Court to consider extent to which New Jersey Transit can be held liable for injuries in other states

The Supreme Court will hear oral argument on Wednesday in a pair of disputes stemming from accidents in Philadelphia and New York City involving buses operated by the New Jersey Transit Corporation, which describes itself as the state’s “public transportation corporation.” The issue at the center of both cases is not whether New Jersey Transit is responsible for the plaintiffs’ injuries, but instead, whether it can be sued in state courts in Pennsylvania and New York.

The New Jersey Legislature created New Jersey Transit in 1979. In the decades since then, it has become one of the largest public transit providers in the United States, with a network of train, bus, and light rail services that extends beyond New Jersey to New York and Pennsylvania.

Jeffrey Colt, the plaintiff in one case, sued New Jersey Transit in a New York state court after he was struck by a New Jersey Transit bus in a crosswalk in Manhattan – leaving him, he says, with “life-changing and permanent injuries.”

New Jersey Transit initially asserted as one of its defenses that it was “immune from suit”; three years later, it asked the court to dismiss the case, arguing that New Jersey Transit was “the alter ego of New Jersey” and therefore it could invoke sovereign immunity – that is, it could not be sued absent the state’s consent.

In a decision in November 2024, the New York Court of Appeals – the state’s highest court – declined to throw out the case. In that court’s view, the decision whether an entity is an “arm of the state” that cannot be sued hinges on whether allowing it to be sued “in New York would offend that State’s dignity as a sovereign.” And that, in turn, hinges on factors such as “how the State defines the entity and its functions, its power to direct the entity’s conduct, and the effect on the State of a judgment against the entity.”

In this case, the New York court concluded, NJ Transit is not an “arm of the state” and allowing the lawsuit against it to go forward would “not offend New Jersey’s sovereign dignity.” In particular, the New York Court of Appeals pointed to the fact that New Jersey would not bear any financial responsibility for a judgment against NJ Transit. And that, it said, “outweighs the relatively weak support provided by the other factors.”

Cedric Galette, the plaintiff in the second case, was injured when the car in which he was a passenger was struck by a New Jersey Transit bus on Market Street in Philadelphia. He filed a lawsuit against New Jersey Transit in state court in Pennsylvania; New Jersey Transit then asked that court to dismiss the case.

In a decision last March, the Pennsylvania Supreme Court agreed with New Jersey Transit that Galette’s case should be dismissed – even as it acknowledged that the New York court had reached the opposite result in Colt’s case. There is no dispute, the state supreme court observed, that New Jersey would be immune from private lawsuits filed in Pennsylvania courts. “The question, therefore, becomes whether NJ Transit is an arm or instrumentality of the State of New Jersey entitled to the protections afforded by the doctrine of sovereign immunity,” the state court wrote.

The Pennsylvania Supreme Court noted that the U.S. Supreme Court had not yet weighed in on how courts should determine whether an entity, like New Jersey Transit, that had been created by a state is an “arm” of the state entitled to the state’s immunity. Under Pennsylvania law, the Pennsylvania Supreme Court said, courts should “give primacy to the manner in which the sister State classifies and describes the entity within the structure of that State.” The state supreme court conceded that NJ Transit has the power to independently raise its own revenue, but it also noted, among other things, that the law creating NJ Transit explicitly described it “as an instrumentality of the State exercising public and essential governmental functions.” Moreover, the Pennsylvania Supreme Court added, “the political branches of the State of New Jersey have significant power over NJ Transit, as the New Jersey Executive and Legislative branches appoint NJ Transit’s board and the board can take no action without seeking the Governor’s approval.” Therefore, the state court concluded, “[a]s a coequal sovereign to New Jersey, Pennsylvania must honor this decision and refuse to allow NJ Transit to be haled into Pennsylvania courts to defend against private suits.”

Galette came to the U.S. Supreme Court in March of last year, asking the justices to review the Pennsylvania court’s decision. NJ Transit came to the Supreme Court approximately a month later, asking the justices to do the same for the New York court’s decision. The justices agreed in early July to hear both cases together, and it instructed the litigants to address a single question – whether, for purposes of its immunity from lawsuits brought against in other states’ courts, NJ Transit is an “arm” of New Jersey.

In its brief in the Supreme Court, NJ Transit told the justices that “[i]nterstate sovereign immunity protects each State from the indignity of being haled into another’s courts without its consent.” That immunity, NJ Transit wrote, “applies not only to lawsuits formally brought against the State, but also to any ‘arm of the State.’” After all, the agency said, a lawsuit against a state office or department “offends a State’s dignity no less than one styled as against ‘the State of New Jersey’ itself.”

