In the case of Indian Towing Co., Inc. v. United States, 1955, the U.S Supreme Court ruled that the federal government could be held liable for negligence under certain circumstances where it voluntarily undertakes a service to individuals and then fails to perform it with due care. The dispute arose when a lighthouse operated by the Coast Guard failed temporarily, causing a ship owned by Indian Towing Company to run aground and suffer damage. The company sued for compensation under the Federal Tort Claims Act (FTCA), which allows private parties to sue the U.S government in federal court for most torts committed by persons acting on behalf of America. The Government argued that they should not be held accountable as their operation of lighthouses was discretionary activity exempt from liability under FTCA's "discretionary function" exception clause; however, this argument was rejected by Justice Frankfurter who delivered majority opinion stating that once such an undertaking is embarked upon, there arises duty enforceable at law to perform diligently and carefully within standards established.

In the dissenting opinion for Indian Towing Co., Inc. v. United States, Justice Reed argued that the majority's decision expanded the Federal Tort Claims Act (FTCA) beyond its intended scope and could lead to an overwhelming number of claims against the government. He contended that while it is true that a private individual who fails to maintain a lighthouse may be held liable, this does not mean that similar rules should apply to governmental functions like maintaining lighthouses or other public works projects. The FTCA was designed to waive sovereign immunity in certain cases where government employees act negligently within their official duties, but according to Justice Reed, it was never meant to hold the government accountable as if it were a private entity engaged in commercial activities. This interpretation would open up potential liability for any failure of public facilities such as roads or bridges which he believed went too far.