Galette v. NJ Transit Corp. (24-1021)

Term: OT 2025
Argued: 2026-01-14
Decided: 2026-03-04
Vote: 9-0 for Galette
Majority: Roberts, Thomas, Alito, Sotomayor, Kagan, Gorsuch, Kavanaugh, Barrett, Jackson

Holding

Justice Sotomayor delivered the opinion for a unanimous Court. The Court held that NJ Transit is not an arm of New Jersey and thus not entitled to interstate sovereign immunity. The opinion established a three-factor framework:<ul style="margin:var(--space-sm) 0;padding-left:var(--space-lg);line-height:1.7"><li>Legal separateness / corporate form — the "clearest evidence." NJ Transit was created as a "body corporate and politic with corporate succession" with power to sue, be sued, make contracts, and hold property. Courts should presume that a state-created corporation bears all advantages and disadvantages of separate legal status.</li><li>State liability for judgments — NJ Transit's organic statute provides that its debts "shall not constitute a debt [or] liability of the State." The State is not formally liable.</li><li>Degree of state control — least important factor. Even substantial control (Governor appointment/removal, veto powers) does not override corporate separateness because "ultimate control of every state-created entity resides with the State."</li></ul>The Court rejected NJ Transit's argument that its statutory label as an "instrumentality" was dispositive, noting it simultaneously used "body corporate" — a term historically understood to create separate legal personality. The Court also rejected the amici States' argument that state characterizations should be controlling.

Pre-decision prediction

Galette 9-0 (75% confidence).

Opinion of the Court

Authored by the Court (9,687 words total).

CERTIORARI TO THE SUPREME COURT OF PENNSYLVANIA, EASTERN DISTRICT No. 24–1021.

Argued January 14, 2026—Decided March 4, 2026*

In 1979, the New Jersey Legislature created the New Jersey Transit Corporation (NJ Transit) as a “body corporate and politic with corporate succession” and constituted it as an “instrumentality of the State exercising public and essential governmental functions” but “independent of any supervision or control” by the New Jersey Department of Transportation. N. J. Stat. §27:25–4(a). The State gave NJ Transit significant authority, including the power to make bylaws, sue and be sued, make contracts, acquire property, raise funds, own corporate entities, adopt regulations, and exercise eminent domain powers. §§27:25–5, 27:25–13. NJ Transit’s organic statute provides that “[n]o debt or liability of the corporation shall . . . constitute a debt [or] liability of the State,” and that “[a]ll expenses . . . shall be payable from funds available to the corporation.” §27:25–17. NJ Transit is governed by a board of directors (Board). §27:25–4(b). The Governor may remove Board members and may veto Board actions; the Legislature may veto some eminent domain actions. §§27:25–4(b), (f); §27:25– 13(h). NJ Transit is now the third largest provider of bus, rail, and light rail transit, operating within an area that includes New Jersey, New York City, and Philadelphia. In 2017, Jeffrey Colt was struck by an NJ Transit bus in Midtown Manhattan; a year later, Cedric Galette was injured when an NJ Transit bus crashed into a car in which he was a passenger in Philadelphia. Both sued NJ Transit for negligence in their respective home state courts. NJ Transit moved to dismiss both lawsuits, arguing that it is an arm of New Jersey entitled to sovereign immunity. The New —————— *Together with No. 24–1113, New Jersey Transit Corporation et al. v. Colt et al., on certiorari to the Court of Appeals of New York.

Syllabus York Court of Appeals held that NJ Transit is not an arm of New Jersey; the Pennsylvania Supreme Court held the opposite, concluding NJ Transit is an arm of New Jersey. This Court consolidated the cases and granted certiorari to resolve the conflict.

