Galette v. New Jersey Transit Corp.

A state agency incorporated as a legally separate corporation—one that holds its own property, enters its own contracts, and pays its own debts—cannot claim the state's sovereign immunity (the legal protection that generally shields governments from being sued without their consent) simply because the state created it, controls it, or funds it. Justice Sonia Sotomayor authored the unanimous opinion of the Court. Sovereign immunity belongs to the state itself, not to every entity the state creates. To determine whether a state-created body qualifies as a true "arm of the state" entitled to that protection, the central question is whether the state structured the entity as legally separate. The clearest sign of legal separateness is corporate status: when a state creates a corporation with the power to sue and be sued, make contracts, hold property, and incur its own debts, it has deliberately chosen to put that entity outside itself. New Jersey did exactly that when it created NJ Transit as a "body corporate and politic." New Jersey law also expressly provides that no debt of NJ Transit constitutes a debt of the state—a point NJ Transit itself conceded. Those two facts, corporate structure plus exclusive financial responsibility, establish that NJ Transit stands apart from New Jersey as a matter of law. The remaining arguments for immunity do not hold up. That NJ Transit performs public transportation functions—and even exercises powers like eminent domain—does not make it part of the state, because cities, counties, and school boards perform public functions too, yet none of them share in state immunity. That the Governor can appoint and remove board members and veto board actions also changes nothing: states retain ultimate authority over virtually every entity they create, so the degree of control is an unreliable and legally weak factor. Finally, the fact that New Jersey has historically subsidized a significant portion of NJ Transit's budget is irrelevant; what matters is formal legal liability, not practical financial entanglement. Because New Jersey is not legally on the hook for NJ Transit's judgments, NJ Transit must face these lawsuits on its own.