The Supreme Court seemed receptive to New Jersey’s argument on March 1 that it should be allowed to unilaterally withdraw from the interstate compact that created the Waterfront Commission of New York Harbor to combat corruption.
The justices asked many questions that focused on what impact their ruling would have on other interstate compacts. Other questions reflected a basic principle of contract law, which is that one can party can end a contract on its own unless the contract specifies how it can be terminated.
Although the storied Port of New York and New Jersey’s reckoning with organized crime was immortalized in director Elia Kazan’s 1954 film, “On the Waterfront,” organized crime was driven out years ago and critics have long accused the commission of over-regulating businesses involved in the port and causing labor shortages.
New Jersey also claims it no longer benefits from the existence of the commission because when the compact was created in 1953 most of the economic activity in the port was on the New York side, but nowadays more than 80 percent of the activity is reportedly on the New Jersey side.
Allowing New Jersey to exit the compact would effectively kill it, commentators say.
New York Attorney General Letitia James, a Democrat, previously said that allowing New Jersey to leave the compact would cause “immediate and irreparable harm to New York” and result in more crime, higher prices on goods, and racial inequities in port hiring.
The Biden administration supports New Jersey’s position.
The compact, which is a contract between the states, was approved by Congress, an action that transformed it into federal law.
New Jersey may not simply walk away from the compact, Judith Vale, deputy solicitor general of New York, told the justices during oral arguments on March 1.
When the two states formed the compact, both “intended to prohibit unilateral termination,” Vale said. “Unilateral termination is not allowed unless the compact expressly grants that power.”
“Out of 80 compacts before 1953, approximately 56 omitted a termination provision. New Jersey seems to admit that, despite that omission, most of these compacts did not allow unilateral termination,” she said.
“When New York and New Jersey omitted a termination clause here, they intended the same result: no unilateral termination.”
Justice Clarence Thomas challenged Vale.
“If you were suing New Jersey, would you concede that you have subjected your sovereignty to this compact by not being able to withdraw?” he asked.
Vale denied that entering a compact involved giving up state sovereignty. It is “a sovereign arrangement that both states enter,” she said.
Thomas replied, “So what I’m hearing you say is that if they say nothing about terminating it, they basically sacrifice their sovereignty permanently unless the other party agrees.”
Vale didn’t answer the question directly, instead saying that entering into a compact was not “a sovereign giveaway.”
“It is a mutual exchange of sovereignty where each state gets a benefit,” the lawyer added.
Justice Samuel Alito said not allowing withdrawal was “an extraordinary thing.”
“Shouldn’t there be a presumption against a state having done that, which could be overcome by a clear indication of a contrary intent?” he said.
New Jersey Solicitor General Jeremy Feigenbaum said “there is nothing in the plain text of the compact that expressly limits New Jersey’s withdrawal.”
“And as New York this morning has confirmed, there is nothing that justifies a perpetual veto in an agreement New York now admits is not itself perpetual.”
The silence of the contract on the issue of withdrawal “confirms that settled background rules apply,” Feigenbaum said. “And those rules, contract law and state sovereignty, both well established by the 19th century, allow New Jersey to withdraw.”
Although states are unable to “withdraw from agreements settling boundaries or settling water rights … contracts of continuing performance are different,” and “parties can withdraw from agreements that would otherwise require them to keep performing forever,” he said.
Chief Justice John Roberts suggested that winding down the affairs of the commission, which has about 70 employees, would be easier than closing the much larger Port Authority of New York and New Jersey, which was also created by an interstate compact.
“It’s hard to unscramble the eggs when you’re talking about the Port Authority as a whole,” but here “it’s not that disruptive,” Roberts said.
Justice Sonia Sotomayor asked Vale if the “simplest way” to rule would be to not “expect this contract to be indefinite,” in which case, “unilateral withdrawal is presumed.”
“Here, the parties clearly stated it wasn’t going to be forever, unlike your Port Authority compact,” the justice said.
It “doesn’t make any sense” to allow one state to force another to stay in a compact in perpetuity, Sotomayor said.
“It’s a contradiction in terms in my mind,” she said.
Because individual states lack jurisdiction over each other, state courts cannot hear cases dealing with another state, so the U.S. Constitution allows the Supreme Court to hear disputes between states. Exercising its original jurisdiction, the court agreed to hear the case, New York v. New Jersey (court file 22O156) in June 2022.
The Supreme Court is expected to issue a ruling by June.