Held: NJ Transit Corporation is not an arm of New Jersey and thus is not entitled to share in New Jersey’s interstate sovereign immunity. Pp. 5–23. (a) Sovereign immunity is “ ‘personal’ ” to the State and extends only to arms of the State itself, College Savings Bank v. Florida Prepaid Postsecondary Ed. Expense Bd., 527 U. S. 666, 675, not to legally independent entities that the State creates. Whether an entity is “an arm of the State . . . is a question of federal law” answered by considering the “provisions of state law that define the agency’s character.” Regents of Univ. of Cal. v. Doe, 519 U. S. 425, 429, n. 5. Pp. 5–10. (1) The Court’s early cases focused on whether an entity was a separate legal person from the State, with the corporate form serving as a key marker of separate legal personhood. A “corporation” was understood as “an artificial person” that could “sue and be sued by its own members” and “contract with them . . . as with any strangers.” Trustees of Dartmouth College v. Woodward, 4 Wheat. 518, 667–668. In Bank of United States v. Planters’ Bank of Ga., 9 Wheat. 904, the Court held that a state-chartered bank was not an arm of Georgia because it was a “corporation” and judgments would be satisfied by the corporation’s property, not the State’s. Subsequent cases reaffirmed this holding even when the State exerted significant control over the bank. See, e.g., Bank of Kentucky v. Wister, 2 Pet. 318, 323–324. The Court also applied the same reasoning to cities and counties created as municipal corporations. See Lincoln County v. Luning, 133 U. S. 529, 530–530. Pp. 6–7. (2) Beginning in the mid-20th century, the Court began taking a more holistic view of an entity’s relationship with the State, but remained focused on whether the State structured the entity to be legally separate, with corporate status remaining central. In Moor v. County of Alameda, 411 U. S. 693, 719–721, the Court held that a county was not an arm of the State because it was created as a “body corporate and politic” with “ ‘corporate powers’ ” and the county alone would be “liable for all judgments against it.” In Mt. Healthy City Bd. of Ed. v. Doyle, 429 U. S. 274, 280, the Court framed the inquiry as asking whether an entity is “more like a county or city” than “like an arm of the State,” and concluded a local school board was not an arm of the State. In Lake Country Estates, Inc. v. Tahoe Regional Planning Agency, 440 U. S. 391, and Hess v. Port Authority Trans-Hudson Corporation, 513 U. S. 30, the Court found that two bistate entities were not arms of the State where they were created as separate legal

Syllabus entities, judgments against the entities were not binding on the States, and the entities generated their own revenues and paid their own debts. Pp. 8–10. (b) The Court’s precedents have consistently and predominantly examined whether the State structured the entity as a legally separate entity liable for its own judgments. The clearest evidence of legal separateness is when the State created a corporation with traditional corporate powers to sue and be sued, hold property, make contracts, and incur debt. A State might create a corporation precisely because of its independent legal status, allowing the State to distance itself from burdens the corporate entity may incur. When a State makes such a decision, courts should presume the corporation enjoys all the advantages and disadvantages of separate legal status, including that it is no longer part of the State itself. Other aspects of state law may also indicate legal separateness, such as defining the entity as a “separate legal entity” or excluding it from the definition of “State” for other purposes. The Court’s precedents also focus on whether the entity is liable for its own judgments or whether the State is formally liable. One central rationale for sovereign immunity is protecting States’ “ability to make [their] own decisions about ‘the allocation of scarce resources.’ ” Lewis v. Clarke, 581 U. S. 155, 167. If the State is formally liable for judgments against an entity, that entity is more likely an arm of the State. An entity’s practical financial relationship with the State, such as an expectation that the State would cover its judgments if needed, or the State’s history of subsidizing the entity, has less relevance. Finally, courts may consider the degree of control the State exerts over the entity, but should do so with caution because “ultimate control of every state-created entity resides with the State,” even those that are not arms of the State. Hess, 513 U. S., at 47. “Gauging actual control” can be a “ ‘perilous’ ” and “ ‘unreliable’ ” inquiry. Ibid. The Court has never found a corporation liable for its own judgments to be an arm of the State, even when the State had significant control, including cases where the State was sole shareholder, possessed appointment and removal powers, and managed the entity’s affairs. See Wister, 2 Pet., at 323–324. Pp. 10–13. (c) Even if an entity is not an arm of the State, a particular suit or remedy may require dismissal due to sovereign immunity if the State is nevertheless the real party in interest. See, e.g., Hopkins v. Clemson, 221 U. S. 636. Because NJ Transit never argued that New Jersey is the real party in interest in either of these cases, dismissal on this ground is not implicated here. Pp. 13–15. (d) Applying these principles, NJ Transit is not an arm of New Jersey. To start, New Jersey structured NJ Transit as a legally separate

