Last week, the U.S. Supreme Court heard oral arguments in the consolidated appeals for Galette v. New Jersey Transit and New Jersey Transit v. Colt. The consolidated appeal focuses on the question of whether or not New Jersey Transit is an “arm of the state” of New Jersey and resultantly if state sovereign immunity applies to the public transportation corporation.  Audio recordings and printed transcripts can be downloaded here.

Under the 11th Amendment, states have sovereign immunity and cannot be privately sued in other state courts. The NJ Transit case examines the extent to which sovereign immunity extends to public corporations created by the state, based upon whether or not NJ Transit is an arm of the state. This determination is particularly pertinent for transit agencies developed as public corporations by a state with an operational domain extending beyond the borders of their home state. NJ Transit, created by NJ state law in 1979, operates bus and rail services in the high-density tristate area of New Jersey, New York, and Pennsylvania. Beyond transit agencies, other types of public corporations with interstate operations will potentially be implicated by the outcome of the case, including port authorities, energy utilities, public universities, and economic development corporations.  

The case emerged following two lawsuits against NJ Transit with diverging outcomes. The Galette case involves a passenger in a vehicle that was allegedly struck by an NJ Transit bus operating in the state of Pennsylvania. The Pennsylvania Supreme Court agreed with NJ Transit’s argument that as an arm of the state of New Jersey, NJ Transit could not be sued in Pennsylvania courts. In this determination, the Pennsylvania Supreme Court pointed to the fact that NJ Transit was created in NJ law as an instrument of the state to provide an essential public service. The Pennsylvania court also emphasized the political control the state of NJ has over NJ Transit.  

In the Colt case, a pedestrian hit by a NJ Transit bus in New York brought a private suit against NJ Transit to the state of New York. While in this case NJ Transit made the same assertion of state sovereignty, the New York Court of Appeals emphasized that the determination of whether an entity is an arm of the state relies on “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 judgement against the entity.” The NY court emphasized that the state of NJ would not face financial responsibility if NJ Transit is effectively sued. These diverging outcomes in the determination of whether or not NJ Transit can be privately sued in other states resulted in the cases moving to the Supreme Court, being consolidated, and granted cert in July 2025. A decision is expected by June or July 2026.  

In its brief to the Supreme Court, lawyers for NJ Transit argued that the question of whether or not a state entity should be included in sovereign immunity should be determined based upon the original intention of the state in the creation of the entity. When the transit agency was originally created by the state, state law described the entity as an instrument of the state created to provide an essential governmental function. NJ Transit also emphasized the importance of considering the State’s level of regulatory and financial control over the entity. Lawyers for NJ Transit highlighted the governor’s ability to appoint and remove board members of the organization and to veto board decisions. While NJ Transit conceded that the state is not legally liable for NJ Transit, the transit corporation’s financial reliance on the state makes the state effectively responsible for the agency’s legal liabilities. NJ Transit’s arguments also emphasized the agency’s statewide powers, “including general law-enforcement powers, eminent-domain authority, and the power to issue regulations that have the force of law.”  

In the Galette brief, the plaintiffs disputed that NJ Transit is an arm of the state, citing the agency’s independence from NJ, legal liability, and commercial operations. NJ Transit has the authority to sue and be sued, litigates in its own name, is liable for its own debts, and enters into contracts, acquires property, and manages labor relations in its own name. Colt also emphasized the independence of NJ Transit in its operations, finances, and legal liability. Both Colt and Galette framed NJ Transit a commercial entity, competing for paying passengers and operating across state lines. The plaintiffs also emphasized NJ Transit’s broad ability to run the corporation as it sees fit. According to Galette, historically state-created entities with sue and be sued authority have not received state sovereign immunity, pointing to decisions related to 19th century state-created banks. Colt stated that sovereign immunity for NJ Transit would “deprive New York of its dignity interest in providing a judicial forum for citizens harmed within its borders.” 

While both parties emphasized the definition of the entity, the independence of the entity, and the impact of judgements on the state treasury as important factors in determining whether or not an entity is an arm of the state, they disagree about how these factors relate to NJ Transit. According to NJ Transit, state sovereign immunity includes respecting the state’s original intention in the creation of its entities and avoiding “the indignity of overruling a State’s own view regarding how it organized its own government.” According to Colt and Galette, state sovereign immunity protects the state itself from not being brought to court, but does not protect NJ Transit from injuring those in New York or Pennsylvania without having to answer in those state courts. The plaintiffs argue that the dignity of Pennsylvania and New York courts would be infringed upon by immunity for NJ Transit.  

During oral arguments, New Jersey Deputy Solicitor General Michael Zuckerman said NJ Transit is neither a locality nor private business but rather a state agency and subsequently plaintiffs must sue NJ Transit within New Jersey. Zuckerman emphasized NJ Transit’s limitation on raising revenue, influence from the governor, and ability to make rules subject to state procedural laws. Zuckerman stated, “New Jersey owns NJ Transit. NJ Transit has no property rights against the state, and the state sharply limited NJ Transit’s ability to raise revenue, cut costs, or issue debt, effectively promising to cover its annual deficits as it always does.”  

On behalf of the plaintiffs, Michael Kimberly said that NJ Transit was created as a public corporation, not an agency of the state. As a public corporation, NJ Transit is a distinct legal entity and according to Kimberly does not share in sovereign immunity. Kimberly raised concerns that ruling in favor of NJ Transit’s multifactor look at arm of the state determination would create regulatory and jurisdictional confusion. Zuckerman stated that his framework was clearcut as NJ Transit is very clearly not a private corporation nor a municipality. Zuckerman also hypothesized that a ruling against NJ Transit would place risks on numerous state agencies that were also developed as public corporations for the sake of efficiency, who would be subject to being sued without consent. Kimberly emphasized that the plaintiff’s determination of NJ Transit as a corporate entity and not an arm of the state was not primarily from the name of the entity but rather rooted in the separate legal identity and personhood of the entity.  

When Chief Justice Roberts inquired about the impact of New Jersey Transit being held financially liable in legal cases, Zuckerman emphasized that every year the state covers the transit agency’s debts. Kimberly said the question of financial burden is irrelevant in the face of who is actually bearing legal responsibility. Justices Sonia Sotomayor, Amy Coney Barrett, and Ketanji Brown Jackson questioned Zuckerman’s argument that a multifactor test is needed to determine the function of the agency, while Justice Jackson said that if the original intent was for the entity to be a corporation it would presumptively not be included in sovereign immunity. On the other hand, Justice Elena Kagan brought up Biden v. Nebraska in which Missouri Higher Education Loan Authority (MOHELA) was determined to be part of Missouri as a sue-and-be-sued agency.  

From the oral arguments, it was not clear how the Justices will most likely rule. The decision likely to be released by summer will have important implications for transit agencies providing interstate services. The Justices’ decision could potentially open up more transit agencies operating across state lines and other public corporations with interstate operations to more private lawsuits in courts outside of their state of origin. On the other hand, the potential decision could clarify the parameters for public corporations to be considered arms of the state and subsequently potentially cement protection under state sovereignty. Regardless of the outcome, the decision has the potential to provide greater clarity on the legal status of transit agencies created as public corporations and their interstate regulatory responsibilities.