Interstate Sovereign Immunity Extends to Sister-State Instrumentalities, with Primacy Given to the Creating State’s Classification

1. Introduction

In Galette, C. v. NJ Transit (Appeal of: NJ Transit), the Supreme Court of Pennsylvania (Eastern District) addressed whether a Pennsylvania tort action may proceed in Pennsylvania courts against NJ Transit, an entity that New Jersey law expressly describes as an “instrumentality” of the State of New Jersey. The plaintiff, Cedric Galette, alleged he was injured when an NJ Transit vehicle struck the car in which he was a passenger in Philadelphia. Galette sued NJ Transit and the vehicle’s operator, Julie E. McCrey, in the Court of Common Pleas of Philadelphia County.

NJ Transit moved to dismiss, invoking interstate sovereign immunity based on the U.S. Supreme Court’s decision in Franchise Tax Board of California v. Hyatt, 587 U.S. 230 (2019) (Hyatt III). The trial court denied dismissal and the Superior Court affirmed in Galette v. NJ Transit, 293 A.3d 649 (Pa. Super. 2023), holding NJ Transit was not an “arm” of New Jersey. The Pennsylvania Supreme Court granted review (limited to three issues framed around Hyatt III, conflicting intermediate authority, and use of arm-of-state tests) and reversed, ordering NJ Transit dismissed.

2. Summary of the Opinion

The Court held that Hyatt III bars private suits in Pennsylvania courts against a sister State and, by extension, against a sister State’s instrumentality. It concluded that NJ Transit is an arm/instrumentality of New Jersey for interstate sovereign immunity purposes. In determining instrumentality status in this interstate setting, the Court treated the six-factor framework from Goldman v. Se. Pennsylvania Transp. Auth., 57 A.3d 1154 (Pa. 2012) as a “general guidepost,” but emphasized that the factors are not equally weighted for interstate sovereign immunity: primacy goes to how the creating State legally classifies and describes the entity (the first Goldman factor). Because New Jersey’s Transportation Act expressly characterizes NJ Transit as an instrumentality exercising essential governmental functions and embeds substantial state control, the Court held Pennsylvania must honor New Jersey’s design and dismiss.

The Court also rejected Galette’s waiver theory, holding that any waiver of constitutionally grounded immunity must be express; neither the New Jersey Tort Claims Act nor a statutory “sue and be sued” clause sufficed.

