Two negligence lawsuits were consolidated to resolve a conflict between state courts regarding the status of the New Jersey Transit Corporation (NJ Transit). In 2017, Jeffrey Colt was injured by an NJ Transit bus in New York, and Cedric Galette was injured by an NJ Transit bus in Pennsylvania. Both plaintiffs sued NJ Transit in their respective state courts. NJ Transit moved to dismiss, claiming it was an arm of New Jersey entitled to sovereign immunity. The New York Court of Appeals held that NJ Transit was not an arm of the State, allowing the suit to proceed. Conversely, the Pennsylvania Supreme Court held that NJ Transit was an arm of the State, dismissing the suit. The U.S. Supreme Court granted certiorari to resolve this circuit split.
The Court analyzed whether NJ Transit is an arm of the State under federal law, focusing on whether the State structured the entity as legally separate. The Court emphasized that the corporate form is the clearest evidence of legal separateness. NJ Transit was created as a 'body corporate and politic' with the power to sue and be sued, enter contracts, and acquire property. Crucially, New Jersey law explicitly states that no debt or liability of NJ Transit constitutes a debt or liability of the State. The Court held that when a State creates a corporation with these traditional powers, it presumes the entity is not part of the State. The Court rejected the argument that NJ Transit's designation as an 'instrumentality of the State' or its performance of public functions makes it an arm of the State. The Court also clarified that the degree of state control, such as the Governor's power to appoint and remove board members, is not dispositive. Finally, the Court ruled that the practical financial relationship, including state subsidies, does not determine arm-of-the-State status; only formal legal liability matters. Because NJ Transit is a separate legal entity liable for its own judgments, it cannot claim the State's sovereign immunity.
The judgment of the New York Court of Appeals is affirmed, and the judgment of the Pennsylvania Supreme Court is reversed. The cases are remanded for further proceedings. This decision allows negligence lawsuits against NJ Transit to proceed in state courts, as NJ Transit cannot assert New Jersey's sovereign immunity as a defense. The ruling clarifies that state-created corporations with independent legal status and liability remain separate from the State for immunity purposes, regardless of state funding levels or the extent of state control.