COOLAHAN, District Judge:
Plaintiff S. J. Groves & Sons Company, a Minnesota corporation, seeks damages from the New Jersey Turnpike Authority [the Authority], for breach of construction contract. The contract is between Groves and the Authority; New Jersey is not a party to the contract nor a defendant to the suit. Jurisdiction is posited on diversity of citizenship and damages exceed $10,000.00.
In addition to denials and a counterclaim, the Authority challenges this Court's jurisdiction to entertain suits against it because of the immunity conferred by the Eleventh Amendment of the United States Constitution. It also challenges the Court's jurisdiction over this particular diversity suit.
Plaintiff moved under Rule 12(b) and (d) of the Federal Rules of Civil Procedure for a preliminary hearing on the separate defenses regarding this Court's jurisdiction.
Both of these defenses rest on the Authority's basic claim that it is an "alter ego" of the State of New Jersey, or put differently, that it is an inextricable part of the State Government. On this assumption, defendant argues the instant suit is tantamount to an action directly against New Jersey which would be barred by the Eleventh Amendment [hereinafter sometimes referred to as "the Amendment"].
The Authority also claims that as part and parcel of the State it is not a citizen within the meaning of the diversity statute which extends this Court's jurisdiction to suits between "citizens of different States." 28 U.S.C. § 1332.
The plaintiff claims that, as an autonomous corporation distinct from the State, the Authority does not come under the aegis of the Amendment. Plaintiff further contends the Authority is a "citizen" within the diversity statute. It stresses that the Legislature authorized the Authority "to sue and be sued", N.J.S.A. 27:23-1 et seq. [New Jersey Turnpike Authority Act, Section 5]; that authorization is urged as a waiver of any immunity under the Amendment.
The Authority replies that the pertinent question is simply whether it is the alter ego of the State; if it is, waiver of sovereign immunity is not relevant. Moreover, the Authority maintains that whether the Amendment applies to this diversity action is a question of State law under Erie v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938).
Neither analysis is fully accurate, and it will be helpful, prior to examining the exact nature of the Authority, to sort out the several species of "sovereign immunity" which have become entangled in the course of argument.
One starts with the fundamental proposition that Federal Courts may not entertain suits by private parties against a State without its consent;
neither suits by citizens of another State or foreign nation, by virtue of the Amendment's express prohibition; nor suits by its own citizens, by virtue of the underlying postulates of sovereignty which the Amendment embodies.
Second, since diversity jurisdiction requires "citizens" of different States, an agency not deemed a citizen of its State may only be sued upon a Federal question. The test for such citizenship overlaps the test for the Amendment; if it is not considered part of the State within the Amendment, an agency is usually ipso facto held to be its citizen. State Highway Commission of Wyoming v. Utah Const. Co., 278 U.S. 194, 49 S. Ct. 104, 73 L. Ed. 262 (1928); Moss v. Calumet Paving Co., 201 F. Supp. 426 (S.D.Ind., 1962). However, diversity presents a distinct hurdle; unlike the Amendment, it does not involve a privilege belonging to the State. Thus, even though a State waives the Amendment to which one of its agencies is entitled, it cannot thereby create diversity jurisdiction if that agency is not a "citizen." Such jurisdiction may neither be enlarged nor diminished by the States. State Highway Commission of Wyoming v. Utah Co., supra, 278 U.S. at 199, 49 S. Ct. 104; O'Neill v. Early, 208 F.2d 286, 289 (4th Cir., 1953).
Next, there is the constellation of state-created immunities, not derived from the Federal Constitution, but based on traditional notions of the State's inherent sovereignty. By its own constitution or as a matter of common law, a State may withhold consent to be sued in its own courts. In addition, public corporations, counties, municipalities, and other instruments of State and local government often are sheltered by various doctrines loosely subsumed under the heading of "sovereign immunity." In some instances these creatures of the State are granted complete immunity from suit, while in others they are only immunized from tort liability. [The latter may be further broken down into the traditional proprietary-governmental dichotomy applied to municipal corporations.]
State agencies are sometimes protected from suit or from liability on theories of governmental immunity even though they cannot be considered alter egos of the State itself, at least by the Federal standard required to invoke the Amendment. Masse v. Pennsylvania Turnpike Comm., 163 F. Supp. 510 (E.D.Pa.1958). See American Governmental Tort Liability, 20 Rutgers L.Rev. 710 (1966), [discussing the American history of "sovereign immunity" in this sense].
A State institution, not protected by the Eleventh Amendment and also deemed a citizen, nonetheless may be immunized from diversity suit because the doors of the State courts are closed to its adversary, and this Court, under Erie, must do likewise. If the institution is clothed with complete immunity in the State courts, it is not suable here on a diversity claim; if it is only immune to certain liabilities, that too will be mirrored by partial immunity here. Whether it is immune in this sense, of course, is a question of State law. Masse v. Turnpike Comm., supra; Gerr v. Emrick, 283 F.2d 293 (3rd Cir., 1960).
This is the relevance of Erie to the problem of sovereign immunity in Federal litigation, but it is only reached if the Eleventh Amendment is inapplicable - and Erie is not pertinent to that determination.
