Oral Arguments Heard in Supreme Court Case on NJ Transit’s Claim of Sovereign Immunity

Two men sued the New Jersey Transit Authority (“NJ Transit”) after they were injured in accidents involving state buses. In its defense, NJ Transit claimed that it was immune from suit because it operated as an “arm” of the state (despite its formal legal status as a independent publicly-owned corporation) and invoked the doctrine of sovereign immunity (a defense that applies to state governments unless the State of New Jersey had expressly consented to being sued).

During oral argument before the Supreme Court earlier this month in Galette v. New Jersey Transit Corp., Galette argued that NJ Transit is not entitled to sovereign immunity because it is a corporation legally separate from the State of New Jersey with operational autonomy. Galette argued that the test for sovereign immunity turns on whether any state-adjacent entity is a legal corporation and not on whether, as a practical matter, it has other features typical of public entities. For example, Galette argued that, as a corporation, NJ Transit maintains the capacity to accept service of lawsuits against NJ Transit, as well as the authority to file lawsuits itself.

In response, NJ Transit argued that the State of New Jersey intended to share its sovereignty with NJ Transit. It further argued that the appropriate legal question is whether NJ Transit, as a practical matter, acted as an “arm” of the state, and not whether it was formally incorporated as a separate entity. In other words, NJ Transit argued that the state’s decision to organize NJ Transit as a corporation was not a sufficient reason alone to withhold sovereign immunity; instead, argued NJ Transit, the legal test for whether sovereign immunity applies turns on how the quasi-state agency functions in practice.

The oral argument focused heavily on a single word: “corporation.” Several of the Justices (i.e., Justices Thomas, Sotomayor, and Barrett) appeared wary of NJ Transit’s argument that an entity “close enough” to a state agency is entitled to sovereign immunity, despite a state’s decision to structure the entity as a non-governmental corporation. Justice Sotomayor, for example, asked how a state’s decision to organize a state agency via the corporate form (and, in doing so, take advantage of the main perk of the corporate form: legal separation from its operators) would mean anything if the Court decided to collapse that legal separation by shepherding a corporation back under the State’s protections of sovereign immunity.

To the contrary, the Court seemed to accept the premise of Galette’s test: that public corporations are not subject to sovereign immunity because the state chose to organize these entities as corporations. The Justices asked Galette about the bounds of this bright-line rule, including asking Galette how limiting sovereign immunity would affect standing, and how the bright-line “corporation” rule would comply with the  Court’s precedent.

The Court seemed persuaded to honor a state’s choice to create a public corporation as distinct from a state’s choice to create a public entity but wrestled with squaring this conclusion with prior Court precedent. The outcome is not clear. The Court’s Opinion in this case will likely be published this summer.