William H. Rehnquist: We'll hear argument now in Number 93-1197, Albert Hess and Charles F. Walsh v. the Port Authority Trans-Hudson Corporation. Mr. Katz.
Lawrence Allen Katz: Mr. Chief Justice and may it please the Court: This case involves a very narrow issue: whether the Port Authority, a Compact Clause entity, and PATH, its subsidiary, are entitled to the protection of the Eleventh Amendment. This Court, in its Lake Country decision, instructed that Compact Clause entities are not automatically entitled to the protection of the Eleventh Amendment.
Anthony M. Kennedy: Why does one follow from the other? Is it necessarily so that if PATH has immunity... well, is it necessary to sort of... if the Port Authority has immunity that PATH does? PATH is a wholly owned subsidiary, as it's described.
Lawrence Allen Katz: The statute creating PATH gives it all the rights and immunities of the Port Authority. We believe that--
Anthony M. Kennedy: But if a State created a corporation and gave it all the immunities of the State, it wouldn't necessarily follow that it would have immunity as a matter of Federal law. That would still be for us to determine.
Lawrence Allen Katz: --That's correct, Your Honor.
Anthony M. Kennedy: So I'm not... so nothing turns, in your view, on the fact that this is a wholly-owned subsidiary of the Port Authority?
Lawrence Allen Katz: We believe that there is certainly a connection between the Port Authority and PATH that would in all probability permit this Court to find that if the Port Authority is entitled to the Eleventh Amendment immunity, it is likely that PATH is similarly, because their structure is very similar.
Anthony M. Kennedy: Then that's the analysis that we have to follow here, isn't it?
Lawrence Allen Katz: Yes, Your Honor. We don't believe, though, that the Port Authority is entitled to the Eleventh Amendment immunity.
David H. Souter: But in any case, the terms of the corporate charter have nothing to do with our inquiry except insofar as it identifies the powers of the corporation and allows us to determine whether the corporation is equivalent to the Authority, and hence whether the Authority is equivalent to the State.
Lawrence Allen Katz: That's correct. There's a step procedure that must be followed. We must first see whether or not PATH is the functional equivalent of the Port Authority, and then the constitutional issue, whether the Port Authority is then the functional equivalent of the State. Technically--
Anthony M. Kennedy: But you don't think anything turns on that first inquiry, as I understand your brief. You treat PATH just as if it were the Port Authority.
Lawrence Allen Katz: --We do, because by statute it is considered the same.
David H. Souter: But if it is the same, it's not because its charter says it's the same, it's because under straight Eleventh Amendment analysis it is the same. Nothing is added by their saying, this is the same, any more than anything is added to the analysis by the Port Authority's enabling act saying this is the State.
Lawrence Allen Katz: The only thing that at all is added is the fact that the discussion relating to the Port Authority in several instances will also apply to PATH because the same Compact is used in creating the rights and regulations with regard to both under State law.
Antonin Scalia: Yes. Well, it may work one way and not the other way. That is to say, if the Port Authority is not entitled to sovereign immunity, surely PATH is not, but if the Port Authority is, perhaps PATH is and perhaps it isn't. Would you agree with that?
Lawrence Allen Katz: Justice Scalia, I would agree with that. I believe that PATH, because of the nature, acting for all intents and purposes as a private business owned by State entities, could be found to not possess Eleventh Amendment protection, where, if the Court was so inclined, the Port Authority could be found to possess that protection. We do not believe that is the case, though. We believe that this case is controlled by the Lake Country decision, and the importance of Lake Country, as we view it, is the fact that this Court held that bi-State Compact Clause entities are not automatically entitled to the protection of the Eleventh Amendment, and that with respect to these Compact Clause entities, the limited language of the Eleventh Amendment is not to be expansively applied. Now, with both regard to the Port Authority and PATH, it is clear, first of all, that neither is a State, it is also equally as clear that neither is controlled by any individual sovereign State and, finally, it is clear that neither is the functional equivalent of any individual sovereign State. Lake Country--
Antonin Scalia: Let's take a similar internat... do you think that is enough just with those givens we can say it's not entitled to sovereign immunity, neither a State nor--
Lawrence Allen Katz: --A State or the functional equivalent of a State--
Antonin Scalia: --Right.
Lawrence Allen Katz: --that would show the relationship between them. I believe--
Antonin Scalia: Right, nor can it act... can a State require its action.
Lawrence Allen Katz: --That's critical--
Antonin Scalia: Yes.
Lawrence Allen Katz: --to the case, Your Honor.
Antonin Scalia: What about an international organization like OPEC, for example, an international organization of sovereigns to operate in one particular field, or what about something like a joint command of a military operation like a crusade in Europe, I mean, the unified forces?
Lawrence Allen Katz: Justice Scalia, I would have to know how those international agencies are structured. If they're structured similar to the Port Authority, where neither State on its own can compel the Port Authority to act, then I would say that under an analogous situation the same result should apply as--
Antonin Scalia: Really?
Lawrence Allen Katz: --we seek here.
Antonin Scalia: You think OPEC is suable in American courts?
Lawrence Allen Katz: Well, no, I don't think that OPEC is covered by the Eleventh Amendment at all. The Eleventh Amendment does not apply.
Antonin Scalia: Well, I'm talking about sovereign immunity in the international sense, which has a lot of bearing upon what sovereign immunity in the Eleventh Amendment is.
Lawrence Allen Katz: Your Honor, I must be--
Antonin Scalia: You see, I've always thought that an organization like OPEC surely is not suable.
Lawrence Allen Katz: --Your Honor, I would have to plead ignorance to OPEC, because I'm not certain as to their structure. If they are structured so that there is a direct relationship between any individual member, any individual nation, and OPEC--
Antonin Scalia: No individual nation can control it. Just as in a joint military operation no individual State can control it. It has to have the consent of all.
Lawrence Allen Katz: --If the consent of all the States are necessary, then using an Eleventh Amendment analysis, I would contend that OPEC is not protected by the Eleventh Amendment or the analogous international law. What's very important to--
Antonin Scalia: I think you're wrong, but-- --Mr. Katz, am I wrong in thinking that you are relying dominantly on, this is an entity that raises its own money and pays its own way? I thought that that's what... you were emphasizing that and not the business of who controls, or how is the control spread.
Lawrence Allen Katz: --Well, we believe that this Court has indicated that the significant factor to look at is in fact what's been called the Treasury factors. It's a flip side. Where does the money come from, and are the States liable to it? We take the position that it is the most important factor because of this Court's language in Lake Country.
Sandra Day O'Connor: Well, can we talk about that a little bit? The States are liable up to $100,000?
