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Following a failed attempt by the Department of Agriculture to revoke or suspend his commodity futures commission company's registration, Arthur Economou sought damages against Earl Butz and several other federal administrative officials for wrongful initiation of administrative proceedings. On appeal from an adverse district court finding of absolute immunity for state officials, the New York Court of Appeals reversed as it found that federal administrators were only entitled to qualified immunity. Butz appealed and the Supreme Court granted certiorari.

Are federal administrators entitled to absolute or qualified immunity in the face of challenges to their conduct of public business?

In a 4-to-5 opinion, the Court began by noting that absent exceptional circumstances federal executive officials are only entitled to qualified immunity, since such officials must abide by constitutional and statutory scope-of-power limitations. Federal officials who perform adjudicatory, or other similar prosecutorial functions, cannot, however, be held liable for mere "good faith" judgment errors. The Court reasoned that the risk of making unconstitutional determinations is outweighed by the need to preserve independent judgement, through grants of absolute immunity to judges and other similarly situated decision makers. The Court concluded that the similarity between the type of decision-making required of federal prosecutors and other administrative agents is sufficiently strong to warrant an extension of absolute immunity to the latter for decisions made in the course of their official conduct.