Sovereign Immunity; Arm of the State
Galette v. NJ Transit, 293 A.3d 649 (Pa. Super. 2023), allocatur granted Feb. 14, 2024, appeal docket 4 EAP 2024
This case arises from a personal injury lawsuit filed by a vehicle passenger against the New Jersey Transit Authority (NJ Transit) alleging negligence related to a collision with a bus owned and operated by NJ Transit. NJ Transit filed a motion to dismiss alleging that it was an “arm” of the State of New Jersey and that Mr. Galette’s claims against it were barred by the doctrine of sovereign immunity. The trial court denied NJ Transit’s motion to dismiss. NJ Transit petitioned Superior Court for interlocutory appeal.
Superior Court granted NJ Transit’s interlocutory appeal and held that NJ Transit is not an arm of the state of New Jersey entitled to sovereign immunity. Superior Court explained that Pennsylvania’s six-part test for determining whether an entity is an arm of the state was not dispositive in this case, reasoning that:
The first element in Pennsylvania’s six-part test entails an examination of NJ Transit’s status under New Jersey law, which clearly evinces support for the conclusion that it should be considered an instrumentality of the State of New Jersey. See N.J.S.A. § 27:25-4 (“[NJ Transit] is hereby constituted as an instrumentality of the State exercising public and essential governmental functions, and the exercise by [NJ Transit] of the powers conferred by this act shall be deemed and held to be an essential governmental function of the State.”). Similarly, the second factor regarding relative autonomy is also supportive of a finding that NJ Transit is an alter ego of the State’s government. See Karns, supra at 518 (reviewing New Jersey statutes to document the “operational constraints” placed upon NJ Transit by the state government, which controls the appointment of its governing board, reviews and audits its expenditures, and possesses veto power over actions taken by its board and certain acquisitions). Finally, the sixth factor also supports the same conclusion, as NJ Transit’s activities are explicitly identified as an “essential governmental function” of New Jersey. See N.J.S.A. § 27:25-4.
By contrast, however, the remaining three factors augur in favor of the opposite conclusion. Specifically, NJ Transit is independently empowered to raise revenue through several different avenues. See N.J.S.A. § 27:25-5(k), (n)-(o) (providing NJ Transit may generate revenue through the disposition of “real and personal property,” by setting and collecting fares, rentals, fees, and other charges, and/or by depositing corporate revenues in interest-bearing accounts). Moreover, NJ Transit is funded from a “combination of federal, state, and local funds,” such that “it is not entirely reliant on state funds[.]” Karns, supra at 516. Finally, New Jersey law provides that “[n]o debt or liability of the corporation shall be deemed or construed to create or constitute a debt, liability, or a loan or pledge of the credit of the State.” N.J.S.A. § 27:25-17. Accordingly, “the [S]tate is under no legal or other obligation to pay NJ Transit’s debts or to reimburse NJ Transit for any judgments that it pays.” Karns, supra at 516. Thus, the third, fourth, and fifth factors do not support NJ Transit’s alleged status as an instrumentality of New Jersey.
Slip op. at 9-10. Superior Court concluded that finding NJ Transit was not an arm of the state posed no risk to the sovereign dignity of the state, reasoning that:
NJ Transit is a distinct legal entity that is empowered to sue, and be sued, in a capacity that is independent from the State. See N.J.S.A. §§ 27:25-4(a), 27:25-5(a). To that end, NJ Transit is authorized “[t]o employ and retain legal counsel” at its own discretion and, thereby, manage its own legal affairs. See N.J.S.A. § 27:25-5(z). New Jersey has also disclaimed any and all financial responsibility as to the liabilities of NJ Transit. See N.J.S.A. § 27:25-17.
We discern no risk to the sovereign dignity of New Jersey in permitting a suit against NJ Transit to proceed. For the purposes of such legal disputes, it seems beyond cavil that NJ Transit operates as a “wholly independent entity” that cannot bind the State of New Jersey or otherwise place it in a position where it will be “subject to and controlled by the mandates of judicial tribunals,” without its consent, “at the instance of private parties.” Goldman, supra at 1183. Thus, the paramount consideration of the Eleventh Amendment does not support a finding that NJ Transit is a state instrumentality for the purposes of sovereign immunity. See id. at 1183-84.
Slip op. at 12-13. Superior Court further reasoned that New Jersey bore no culpability for transit authority’s financial liabilities, which supported a conclusion that NJ Transit is not a state instrumentality. Having found “no threat to either the sovereign dignity or the state treasury of New Jersey,” Superior Court held that NJ Transit is not an arm of the State of New Jersey and, thus, it is not entitled to the protections of sovereign immunity. Slip op. at 13.
The Pennsylvania Supreme Court granted allocatur to consider the following issues:
(1) Whether guidance by this Court is necessary when the Superior Court issued an opinion that New Jersey Transit is not an arm of the State of New Jersey, conflicting with its own prior decision in Flamer v. New Jersey Transit Bus Operations, 414 Pa.Super. 350, 607 A.2d 260 (1992) and thereby creating inconsistent precedent?
(2) Whether guidance by this Court is necessary when the Superior Court disregarded the persuasive authority of Karns v. Shanahan, 879 F.3d 504 (3rd. Cir. 2018) and instead misinterpreted and misapplied Goldman v. SEPTA, 618 Pa. 501, 57 A.3d 1154 (2012) to issue an opinion that New Jersey Transit is not an arm of the state of New Jersey and therefore not entitled to Eleventh Amendment Sovereign Immunity?
(3) Whether guidance by this Court is necessary because the issue of whether New Jersey Transit is an arm of the state of New Jersey entitled to Eleventh Amendment Sovereign Immunity under the United States Constitution in accordance with Franchise Tax Board of California v. Hyatt, 587 U.S. 230, 139 S.Ct. 1485, 203 L.Ed.2d 768 (2019), is an issue of first impression in this Court?
In granting allocatur, the Supreme Court further directed the parties to address Marshall v. Southeastern Pennsylvania Transp., Authority, 300 A.3d 537 (Pa. Cmwlth. 2023), in which Commonwealth Court held that the New Jersey state transit system did not consent to be sued outside of New Jersey courts, and thus did not waive its sovereign immunity under New Jersey Tort Claims Act with respect to negligence action brought in Pennsylvania court by passengers against system.
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