Even in diversity actions, whether the agency comes within the meaning of the Eleventh Amendment is a question of Federal, not State, law. State Highway Comm. in Arkansas v. Kansas City Bridge Co., 81 F.2d 689 (8th Cir., 1936); NA-JA Const. Corp. v. Roberts, 259 F. Supp. 895 (D.Del., 1966); DeLong Corp. v. Oregon State Highway Comm., 233 F. Supp. 7 (D.Or.1964) aff'd 343 F.2d 911 (9th Cir., 1965), cert. den. 382 U.S. 877, 86 S. Ct. 161, 15 L. Ed. 2d 119; State Highway Comm., supra; Zeidner v. Wulforst, 197 F. Supp. 23 (S.D.N.Y., 1961); Masse v. Pennsylvania Turnpike Comm., supra.
Finally, the State may set up a special tribunal of limited competence for all claims against itself and its agencies, to the exclusion of its courts of general jurisdiction. Since this Court in diversity is coordinate with those courts of general jurisdiction, Erie also compels refusal of jurisdiction in that situation. Zeidner v. Wulforst, supra.
These distinctions between varieties of "sovereign immunity", though pertinent to Federal jurisdiction, are sometimes blurred in State litigation where the question is simply "can the plaintiff bring this action?" Immunity can properly be treated as a unitary question, without differentiating between an agency that has been established as a distinct entity from the State, but nevertheless clothed with governmental immunity; and an agency which is immune because it has been established as an alter ego of the State.
While the difference between the prohibition of the Amendment and the state-created immunities may be academic in State litigation, it is important in the matter at Bar.
The protection of the Amendment may be waived by the States, Clark v. Barnard, 108 U.S. 436, 2 S. Ct. 878, 27 L. Ed. 780 (1883); Parden v. Terminal Ry. Co., supra, 377 U.S. at 186, 84 S. Ct. 1207. However, the State also may retain the Amendment, while consenting to suit in its own courts. Smith v. Reeves, 178 U.S. 436, 20 S. Ct. 919, 44 L. Ed. 1140 (1899); Chandler v. Dix, 194 U.S. 590, 24 S. Ct. 766, 48 L. Ed. 1129 (1903). Unless the State waives the Amendment, its restraint remains intact. Such waiver will not be lightly implied from consent to be sued in its own tribunals; it must be an explicit waiver by clear language. Murray v. Wilson Distilling Co., 213 U.S. 151, 171, 29 S. Ct. 458, 53 L. Ed. 742 (1908); Ford Motor Co. v. Department of Treasury of State of Indiana, 323 U.S. 459, 65 S. Ct. 347, 89 L. Ed. 389 (1944); Hamilton Mfg. Co. v. Trustees of State Colleges in Colo., 356 F.2d 599 (10th Cir., 1966).
Since the waiver is a matter of legislative intent, the determination is usually a question of State law. Parden v. Terminal Ry. Co., supra, 377 U.S. at 194, 84 S. Ct. 1207.
On the other hand, if the agency does not come under the Amendment, then the State can only curtail Federal jurisdiction by closing its own courts. Unlike the protection of the Amendment, state-created immunities cannot be turned on and off - disregarded by the State in its own courts, but pressed as a bar to Federal jurisdiction. The States cannot limit this Court's diversity jurisdiction, conferred by Congress under the Constitution, to adjudicate a cause of action created by State law. Railway Co. v. Whitton's Administrator, 80 U.S. (13 Wall.) 270, 20 L. Ed. 571 (1871); Cowles v. Mercer County, 74 U.S. (7 Wall.) 118, 19 L. Ed. 86 (1868); Markham v. City of Newport News, 292 F.2d 711 (4th Cir., 1961); Sherman v. Ulmer, 201 F. Supp. 660 (E.D.Pa., 1962).
With this framework in mind, our present problem becomes simpler. The defendant concedes there is no obstacle to this suit in New Jersey's courts. McCabe v. New Jersey Turnpike Authority, 35 N.J. 26, 170 A.2d 810 (1961); and see Taylor v. New Jersey Highway Authority, 22 N.J. 454, 126 A.2d 313, 62 A.L.R.2d 1211 (1956).
Nor has New Jersey limited suit against the Authority to a special tribunal, cf. Zeidner v. Wulforst, supra, or place venue limitations on the availability of State forums.
It only remains to decide whether the Eleventh Amendment applies to this suit against the Turnpike Authority. If it does, I must dismiss this action unless New Jersey has waived the Authority's immunity; if it does not, the Authority is a New Jersey "citizen", and plaintiff may press his claim here to the same extent that he could in a State forum.
Is a suit against the New Jersey Turnpike Authority a suit against New Jersey within the meaning of the Amendment? This is a matter of first impression, but after reviewing the numerous decisions of New Jersey courts, as well as pertinent State and Federal decisions of other jurisdictions I am convinced that it is not.
The Amendment initially was limited to cases in which the State was the defendant of record. But today, suits against State officers or agencies of a State may be in effect suits against the State subject to the Amendment, even though the State is not made a party. In re Ayers, 123 U.S. 443, 8 S. Ct. 164, 31 L. Ed. 216 (1887).
