In the 1991 case of Barbara Hafer v. James C. Melo, Jr., et al., the U.S. Supreme Court ruled that state officials can be held personally liable for damages under Section 1983 of the Civil Rights Act when they act in violation of federal law, even if their actions are within their official capacities. The case arose after Pennsylvania Auditor General Barbara Hafer fired several employees who had supported her opponent in an election campaign, including James C. Melo and others who then sued her for violating their First Amendment rights to freedom of speech and association by retaliating against them politically. In a unanimous decision written by Justice Thurgood Marshall, the court rejected Hafer's argument that she was immune from personal liability because she acted as a state official rather than as an individual private party.

In the dissenting opinion for Barbara Hafer v. James C. Melo, Jr., et al., Justice Clarence Thomas, joined by Chief Justice William Rehnquist and Justices Antonin Scalia and Anthony Kennedy, argued that a state official acting in his or her official capacity should be immune from personal liability under Section 1983 of the Civil Rights Act. The majority's decision to hold officials personally liable would deter individuals from public service due to fear of litigation costs and potential damages awarded against them personally. Furthermore, they contended that this ruling contradicted previous court decisions which had established qualified immunity for government officials performing discretionary functions within their role as long as their conduct did not violate clearly established statutory or constitutional rights.