Supreme Court Asks Biden Administration to Weigh In on Waterfront Commission Dispute

Two heavy cranes at the Red Hook Container Terminal in the Brooklyn borough of New York on Feb. 16, 2006. (Stan Honda/AFP via Getty Images)

The Supreme Court directed the Biden administration to share its views on whether New Jersey should be allowed to withdraw from a powerful bistate commission that monitors corruption at the storied Port of New York and New Jersey, a signal that it may soon decide to hear the commission’s appeal from a lower court.

The case is Waterfront Commission of New York Harbor v. Murphy, court file 20-772. The commission won at trial, foiling, at least temporarily, New Jersey’s move to exit from the commission, but that decision was reversed by the U.S. Court of Appeals for the 3rd Circuit.

The Waterfront Commission is “a somewhat unique [interstate] compact agency,” according to the Yale Journal on Regulation.

It states that the commission is “a regulatory agency, exercising federal and state regulatory powers over interstate and international trade. While the missions of compact agencies are quite varied, most merely exercise the contracting states’ proprietary powers to construct or maintain facilities or allocate resources or responsibilities between or among states.”

In an unsigned order on April 5, the Supreme Court invited Acting Solicitor General Elizabeth Prelogar to file a brief “expressing the views of the United States.”

The Department of Justice declined to comment.

In 1953, New York and New Jersey entered into the Waterfront Commission Compact, as allowed by the U.S. Constitution, and created the commission to combat widespread corruption and racketeering at the Port of New York and New Jersey. The compact was approved by Congress and became federal law, the commission stated in its petition for certiorari, or review, filed with the Supreme Court on Dec. 4, 2020.

The port’s reckoning with organized crime was immortalized in director Elia Kazan’s 1954 film, “On the Waterfront,” which won eight Academy Awards.

“For decades since, the Commission has successfully rooted out illegal activities at the port,” but New Jersey had a change of heart and enacted a law to withdraw itself unilaterally from the compact, according to the petition. The state law, known as Chapter 324, would dissolve the commission and divert revenues that would otherwise fund the commission to the New Jersey state police, who would assume the commission’s regulatory responsibilities over the New Jersey side of the port.

In 2018, then-New Jersey Gov. Chris Christie, a Republican, signed the legislation withdrawing New Jersey from the commission. Christie was succeeded in the post by Phil Murphy, a Democrat.

Critics have long derided the commission as ineffective, along with blaming it for over-regulating businesses involved in the port and for labor shortages long after organized crime had been driven out.

The commission sued to block the New Jersey governor from enforcing Chapter 324. A U.S. district court granted summary judgment to the commission, but the 3rd Circuit reversed, holding that a state could dissolve an agency created under federal law and transfer the agency’s functions to itself. The lawsuit itself couldn’t proceed because New Jersey enjoys state sovereign immunity, the appeals court determined.

But the commission disagrees, arguing the 3rd Circuit’s decision conflicts with those issued by two other appeals courts and has implications for federalism.

It stated that the decision raises issues of “broad significance for interstate compacts” and “destabilizes dozens of similar compacts by heightening the risk of a violation of the compact or a unilateral withdrawal with no readily available recourse. And given that interstate compacts approved by Congress have the status of federal law, the decision undermines the strong federal interest in encouraging States to cooperate with each other by entering into and adhering to compacts.”

In a brief filed with the Supreme Court on March 1, New Jersey urged the court not to take up the commission’s appeal.

“The core question presented is whether—on the specific facts of this case—New Jersey retained its sovereign immunity in a lawsuit implicating the diversion of revenue from its treasury to an interstate compact agency,” it stated.

“As the unanimous Third Circuit panel explained, its ‘fact-specific’ conclusion that New Jersey retained its immunity follows from this Court’s precedents. That holding does not warrant certiorari.”

Ruling for New Jersey will not make interstate compacts unenforceable, the state argued.

“After all, myriad other options exist to hold States accountable for violating an interstate compact.”