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May 18, 1967

S. J. GROVES & SONS COMPANY, a corporation of the State of Minnesota, authorized to do business in the State of New Jersey, Plaintiff,
NEW JERSEY TURNPIKE AUTHORITY, a body corporate and politic of the State of New Jersey, Defendant

The opinion of the court was delivered by: COOLAHAN


 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"]. *fn1" 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; *fn2" 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. *fn3"

  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 ...

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