Lawrence Allen Katz: That is not correct, Justice O'Connor. It is, in fact, the fundamental error of the Third Circuit decision below. Compact Article XV says that the Port Authority can request funding for certain administrative expenses and if the legislatures of both States approve that funding with the approval of the Governor. The problem below in the Third Circuit was that, when they quoted the statute, when they quoted Compact Article XV, they ignored the language, with the approval of the Governor. There is no way that the States can be compelled to contribute funds. It's a totally discretionary act.
Sandra Day O'Connor: Even up to the $100,000?
Lawrence Allen Katz: Even up to the $100,000.
Sandra Day O'Connor: What about the other side of the coin? If the Port Authority and the related entities make money, and there's something left over, that goes back to the States?
Lawrence Allen Katz: No, it does not, Your Honor. That money goes to a general surplus revenue fund. That money is available for the cooperative States for use, but we submit that the statute does not permit... and Justice O'Connor, if I might, this is why the fact that the Port Authority is a Compact Clause entity is pivotal in this case. This is not a situation where the State of New York or the State of New Jersey has their own entity that they can control. In this case, the extra reserves in the fund stay in that fund unless both States cooperate and agree to their expenditures. If from this day until the end of the world the States of New Jersey and New York cannot agree on how that money is spent, it will stay there. If the--
Antonin Scalia: But why should the fact that two States are involved, or two sovereigns are involved, eliminate sovereign immunity? It seems to me you have double the claim to sovereign immunity, if anything. I don't understand that it follows.
Lawrence Allen Katz: --On its face, Your Honor, it certainly appears that way. That's simply not constitutionally accurate. The reason that two States are not better than one State, for lack of a better phrase, is the Compact Clause itself. In a single State entity, any individual State can compel the entity to act. No two--
Antonin Scalia: Well, that's very true--
Lawrence Allen Katz: --can do so.
Antonin Scalia: --but so what? That's very true, but so what? I mean, we've said that the Eleventh Amendment is simply a reflection of preexisting notions of sovereign immunity that came along with our union before the Eleventh Amendment was even adopted.
Lawrence Allen Katz: A tradition--
Antonin Scalia: It seems to me that those standard conceptions of sovereign immunity extend to two sovereigns acting jointly just as they extend to a single sovereign.
Lawrence Allen Katz: --By entering into this Federal system, Your Honors, the Founding States and all subsequent States have as part of the plan to the Convention, as part of the Compact Clause, changed their role with respect to interstate Compact entities. The reason for that is that sovereign States, on their own... sovereign colonies before this Constitution was enacted... had the ability to create entities, had the ability to form coalitions. When they joined the Union, they approved the Compact Clause, and today, a sovereign... today, a State does not have the sovereign power to create a Compact Clause entity without the approval of the Congress.
Antonin Scalia: That's true, but why does that lead to the conclusion... that says they cannot act jointly without the approval of Congress, but why does it follow from that that when... moreover, which is what you're saying, when they do act jointly, they no longer have sovereign immunity the way they used to? I don't see how that follows.
Lawrence Allen Katz: They don't have sovereign immunity any longer because the practical day-to-day realities of bi-State Compact entities is that the States cannot exercise their sovereign control over the entity.
William H. Rehnquist: Well, are you saying as a matter of law if there's a bi-State entity it does not have Eleventh Amendment immunity?
Lawrence Allen Katz: No, Your... Mr. Chief Justice, I am not saying that. What I am saying is that a bi-State entity, structured as the Port Authority is structured, does not have the ability to claim the Eleventh Amendment. It is possible--
William H. Rehnquist: You would apply no different test to a bi-State entity than to a single State entity, then. Is that--
Lawrence Allen Katz: --No, on the contrary. I believe that the burden that a bi-State entity has to show in order to establish that it's entitled to the protection of the Eleventh Amendment is stronger because of its unique role in our constitutional system. Bi-State entities require not only the cooperation of the other States, but the concurrence of Congress. I believe there's--
William H. Rehnquist: --Well, in the Lake Country Estates there's certainly no suggestion, as I read the opinion, that the analysis is different because it's a bi-State entity rather than a single-State entity.
Lawrence Allen Katz: --I believe implicit in Lake Country is the underlying factor that this is a Compact Clause entity, and for that reason, the Court was not willing to extend the Eleventh Amendment protection any further than it did.
Ruth Bader Ginsburg: Well, the reason... I thought you had just said your main argument doesn't have to do with who controls, or it's bi-State, but it has to do with how this organiz... what it's operation is, how it pays for that operation. That would be the same if it were one State or two States, right?
Lawrence Allen Katz: That would be correct, but I believe the burden of proof is stronger with a multi-State entity. Justice Ginsburg, responding to the question that you asked earlier, we believe that the Treasury factors are the most important factor to look at, and the reason it's the most important factor is that in Lake Country this Court explained that the reason that some entities who are not the State itself are entitled to the protection of the Eleventh Amendment is in order to protect the State Treasury. The rationale for the extension from State to entity was given in Justice Stevens' opinion as the protection of State Treasuries. In an Eleventh Amendment case, it's important to recognize that there's a two-step process involved. The first step is whether or not the entity is entitled to the Eleventh Amendment. The second step is then whether or not the Eleventh Amendment applies in light of issues such as abrogation and waiver. In that first step, Lake Country and other decisions of this Court emphasized the Treasury factor, and in this case, the Treasury factor is fully supportive of the proposition that the Eleventh Amendment does not apply to the Port Authority and PATH.
Sandra Day O'Connor: Well, I tried to ask you about whether the States would receive any surplus revenues, and you never really answered the question. You went off--
Lawrence Allen Katz: I apologize.
Sandra Day O'Connor: --in a different direction.
Lawrence Allen Katz: The answer to that question--
Sandra Day O'Connor: Now, it is possible that the States may receive surplus revenues under this scheme?
Lawrence Allen Katz: --It is possible.
Sandra Day O'Connor: And have there ever been years in which there were such revenues that the States shared?
Lawrence Allen Katz: In response to the first question, yes, it is possible for the States, by cooperative decision of the legislatures and their Governors, to share the general revenue fund. Yes, there are situations where that has been done, and I believe that the Port Authority has cited some of those situations in their brief. By the same token, there are other examples where an individual State, seeking to pursue what it believed was its sovereign policy, wanted to take that money, and they weren't permitted to because the agreement of the other State was not available. It is that situation, the practical realities that once they cannot act on its own, that leads to the conclusion that this entity cannot be sovereign, is not entitled--
William H. Rehnquist: Well, then you're saying as a matter of law a bi-State entity cannot have Eleventh Amendment protection. You don't need to examine all these other factors, because in no bi-State entity will you find that one State can act on its own.
