NJ Transit Looks Like a Corporation So It Can Be Sued Like One

The US Supreme Court’s recent decision in Galette v. New Jersey Transit Corporation illustrates how constitutional doctrine can turn on the legal structure governments choose to create.

In a unanimous opinion by Justice Sonia Sotomayor, the Supreme Court held that New Jersey Transit Corp. doesn’t qualify as an “arm of the State” entitled to interstate sovereign immunity.

The decision allows negligence suits arising from accidents involving the transit authority to proceed in the courts of Pennsylvania and New York, reinforcing the role corporate structure can play in sovereign-immunity analysis.

The case arose from two accidents involving New Jersey Transit buses that occurred outside New Jersey—one in Pennsylvania and another in New York. The injured plaintiffs brought negligence actions in the states where the accidents occurred.

New Jersey Transit moved to dismiss, arguing that because it was created by the New Jersey Legislature and performs an essential governmental function, it should share the state’s sovereign immunity and therefore couldn’t be sued in another state’s courts without New Jersey’s consent.

The Supreme Court rejected that argument, focusing not on the importance of the transit system’s public function but on the legal structure through which the New Jersey Legislature chose to organize it. Sovereign immunity protects states themselves, but not every entity a state creates automatically shares that protection. The key question is whether the entity is legally indistinguishable from the state or whether it exists as a separate corporate body responsible for its own obligations.

In the opinion, Sotomayor emphasized that New Jersey Transit was created as a public corporation with many of the ordinary attributes associated with corporate entities. The legislature granted the corporation powers typical of independent legal status: the authority to “sue and be sued,” to enter contracts, to acquire and hold property, and to incur financial obligations in its own name. These attributes aren’t merely drafting details but instead reflect a legislative decision to create an entity capable of acting as a separate corporate entity rather than as the state itself.

The Supreme Court treated these features as strong evidence that New Jersey deliberately structured the transit authority as a distinct legal entity capable of bearing its own rights and obligations. When a state chooses to organize a public function through a legally distinct corporation with the power to sue, hold property, and incur obligations in its own name, that entity should be able to stand on its own in court.

The ruling may prompt state legislatures to more carefully examine the tradeoffs involved in creating public benefit corporations and similar authorities. These entities are often designed to provide operational flexibility and financial independence, including the ability to issue debt, manage assets, and operate outside traditional bureaucratic structures.

In New York State alone, according to the State Comptroller’s Office, our public benefit corporations employ hundreds of thousands of people, spending close to $100 billion a year while holding hundreds of billions of dollars of debt. The implications of how these organizations are treated in court is no small matter.

But Galette highlights that this independence can come with legal consequences. If a public corporation is structured as a separate juridical entity capable of bearing its own liabilities, it may also lack the sovereign immunity protections that shield the state itself from suit in the courts of other states.

As a result, legislatures creating or revising public authorities may increasingly weigh the costs and benefits of corporate independence. The same statutory features that enable an authority to finance infrastructure projects, operate transportation systems, or issue bonds may also expose it to litigation beyond the borders of the state that created it.

Galette therefore serves as a reminder that organizational design in government isn’t merely administrative, it carries meaningful constitutional and practical implications.

The case is Galette v. New Jersey Transit Corporation, U.S., No. 24-1021, decided 3/4/26.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

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Christopher Riano is a constitutional, public law, and regulatory partner at Holland & Knight.

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