The US Supreme Court recently issued a unanimous decision that is likely to have far-reaching consequences in courthouses and statehouses across the country for years to come.
In Galette v. New Jersey Transit Corp., the court held that NJ Transit is not entitled to sovereign immunity under the arm-of-the-state doctrine, a long-standing legal test used to determine when an entity is entitled to invoke the sovereign’s immunity from suit pursuant to the 11th Amendment to the US Constitution.
The case arose from two similar accidents involving NJ Transit commuter busses. In each instance, plaintiffs filed tort actions in New York and Pennsylvania. NJ Transit moved to dismiss both cases, arguing it was immune from a suit as an arm of the state of New Jersey. The courts in those states reached opposite conclusions. The New York Court of Appeals, applying a three-factor test, concluded that the company was not an arm of the state, while the Pennsylvania Supreme Court held that the company was in fact an arm of the state entitled to sovereign immunity.
In this article, McCarter & English lawyers Mark Makhail and Brendan Ashe analyze the Supreme Court’s decision to focus squarely on New Jersey’s deliberate decision to structure NJ Transit as a corporation and explore the broader implications of the ruling—particularly for lawmakers and legislatures overseeing publicly created corporations operating at the intersection of public governance and private industry.