Syllabus entity: It was created as a “body corporate and politic with corporate succession” possessing typical corporate powers, such as the power to “[s]ue and be sued,” “enter into contracts,” and “acquire . . . property.” §§27:25–4(a), 27:25–5(a), (j), (r). NJ Transit’s corporate status serves as strong evidence it is not an arm of the State. Although NJ Transit’s organic statute labels it an “instrumentality of the State,” §27:25–4(a), that term lacks the historical weight of the corporate form and says little about arm-of-the-State status. Other aspects of New Jersey law undercut any inference from the term “instrumentality”: The New Jersey Tort Claims Act and Contractual Liability Act exclude entities with sue-and-be-sued authority from the definition of “State.” §§59:1, 59:3, 59:13–2. Second, as NJ Transit concedes, the State is not formally liable for any of NJ Transit’s debts or liabilities under New Jersey law. §27:25–17. Finally, the control New Jersey exerts over NJ Transit does not change the conclusion. Although the State exerts substantial control— e.g., Governor’s appointment and removal powers, §27:25–4(b); cabinet member chairing the Board, §27:25–4(d); gubernatorial veto power, §27:25–4(f); legislative veto over some eminent domain actions, §27:25–13(h)—New Jersey law also states NJ Transit “shall be independent of any supervision or control by the [transportation] department” and requires it to “exercise independent judgment.” §§27:25– 4(a), 27:25–4.1(b)(2)(d). This level of control does not meaningfully affect NJ Transit’s status with respect to the arm-of-the-State analysis given that it is a legally separate corporation responsible for its own judgments. Pp. 15–17. (e) NJ Transit’s and its amici’s counterarguments are unavailing. NJ Transit contends corporate status is not dispositive, but NJ Transit is a corporation with all the hallmarks of separate legal personhood, and the Court has not previously found a similarly structured corporation to be an arm of the State. NJ Transit’s reliance on State Highway Comm’n of Wyo. v. Utah Constr. Co., 278 U. S. 194, is misplaced because that case concerned whether the State was the real party in interest in a particular contract dispute, not whether the entity was in the abstract an arm of the State. NJ Transit argues its description as serving “public and essential governmental functions,” §27:25–4(a), and its delegation of substantial public powers demonstrate an intent by New Jersey to create it as an arm of the State. The arm-of-the-State analysis, however, focuses not on whether the entity serves public functions but on whether the State chose to serve those functions through its own apparatus or through a legally separate entity. Cities and counties serve public functions and exercise police powers but are not arms of the State. Assessing what qualifies as an essential governmental function can also be “unsound

Syllabus in principle and unworkable in practice.” Garcia v. San Antonio Metropolitan Transit Authority, 469 U. S. 528, 546. NJ Transit also contends that the Court should consider its practical financial relationship with the State, including the degree of state funding and the likelihood the State would pay its judgments. Neither Lake Country nor Hess supports this position: Lake Country’s discussion of practical consequences relied on real-party-in-interest cases, while its arm-of-the-State analysis discussed only whether the Compact expressly provided that obligations would not bind the States. 440 U. S., at 402. Hess focused on whether the Compact or state laws required the States to bear judgments, concentrating on formal liability rather than the entity’s practical financial relationship with the State. 513 U. S., at 46. Hinging arm-of-the-State status to practical realities of state funding also risks arbitrary distinctions and inconsistent treatment, as illustrated by New Jersey’s funding of NJ Transit’s operating budget oscillating from 15% to 46% over 35 years. Finally, NJ Transit points to cases outside the sovereign immunity context to argue that the Court should place more weight on the State’s control over, and practical financial relationship with, the entity. Those cases, however, warned that an entity can count as part of the State for some but not other purposes, and thus have little bearing on the arm-of-the-State analysis. Amici States urge the Court to adopt a rule that a State’s own characterization of an entity should be dispositive. This position focuses on the label the State places on an entity, rather than on whether the State structured the entity as legally separate. It also prioritizes one characterization (“instrumentality”) over another (“body corporate”), and there is no good reason to believe the State intended NJ Transit to be part of the State itself by using “instrumentality” when it simultaneously used “body corporate,” a term traditionally understood to create a “[s]eparate legal personality,” First Nat. City Bank v. Banco Para el Comercio Exterior de Cuba, 462 U. S. 611, 625. The States’ preferred test does not promote predictability because it still requires courts to decide which state-law pronouncement is dispositive. Consistency is promoted by adhering to the long line of cases finding statecreated corporations formally liable for their own judgments not to be arms of the States that created them. States maintain the power to structure themselves as they wish and are free to amend their laws if they intend corporate entities to remain part of the State and for the State to assume their liabilities. Pp. 17–23. No. 24–1021, 332 A. 3d 776, reversed; No. 24–1113, 43 N. Y. 3d 463, 264 N. E. 3d 774, affirmed; and both cases remanded. SOTOMAYOR, J., delivered the opinion for a unanimous Court.

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