Lawrence Allen Katz: --Mr. Chief Justice, based on the current posture of this case, I agree, but I disagree with the conclusion.
William H. Rehnquist: Well, but you've agreed with several totally inconsistent propositions, it seems to me. First, no bi-State entity can have Eleventh Amendment... second, that it depends on the facts and circumstances. What is your position?
Lawrence Allen Katz: Let me give you an example, Mr. Chief Justice.
William H. Rehnquist: Well, just tell me.
Lawrence Allen Katz: My position is that any entity structured as the Port Authority is structured is not entitled to the protection of the Eleventh Amendment. I believe that the States and Congress concurring could create a statutory framework where each State has the opportunity to either exercise some control or dip into the funds themselves, where there is significant sovereignty exercised by the States and, if that structure did exist, those entities would be entitled to the Eleventh Amendment protection.
John Paul Stevens: Isn't that kind of a silly approach? If Congress wanted there to be immunity from suit in Federal courts, all it would have to do would be to say in its consent there should be immunity from suit in Federal court. Then you don't have to worry about all the details of the structure.
Lawrence Allen Katz: Well, Justice Stevens, we believe that's another argument supporting our position here, that in fact there's nothing in the Compact itself to indicate that the States intended to give Eleventh Amendment immunity to this entity. Lake Country--
David H. Souter: What's the intent got to do... as I understand it, what Justice Stevens has suggested is not Eleventh Amendment immunity. It would be the equivalent of statutory immunity created for this entity by Congress on the theory that the Compact is treated as Federal law.
Lawrence Allen Katz: --I believe that's true. I've tackled with that problem, and I'm not certain there's an actual difference between a congressional statute precluding these cases from Federal court and the ramifications of the Eleventh Amendment precluding them from Federal court. The effect is still the same, and I'm not certain technically which would have applied. I think the significance, though, is that Lake Country speaks about the need for congressional concurrence. Concurrence indicates the need to agree with something. If the Compact is silent, then it's clear that Congress did not concur, and without congressional concurrence, the suggestion that Justice Stevens raised, the hypothetical that he raised, could not exist and does not exist in this case.
David H. Souter: Well, let me ask you... and I suppose this is just a theoretical question, but let's assume that in this case we were to find an intent on the part of the compacting parties, approved by Congress, to extend immunity to PATH. Would you lose, in that case?
Lawrence Allen Katz: Let me make certain I understand the question.
David H. Souter: Because we took a case, as I understand it, to decide what the Eleventh Amendment provides, and I think you have agreed with me that whatever this immunity might be based on intent with congressional approval, it wouldn't necessarily be Eleventh Amendment immunity.
Lawrence Allen Katz: If this Court were to find that the parties... that the States specifically intended to confer some sort of sovereign immunity from suit in Federal court to this entity, and that Congress, understanding that intention, specifically and explicitly concurred with it, then I would agree that under Federal law, Article III jurisdiction would not vest in the Federal courts.
Ruth Bader Ginsburg: Then the Treasury factor isn't important at all. Even if this is the biggest moneymaker for the State, it wouldn't matter, as long as the States intended it to be immune?
Lawrence Allen Katz: The Treasury factor is an extremely relevant, the most relevant factor in the analysis on the constitutional issue. The statutory issue is a totally different approach. Such a statute does not exist in this case. There is no specific congressional concurrence for protection from suit in Federal court. In the absence of that, the only issue that remains is the Eleventh Amendment issue, and the Eleventh Amendment issue looks primarily to the Treasury factors. I believe there's another important factor--
Antonin Scalia: It looks to the Treasury factors when there's any doubt whether you're suing the State. If you sued a department of the State to get the State to get particular State action, is there any doubt the Eleventh Amendment would apply, unless there's a--
Lawrence Allen Katz: --None at all, Your Honor. The reason we must address the Treasury--
Antonin Scalia: --Treasury or no Treasury, you can't sue a State agency as such.
Lawrence Allen Katz: --That's right. The issue before this Court is whether or not the Port Authority is such a State agency, and in determining that question, Lake Country and other cases indicate reliance on the Treasury factor.
Antonin Scalia: It's one factor, but don't make it the be-all and end-all. It's certainly a sufficient factor, I think. I'm not sure it's anywhere near a necessary--
Lawrence Allen Katz: Justice Scalia, let me address another factor, then. In Lake Country, this Court noted that the most forceful evidence of autonomy between the Tahoe agency and the States was evidence that the States had to go to court to litigate against the entity. I believe that that factor being called the most forceful was evidence for the court's position that actions speak louder than words, that regardless of what the Port Authority says today, let's look at what they did. In this case, we had that situation. We have a situation where the Attorney General of New York went into court to compel the Port Authority to stop polluting the water around the Kennedy Airport. The judge who heard that injunction hearing noted that it was in fact unusual that the Port Authority, being a quasi-State agency of some sort, would come in and basically take the position, don't enjoin us, we should be able to pollute the water because we don't know that it's our pollution that's causing the damage. Now, the Port Authority in their reply brief indicates that the presence of this lawsuit is actually some indication of State connection. They take the position that the Attorney General has to screen these suits, and the reason for that is because the Port Authority is related to the State. I submit that's simply not true. The statute gives the Attorney General discretion. If not polluting the waters near the Kennedy Airport was an important State policy, sufficiently important that the Attorney General would want to pursue it, and in his discretion decided to pursue it through litigation, then if the Port Authority was sufficiently connected to the State to make it the functional equivalent of the State, or if the Port Authority was subject to the control of an individual State, the Attorney General would not have had to go to court. It could have been handled within the executive branch.
Antonin Scalia: --That all reduces back down to your basic argument that you have no sovereign immunity unless you are within the control of a single State, and that being within the control of two sovereign States suddenly eliminates sovereign immunity.
Lawrence Allen Katz: The reason that eliminates sovereign immunity unless the statutory structure gives those individual States some independent control is because the purpose of extending sovereign immunity is because the agency is derivative of the sovereign. In this case, the States are not effectively sovereign as to this entity, because it can't exercise control as to that entity. If today--
Antonin Scalia: It's derivative of two sovereigns. The two sovereigns are the only people that can exercise control over it instead of one sovereign. You know, two sovereigns are twice as good as one sovereign, it seems to me, not half as good.
Lawrence Allen Katz: --Only if they had the authority to act and they can agree.
Anthony M. Kennedy: Well, do you agree with that, counsel? Why isn't two sovereign... isn't two sovereigns just half of the control that a State usually has?
