In a unanimous decision, the United States Supreme Court held that NJ Transit Corporation is not an arm of the state of New Jersey and is therefore not entitled to share in its interstate sovereign immunity. Galette v. New Jersey Transit Corp., 607 U.S. __, 146 S. Ct. 854 (2026). The Court also explained that because New Jersey did not argue below that it was the real party in interest, dismissal on that basis was not at issue. Id. at 871, n. 6.

The case reached the Court through two lawsuits filed in different states. In Pennsylvania, an NJ Transit bus collided with a passenger vehicle, and the Pennsylvania Supreme Court held that NJ Transit was an arm of the state and immune from suit. In New York, an NJ Transit bus struck a pedestrian in Midtown Manhattan, and New York’s highest court reached the opposite conclusion. The U.S. Supreme Court accepted both cases to resolve the split.

The Court reviewed the basics of state sovereign immunity under the Eleventh Amendment. It emphasized that sovereign immunity belongs to the state itself and does not automatically extend to public entities the state creates. Whether an entity qualifies as an arm of the state is a matter of federal law, informed by state law’s description of the entity’s structure and character. The central question is whether the state set up the entity as legally separate and responsible for its own liabilities. One clear sign of legal separateness is when the legislature creates a corporation with ordinary corporate powers, including the power to sue and be sued. But corporate form is not the only indicator.

Another major factor is who is legally responsible for a judgment against the entity. If the state must pay the judgment from its own treasury, that points toward arm-of-the-state status. By contrast, it matters less that the entity may expect the state to step in voluntarily. Courts may also consider how much control the state exercises over the entity, but that factor should be handled carefully because states ultimately control all entities they create. The Supreme Court “has never once found a corporation that was liable for its own judgments to be an arm of the state,” even when the state was the sole shareholder. Id. at 869.

Separately, the Court emphasized that sovereign immunity may still apply when the State is the real party in interest in a particular case, even when an entity is not an arm of the state. Damage claims against a state or federal officer in their official capacity, for example, are barred by sovereign immunity because the State is the real party in interest. Particular remedies that run directly against a state can be barred by sovereign immunity, such as compelling a State attorney general to perform a contract or granting equitable relief against a Governor.

Applying those principles, the Court concluded that NJ Transit is not an arm of New Jersey. The statute creating NJ Transit gives it familiar corporate powers, including the ability to sue and be sued and to enter contracts. And although the statute describes NJ Transit as an “instrumentality of the State,” the Court found that label less important than the entity’s legal structure. Just as importantly, New Jersey is not legally responsible for NJ Transit’s debts or liabilities. That remained true even though the state exercises substantial control over the agency.

For government entities, this case reinforces the importance of knowing who is responsible for the ultimate relief requested. When a lawsuit requests relief that requires direct action from the State itself, that may be a situation where a government entity can still raise an Eleventh Amendment Immunity argument, even though that entity is otherwise not an arm of the State. The case also serves as a reminder that arguments not presented during key stages of litigation may later be waived or forfeit on appeal.

Read the full opinion at https://www.supremecourt.gov/opinions/25pdf/24-1021_p860.pdf