MVA Litigation Blog

The U.S. Supreme Court kicks off the latest session with transportation issues early up on the calendar. On January 14, 2026, the High Court will hear oral arguments on whether New Jersey Transit Corporation (NJ Transit) can be sued in New York and Pennsylvania courts. NJ Transit is one of the largest public transit providers in the country, providing interstate transportation services connecting New Jersey, New York, and Pennsylvania. But does that mean it can be sued in the courts of all three states? In our previous post, we discussed the U.S. Supreme Court’s grant of certiorari review to resolve two conflicting decisions issued by the high courts of Pennsylvania and New York regarding NJ Transit’s ability to claim interstate sovereign immunity in their state courts: Galette v. NJ Transit (24-1021) and NJ Transit, et al. v. Colt (24-1113). States are entitled to interstate sovereign immunity, which protects them from being sued by a private party in the courts of a different state without consent. Interstate sovereign immunity is grounded in the U.S. Constitution and extends to state-created entities that are considered an “arm of the state.” Thus, interstate sovereign immunity may serve to mitigate the risk borne by interstate transit providers by limiting exposure to the courts of other states. The Galette and Colt cases were consolidated[1] with the question limited to whether NJ Transit is an arm of the state of New Jersey for interstate sovereign immunity purposes. The Supreme Court extended the briefing schedule into November 2025 and scheduled arguments for January 14, 2026. We provide a brief case background and highlight several points of contention as a preview of the arguments.

Case Background

NJ Transit was sued first in New York and subsequently in Pennsylvania under similar circumstances. It sought to dismiss both cases on the grounds of interstate sovereign immunity yet received opposite determinations from the state courts. The Colt plaintiffs sued NJ Transit in New York state court after a plaintiff had been hit by a bus in Manhattan. The Galette plaintiff sued NJ Transit in Pennsylvania state court after being struck while riding as a passenger in a vehicle in Philadelphia. The New York and Pennsylvania state courts considered several factors in analyzing NJ Transit’s arm-of-the-state status, including how the state defined the entity, the level of state control over the entity, and the impact of a judgment against it on the State’s treasury. Yet, in the absence of a definitive standard, the courts weighed the factors they considered differently and reached opposite conclusions on the ultimate question regarding NJ Transit’s immunity claim. New York’s highest court ruled that NJ Transit is not an arm of the state of New Jersey and therefore not entitled to interstate sovereign immunity. A few months later, the Pennsylvania Supreme Court held the opposite – that NJ Transit is an arm of the state of New Jersey and therefore immune from a private suit in the courts of Pennsylvania.

The U.S. Supreme Court granted cert. to resolve this conflict in July 2025. New York’s courts denied NJ Transit’s requests to stay the state trial days before the trial was set to begin in September 2025. NJ Transit ultimately sought a stay from the U.S. Supreme Court four days before the state trial date, arguing that “because sovereign immunity is an immunity from suit and not merely a defense to monetary liability at that lawsuit’s end, the benefit of sovereign immunity ‘is effectively lost if a case is erroneously permitted to go to trial.’” The U.S. Supreme Court granted the stay pending the issuance of its mandate in the Colt and Galette cases. The Court confirmed that “the pending damages trial before the Supreme Court of the State of New York would be barred if New Jersey Transit Corporation were entitled to sovereign immunity from suit” and found there was no irreparable harm posed to the respondents if the trial were delayed.

The Party Positions

NJ Transit and the Colt and Galette plaintiffs present opposing viewpoints of both the analysis of NJ Transit’s structure and operations under the interstate sovereign immunity framework, as well as the very notion of protecting the dignity of the sovereign states that underpins the purpose of the immunity. While they agree that sovereign immunity protects each state from the indignity of being brought before the courts of another state, they diverge on what that requires in these circumstances as the dignity of multiple states is at issue. Similarly, the factors to be considered in analyzing arm-of-the-state status are generally agreed upon – the definition/structure of the entity, the degree of control exercised by the State over the entity, and the impact of a judgment against the entity on the state treasury. But which way the facts lean in this case and which factors are to be given primary consideration is where the parties, and the courts of New York and Pennsylvania, disagree.