Lawrence Allen Katz: Personally, I believe, Justice Kennedy, that two sovereigns are the equivalent of no sovereign with respect to a bi-State entity, because independently--
Anthony M. Kennedy: All right, so--
Lawrence Allen Katz: --they cannot exercise control.
Anthony M. Kennedy: --and that's almost always the case with any State agency, so why isn't your argument that, sui generis, this is a category where no State, no Eleventh Amendment immunity can apply?
Lawrence Allen Katz: Because I don't believe that... let me rephrase that. I believe that the Court would take the position that... such as that set forth in the concurrence in the Feeney case that Eleventh Amendment immunity should never apply to a Compact Clause entity. That would be a constitutionally correct decision. I do not believe it is necessary for the Court to go to that extreme in this decision, because this decision can be reached on narrower grounds and still hold the constitutional principles of the Compact Clause.
Ruth Bader Ginsburg: Would you make a distinction between an entity that enriches the State by making... or makes its own money, so it doesn't deplete this Treasury. That's your big Treasury factory. It doesn't deplete the Treasury. It may enrich the Treasury, but should that... those be equal? 1) It doesn't deplete the Treasury, 2) It enriches the Treasury.
Lawrence Allen Katz: May I say two things in response to that question? The first is, there's another very important factor of the Treasury test. Not only is it self-sustaining in terms of its own financial ability, but its debts cannot become the debts of the Compacting States. But a more direct response to your question, I do not believe that the Port Authority does enrich the States, because--
Ruth Bader Ginsburg: And if it did, would that account against your argument? This large Treasury factor... I understand the part they don't deplete the Treasury. If it swells the Treasury, does that indicate it's a State agency?
Lawrence Allen Katz: --I believe that if the individual States had the authority to independently take money out of that surplus fund toward its own use, that would point in favor of Eleventh Amendment immunity. It's important to remember, though, that if either the State--
Antonin Scalia: And the fact that they can do it jointly by agreement with one another, we have to rule that out of accounting?
Lawrence Allen Katz: --I believe there are several historical examples to show that the States often cannot agree, and therefore... the concept of sovereign--
Antonin Scalia: Well, what do you do? It's their money. If New York and New Jersey agree, it's their money.
Lawrence Allen Katz: --Absolutely, but the concept of sovereign is that the sovereign has the power to do something. The State of New York does not have the power to take this money, and the State of New Jersey does not have the power to take this money. Mr. Chief Justice, if there are no questions, at this time I'd like to reserve the remainder of my time.
William H. Rehnquist: Very well, Mr. Katz. Mr. Welsh, we'll hear from you.
Hugh H. Welsh: Thank you, Mr. Chief Justice, and may it please the Court: For more than 30 years, the Port Authority of New York and New Jersey shared the sovereign immunity of the two States that created it, and it was not until 1951 that the two States passed legislation that permitted suits against the Port Authority in the first place. This Court has found that that conditional waiver of the sovereign immunity also contained language that constituted a conditional waiver of the Eleventh Amendment, and so when this case was filed beyond the 1 year within which such suits may be bought, it was only logical, then, for the District of New Jersey and later the Third Circuit to dismiss the case because of the lack of jurisdiction of the Federal court, because the Eleventh Amendment would bar this action being bought against an arm of the State in the Federal courts. The Court over the years has considered many factors to determine whether a State agency is in fact an arm of the State entitled to Eleventh Amendment immunity, and I suggest to you that if one takes a look at the Port Authority of New York and New Jersey and its subsidiary, PATH, it's quite clear that it does share the indicia, or the criteria, that the Court has applied in a number of cases. If you take all of the indicia, all of the criteria that have been considered over the years, you'll find that they really come down to two fundamental questions, and one is, did the States create an agency that was an arm of the State and entitled to share in the immunity, and secondly, did they continue to exercise control over that agency and, in both cases, that is the case of the Port Authority. So if we apply the indicia from Lake Country Estates or from the Mount Healthy decision, both decisions of this Court, I think it's quite clear that the Port Authority does share that immunity. A number of questions were asked relating to the State Treasury test. Justice O'Connor asked about the limit of $100,000 on the State's obligation to the Port Authority. I believe what we were referring to there was an obligation at the time the Port Authority was created for each State to commit up to $100,000 each until such time as the Port Authority became self-supporting. There were other times in its history that the Port Authority was supported by the States of New York and New Jersey. In its early days when there was a danger of defaulting on the bonds, the two States actually gave to the Port Authority the operation and control over the Holland Tunnel, and the revenues from that facility, which was built by the two States, helped to support the Port Authority, and then, since then, the Port Authority has been self-supporting. The Treasury argument, or the Treasury criteria, certainly is not the only criteria that the Court has looked at over the years, but even if one focuses on that with regard to the Port Authority, it's quite clear that the Port Authority is very closely linked to the Treasuries of both of the States that created it. It's true that the Port Authority may not pledge the credit of either the State of New York or New Jersey. It's also true that a judgment against PATH or the Port Authority will not be paid for directly out of the State Treasury of either State.
John Paul Stevens: May I ask a background question? You mentioned that between 1922, or whenever it was they formed this, and 1951, they retained their sovereign immunity?
Hugh H. Welsh: Yes. There's a series of cases that came down during that period of time that made it quite clear that the Port Authority shared the sovereign immunity of the two States until 1951.
John Paul Stevens: Those were all... all those were New York and New Jersey cases, were they?
Hugh H. Welsh: That's right, yes.
John Paul Stevens: What did a person injured by the negligence of the Port Authority do during that period? Was there just no remedy?
Hugh H. Welsh: There was no remedy. Normally those issues, those cases were dealt with through resolutions that were passed, much like many States used to deal with claims against--
John Paul Stevens: Resolutions passed by whom?
Hugh H. Welsh: --By the Board of Commissioners of the Port Authority resolving the cases and providing for payment.
John Paul Stevens: I see.
Hugh H. Welsh: And it's my understanding that a number of cases before they waived... a number of States before they waived sovereign immunity would deal with claims in a similar manner, until they created court of claims or decided to waive it through some tort claims act. But if one looks at the Port Authority and the history of the relationship between the two... the Port Authority and the two States that created it, it's quite evident that there is a very close link financially between the States and the Port Authority. The Port Authority is somewhat unique for State agencies, because the Port Authority is essentially lending its support to the States that created it, so any judgment against the Port Authority is an impact on the State fisc. If one considers the State Treasuries of the other two States to be for the benefit of the people, and in fact the Treasury of the Port Authority to be for the benefit of the people, this--
Ruth Bader Ginsburg: But how would that be different from the Bolden and the later cases involving Pennsylvania, just a one-State authority? It seems that those later Third Circuit Cases accept that the Treasury factor is prime. That is, is this entity making its own money.
