Summary: In 1934 the State of New Jersey and the Commonwealth of Pennsylvania enacted laws forming the Delaware River Joint Toll Bridge Commission. As stated in the Constitution (Article I), all agreements and compacts between the states must be approved by Congress—such approval was given to the toll bridge agreement between Pennsylvania and New Jersey in 1935. The Commission was granted sweeping authority to own, construct, maintain, and operate bridges and related improvements and facilities, and to “exercise all other powers…reasonably necessary to [the Commission’s] authorized purposes…,” specifically including the
exercise of powers with respect to its property and affairs. These broad powers were stated to be subject to an exception: the Commission was expressly denied the power to levy taxes.
In 2017, in connection with the replacement of the Scudder Falls Bridge, the
Commission purchased 10 acres of land near the bridge, on the Pennsylvania side, and proceeded with construction of an administration building for the Commission’s executive and administrative staff. The Commission did not apply for a building permit.
The Pennsylvania Department of Labor and Industry (“Department”) threatened to issue a stop-work order against the project, because of the lack of a building permit, but did not do so. The Department instead attempted to assert authority over the project by singling out the project’s elevator subcontractor, threatening the subcontractor with regulatory sanctions for its involvement in the Commission’s building project. The Commission responded by filing a lawsuit in federal court, seeking a declaration that the Department lacked the authority to enforce Pennsylvania’s building codes with respect to the Commission’s project, and moving for an injunction precluding the Department from any attempted code enforcement.
The U.S. District Court granted the Commission’s motion for an injunction and injunctive relief, enjoining the Department from seeking to “inspect or approve the elevators” or from other actions attempting to impede, interfere with, or delay the completion of the elevator work. Contending that Pennsylvania had reserved its regulatory power to enforce “critical safety-based laws applying to building construction,” the Department appealed.
Decision: The first issue on appeal was a technical dispute regarding the jurisdiction of the federal courts over the Commission’s declaratory action. The Third Circuit concluded that by alleging that the Secretary of the Department would violate the Compact by enforcing the Pennsylvania building codes, the Commission had alleged an ongoing violation of federal law—as noted, the Compact was itself a product of congressional action. Further, the court concluded that a declaration requiring the Department to comply with the Compact as written did not intrude on any constitutional rights reserved to the states. Hence there was federal jurisdiction.
Based on precedent involving other multi-state compacts, the Third Circuit held that:
**“a bi-state entity created by compact, is not subject to the unilateral control” of any state, absent express language to the contrary in the compact.
**The creation of a bi-state entity pursuant to the Compact Clause is an unambiguous surrender of the two states’ sovereignty.
**By creating a bi-state entity, the two states relinquished all control over the entity, unless otherwise stated in the compact.
**In this specific bi-state compact, New Jersey and Pennsylvania ceded authority over building safety regulations by granting the Commission powers to acquire property, make improvements, and “the power over all other matters in connection with [the Commission’s] facilities.”
**By expressly reserving the power of taxation to the states, but failing to reserve any other powers, the two states had shown that they did not intend to reserve the authority to enforce building safety regulations.
Comment: The Compact is constitutional in origin, and was drafted by the two states and approved by an act of Congress, but at its core it is a contract: “Interstate compacts are construed as contracts under the principles of contract law.” Of particular interest is the point about the impact of specifically reserving the power of taxation—under basic rules of contract interpretation this supported an inference that other powers, such as the building permit/code power, had not been reserved. In contract drafting there is often an inclination to list or address specific items, but the drafter must consider whether doing so creates any unintended implications for other items that are not given specific attention.
The Delaware River decision did not discuss which standards and codes the architects and engineers who designed the administration building had actually followed. As a result of the decision the Commission was insulated from
Pennsylvania’s building code requirements, but what exposure to liability would the Commission, its design professionals, and its construction contractors have in the case of an accident or calamity that could be linked to a deviation from the host state’s building codes?
Questions of this same nature arose in the aftermath of the horrific events of September 11, 2001. The World Trade Center had been built by the Port Authority of New York and New Jersey, an entity formed under an interstate agreement under the Compact Clause. The buildings did not conform to certain New York building codes, including certain fireproofing requirements. The Port Authority was exempt from New York city and state code oversight at the time the World Trade Center was designed and constructed, but this alone was not necessarily a shield against all subsequent claims.