Earlier this week, the Third Circuit held in Delaware River Joint Toll Bridge Commission v. Secretary Pennsylvania Department of Labor and Industry that Pennsylvania ceded its authority to enforce its building code and safety regulations against the operator of a transportation facility, the Delaware River Joint Toll Bridge Commission (“Commission”). The Commission is a bi-state entity created by an interstate compact between Pennsylvania and New Jersey (“Compact”) and approved by Congress under the Constitution’s Compact Clause.

The case highlights at least two key issues. First, the right to enforce the state’s building codes, the right to inspect the work, and the right to enjoin the construction based upon the lack of a building permit or perceived violations may be waived even without an explicit waiver of those rights in the entity or commission’s organizational document. Second, despite the broad interpretation of a state’s Eleventh Amendment immunity, the federal courts retain equitable jurisdiction to enjoin a state official’s ongoing violation of federal law.[i] In this case, the violation was the Secretary’s attempt to “enforce Pennsylvania’s building regulations against the Commission . . . .”[ii]

In this case, the Commission purchased land in Pennsylvania and began construction on a building without applying for a building permit that is normally required by the Pennsylvania Department of Labor and Industry’s (“Department”) regulations. The Department threatened the Commission with a stop-work order and one of its subcontractors with regulatory sanctions. In response, the Commission filed suit against the Secretary of the Department, seeking a declaration that the Secretary lacked authority to enforce Pennsylvania’s building regulations absent express language in the Compact to that effect.

Notably, the Commission was able to file suit in federal court despite the Eleventh Amendment’s ban on private-person-versus-state suits.[iii] The Third Circuit relied upon an exception to the Eleventh Amendment’s bar and held the district court properly retained jurisdiction based upon its equitable power to enjoin a state official (the Secretary) from an ongoing violation of federal law. The Secretary’s attempt to enforce Pennsylvania’s building and safety regulations, ostensibly “as an exercise of its fundamental police powers to protect the health safety and welfare of its citizens[,]”[iv] violated the terms of the Compact because the terms of the Compact waived those rights. Because the Compact was approved by the Congress, federal law applied and the Secretary’s violation of said federal law gave rise to the court’s equitable power to enjoin the violation.

Applying ordinary contract-interpretation principles, the Third Circuit agreed with the district court and held that Pennsylvania ceded its authority to enforce its building safety regulations through the Compact. Specifically, the court held that language in the Compact granting the Commission power to acquire and make improvements to property, along with language giving the Commission power over “all other matters in connection with . . . [its] facilities,” surrendered Pennsylvania’s authority over building safety regulations. Likewise, Pennsylvania also ceded its authority by empowering the Commission “[t]o exercise all other powers . . . which may be reasonably necessary or incidental to the effectuation of its authorized purposes . . . except the power to levy taxes.” The broad delegation of power, coupled with the narrow reservation of taxing powers, supported the district court’s conclusion that Pennsylvania relinquished its authority. Thus, the court concluded that Pennsylvania lacked authority to enforce its building safety regulations as to the Commission’s building.

While the court’s decision turned on the language of the compact at issue, it confirms that federal courts are willing to construe broad but non-specific waivers in such compacts as surrendering the states’ sovereign authority to regulate certain aspects of the entities they create. States seeking to regulate construction projects owned by such entities, and entities facing regulatory burdens posed by compacting states, should keep that in mind.

[i] Decision at page 8 (citing Ex. parte Young, 209 U.S. 123 (1908)).
[ii] Decision at 9.
[iii] The Secretary Pennsylvania Department of Labor and Industry cited the Eleventh Amendment to the U.S. Constitution in order to challenge the District Courts jurisdiction.  As the court noted at page 7 of the Decision, “As a general rule, ‘federal courts may not entertain a private person’s suit against a State’ unless the State has waived its immunity or Congress has permissibly abrogated it.” (internal citation omitted).
[iv] Decision at 6.