Dignity of the States

NJ Transit stresses that the “primary function of sovereign immunity is not to protect state treasuries…but to afford the States the dignity and respect due sovereign entities.” Therefore, it argues, courts must primarily look to evidence of the state’s intent to structure an entity as an arm of the state “to avoid the indignity of overruling a State’s own view regarding how it organized its own government.” It criticizes the New York courts for having “badly misunderstood New Jersey law” and “statelaw quirks” derived from New Jersey Constitutional requirements about the structure of Executive Branch departments while analyzing the state’s intent in creating and assigning control over NJ Transit. NJ Transit points to the NY courts’ alleged failures in Colt as an illustration of the “dangers of one State’s court assessing the status of another State’s entity.”

The Colt and Galette plaintiffs assert, however, that the dignity due under interstate sovereign immunity also must be afforded to their respective states and it cuts against finding immunity for NJ Transit. According to the Colt plaintiffs, “the ‘indignity’ sovereign immunity protects New Jersey against is the indignity of having the State itself haled into court, not the indignity of having its say-so on an issue of federal law questioned…That’s especially so when honoring New Jersey’s say-so harms a sister State’s dignity.” Immunity for NJ Transit would mean that it could injure New Yorkers “without having to answer to New York’s citizens in New York’s courts,” they argue, stressing that the Supreme Court “should not lightly deprive New York of its dignity interest in providing a judicial forum for citizens harmed within its borders.” Galette declares that the “respect for the dignity of co-equal sovereigns is a two-way street,” and Pennsylvania’s dignity certainly would be offended if NJ Transit could operate within its state without being subject to its regulations. As such, “if it is not an intolerable offense to New Jersey’s dignity for NJ Transit to be subject to regulation in Pennsylvania by Pennsylvania authorities, neither can it be an intolerable offense to subject NJ Transit to private suit there, to enforce its traffic and other laws.” In response, NJ Transit took the position that “while no party disputes Plaintiffs could have sued NJ Transit in New Jersey, NJ Transit remains free from coercive process in New York and Pennsylvania,” as “is inherent in the nature of interstate immunity—the contract States agreed to in forming the Union.” As for claims regarding Pennsylvania’s regulatory interests, NJ Transit countered that there would be no impact on Pennsylvania’s regulatory interests “whether NJ Transit stayed as is or was renamed the ‘Division of NJ Transit’ and formally backed by the general treasury.” It also pointed out that Pennsylvania in fact supports New Jersey in this case. Several Amicus briefs have been filed in support of each of the parties, among them is a brief in support of NJ Transit filed by 23 States, including Pennsylvania.

Arm-of-the-State Analysis

Which factors under the arm-of-the-state analysis carry more weight and how do the facts bear out regarding NJ Transit’s relationship with the state? According to NJ Transit, the principal consideration should be the “textual and structural evidence that bears on the State’s intent to ‘structure’ the entity as one of its arms,” followed by consideration of the state’s control over the entity and “its overall financial relationship with the entity.” This is the position that the Pennsylvania Supreme Court took in Galette, finding that the statutory purpose and structure of NJ Transit “weigh heavily in favor of concluding that NJ Transit is an arm of the State of New Jersey.” But, the Colt court found the opposite and NJ Transit criticizes the New York court for disregarding the importance of New Jersey’s intentions and elevating the question of financial liability above them as the determining factor: “At the very least, Colt erred in allowing formal financial liability to overcome the more powerful statutory evidence of state intent and control.”

New Jersey’s Intent/NJ Transit Structure. As evidence of New Jersey’s intent to create NJ Transit as an arm of the state, NJ Transit points to the Legislature creating NJ Transit Corporation as an “instrumentality” of the state in the Executive Branch to fulfill what it deemed to be an “essential public purpose” that was the “responsibility of the state.” Several additional details NJ Transit relies on include the Legislature:

• creating NJ Transit in 1979 after having engaged in unsuccessful efforts to provide subsidies to private companies to provide transit services;
• delegating to NJ Transit “statewide powers, including general law-enforcement powers, eminent-domain authority, and the power to issue regulations that have the force of law;”
• deeming NJ Transit’s property “untaxable property belonging to the State;”
• entitling NJ Transit to be represented by the State’s Attorney General, as in this case; and
• specifically instructing NJ Transit on narrow contexts where it could not assert sovereign immunity—indicating that NJ Transit was structured to have immunity.

