WASHINGTON (CN) - New Jersey's Transit Corporation must face lawsuits from victims of two bus accidents, the Supreme Court ruled unanimously on Wednesday, rejecting the public transit agency's sovereign immunity defense.
NJ Transit was created by the New Jersey Legislature over four decades ago to provide train, bus and light rail services across the state and into New York and Pennsylvania. Interstate sovereign immunity bars New Jersey from having to face lawsuits in other state courts.
The Garden State's public transit agency argued that it was due the same protections. Two accidents involving NJ Transit buses put that theory to the test when men in New York and Pennsylvania sued the agency in their respective state courts.
Siding with the bus accident victims, the court rejected NJ Transit's defense. Justice Sonia Sotomayor, a Barack Obama appointee and Empire State native, said the agency wasn't an arm of the state, and therefore not entitled to the same protections.
"States are generally entitled to immunity from being sued in another state's courts without their consent," Sotomayor wrote for the court. "That sovereign immunity is personal to the state and thus extends only to arms of the state itself, not to legally independent entities that the state creates."
Cedric Galette was a passenger in a car hit by a NJ Transit bus in Philadelphia, Pennsylvania that led to his suit against the agency for negligence. Another bus hit Jeffrey Colt while he was in a Manhattan crosswalk. Colt's suit claimed that the accident left him with life-changing and permanent injuries.
The New York Court of Appeals held that NJ Transit was not an arm of New Jersey, allowing Colt's lawsuit to proceed. However, the Pennsylvania Supreme Court concluded the opposite, blocking Galette's suit.
Sotomayor said the Empire State had the correct analysis, holding that NJ Transit's corporate status was strong evidence that it was not an arm of the state. Corporations have a "separate legal personhood," Sotomayor said, allowing them to sue and be sued by its own members.
Under the separate legal structure, entities are liable for their own judgments.
If states are formally liable for judgments against an entity, Sotomayor said, that entity is more likely to be an arm of the state because those liabilities impact the state fisc. New Jersey isn't formally liable for NJ Transit's debts.
"In contrast to formal legal liability, an entity's practical financial relationship with the state, such as its expectation that the state would cover its judgments if needed, has less relevance," Sotomayor wrote. "Just as a state cannot lose its sovereign immunity by 'requir[ing] a third party to reimburse it,', a state cannot imbue an entity with its immunity simply by agreeing to 'pick up the tab.'"
Nearly two dozen states pushed the court to adopt a labeling rule to avoid uncertainty. However, Sotomayor said precedent required the corporate liability path.
"To the extent New Jersey, and other states, created such corporate entities intending that they would remain part of the state and that the state would formally assume their liabilities, the states are always free to amend their laws," Sotomayor wrote.
Galette's attorney praised the decision, noting that NJ Transit's corporate status conferred substantial fundraising benefits on the state and the agency.
"As we've said all along, if New Jersey wants the benefits of a separate legal entity for NJ Transit, it must also take the cost, namely that NJ Transit isn't entitled to sovereign immunity," Michael Kimberly, an attorney with McDermott Will, said in a statement. "That has been the law of the land since at least 1824, and we are very glad to see the Supreme Court agree in modern times."
Source: Courthouse News Service
