Interstate Sovereign Immunity After Hyatt III: Primacy of Sister-State Classification in the “Arm of the State” Inquiry

I. Introduction

In Galette, C. v. NJ Transit; Apl. of: NJ Transit (Pa. 2025), the Supreme Court of Pennsylvania addressed whether a Pennsylvania tort suit could proceed against NJ Transit, a public transportation entity created by New Jersey. Appellee Cedric Galette sued NJ Transit and an individual driver, Julie E. McCrey, alleging negligence after a collision on Market Street in Philadelphia. NJ Transit moved to dismiss on interstate sovereign immunity grounds, arguing that under Franchise Tax Board of California v. Hyatt, 587 U.S. 230 (2019) (Hyatt III), States (and their arms) are immune from private suits in sister-State courts absent consent.

The trial court denied dismissal and the Superior Court affirmed, reasoning—using this Court’s Eleventh Amendment “arm of the State” framework from Goldman v. Se. Pennsylvania Transp. Auth., 57 A.3d 1154 (Pa. 2012)—that NJ Transit was not an arm of New Jersey because a suit would not threaten New Jersey’s dignity or treasury. The Supreme Court of Pennsylvania granted review to decide whether Hyatt III compels dismissal and, in doing so, clarified how Pennsylvania courts should determine whether a sister-State-created entity is protected by interstate sovereign immunity.

II. Summary of the Opinion

The Court (Brobson, J.) reversed. It held that:

  • Hyatt III establishes a constitutional rule that “States retain their sovereign immunity from private suits brought in the courts of other States.”
  • That rule extends to State instrumentalities/arms, and there is “no principled reason” to treat them differently.
  • While Goldman’s six-factor test can be a “guidepost,” it must be weighted differently in the interstate context: primacy is given to how the sister State classifies and describes the entity (the first Goldman factor), as the “clearest expression” of the sister State’s intent.
  • Under New Jersey’s statutory scheme (the Transportation Act), NJ Transit is an “instrumentality of the State exercising public and essential governmental functions,” is heavily controlled by New Jersey’s political branches (including gubernatorial veto over board action), and performs a core governmental function.
  • New Jersey did not expressly waive this constitutionally grounded immunity for suits in Pennsylvania; “sue and be sued” language is insufficient.

Accordingly, NJ Transit was dismissed from the Pennsylvania action, and the case was remanded to proceed only against McCrey.

III. Analysis

A. Precedents Cited

1. The U.S. Supreme Court’s Interstate Sovereign Immunity Line

  • Franchise Tax Board of California v. Hyatt, 587 U.S. 230 (2019) (Hyatt III): The controlling authority. The Pennsylvania Supreme Court treated Hyatt III as establishing a structural constitutional mandate that sister States must honor each other’s immunity from private suits in their courts. The Court leaned on Hyatt III’s historical account (common-law and law-of-nations immunity) and its federalism rationale (avoiding direct sovereign conflict).
  • Nevada v. Hall, 440 U.S. 410 (1979) (Hall), overruled by Hyatt III: Used as the foil. The Superior Court’s approach resembled the comity-based world of Hall; the Supreme Court of Pennsylvania emphasized that Hyatt III displaced comity with a constitutional obligation.
  • Alden v. Maine, 527 U.S. 706 (1999): Cited in the opinion’s historical framing—state immunity exists beyond the text of the Eleventh Amendment and is embedded in constitutional structure.
  • Chisholm v. Georgia, 1 L.Ed. 440 (1793) and Hans v. Louisiana, 134 U.S. 1 (1890): Used to show the Founding-era reaction to compelled suits against States and to reinforce that immunity is not limited to the Eleventh Amendment’s literal terms.

2. Pennsylvania’s “Arm of the State” Framework and Related Authorities

  • Goldman v. Se. Pennsylvania Transp. Auth., 57 A.3d 1154 (Pa. 2012): Central but reoriented. The Court reaffirmed Goldman’s definition of an “instrumentality” (a suit is, for practical purposes, against the State) and its six factors, but held that equal weighting (appropriate in Goldman’s Eleventh Amendment setting) is not appropriate for interstate sovereign immunity.
  • Dorsey v. Redman, 96 A.3d 332 (Pa. 2014): Cited for the English common-law roots of sovereign immunity.
  • Marshall v. Southeastern Pennsylvania Transportation Authority, 300 A.3d 537 (Pa. Cmwlth. 2023): While not binding on the Supreme Court, it served as an in-Commonwealth application of Hyatt III to NJ Transit, supporting dismissal.