To determine whether a state entity is entitled to sovereign immunity in other states’ courts, NJ Transit argued, courts should consider first and foremost whether the state intended “to ‘structure’ the entity as one of its arms, to avoid the indignity of overruling a State’s own view of how it organized its own government.” Courts should also take into account, NJ Transit added, “both the control the State exercises over the entity and its overall financial relationship with the entity too.”

In this case, NJ Transit contended, there is “overwhelming” evidence that it is an arm of the state. The New Jersey Legislature created NJ Transit “to fulfill an ‘essential public purpose,’” and it made it an “instrumentality” of the state housed within the executive branch. Moreover, NJ Transit added, the legislature gave NJ Transit “a series of statewide powers, including general law-enforcement powers, eminent-domain authority, and the power to issue regulations that have the force of law.” The state also exercises significant control over the agency, NJ Transit observed: the governor can appoint and remove the agency’s board members and can “veto any and all actions the Board takes.” Although the state itself is not “formally” responsible for NJ Transit’s legal liabilities, NJ Transit conceded, the agency “is financially dependent on the State for both capital and operating expenses.” And finally, the New Jersey Legislature carved out “narrow” areas in which NJ Transit cannot assert sovereign immunity – which is, the agency said, “an odd choice if the Legislature structured NJ Transit to lack immunity at all.”

Galette countered that he was “unaware of any decision of this Court extending immunity under the arm-of-the-state doctrine to a state-created entity” that has the power both to bring lawsuits and to be sued, and that is exclusively liable for judgments against it. NJ Transit has those two factors, Galette emphasized, in common with 19th-century state-created banks – which, he observed, the Supreme Court “repeatedly held were not entitled to sovereign immunity.”

More broadly, Galette continued, the Supreme Court has instructed courts to consider factors such as whether the state would be liable for judgments against the entity that it created, the entity’s independence from the state, and the nature – governmental or private – of the function that the entity serves.

When applied to NJ Transit, Galette insisted, these factors indicate that the agency is not an arm of the state. New Jersey is not liable for NJ Transit’s debts, and the agency “is functionally independent of the State”: it “litigates in its own name, retains outside counsel, enters contracts, acquires and disposes of property, adopts and amends bylaws, manages its own personnel and labor relations, and generates substantial operating revenues through fares and commercial activities.” And NJ Transit “operates across state lines engaged in a commercial activity, competing with private enterprise for paying passengers” – which is not a traditional governmental function, according to Galette. Therefore, Galette concluded, “[i]t simply cannot be said that a suit against NJ Transit is in fact a suit against New Jersey itself.”

In his brief, Colt made similar arguments. He contended that when the United States was created, corporations that were responsible for judgments against them were “not entitled to sovereign immunity” under any circumstances, and in the years since then, theSupreme Court has never granted sovereign immunityto such corporations. “NJ Transit Corporation,” Colt told the justices, “should not be the first.”

Colt echoed Galette’s arguments regarding the factors that courts should consider in determining whether a state-created entity is an “arm” of the state. He contended that New Jersey has only limited control over NJ Transit – for example, it cannot tell the transit agency to do something, and it cannot fire NJ Transit board members for any reason. “NJ Transit Corporation has near-total discretion to manage its own day-to-day finances and operations,” Colt wrote. And most importantly, he stressed, “New Jersey has disclaimed all legal and financial liability for NJ Transit Corporation.”

Holding that NJ Transit is an “arm” of New Jersey and therefore cannot be sued in New York courts, Colt emphasized, “would allow it to run over a New Yorker outside the Port Authority Bus Terminal, rear end his car in Midtown, or sideswipe him as he bicycles near the Lincoln Tunnel—all without having to answer to New York’s citizens in New York’s courts. This Court should not lightly deprive New York of its dignity interest in providing a judicial forum for citizens harmed within its borders.”

But if there is any doubt that NJ Transit is not an arm of the state, Colt concluded, then the Supreme Court should dismiss the case, leaving the ruling by the New York Court of Appeals in his favor in place. A ruling by the Supreme Court that NJ Transit is an arm of New Jersey, Colt cautioned, would raise “difficult questions about whether it has jurisdiction to vacate the decision below in light of the plain text of the Eleventh Amendment,” which bars the extension of the “Judicial power of the United States” to lawsuits brought against (among other things) one of the states by citizens of another state.

A decision is expected by late June or early July.