3. Analysis

3.1. Precedents Cited

  • Franchise Tax Board of California v. Hyatt, 587 U.S. 230 (2019) (Hyatt III)
    The central controlling authority. Hyatt III overruled Nevada v. Hall, 440 U.S. 410 (1979) (Hall) and held that “States retain their sovereign immunity from private suits brought in the courts of other States.” The Pennsylvania Supreme Court treated Hyatt III as a structural constitutional command, not merely a matter of comity, and applied its logic to a sister-state instrumentality.
  • Nevada v. Hall, 440 U.S. 410 (1979) (Hall) (overruled by Hyatt III)
    Hall’s comity-based approach was used historically to permit suits against States in sister-State courts. Hyatt III’s rejection of Hall removed the doctrinal basis the Superior Court’s reasoning implicitly resembled (balancing dignity/treasury concerns rather than recognizing a constitutional bar).
  • Alden v. Maine, 527 U.S. 706 (1999), Hans v. Louisiana, 134 U.S. 1 (1890), and Chisholm v. Georgia, 1 L.Ed. 440 (1793)
    These cases were used (via Hyatt III’s historical narrative) to explain sovereign immunity as a foundational attribute of statehood and to distinguish the Eleventh Amendment’s text from broader constitutional immunity. The Pennsylvania Supreme Court relied on this lineage to justify treating interstate sovereign immunity as constitutionally embedded.
  • Dorsey v. Redman, 96 A.3d 332 (Pa. 2014)
    Cited for sovereign immunity’s English common-law roots, reinforcing the Court’s framing that immunity is jurisdictional/structural.
  • Goldman v. Se. Pennsylvania Transp. Auth., 57 A.3d 1154 (Pa. 2012)
    The key Pennsylvania arm-of-state precedent. Goldman developed a six-factor test for determining whether an entity is an arm of the State for Eleventh Amendment purposes and, when the factors were indeterminate, considered the Eleventh Amendment’s two principal purposes (dignity and treasury) to conclude SEPTA was not an arm for that federal-law context. In Galette, Goldman is re-purposed: usable as a framework, but the weighting changes for interstate sovereign immunity.
  • Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274 (1977)
    Cited to illustrate the standard arm-of-state inquiry (arm of the State vs municipal/political subdivision), supporting the Court’s statement that the “general inquiry” is similar even if the immunity context differs.
  • Karns v. Shanahan, 879 F.3d 504 (3d Cir. 2018)
    Though not treated as binding, Karns provided persuasive analysis that NJ Transit is an arm of New Jersey for Eleventh Amendment purposes. The Court used Karns mainly for descriptive points about NJ Transit’s sovereign attributes (eminent domain, tax status, police powers), supporting the conclusion that New Jersey created NJ Transit to perform governmental functions.
  • Marshall v. Southeastern Pennsylvania Transportation Authority, 300 A.3d 537 (Pa. Cmwlth. 2023)
    Specifically highlighted (the Court directed briefing on it) as a Pennsylvania decision already applying Hyatt III to hold NJ Transit is entitled to sovereign immunity in a Pennsylvania tort suit. Galette aligns Pennsylvania Supreme Court doctrine with Marshall.
  • Flamer v. New Jersey Transit Bus Operations, 607 A.2d 260 (Pa. Super. 1992), plus 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)
    Flamer had stated NJ Transit is a New Jersey public entity/alter ego, relying on federal district court decisions. The Supreme Court found Flamer did not supply a helpful test, but it remains part of the background of conflicting Pennsylvania intermediate authority.
  • 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)
    Cited for the “good reason to believe” design inquiry—whether the States and Congress designed an entity to enjoy immunity—used here by analogy to support deference to New Jersey’s statutory design of NJ Transit.
  • Mississippi & Rum River Boom Co. v. Patterson, 98 U.S. 403 (1878)
    Used to characterize eminent domain as an “attribute of sovereignty,” supporting NJ Transit’s sovereign character.
  • 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 immunity and similar attributes are associated with sovereignty.
  • 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)
    These cases were used to illustrate that courts often distinguish “Eleventh Amendment immunity” from broader “state sovereign immunity,” bolstering the Court’s conceptual move: the test and weighting may vary by immunity type.
  • Colt v. New Jersey Transit Corporation, 2024 WL 4874365 (N.Y. 2024)
    A recent contrary decision from New York’s highest court. New York emphasized the effect of a judgment on New Jersey (financial/legal liability) and denied NJ Transit immunity. Pennsylvania expressly disagreed, placing substantially more weight on New Jersey’s statutory classification and structural control.
  • Edelman v. Jordan, 415 U.S. 651 (1974), Murray v. Wilson Distilling Co., 213 U.S. 151 (1909), and Coll. Sav. Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666 (1999)
    These cases supplied the waiver standard: waiver of constitutionally grounded immunity must be stated in the “most express language” or by overwhelming implication; consent to suit in one’s own courts or “sue and be sued” language is not enough. The Court imported that logic to interstate sovereign immunity.
  • Werner v. Plater-Zyberk, 799 A.2d 776 (Pa. Super. 2002)
    Cited (by the Superior Court) for the principle that Third Circuit authority is not binding on Pennsylvania courts; relevant to why the Superior Court discounted Karns.
  • Franchise Tax Board of California v. Hyatt, 538 U.S. 488 (2003) (Hyatt I) and Franchise Tax Board of California v. Hyatt, 578 U.S. 171 (2016) (Hyatt II)
    Noted as earlier stages of the same litigation but not impacting the appeal’s dispositive issue.

3.2. Legal Reasoning

  1. Hyatt III’s constitutional rule controls the forum State.
    The Court treated interstate sovereign immunity as “integral to the structure of the Constitution,” requiring Pennsylvania courts to recognize New Jersey’s immunity from private suits filed in Pennsylvania.
  2. Instrumentalities are covered, even if Hyatt III did not articulate an explicit test.
    The Court reasoned there was “no principled reason” not to extend Hyatt III to “agents or instrumentalities” of the State. It noted that Hyatt III itself involved a suit against the Franchise Tax Board of California (a state agency) rather than the State named as such, reinforcing that the doctrine cannot be evaded by pleading choices.
  3. Goldman’s six factors are relevant, but their weight changes in the interstate context.
    Goldman’s six-factor test was developed for Eleventh Amendment problems (often about federal-court exposure and federal statutory claims). Galette distinguishes those aims from interstate sovereign immunity’s structural aim: preventing one State from compelling another sovereign into its courts, thereby risking inter-sovereign conflict. That objective leads to the Court’s core doctrinal move: the first Goldman factor—how the sister State legally classifies and describes the entity—takes primacy because it most directly reflects the creating State’s sovereign choice about whether the entity is part of the State.
  4. Application to NJ Transit: New Jersey’s statutory design dominates.
    The New Jersey Public Transportation Act of 1979 (N.J. Stat. Ann. §§ 27:25-1 to -24.2) expressly states NJ Transit is “an instrumentality of the State exercising public and essential governmental functions,” and that its powers are an “essential governmental function” (N.J. Stat. Ann. § 27:25-4(a)). The Act embeds high-level state control: board composition and appointment structures, the Governor’s approval of board action (N.J. Stat. Ann. § 27:25-4(f)), executive-branch location (id. § 27:25-4(a)), legislative override of certain eminent-domain actions (id. § 27:25-13(g)), mandatory reporting (id. § 27:25-20(b)), and other sovereign attributes (eminent domain, tax exemptions, statewide police powers).
  5. Treasury impact is not the driving inquiry for interstate sovereign immunity.
    The Court acknowledged statutory language suggesting New Jersey disclaimed legal liability for NJ Transit debts/judgments (N.J. Stat. Ann. § 27:25-17) and that NJ Transit has independent revenue sources. But it declined to give these factors controlling weight, specifically disagreeing with Colt v. New Jersey Transit Corporation, 2024 WL 4874365 (N.Y. 2024), which treated judgment impact as decisive.
  6. No waiver without express consent to suit in Pennsylvania.
    Galette’s reliance on the New Jersey Tort Claims Act failed because the Court required express consent to suit in another State’s courts. The “sue and be sued” clause (N.J. Stat. Ann. § 27:25-5(a)) was insufficient under Coll. Sav. Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666 (1999) and the express-waiver standard in Edelman v. Jordan, 415 U.S. 651 (1974).