3. Federal “Arm of the State” and Immunity Design Cases

  • Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274 (1977): Cited for the basic dichotomy: “arm of the State” versus municipal/political subdivision.
  • Hess v. Port Auth. Trans-Hudson Corp., 513 U.S. 30 (1994) and Lake Country Ests., Inc. v. Tahoe Reg'l Plan. Agency, 440 U.S. 391 (1979): Used for the “good reason to believe” design inquiry—whether States intended an entity to enjoy immunity.

4. NJ Transit’s Status in Other Courts

  • Karns v. Shanahan, 879 F.3d 504 (3d Cir. 2018): Quoted for the proposition that NJ Transit is an arm of New Jersey for Eleventh Amendment purposes, and for identifying sovereign attributes (tax exemption, eminent domain, statewide police powers). The Pennsylvania Supreme Court did not treat Karns as binding, but it used Karns’s statutory analysis to bolster its conclusion about New Jersey’s design and control.
  • Flamer v. New Jersey Transit Bus Operations, 607 A.2d 260 (Pa. Super. 1992): Noted as earlier Pennsylvania Superior Court authority calling NJ Transit an alter ego of New Jersey, but the Supreme Court deemed it analytically thin because it relied on district court Eleventh Amendment cases without articulating a test.
  • Smith v. New Jersey Transit Corp., 691 F.Supp. 888 (E.D. Pa. 1988) and Dunn v. New Jersey Transit Corp., 681 F.Supp. 246 (D. N.J. 1987): Mentioned as the cases Flamer relied upon.

5. Waiver Doctrine

  • Edelman v. Jordan, 415 U.S. 651 (1974) and Murray v. Wilson Distilling Co., 213 U.S. 151 (1909): Cited for the strict standard that waiver of constitutionally grounded immunity must be express or overwhelmingly implied.
  • Coll. Sav. Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666 (1999): Used to reject the argument that consent to be sued in a State’s own courts—or generic “sue and be sued” language—amounts to consent to suit elsewhere.

6. Comparative Authority: New York’s Contrasting Approach

  • Colt v. New Jersey Transit Corporation, 2024 WL 4874365 (N.Y. 2024): The Court explicitly disagreed with New York’s balancing, especially the emphasis on State non-liability for judgments. Pennsylvania’s Court minimized judgment-liability in the interstate context and elevated statutory classification/intent.

7. Additional Immunity Taxonomy Cases

  • Tercero v. Texas Southmost Coll. Dist., 989 F.3d 291 (5th Cir. 2021), Beaulieu v. Vermont, 807 F.3d 478 (2d Cir. 2015), and Lombardo v. Pennsylvania, Dep't of Pub. Welfare, 540 F.3d 190 (3d Cir. 2008): Cited to illustrate that courts often distinguish between “Eleventh Amendment immunity” and broader state sovereign immunity concepts.

8. Sovereign Attributes

  • Mississippi & Rum River Boom Co. v. Patterson, 98 U.S. 403 (1878): Cited to characterize eminent domain as an attribute of sovereignty.
  • Christy v. Pa. Tpk. Comm'n, 54 F.3d 1140 (3d Cir. 1995) and Skehan v. State Sys. of Higher Educ., 815 F.2d 244 (3d Cir. 1987): Cited (via Karns) for the proposition that tax treatment and related features indicate sovereign character.

B. Legal Reasoning

1. Hyatt III as a Structural, Not Merely Eleventh Amendment, Rule

A key move in the opinion is doctrinal framing: the Court treated interstate sovereign immunity as flowing from “the structure of the Constitution,” not as a subcategory limited by the Eleventh Amendment’s text. This permitted the Court to:

  • Center the federalism objective of avoiding one State’s compulsory judicial process over another (“direct conflict between sovereigns”); and
  • Decouple the interstate immunity inquiry from Eleventh Amendment purposes that are often operationalized through a “dignity and treasury” lens.

2. Extending Interstate Immunity to “Arms” of the Sister State

Although Hyatt III spoke in terms of “States,” the Pennsylvania Supreme Court concluded the doctrine must also cover State instrumentalities. Otherwise, a forum State could circumvent Hyatt III by suing the functional State through its principal agencies, recreating the same compelled-process sovereign conflict Hyatt III forbids.

3. Reweighting Goldman: The First Factor Becomes the Driver

The Court accepted that Goldman’s six factors help answer the same fundamental question—whether the entity is the State for practical purposes— but held that the weights change in the interstate context. Because interstate sovereign immunity is centrally about respecting coequal sovereignty and avoiding compelled litigation against the sister State, the forum must give primacy to “the manner in which the sister State classifies and describes the entity.”

