A state-created transit corporation providing service in multiple states is not entitled to sovereign immunity when sued for negligence by plaintiffs in New York and Pennsylvania who suffered injuries in separate accidents involving the corporation’s buses, the U.S. Supreme Court has ruled.
The case involves two negligence suits against the New Jersey Transit Corporation, which New Jersey Legislature created in 1979 as a corporation deemed an “instrumentality of the State exercising public and essential governmental functions” but “independent of any supervision or control” of the state’s transportation department.
In 2017, plaintiff Jeffrey Colt sustained injuries when struck by a NJ Transit bus in Midtown Manhattan. In 2018, plaintiff Cedric Galette sustained injuries when a NJ Transit bus struck a car in which he was a passenger in Philadelphia. Both plaintiffs sued NJ Transit for negligence in their respective state courts.
The defendant moved to dismiss on the ground the corporation was entitled to sovereign immunity as an instrumentality of the state of New Jersey. In Colt, the New York Court of Appeals determined that NJ Transit is not an arm of New Jersey. On the other hand, the Pennsylvania Supreme Court in Galette ruled that, for purposes of sovereign immunity, NJ Transit is an arm of New Jersey state government.
The U.S. Supreme Court consolidated the cases and granted certiorari to resolve the conflict.
A unanimous court held that NJ Transit Corporation is not an arm of New Jersey and thus is not entitled to share in New Jersey’s interstate sovereign immunity. In reaching this conclusion, the court pointed to the defendant’s corporate status as “strong” evidence it is not an arm of the state.
Click here to read the full text of the U.S. Supreme Court’s March 4 decision in Galette v. New Jersey Transit Corporation.
BULLET POINTS: “To start, New Jersey structured NJ Transit as a legally separate entity. NJ Transit was created as a ‘body corporate and politic with corporate succession.’ Consistent with that label, NJ Transit possesses typical corporate powers, such as the power to ‘[s]ue and be sued,’ ‘enter into contracts,’ and ‘[p]urchase, … or otherwise acquire, … real or personal property,’ among others. It also has the power to ‘[m]ake and alter bylaws,’ ‘[s]et and collect fares,’ raise funds from ‘gifts, grants, or loans,’ ‘[e]stablish’ its own ‘operating divisions,’ ‘[a]dopt and maintain’ its own ‘employee benefit programs,’ and even ‘[o]wn’ and ‘control’ any ‘corporate entity’ that it ‘acquired’ or ‘formed’ to carry out its statutory objectives. NJ Transit’s corporate status serves as strong evidence that it is not an arm of the State.
“True, NJ Transit’s organic statute also labels it an ‘instrumentality of the State.’ The term ‘instrumentality,’ however, lacks the historical weight the corporate form does and says little about whether an entity is an arm of the State. Moreover, other aspects of New Jersey law undercut any inference that the term ‘instrumentality’ favors NJ Transit’s position. The New Jersey Tort Claims Act, for instance, excludes entities with sue-and-be-sued authority, like NJ Transit, from its definition of the ‘State.’ The New Jersey
Contractual Liability Act also specifies that entities with sue-and-be-sued authority are not part of the State. All told, NJ Transit is therefore structured as a legally separate entity under state law.
“Second, the State is not formally liable for any of NJ Transit’s debts or liabilities. New Jersey law provides that ‘[n]o debt or liability of the corporation shall be deemed or construed to create or constitute a debt, liability, or a loan or pledge of the credit of the State.’ Before this Court, NJ Transit concedes that ‘New Jersey is not formally liable for NJ Transit’s debts.’
“Finally, the control that New Jersey exerts over NJ Transit does not change the overall conclusion here. Undoubtedly, the State exerts a substantial amount of control over NJ Transit. The Governor has appointment and removal powers over the Board; a state cabinet member (the Commissioner of Transportation) chairs the Board; the Governor may veto any of the Board’s actions; and the Legislature may veto some eminent-domain actions. On the other hand, New Jersey law states that NJ Transit ‘shall be independent of any supervision or control by the [transportation] department or by any body or officer thereof,’ and requires that it ‘exercise independent judgment.’ In addition, the Governor’s removal authority for 8 of the 13 board members is limited to for-cause removal. This level of control does not meaningfully affect NJ Transit’s status, given the fact that it is a legally separate corporation and is responsible for its own judgments.”
— Justice Sonia Sotomayor, opinion of the court