3.3. Impact

  • A new Pennsylvania rule for sister-State entities: Courts in Pennsylvania assessing whether a sister-State-created entity is shielded by interstate sovereign immunity may consult Goldman’s factors, but must give decisive priority to the creating State’s statutory and case-law classification of the entity (and closely related indicia of state design and control).
  • Forum limitation for Pennsylvania plaintiffs: Plaintiffs injured in Pennsylvania by NJ Transit operations may be unable to maintain claims against NJ Transit in Pennsylvania courts unless New Jersey expressly consents. Litigation strategies may shift toward: (i) pursuing claims in New Jersey forums where permitted; (ii) pursuing claims against non-immune parties (as here, the claim against McCrey remained); or (iii) identifying any explicit statutory consent to extra-territorial suit (which the Court found absent).
  • Interstate uniformity pressures: By openly disagreeing with New York’s approach in Colt, the decision highlights a developing split among state high courts on the proper “arm-of-the-state” methodology for interstate sovereign immunity. Pennsylvania adopts a sovereignty-respecting, classification-forward approach, potentially inviting further clarification from the U.S. Supreme Court.
  • Reduced relevance of “treasury risk” disclaimers in interstate cases: Sister States may not be able to defeat immunity in Pennsylvania merely by pointing to statutory disclaimers of state liability; the creating State’s declaration of instrumentality and structural control may still control.

4. Complex Concepts Simplified

Interstate sovereign immunity
A constitutional rule (after Hyatt III) that one State’s courts generally cannot hear private suits against another State without that State’s consent. It is not merely “politeness” (comity); it is mandatory under the Constitution’s structure.
Eleventh Amendment immunity vs broader sovereign immunity
“Eleventh Amendment immunity” is often discussed in the federal-court context and in connection with federal statutes. “Broader” sovereign immunity refers to the States’ inherent immunity as sovereigns, including the interstate setting addressed in Hyatt III. Galette treats the interstate doctrine as structurally different enough to justify re-weighting arm-of-state factors.
“Arm of the State” / “instrumentality” / “alter ego”
Different labels for a state-created entity that is so closely tied to the State that suing it is, “for all practical purposes,” suing the State itself (as described in Goldman). If the entity is an arm/instrumentality, it shares the State’s immunity.
Goldman’s six-factor test
A multi-factor framework to evaluate whether an entity is the State (or instead more like a separate political subdivision/corporation). In Galette’s interstate setting, the test is not discarded, but the first factor—how the creating State defines the entity—becomes the most important.
Waiver (consent to be sued)
A State can choose to allow suits against itself or its instrumentalities, but Galette holds such waiver must be express. General “sue and be sued” language or consent to suit in the State’s own courts does not equal consent to suit in another State’s courts.
Stare decisis and overruling
Stare decisis is respect for precedent. Hyatt III overruled Hall despite its longevity, which Galette uses to underscore that interstate sovereign immunity is now firmly constitutional rather than discretionary.

5. Conclusion

The Pennsylvania Supreme Court’s decision establishes a clear doctrinal takeaway: under Hyatt III, interstate sovereign immunity in Pennsylvania extends to sister-State instrumentalities, and the dispositive indicator of instrumentality is the creating State’s own legal classification and design of the entity. Applying that approach, the Court held New Jersey created NJ Transit to function as a state instrumentality performing essential governmental functions under pervasive state control, requiring Pennsylvania courts to dismiss Pennsylvania-law tort claims against NJ Transit absent express New Jersey consent. The ruling strengthens the structural, sovereignty- respecting character of interstate immunity and materially narrows the ability to sue sister-State transportation authorities in Pennsylvania courts.