Hugh H. Welsh: --In Bolden and other Third Circuit cases, the Third Circuit did focus on the fact that the Treasury factor was an important factor, but it made it quite clear it was not the only factor, and they applied a balance of those factors. Interestingly in Bolden--
Ruth Bader Ginsburg: But they did say, did they not, that it was probably the most important factor, and they distinguished the Third Circuit... whose decision is before us for review... distinguished the Port Authority cases on the ground that the States really would come to the rescue of the Port Authority, that the State's credit really did stand behind that entity?
Hugh H. Welsh: --That was part of the distinction that was made in Bolden to, I think it was the Southeast Pennsylvania Transit Authority in the Bolden case, that they focused on the fact that the States might step in in the case of the Port Authority, but I suggest that they also looked at other factors in Bolden. In Bolden, the Third Circuit, sitting en banc, considered a continuum with the Port Authority at one end as an example of an agency that was entitled to Eleventh Amendment immunity, and I think at Rutgers University at the other end, and they were trying to determine where on that continuum SPTA fit in, but they didn't rely solely on the Treasury... argument of the Treasury issue to determine that case. The Port Authority over the years has committed vast resources to the support of the two States that created it. This was done through bi-State legislation that was passed by the two States authorizing and directing the Port Authority to undertake various projects, and we set forth a number of examples in our brief with citations to the authorizing legislation. As an example, the Port Authority has committed $440 million, $220 million to each State, to acquire buses that are being used by the two States for the benefit of their people. We have provided railroad connections when requested by the State, and we've committed $106 million pursuant to legislation to develop the so-called Oak Point connection, and this was done at the request of the State of New York. And there are a number of other projects that the States have come to the Port Authority to ask for the Port Authority... in effect direct the Port Authority and authorize the Port Authority to support the State in its endeavors, so there is a very close financial link between the Port Authority and the two States.
Anthony M. Kennedy: Do you want us to say that the Port Authority is an arm of the State of New York?
Hugh H. Welsh: Yes, I believe it is an arm of the State, of both New York and New Jersey.
Anthony M. Kennedy: Well, it seems it has a more autonomous existence than that when the State of New York has to go into court to sue it.
Hugh H. Welsh: Yes, Justice--
Anthony M. Kennedy: To compel it to take action that it wishes, that New York wants.
Hugh H. Welsh: --Justice Kennedy, there are a number of cases such as that where the State Attorney General has lent his office and his name to injunctive actions that would award against the Port Authority, and that was one of them. We suggested in our brief, and I believe it is a valid suggestion, that that in fact is an argument in support of the fact that the Port Authority is an arm or an agency of the State. The two State legislatures have stated that one may not get an injunction against the Port Authority unless the action is bought by the Attorney General of the State, thereby limiting the actions that can be bought against the agency. The New Jersey supreme court, in a case entitled Evans-Aristocrat Industries v. the Port Authority, made it clear what the purpose of that provision was in the statute, and they stated that the purpose was to permit a State governmental authority, in this case an Attorney General, to screen the actions that are being bought against the Port Authority to assure that strike suits or similar actions would not be bought that would delay or prevent the undertaking of valid, much-needed public projects by the Port Authority. So at least the State of New Jersey has viewed that provision that requires the Attorney General in all cases to seek an injunction--
William H. Rehnquist: But you're not saying that one may sue the Port Authority only by going to the Attorney General and having him bring the suit in your stead, are you?
Hugh H. Welsh: --The cases have held that a suit for an injunction against the Port Authority may only be bought by the Attorney General of one of the States.
William H. Rehnquist: But a suit for damages is otherwise.
Hugh H. Welsh: A suit for damages is otherwise. That limitation relates only to suits for injunctive relief.
Anthony M. Kennedy: You mean, if the Port Authority were trespassing on my property, as a private property owner I couldn't obtain an injunction?
Hugh H. Welsh: No. You would have to go to the Attorney General to seek an injunction. The Attorney General would have to file that suit on your behalf or endorse the action that was being bought. You could, of course, bring a suit for money damages as a taking in that particular case. You wouldn't be barred because of that provision of what we call the suability--
Anthony M. Kennedy: And does PATH have the same protection--
Hugh H. Welsh: --Yes, it does.
Anthony M. Kennedy: --that only the Attorney General can enjoin PATH?
Hugh H. Welsh: Yes, it does. The statute that created PATH, the bi-State legislation that created PATH and authorized the Port Authority to establish a railroad, states quite clearly that the subsidiary corporation will share in all of the privileges and immunities of the Port Authority as if it was--
Anthony M. Kennedy: I thought PATH was created by the Compact. Am I--
Hugh H. Welsh: --No. PATH was created by bi-State legislation between the two States. PATH was not created until 1961.
Antonin Scalia: --Well, that... I mean, just saying it doesn't make it so. If we're in agreement, and I think you are, that whether sovereign immunity on the part of an entity exists or not depends to a large degree upon the functions that that entity performs, simply creating a subordinate entity which may do something that is not essential to State action and what-not, and that does not bring any money into the State Treasury or take any money out, if you do that, even though you say it shall share in all the sovereign immunity that I have, that wouldn't be effective, would it?
Hugh H. Welsh: Well, the--
Antonin Scalia: So you have to convince us not only that the Port Authority but that PATH meets the test that you've been talking about.
Hugh H. Welsh: --The... I believe that if we find that the Port Authority shares the Eleventh Amendment immunity of the States, and it was created as such an agency... not necessarily with the intent, but because of its fundamental nature is an arm of the State, I believe it does follow that that subsidiary corporation, because it is established under the authority from the two States, would share in the immunity. But the legislation does state that PATH, the subsidiary, in undertaking the development of the railroad, is doing it for the benefit of the people of the two States, for their prosperity, and has a great deal of language in the bi-State legislation--
Antonin Scalia: I'm not sure you answered my question. Do you agree that we have to look to the activities and the functions performed by PATH?
Hugh H. Welsh: --I think the functions are one of the criteria that has to be looked for. That's certainly a valid inquiry.
Anthony M. Kennedy: Then can you tell me-- --For instance, if a State said that a municipality were to have Eleventh Amendment immunity, as a matter of Federal law we would just ignore that. We would look to see what the function was.
Hugh H. Welsh: Exactly.
Anthony M. Kennedy: The fact that the State says it is not controlling.
Hugh H. Welsh: Well, the State's announcement is certainly strong evidence of the nature of the agency, but that alone does not, of course, grant a State agency Eleventh Amendment immunity. It's the nature of the agency itself. The States do not bestow Eleventh Amendment immunity, nor does Congress bestow Eleventh Amendment immunity.