On the statutory record, New Jersey’s intent was unmistakable: NJ Transit is labeled an “instrumentality of the State” performing “essential governmental functions,” housed in the Executive Branch, governed by a board largely appointed through the Governor and Legislature, and subject to gubernatorial approval/veto of board actions.

4. Statutory Control and Sovereign Functions Matter More Than Judgment Liability

The Superior Court (and New York’s Colt) emphasized autonomy and the State’s disclaimer of liability for NJ Transit’s debts (N.J. Stat. Ann. § 27:25-17). The Pennsylvania Supreme Court acknowledged these facts but treated them as less significant for interstate immunity than:

  • New Jersey’s explicit sovereign characterization of NJ Transit;
  • High-level political control (appointments and gubernatorial approval);
  • Delegation of sovereign-like powers (eminent domain, statewide police authority, tax treatment).

This reflects the Court’s view that the “affront” in interstate cases is not primarily whether the sister State’s treasury is legally on the hook, but whether the forum’s courts are asserting compulsory process over what the sister State has constituted as itself.

5. Waiver Must Be Express—and Was Not Shown

Galette argued (in the Court’s view, unclearly) that New Jersey’s Tort Claims framework effectively removed immunity for ministerial negligence. The Court treated this as a waiver theory and rejected it under the strict waiver standard articulated in Edelman v. Jordan and Murray v. Wilson Distilling Co.: a waiver of constitutionally grounded immunity must be express (or overwhelmingly implied). Further, Coll. Sav. Bank foreclosed reliance on “sue and be sued” language as consent to be sued in another sovereign’s courts.

C. Impact

  • Doctrinal clarification in Pennsylvania: The decision establishes that Pennsylvania courts must treat the “arm of the State” question differently when the defendant is a sister-State entity invoking Hyatt III. Goldman remains relevant, but its factors are not equally weighted.
  • Greater protection for sister-State instrumentalities: By giving primacy to sister-State statutory classification and design, the opinion makes dismissal more likely when the creating State has clearly denominated the entity an instrumentality performing essential governmental functions—even if the entity can raise revenue and the State disclaims legal liability for the entity’s debts.
  • Forum shopping constraints: Plaintiffs injured in Pennsylvania by out-of-state public entities may face dismissal in Pennsylvania courts and may need to sue in the defendant State (if that State has consented there), or pursue alternative defendants (as here, the individual driver).
  • Interstate divergence persists: The Court’s express disagreement with Colt v. New Jersey Transit Corporation signals that States may apply differing tests to the same entity. That divergence may invite further litigation (including possible U.S. Supreme Court intervention) on the proper uniform standard for identifying “arms” under Hyatt III.
  • Legislative drafting effects: Sister States that want their entities to benefit from interstate immunity may emulate New Jersey’s explicit “instrumentality” language, embed the entity within executive structure, and retain strong approval/veto mechanisms.

IV. Complex Concepts Simplified

  • Interstate sovereign immunity: After Hyatt III, a State generally cannot be sued by a private person in another State’s courts unless it consents. This is treated as a constitutional rule tied to the structure of federalism, not merely a courtesy (“comity”).
  • Eleventh Amendment immunity vs. broader sovereign immunity: “Eleventh Amendment immunity” is often discussed in federal-court contexts. The opinion distinguishes that body of law from the broader, structural immunity that also applies in State courts when one State is sued in another.
  • “Arm of the State” / “instrumentality” / “alter ego”: Different labels for the same core idea: an entity is so closely identified with the State that suing it is effectively suing the State.
  • Goldman’s six factors (as adapted here): A multi-factor test to decide whether the entity is the State. In interstate cases, the most important factor is how the creating State defines and situates the entity in its governmental structure.
  • Waiver: A State can give up immunity, but courts require a clear, express statement. General authorization to “sue and be sued” usually is not enough, and consenting to suit at home does not mean consenting to suit elsewhere.

V. Conclusion

This decision squarely applies Hyatt III in Pennsylvania and sets a practical rule for future interstate immunity disputes: when a Pennsylvania court evaluates whether a sister-State-created entity is protected by interstate sovereign immunity, it may consult Goldman’s framework, but it must give primary weight to the creating State’s statutory classification and structural design of the entity. Because New Jersey expressly designated NJ Transit an “instrumentality of the State” performing essential governmental functions and retained substantial political control, Pennsylvania was constitutionally required to decline compulsory jurisdiction over NJ Transit absent an express waiver. NJ Transit was therefore dismissed, and the case proceeds only against the remaining individual defendant.