSC). He filed suit against CSC alleging violation of his Eighth Amendment rights prohibiting cruel and unusual punishment. However, the court held that extending Bivens actions - lawsuits for damages against federal officials accused of violating constitutional rights - to reach private entities would lead to an unwarranted extension of liability which is better addressed through state tort law or contractual remedies provided by Congress.

In the dissenting opinion for Correctional Services Corporation v. John E. Malesko, Justice Stevens argued that private corporations engaged in public service should be held to the same standards of liability as government entities. He contended that when a corporation is performing a function traditionally reserved for the state, such as running a prison, it should not enjoy more immunity from lawsuits than its governmental counterparts would have had under similar circumstances. The majority's decision to deny inmates an avenue to seek redress against abusive corporate practices was seen by Justice Stevens as inconsistent with previous case law and contrary to principles of fairness and accountability. Furthermore, he expressed concern about creating incentives for privatization if private firms could escape liabilities faced by their public counterparts.