Ruth Bader Ginsburg: Mr. Welsh, if it's the function that counts now, how does this PATH differ from the Pennsylvania... the Southeastern Pennsylvania, the New Jersey Transit, and why... explain to me rationally why PATH would get immunity that Southeastern Pennsylvania Transit Authority didn't have in the Third Circuit's view and the New Jersey Transit rail operators didn't have.
Hugh H. Welsh: To be perfectly honest, Justice Ginsburg, I have a great deal of difficulty understanding the Fitchik case involving New Jersey Transit. I think the Third Circuit was somewhat inconsistent there. Very frankly, I think New Jersey Transit should share in the Eleventh Amendment immunity also. I have difficulty. I can distinguish PATH, however, from both of those enterprises. There are very, very strong controls over the Port Authority that I am not sure exists with regard to those other agencies in it... beyond the State Treasury argument. An example is the Commissioners of the Port Authority themselves, the governing body, are appointed by the Governors of the two States, and the Governors maintain--
Ruth Bader Ginsburg: And in the other cases they were appointed by--
Hugh H. Welsh: --I'm not sure how they were appointed. I think that New Jersey Transit may be an appointed board, also. I'm not sure of the element of control. In the case of the Port Authority, the Governor can exercise veto power over the activities of the Commissioners, and has a right within 10 working days to veto any action that's taken. I'm not sure that exists in the case of New Jersey transit. But beyond that, of course, the Port Authority and PATH operate in a far wider field.
John Paul Stevens: --May I ask a question about your... you earlier explained to us in injunctive actions that the citizen has to go to the Attorney General to bring the action. That, of course, is in State court cases.
Hugh H. Welsh: That's right.
John Paul Stevens: In a Federal... if there were a Federal question such as whether the authority had violated an environmental statute or something like that, would you contend the same procedure had to be followed?
Hugh H. Welsh: Yes, I do.
John Paul Stevens: That the Federal court would not have jurisdiction of an individual's complaint unless the individual went to the--
Hugh H. Welsh: Unless we can find--
John Paul Stevens: --Do you have any authority for that?
Hugh H. Welsh: --No case on point, other than cases that involved other statutes. Unless one can point to a piece of Federal legislation where there has been an explicit abrogation of Eleventh Amendment, for some reason--
Antonin Scalia: You can enjoin the officer acting on behalf of the authority--
Hugh H. Welsh: --Yes, you can.
Antonin Scalia: --just as you can enjoin a State officer.
Hugh H. Welsh: You can enjoin the State officer prospectively, and there are a number of cases involving grants-in-aid and the like, or a violation of civil rights, where you can seek an injunction against the officer barring their prospective action.
Hugh H. Welsh: You're talking about Federal actions.
Hugh H. Welsh: You may not bring the action for past damages.
John Paul Stevens: You're talking about Federal court actions now, but you couldn't do that in the State court, I don't suppose.
Hugh H. Welsh: Well, there's a--
John Paul Stevens: Your bar would apply to an action brought against an officer of PATH as well as PATH itself, wouldn't it?
Hugh H. Welsh: --I suggest that there is a cause of action available against a State officer as opposed to the agency itself.
John Paul Stevens: In State court?
Hugh H. Welsh: In the State court, an action in lieu of prerogative writ, or in the State of New York, an Article 78 action would be available against the officer even though it would not be permitted against the State agency itself. The distinction is made between action of the officer, and in many cases it might be considered to be ultra vires. So that remedy is available.
David H. Souter: So why does anybody bother with the Attorney General, then?
Hugh H. Welsh: Frankly, I don't know. They would have to establish the fact that the officer was acting ultra vires and beyond his authority, or some other standard that would apply to an action in lieu of prerogative writ. Normally, they attack the policy of the Port Authority in such actions, rather than the activity of a State officer, we find. From experience I've seen that. But there is a remedy available, I suggest, and in a number of occasions in New York people have sought such a remedy through--
John Paul Stevens: May I ask you one other question, since I've interrupted you already? The first argument that we made in our opinion for the Court in the Lake Country Estate was a plain language argument, that the plain language of the Eleventh Amendment applies to suits against "any one State". What's your response to that argument?
Hugh H. Welsh: --Well, if one remembers that the Eleventh Amendment immunity is a constitutional provision that protects the States... State or States, there's no reason to distinguish between the immunity that a State has, acting as one State, or if that one State chooses--
John Paul Stevens: Except that in the Lake Country opinion we said there was, based on the plain language.
Hugh H. Welsh: --Well, in Lake Country the Court looked at the Compact itself, and it found language in the Compact itself that it felt was a clear indication that it was... the States did not intend for this new agency that was created to have Eleventh Amendment immunity, and then it went on, I believe... I think... I believe it's page 401 of the Lake Country Estates. There's a two-sentence paragraph, and it refers to the fact that a review of the Compact does not find evidence for the support that it was the intention of the States to create such an entity, and then goes on to say, in the absence of such a finding, but it was referring to that specific Compact when it referred to--
John Paul Stevens: So there's nothing in the Compact that would justify reading additional meaning into the limited language of the amendment. That's at page 401.
Hugh H. Welsh: --Yes. It was nothing in that particular Compact, but it was in light of the fact that there was strong language in there--
John Paul Stevens: But you think there's something in this Compact that justifies a departure from a general rule that the Eleventh Amendment means what it says.
Hugh H. Welsh: --I believe the general rule should be that in the absence of language, one should assume that the Eleventh Amendment does protect the agency if it is an agency of a nature that would make it an arm of the State for those purposes.
Antonin Scalia: Mr. Welsh, I thought you were going to say that we've also had cases subsequent to Lake Country which say that the Eleventh Amendment means more than it says, that it is simply exemplary of a sovereign immunity which was assumed to exist even before the Eleventh Amendment was passed, and that--
Hugh H. Welsh: Yes.
Antonin Scalia: --it simply addressed the most common instance of it.
Hugh H. Welsh: There have been cases--
Antonin Scalia: And that is all post Lake Country.
Hugh H. Welsh: --And one of the recent cases--
Speaker: And different language--
Hugh H. Welsh: --was Puerto Rico Aqueduct, but one has to remember that the Eleventh Amendment immunity is not bestowed by the States, nor is it bestowed by Congress. It's bestowed by the Constitution onto the States, and if the States... if one State would have that Eleventh Amendment immunity and would have the right, under the Constitution, to create an agency as its arm that also shares in that Eleventh Amendment immunity, I see no reason why two States can combined, each exercising its own sovereign rights to create a bi-State agency, and that agency also share in the Eleventh Amendment immunity--
Anthony M. Kennedy: --Well, I guess the reason might be the lack of political control. Each State is controlled by its citizens, but a bi-State agency is not.
