Newark, N.J. (August 14, 2025) - On July 3, 2025, New Jersey Transit (NJT) was granted a writ of certiorari to the United States Supreme Court regarding the issue of whether states are entitled to sovereign immunity from private suits in other states' courts, including "state-created entities" that function as "arms of the State."
NJT, which is a state-created entity, was named as a defendant in a civil suit in New York. The New York Court of Appeals, the state's highest court, relied primarily on the financial impact of a judgment against NJT to hold that it was not an arm of New Jersey, even as previous and subsequent state and federal courts held exactly the opposite. The matter is now scheduled for oral arguments before the U.S. Supreme Court in its October 2025 term.
The underlying facts of the matter are as follows: on February 9, 2017, a bus owned and operated by NJT allegedly struck and injured plaintiff Jeffrey Colt as he traversed a crosswalk on 40th Street in Manhattan. The bus was driven by defendant Ana Hernandez, an employee of NJT. Colt and his wife, plaintiff Betsy Tsai, commenced an action in New York County Supreme Court on September 18, 2017, asserting causes of action for negligence, negligent hiring, and loss of consortium.
The defendants answered the complaint and denied many of plaintiffs' factual allegations. They asserted—as part of an exhaustive list including many boilerplate defenses—that the plaintiffs' recovery was "barred by lack of jurisdiction over NJT" and "barred as this Court lacks jurisdiction," and that the defendants were "immune from suit."
On July 15, 2020, the defendants moved to dismiss the complaint, arguing that NJT is "the alter ego of New Jersey" and therefore protected by sovereign immunity. On October 2, 2020, the New York County Supreme Court denied defendants' motion (2020 NY Slip Op 33260 [Sup Ct, NY County 2020]). The court held that, by waiting three years from the inception of the action to raise a jurisdictionally-based objection, the defendants had waived their right to assert a sovereign immunity defense. The defendants appealed.
The Appellate Division, First Department, affirmed in a split decision (206 AD3d 126 [1st Dept 2022]). The Court concluded that NJT did not waive its sovereign immunity defense. At the outset, the Court noted that it had previously held that NJT was an arm of the State of New Jersey and thus entitled to invoke sovereign immunity (id. at 128, citing Fetahu v New Jersey Tr. Corp., 197 AD3d 1065, 1065 [1st Dept 2021]). The Court further concluded that, contrary to the lower court's holding, the defendants had not waived this immunity through their litigation conduct, or otherwise (id. at 129). The Court nonetheless affirmed because dismissal would be "an affront to our sense of justice and cannot be countenanced" (id. at 133). In reaching this conclusion it considered whether the plaintiffs would have been able to bring their suit in New Jersey under the New Jersey Tort Claims Act (NJTCA). Reviewing New Jersey's venue rules, the Court concluded that "plaintiffs cannot commence an action in New Jersey because the cause of action arose outside its borders" (id. at 130). Thus, the Court concluded that there was an issue "pitting the sovereign immunity defense against an individual's fundamental right derived from the common law to be able to seek redress in a judicial forum for injuries inflicted by a tortfeasor" (id. at 132). Resolving this issue by analogy to the forum non conveniens doctrine, the Court concluded that these factors weighed in favor of retaining the action, reasoning that NJT would not be prejudiced by allowing the suit to proceed, given that it waited three years to move to dismiss, would not be burdened by defending the action in New York, where all of the material witnesses and evidence were located, and plaintiffs would not be able to sue in New Jersey's courts (id. at 133).
On appeal, the New York Court of Appeals ruled in Colt v New Jersey Tr. Corp., 2024 NY Slip Op 05867, CtApp 11-25-24 that NJT Corporation could not assert the sovereign immunity defense in this traffic-accident case. Before the Court was a question as to whether a "state-created entity" is entitled to immunity. The relevant inquiry, the Court of Appeals decided, is whether subjecting a state-created entity to suit in New York would offend that state's dignity as a sovereign. The Court of Appeals analyzed how the state defines the entity and its functions, its power to direct the entity's conduct, and the effect on the state of a judgment against the entity. Considering these factors, the Court of Appeals concluded that maintaining this action against NJT in New York courts would not offend New Jersey's sovereign dignity and accordingly held that NJT was not entitled to invoke a sovereign immunity defense.
The forthcoming decision from the U.S. Supreme Court in this matter will potentially affect the viability of a sovereign immunity defenses for "state-created entities" nationwide, in those instances when they are sued in foreign jurisdictions.
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