In the United States v. Orleans et al., 1975, the Supreme Court ruled that a community action agency (CAA) created under the Economic Opportunity Act of 1964 was not a federal agency or instrumentality for purposes of the Federal Tort Claims Act (FTCA). The case arose when an employee of CAA caused a fire while performing his duties, leading to property damage claims against both him and CAA. The government argued it should be immune from these claims as per FTCA since CAA was federally funded and subject to significant federal regulation. However, the court held that despite receiving federal funds and being regulated by federal rules, CAAs were intended to be locally based organizations with local control over their operations. Therefore they did not qualify as part of any government department or agency covered by FTCA's waiver of sovereign immunity in tort cases.

In the dissenting opinion for United States v. Orleans et al., Justice Rehnquist argued that the majority's decision to absolve the federal government of liability was incorrect. He contended that, under the Federal Tort Claims Act (FTCA), a community mental health center funded and heavily regulated by the U.S. government should be considered a federal agency, thus making it liable for its employees' actions. The FTCA waives sovereign immunity for certain torts committed by persons acting on behalf of federal agencies; therefore, if an employee at such a facility commits malpractice or negligence causing harm to patients, as in this case, then according to Rehnquist’s interpretation of FTCA provisions, it would make sense for victims to seek redress from their ultimate employer - i.e.,  the U.S Government.