In such cases, the court must examine "the essential nature and effect of the proceedings" to determine whether the State is the real party in interest against whom relief is sought. Smith v. Reeves, supra; Ex parte State of New York, (Case No. 1) 256 U.S. 490, 41 S. Ct. 588, 65 L. Ed. 1057 (1920). This depends on the facts and considerations in each case. Pennsylvania Turnpike Comm. v. Welsh, 188 F.2d 447 (3rd Cir. (1951)).
With the proliferation of governmental bodies below the State level, debate on the Amendment has shifted emphasis from individual State officers and employees to public authorities, municipal corporations, and other "bodies corporate and politic." See "Note, The Applicability of Sovereign Immunity to Independent Public Authorities." 74 Harv.L.Rev. 714 (1961).
Counties and municipalities do not partake of the Eleventh Amendment immunity enjoyed by the States. Lincoln County v. Luning, 133 U.S. 529, 10 S. Ct. 363, 33 L. Ed. 766 (1890); Pettibone v. Cook County, 120 F.2d 850 (8th Cir., 1941); N. M. Paterson & Sons v. City of Chicago, 176 F. Supp. 323 (N.D.Ill., 1959), although they clearly are public bodies and in many cases perform functions on behalf of the State. NAJA Construction Corp., supra. Whether other bodies come under the Amendment depends on their relationship to the State, on the powers and responsibilities, the attributes and limitations, with which they have been endowed. Murray v. Wilson Distilling Co., supra; Pennsylvania Turnpike Comm. v. Welsh, supra. Where monetary damages are sought, the dominant factor is the impact of such relief upon the State treasury. State Highway Comm. v. Utah Const. Co., supra; Ford v. Dept. of Treasury, supra, cf. Gallena v. Scott, 11 N.J. 231, 94 A.2d 312 (1953); see also "The Applicability of Sovereign Immunity to Independent Public Authorities", supra (and cases cited). But no single factor is controlling. Pennsylvania Turnpike Comm. v. Welsh, supra.
The New Jersey Turnpike is an independent public authority, combining certain attributes common to State executive departments, on the one hand, with qualities common to municipal or private corporations, on the other. Created to improve vehicular traffic by the construction of modern expressways, New Jersey Turnpike Authority Act, N.J.S.A. 27:23-1, et seq., it exercises a number of powers free of any substantial legislative supervision. It may issue revenue bonds, payable from tolls and other revenues of the Authority (Sec. 1); the only alternative is refunding through new Authority bonds (Sec. 2). The Authority is also empowered to set tolls; to enter contracts in its own name; to sue and be sued; to construct, repair and operate turnpike projects; to acquire property by purchase or otherwise, including exercise of eminent domain - also in its own name; and to hire professional and other employees, not carried on the State payroll nor subject to the general Civil Service for State employees [N.J.S.A. 11]. (Sec. 5). The Authority is composed of three members, appointed by the Governor with the consent of the Senate. As such, they constitute a "body corporate and politic" established in the State Highway Department and officially designated as "an instrumentality exercising public and essential governmental functions * * * of the State." (Sec. 3).
The most complete analysis of its status in light of these powers was provided by Chief Justice Vanderbilt in a declaratory judgment action brought to test the constitutionality of the Act under the New Jersey Constitution. New Jersey Turnpike Authority v. Parsons, 3 N.J. 235, 69 A.2d 875 (1949). It was feared that the Act might be an unconstitutional pledge of the State's credit for the activities of a body not subject to regular executive and legislative controls. Justice Vanderbilt's reply was twofold. First, he emphasized that the Authority's bonds were disengaged from the State treasury by express provision that they are not a debt or a liability or a pledge of faith and credit of the State. (Sec. 2). He then noted the general disclaimer of State responsibility for any liabilities.
As for the contention that New Jersey would still be responsible for the debts of its creature, the learned jurist said:
"This view flies in the face of long established principles of government. Though created by the State and subject to dissolution by the State, they are, in the eyes of the law, independent entities * * *. The fact that the members of the Turnpike Authority are appointed by the Governor * * * rather than elected by the voters in nowise alters the status of the Turnpike Authority as an independent entity." 3 N.J. at 243, 69 A.2d at 879.
Another argument, also advanced here, was dispatched as follows:
"It is also objected that the Turnpike Authority is the alter ego of the State and not a self-sufficient public corporation because it is a body corporate and politic 'in the State Highway Department', R.S. 27:23-3. This statutory provision is manifestly intended to be a compliance with the constitutional provision requiring that 'all executive and administrative offices, departments, and instrumentalities of the State government * * * shall be allocated by law among and within not more than twenty principal departments.' Article V., Section IV, paragraph 1. But the State Highway Commissioner is given no authority whatsoever over the Turnpike Authority. The Turnpike Authority is in but not of the Highway Department and the fact does not make it any the less an independent entity, as the language of the entire Act clearly demonstrates." 3 N.J. at 244, 69 A.2d at 879.