December 01, 2015

Supreme Court Decides OBB Personenverkehr AG v. Sachs

On December 1, 2015, the Supreme Court of the United States decided OBB Personenverkehr AG v. Sachs, No. 13-1067, holding that the commercial-activity exception to the Foreign Sovereign Immunities Act did not apply to a California woman's federal lawsuit against an Austrian state-owned railroad where the suit was based on the railway's operations in Austria and not on a travel agent's sale of a railway pass in the United States.

Carol Sachs, a California resident, bought a Eurail pass from a travel agent in Massachusetts for rail travel in Europe. While using that pass to board a train from Innsbruck, Austria to Prague, Sachs fell from the platform onto the tracks. A moving train crushed her legs, and they had to be amputated above the knee. The train was operated by OBB Personenverkehr AG, the Austrian state-owned railway.

Sachs sued OBB in federal court in the Northern District of California. OBB moved to dismiss for lack of subject-matter jurisdiction, arguing that the lawsuit was barred by the Foreign Sovereign Immunities Act, 28 U.S.C. § 1604, which shields foreign states and their agencies and instrumentalities from suit in United States courts. Sachs responded that her lawsuit fell within the FSIA's commercial-activity exception, which withdraws sovereign immunity where "the action is based upon a commercial activity carried on in the United States by [a] foreign state." Id. § 1605(a)(2). In particular, Sachs contended that her lawsuit was "based upon" the Massachusetts travel agent's sale of the Eurail pass in the United States, and that the travel agent's sale of that pass could be attributed to OBB through common-law principles of agency. The District Court granted the motion and dismissed for lack of subject-matter jurisdiction. The Ninth Circuit reversed.

The Supreme Court reversed and reinstated the dismissal, ruling that Sach's lawsuit fell outside the FSIA's commercial-activity exception. The Court declined to address whether the sale of the Eurail pass could be attributed to OBB under the common law of agency, concluding instead that the lawsuit was not "based upon" the sale of the Eurail pass. Guided by a previous decision interpreting the commercial-activity exception, Saudi Arabia v. Nelson, 507 U.S. 349 (1993), the Court clarified that the "commercial activity" exception applies only when the conduct at issue goes to the "core" of the action based on the "gravamen of the complaint," and not when that conduct merely satisfies "an element" of each of the asserted claims. Because Sach's lawsuit complained of the traumatic injuries allegedly caused by OBB in Austria, rather than the selling of the Eurail pass by the travel agent in the United States, her claim was not based on commercial activity on American soil. OBB therefore enjoys sovereign immunity under the FSIA, and the federal courts lacked jurisdiction over the lawsuit.

Chief Justice Roberts delivered the opinion for a unanimous Court.

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