Hugh H. Welsh: --In--
Anthony M. Kennedy: It's controlled only half by each State, and you are creating an entity, a new governmental entity which is now exempt from suit. This is a very serious immunity.
Hugh H. Welsh: --The petitioner suggests that the Port Authority is not either legally or politically controlled by the two States. That simply isn't the fact. The Port Authority may not act unless it has legislative authority from the two States that created it. It requires bi-State approval for the various projects. A good example of that was the construction of the third tube of the Lincoln Tunnel. Interestingly, it was Justice Brennan, then sitting as a justice in the New Jersey supreme court, that ruled that the Port Authority lacked the authority to undertake the construction in that tube, absent specific authority coming from the two State legislatures. So there is legal control over the agency. There's also the veto power that the Governor, an elected official, exercises over the acts of the Board of Commissioners of the Power Authority. Those Commissioners are appointed by the chief executive officer of each State, and their appointment is subject to the approval process of each of the States, in both cases through the Senate of each of the State--
William H. Rehnquist: For a fixed term of years at the pleasure of the Governor, or what?
Hugh H. Welsh: --They serve for a 6-year term, but they can be removed for cause either by the Governor of one State after a hearing, or the State Senate in New Jersey can remove them, but there is a fixed term.
William H. Rehnquist: And New York unilaterally can remove New York appointees?
Hugh H. Welsh: Yes. Each State reserved the right to enact legislation relating to the appointment of their Commissioners. In the case of New York, they have provided for the removal by the Governor after... it's a for-cause removal, but the Governor exercises that right. In New Jersey, the right is exercised by the State Senate.
Antonin Scalia: You say for both of them their actions can be vetoed by the Governor within 30 days?
Hugh H. Welsh: No, 10 days. The Board of Commissioners of the Port Authority acts, like most boards, through resolutions. Their actions in passing resolutions approving the activities of the Port Authority is subject to the veto of the Governors of the States, so they can actually veto the minutes of the meeting, veto these resolutions and--
Antonin Scalia: Line-item veto, or--
Hugh H. Welsh: --It's a very precise veto.
Hugh H. Welsh: --It is.
Hugh H. Welsh: It is a line-item veto. It deals with a specific resolution that would be passed by the board authorizing the staff to do things.
William H. Rehnquist: What would the resolutions deal with, proposed future projects?
Hugh H. Welsh: The resolutions, Mr. Chief Justice, can deal with any of the activities of the Port Authority. They could range to the Port Authority undertaking the planning for a... you know, a new airport, an airport connection, down to a resolution adopting the budget of the agency, resolution authorizing the award of certain contracts... they are all subject to a veto power.
William H. Rehnquist: Could a resolution dealing with personnel matters--
Hugh H. Welsh: The personnel matters are usually found in a budget resolution. The specific hiring and firing is left to the executive director, but policies that are found in board resolutions would be subject to the veto, pay raises as contained in the budget resolution of course would be subject to--
Anthony M. Kennedy: --Is this... are you describing the Port Authority of New York and PATH?
Hugh H. Welsh: --Yes. The minutes of PATH are also subject to gubernatorial veto. The Board of Commissioners of the Port Authority are in fact the board of directors of PATH, by the legislation that created PATH and the by-laws of PATH. The Board of Commissioners also function as the board of directors. They are the exact same people, and their actions are also subject to gubernatorial veto. So there is a great deal of legal control over the activities of the agency. In addition, of course, there's more subtle control in the form of political control. The Board, the Port Authority consists of 12 Commissioners who are the appointees of the Chief Executive Officer of the two States.
Ruth Bader Ginsburg: Mr. Welsh, you were candid enough to say that you have a little problem with Bolden and Fitchik, and I think it might be helpful... you say the Third Circuit seems to be going in the opposite direction in those cases.
Hugh H. Welsh: Well now, I mentioned the fact that the Third Circuit established a continuum in doing an analysis.
Ruth Bader Ginsburg: But they did say without qualification that who pays the judgments is the most important factor. Bolden I think said that fairly flat-out, didn't it, and there's another... what do you make of the Puerto Rican Port Authority case saying you have to look at the function that's being performed... running a railroad, operating a dock?
Hugh H. Welsh: If you're referring to the recent... well--
Ruth Bader Ginsburg: I'm referring to Royal Caribbean against--
Hugh H. Welsh: --Yes. Well, that was a case decided in the First Circuit, and--
Ruth Bader Ginsburg: --Yes, by a well-respected jurist. [Laughter]
Hugh H. Welsh: --And in the Puerto Rican Port Authority case they looked at the functions of the agency, among other things. They considered the State Treasury issue, but in addition they... there was an analysis that included a proprietary governmental function analysis, and they viewed the Puerto Rican Port Authority as an agency that was more akin to a private corporation because it leased port facilities and it paid as it went, and there wasn't a great deal of discussion as to the political or the legal controls over the agency, other than the general functions of the agency.
Antonin Scalia: What functions does PATH perform here that you would characterize as essentially governmental functions?
Hugh H. Welsh: Well, one... first of all, it's the operation of a mass transit system that the two States have specifically found to be a governmental undertaking.
Antonin Scalia: Well, I mean, they can say it's so, but is it so? I mean, most railroads are not run by States. I think it's rather unusual to have a State-run railroad, isn't it?
Hugh H. Welsh: Actually, one fine example of that is right here in the Washington Metropolitan Area in Washington Metro, where the Washington Metro has been held to share the Eleventh Amendment immunity of the States of Virginia and Maryland. I believe that the operation of mass transit systems has come to be a governmental function. If one looks around the country, you'll find that most public transit systems today are being operated by agencies of either municipalities or State government. We could go around the country and look at them, ranging from San Francisco all the way to the East, but a good example is right here in this city with Washington Metro. In the case of PATH, the enabling legislation that authorized the Port Authority--
Antonin Scalia: We haven't held Washington Metro to be immune, right?
Hugh H. Welsh: --Yes, you did.
Antonin Scalia: Huh?
Hugh H. Welsh: Yes. In a decision by Judge Bork that I believe Your Honor concurred in.
Antonin Scalia: I mean, we, us here, I don't mean... I don't mean--
Hugh H. Welsh: Not this one. [Laughter]
Antonin Scalia: --I never... I never use the editorial Mr. Welsh. I never do that.