The Colt and Galette plaintiffs contradict NJ Transit’s claims, arguing that NJ Transit is a corporation that operates separately with autonomy in commercial operations that are not core government functions. They weigh heavily the fact that NJ Transit has sue-and-be-sued authority, which allows it to sue and be sued in its own name, to choose outside counsel, and to settle lawsuits on its own. Galette likens NJ Transit to a corporate municipality, which “by definition is not an arm of the state.” But, NJ Transit argues that “a State’s decision to use a sue-and-be-sued clause or the corporate form does not remove the entity from the State’s sovereign scope.”

State Control Over NJ Transit. As evidence of state control, NJ Transit relies upon aspects of the Governor’s power over it and the fact that it is subject to similar requirements as other state government entities, functioning consistently with them. For example, the Governor has appointment and removal powers for NJ Transit Board members, and the authority to veto actions the Board takes. The Board must provide minutes of all meetings to the Governor and actions have a 10-day effective delay to accommodate the Governor’s veto power. NJ Transit also is subject to procedural requirements applicable to state agencies, including those for the issuance of rules and resolving challenges to NJ Transit administrative actions, it is required to publish meeting agendas ahead of time, it is subject to legislative reporting requirements, and its records are open to public inspection under government transparency laws. NJ Transit also points to additional controls of the Legislature, including its ability to compel testimony and documents from NJ Transit, its power to veto certain eminent-domain actions, and its control over NJ Transit hires.

The Cole and Galette plaintiffs argue that NJ Transit is nearly autonomous, with its board having “broad leeway to run the corporation’s affairs as it sees fit.” And this is where NJ Transit argues the danger of the parties and courts misunderstanding New Jersey law, because NJ Transit’s seeming independence from the control of the Department of Transportation is due to constitutional requirements on limits of departments in the executive branch, not actual relinquishment of state control. NJ Transit stresses that “the relevant legal question is whether the entity is subject to state control, not that of a particular executive agency.” And it is still accountable to and “subject to back-end review by politically accountable superiors…here, the Governor.”

Financial Impact of Judgment on State Treasury. NJ Transit urges that there should be some nuance to the financial prong of the analysis that requires the courts to look beyond just simply whether or not a judgment against the entity would be paid out of the state treasury. It argues that “the state treasury is not itself formally liable for money judgments against NJ Transit, but NJ Transit is financially dependent on the State for both capital and operating expenses—resulting from the Legislature’s decision to restrict NJ Transit’s ability to incur debt, raise revenue, or lower costs.” It operates at a loss and receives non-federal capital funding “solely through appropriations or disbursements via another state instrumentality, the Transportation Trust Fund Authority (TTFA).” Accordingly, “given the expected reliance on legislative appropriations,” NJ Transit must submit to the Legislature proposed budget recommendations and financial reports and statements. NJ Transit argues that it “is financially integrated with the State and financially dependent on it,” and “[a]lthough New Jersey is not formally liable for [its] debts…in statutory design and in practice the entity depends on state funding.”

Galette asserts that “arm-of-the-state status has never been extended to an entity with (1) sole responsibility for paying judgments entered against it and (2) operational independence from its state creator, including sue-and-be-sued authority.” This is like early public banks, Galette argues, “which [the Supreme] Court, in the early nineteenth century and onward, repeatedly held were not entitled to sovereign immunity.” The Colt plaintiffs similarly focused on the lack of payment from the state treasury. NJ Transit submitted that courts consider the “broader financial relationship, of which formal legal liability is just one part.” It argued that there would be no logic in looking at the entity’s payment of liabilities as dispositive, but ignoring a structure where the state pays a large portion of that entity’s budget.

Conclusion

Will NJ Transit’s view be confirmed as correct – that “a suit against NJ Transit offends New Jersey’s sovereignty because the State made the entity one of its instrumentalities, in its Executive Branch, for essential public purposes, bound by extensive gubernatorial control, and reliant on state funding—even as it formally separated NJ Transit liabilities from the overall state treasury.” More succinctly, NJ Transit is of the view that “[s]o long as New Jersey has structured NJ Transit to share its sovereignty, it matters little how the State structured its bank accounts.” The U.S. Supreme Court will have the opportunity to clarify the proper arm-of-the-state analysis as applied to NJ Transit’s structure and operation. The Court’s review also is being looked to as an opportunity to bring clarity to the arm-of-the-state analysis for entities in other states that similarly offer interstate transportation services, as well as state-created entities providing other services outside of the transportation context. We will keep you posted.

[1] The Court is updating the consolidated docket under Docket No. 24-1021.