In the case of United States v. Sherwood (1940), the Supreme Court ruled that the federal government cannot be sued without its consent, reaffirming its sovereign immunity. The plaintiffs were creditors who had won a judgment against a bankrupt company and sought to collect from the U.S. government because it owed money to this company for unpaid coal shipments. They argued that under Section 3466 of Revised Statutes, their claim should take precedence over those by other creditors in bankruptcy proceedings since they are debts due to the U.S., but both lower courts dismissed their claims on grounds of sovereign immunity. The Supreme Court upheld these decisions, stating that while Congress has waived sovereign immunity in certain cases through legislation allowing lawsuits against specific agencies or officials, such waivers must be "strictly interpreted" and do not extend beyond what is explicitly stated in law. In this case, there was no statutory provision permitting suits like theirs against the federal government itself rather than an agency or official acting within scope of employment; hence they could not sue for payment out of public funds held by Treasury Department.

In the dissenting opinion for United States v. Sherwood, Justice Black argued that the majority's decision was too narrow in its interpretation of sovereign immunity and failed to consider broader principles of justice and fairness. He believed that by denying citizens the right to sue their government under certain circumstances, they were effectively being denied a remedy for wrongs committed against them. This, he felt, contradicted fundamental democratic values such as accountability and transparency in governance. Furthermore, he disagreed with the majority's view that allowing such lawsuits would disrupt governmental operations or drain public resources excessively; instead asserting it could encourage more responsible behavior from government officials knowing they could be held accountable for their actions.