Hugh H. Welsh: No, this Court has not. It hasn't reached this Court, but the--
Ruth Bader Ginsburg: You're not urging that that WMATA case is distinguishable, that it wouldn't be consistent to hold WMATA... why don't you just tell us what was the reason for the holding of immunity in WMATA?
Hugh H. Welsh: --WMATA was... focused on the control that was being exercised by the creating States over that agency that was created to operate the transit system. Treasury was one of the issues, and I believe WMATA is dependant on both the Federal Government and the States for a certain amount of support, but in addition, there was a focus on the fact that the two States did exercise control over that agency, so--
Ruth Bader Ginsburg: What about who pays? Who pays?
Hugh H. Welsh: --Well, it was acknowledged there that the judgment would be paid by WMATA, but ultimately it might be borne by the riders or be borne by the two States that are subsidizing it. That was provided in WMATA, but my point is that they didn't focus solely on the State Treasury test in WMATA. This is one of the difficulties that the courts around the country and the circuits courts are faced with, and it's the fact that we could have a railroad in one State that seemingly has the characteristics of a railroad in the other State, and one circuit will hold that there is immunity and the other State will not. The Puerto Rican Port Authority was held not to have immunity, and yet in the Fourth Circuit, the South Carolina Port Authority was held to have Eleventh Amendment immunity, and the focus has been--
Sandra Day O'Connor: Well, maybe our multifactor test doesn't work very well.
Hugh H. Welsh: --the multifactor test is usually applied in a determination that the agency does not have the Eleventh Amendment immunity, and yet there hasn't been clear direction given to the courts and to public agencies as to what should be included to make sure that there is Eleventh Amendment immunity, or what we should look for to determine that an agency is entitled to it. It's usually put in a negative form in the findings, such as Lake Country Estates and Mount Healthy. But all of those indicia really come down to two fundamental issues, and one is the nature of the agency that was created, and secondly is the elements of control that continue to be exercised by the States, and I suggest to you in both cases the Port Authority and its subsidiary, PATH, should share in that Eleventh Amendment immunity. The control is there, there is very strong political control, there's a very strong legal control that's been written in by the two States that have created those agencies. If there are no further questions--
William H. Rehnquist: Thank you, Mr. Welsh. Mr. Katz, you have 5 minutes remaining.
Lawrence Allen Katz: Justice Ginsburg, I'd like to begin by responding to one of your questions to Mr. Welsh concerning the difference between Fitchik, Bolden, and this case and Police Benevolent. I believe that the Lake Country decision indicated this Court's instructions that the Treasury factor, while not necessarily the only factor, is the most strongly weighted factor in determining these issues. The Third Circuit has recognized that to be true, as is evidenced by the formula that it follows in deciding its cases. Amici for the Port Authority has also indicated that not only did the Third Circuit believe that's what this Court has said in its past cases, but almost every other circuit has agreed the same. The problem with this case, the problem with the Police Benevolent case, and the reason that the Port Authority has been handled differently than the other entities is, as I discussed earlier, simply because the Third Circuit misread the statute. This Court can resolve this matter on a very narrow holding. This Court can confirm that in fact, as stated in Lake Country, when determining whether or not an entity is entitled to the protection of the Eleventh Amendment, the State Treasury factors are the reason that some entities are extended that protection. This Court can then find that the Third Circuit simply misread the statute and misapplied that constitutional formula. Had the Third Circuit included those last three or four words of the statute, it would not have found that there was a discretion... or, I'm sorry, it would not have found that there was a compulsive requirement on the part of the States to fund the entity. That is the narrow ruling of this case, and it goes to the heart of why there is that discrepancy between the Third Circuit's opinions. Mr. Welsh indicated the importance of the consent to sue statute, and its relevance in terms of the position of the States with respect to sovereign immunity.
Antonin Scalia: Mr. Katz, before you get off that question, why should it make a difference whether there is technically an obligation on the part of the State of New York and New Jersey to come to the assistance of a now-bankrupt Port Authority, or PATH? I mean, if, in fact, the alternative is that the whole Port... you don't really think New York and New Jersey are going to let the Port Authority cease to function.
Lawrence Allen Katz: Your Honor, I don't expect that the State of New York is going to let New York City go totally bankrupt, either, but New York City would not be entitled to the protection of the Eleventh Amendment. Likewise, any other State and any other political subdivision. This Court has recognized that political subdivisions, counties, and municipalities, are not entitled to the protection of the Eleventh Amendment.
Antonin Scalia: Not... there are good reasons why New York would not be entitled to sovereign immunity, but I question whether the good reason is just simply the State of New York does not bear the expenses of the City of New York.
Lawrence Allen Katz: The State of New York and the State of New Jersey do not--
Antonin Scalia: If in all other respects the unit in question is at a State level, is performing State functions, is governed by State officers, I don't know that it makes a whole lot of difference whether technically the funds come directly out of the Treasury or the functions are so important to the State that, as a practical matter, if the entity is bankrupt the State is going to have to reach into its pocket to support it. It doesn't seem to me to be a factor of that overwhelming significance.
Lawrence Allen Katz: --Justice Scalia, let us actually look at the Port Authority. First of all, although admittedly the members of the Board of Governors are appointed by the Governors, these are not State officials. It's not as if the State Department of Transportation Secretary sits on the board. The membere of the Board of Governors are primarily leading members of industry. Like in Lake Country, they're oriented toward the Port district. Two-thirds of the members of the Board of Governors must be voting members of the Port district. In addition to whatever--
Antonin Scalia: They're subject to a veto in 10 days of anything that they do, which, of course, you know the councilmen from New York are not.
Lawrence Allen Katz: --Subject to a veto, but if we presume that there are... we don't have to presume, it is true. There are today certain rules and regulations existing for the Port Authority. There are certain legislative mandates for the Port Authority. If the State of New York and the State of New Jersey cannot agree on another issue with regard to the Port Authority from now until the end of time, the Port Authority will continue to operate on its own, following the past legislative mandates, determining on its own the rules and regulations. I direct the Court's attention and invite your attention to the fact that the Compact provides that all of the details for the effectuation, the financing, the leasing, the tolls, the rentals, et cetera, are within the sole discretion and are controlling conclusive... I apologize. That's in a statute. The Compact itself provides that the Port Authority will have all powers necessary and appropriate to effectuate the plan other than the power to tax. That authority has enormous power on its own, and that power is exercised as a large landlord in the New York area. They own the World Trade Center. They own several other complexes. It's important to remember that the Port Authority district contains 1,500 square miles of land centering in New York Harbor.
William H. Rehnquist: Thank you, Mr. Katz. The case is submitted.
Speaker: The honorable court is now adjourned until ten o'clock tomorrow.