US Supreme Court Rules NJ Transit Not Entitled to Sovereign Immunity

In Galette v. New Jersey Transit Corporation, 607 U.S. ___ (2026), the U.S. Supreme Court held that the New Jersey Transit Corporation is not an arm of the state of New Jersey and thus is not entitled to share in New Jersey’s interstate sovereign immunity.

Facts of the Case

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.

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.

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.

NJ Transit is governed by a board of directors (Board). The Governor may remove Board members and may veto Board actions; the Legislature may veto some eminent domain actions. Today, NJ Transit is 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 tr5it is an arm of New Jersey entitled to sovereign immunity. The New 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. The Supreme Court consolidated the cases and granted certiorari to resolve the conflict.

Supreme Court’s Decision

The Supreme Court reversed and remanded, holding that NJ Transit Corporation is not an arm of New Jersey. Justice Sonia Sotomayor wrote on behalf of the unanimous Court.

In reaching its decision, the Supreme Court highlighted that its precedents have “consistently, and predominantly, examined whether the State structured the entity as a legally separate entity liable for its own judgments.”

As Justice Sotomayor explained, “The clearest evidence that a State has created a legally separate entity is that it created a corporation with the traditional corporate powers to sue and be sued, hold property, make contracts, and incur debt.”

Justice Sotomayor also noted that the Court’s cases suggest that while courts may consider the degree of control the State exerts over the entity, they should do so with caution. “Control is not especially probative because ‘ultimate control of every state-created entity resides with the State,’ even those that are not arms of the State,” she wrote.

Applying these principles, the Court unanimously determined that NJ Transit is not an arm of New Jersey. It cited NJ Transit’s corporate status as strong evidence it is not an arm of the State. In further support of its conclusion, the Court also noted that New Jersey cannot be held liable for any of NJ Transit’s debts.

While the Court acknowledged that the State exerts “substantial control” over the agency, it ultimately found that 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.

The Supreme Court went on to reject New Jersey’s counterarguments. With regard to NJ Transit’s contention that its description as serving “public and essential governmental functions,” and its delegation of substantial public powers demonstrate an intent by New Jersey to create it as an arm of the State, the Court noted that the arm-of-the-State analysis, 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.

The Court also rejected calls to adopt a rule that a State’s own characterization of an entity should be dispositive. “One problem with the States’ position is that it focuses on the label a State places on an entity, rather than assessing whether the State structured the entity as legally separate,” Justice Sotomayor wrote. “Another problem is that the States’ position prioritizes one of New Jersey’s characterizations, the term ‘instrumentality,’ over another, ‘body corporate.’” She added:

The States’ preferred test that any label a State chooses is dispositive therefore does not promote predictability in the treatment of state-created entities because it still requires courts to decide which state-law pronouncement is dispositive. Instead, what promotes consistency is adhering to a long line of cases in which this Court has found state-created corporations that are formally liable for their own judgments not to be arms of the States that created them.

Finally, the Court emphasized that 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.