Infra Insight Blog

In Galette v. New Jersey Transit Corporation, 146 S. Ct. 854 (2026), the United States Supreme Court held that New Jersey Transit Corporation (NJ Transit) is not an arm of the state of New Jersey and is therefore not entitled to New Jersey’s interstate sovereign immunity. This decision may have implications for how states structure and utilize state-created corporate entities going forward.

States have found that creating corporations can be an effective vehicle for delivering public services. Such a corporation may be granted the necessary governmental powers for accomplishing its mission, but can be structured to maintain financial independence and flexible governance. NJ Transit, for instance, was created by the New Jersey State Legislature as an instrumentality of the state to provide transit services in and around New Jersey. However, NJ Transit’s corporate structure allowed it to be independent of the New Jersey Department of Transportation and shielded New Jersey from liability for NJ Transit’s debts. The quasi-governmental characteristics of state-created corporations raise the question of whether such entities enjoy their creators’ interstate sovereign immunity, which bars private parties from bringing suit against a nonconsenting state in another state’s courts.

Two accidents brought this question into sharp relief. A NJ Transit bus struck Jeffery Colt in New York City and the New York Court of Appeals allowed his suit against NJ Transit to go forward, reasoning that NJ Transit is not an arm of New Jersey and not entitled to share in the state’s interstate sovereign immunity. By contrast, the Pennsylvania Supreme Court reached the opposite conclusion and dismissed a suit brought by Cedric Galette that arose from injuries caused by a NJ Transit bus in Philadelphia.

The Supreme Court accepted both cases for review and issued a unanimous opinion agreeing with the New York Court of Appeals. The opinion, written by Justice Sotomayor, explains that the question of interstate sovereign immunity turns on whether the entity in question is an “arm of the state.” According to the Court, the key question in the arm-of-the-state analysis is whether a “State structured the entity as a legally separate entity liable for its own judgments.” Id. at 868.

Applying this question to NJ Transit, the Court found that New Jersey clearly structured NJ Transit as a separate entity with traditional corporate powers and that NJ Transit’s organic statute explicitly disclaims the state’s liability for NJ Transit’s debts or liabilities. Id. at 871. While the Court conceded New Jersey exerts substantial control over NJ Transit, it found the level of control exerted ultimately does not alter NJ Transit’s status as a separate entity with responsibility for its own liabilities, given the weight of the other factors. Id. at 871-72.

The Court acknowledged a position advanced by several states that argued a state’s own characterization of its created entities should be dispositive for interstate sovereign immunity analysis purposes. However, the Court found the argument unavailing, reasoning that the states’ preferred rule would not promote greater predictability than the Court’s articulated arm-of-the-state analysis. Instead, the Court advised that states “maintain the power to structure themselves as they wish” and can arrange for services to be provided under the protection of interstate sovereign immunity, consistent with the Court’s opinion. Id. at 875.