OBB Personenverkehr AG v. Sachs

Tort immunity for foreign sovereigns

The Foreign Sovereign Immunities Act of 1976 codified the longstanding common law principle that foreign sovereigns could not be held liable for torts in United States courts. After its enactment, the Act became "the sole basis for obtaining jurisdiction over a foreign state in [United States] courts". The Act states that United States courts may only exercise subject matter jurisdiction in cases brought by a private citizen against a foreign sovereign when the suit falls within one of the Act's enumerated exceptions. Absent subject matter jurisdiction, United States Courts may not exercise personal jurisdiction over a foreign sovereign. However, one of the Foreign Sovereign Immunity Act's enumerated exceptions is the commercial activity exception, which specifies that foreign sovereigns may be held liable in United States courts when "the action is based upon a commercial activity carried on in the United States by [a] foreign state". According to the Act, the definition of a "foreign state" also includes an "agency or instrumentality" of the foreign state.

Initial lawsuit

Carol Sachs, a resident of California, purchased a Eurail pass from a Massachusetts-based travel agent in March 2007. She arrived in Innsbruck, Austria, one month after purchasing her Eurail pass, where she intended to board a train operated by OBB Personenverkehr AG (OBB) bound for Prague. When Sachs attempted to board the train, she fell from the platform onto the tracks and suffered traumatic personal injuries. Sachs filed a lawsuit in the United States District Court for the Northern District of California in which she alleged OBB was responsible for causing her injuries. Although OBB was operated by the Austrian Federal Ministry of Transport, Innovation, and Technology, Sachs argued her suit was not barred by the Foreign Sovereign Immunities Act because her suit was based upon the railway's act of selling her a Eurail pass in the United States. In response, OBB moved to dismiss the suit for lack of subject matter jurisdiction on the grounds that Sachs' suit was barred by sovereign immunity. The district court granted OBB's motion, and the United States Court of Appeals for the Ninth Circuit affirmed the district court's decision. However, the Ninth Circuit ordered the case to be reheard en banc, and a majority of judges reversed the panel's decision. The en banc majority concluded that Sachs' suit was permitted under the Foreign Sovereign Immunities Act's commercial activity exception because her claims were "based upon a commercial activity carried on in the United States by OBB". OBB then appealed to the Supreme Court of the United States, which granted certiorari on January 23, 2015.

Opinion of the Court

Writing for a unanimous Court, Chief Justice John Roberts held that Sachs' injury was "based upon" conduct that occurred solely in Austria, and the suit therefore fell outside the Foreign Sovereign Immunities Act's commercial activity exception. Although the Foreign Sovereign Immunities Act does not define the phrase "based upon" with specificity, Chief Justice Roberts explained that the Court's 1993 ruling in Saudi Arabia v. Nelson should guide the Court's analysis in this case. In Nelson, the Court held that the Saudi Arabian government was protected by sovereign immunity in a tort suit brought by an American who alleged he was tortured by Saudi police after reporting safety violations in a Saudi hospital. Although the plaintiff alleged the suit was based upon commercial activity that occurred when the Saudi hospital recruited the plaintiff in America, the Court ruled that the plaintiffs claims involved "sovereign acts" rather than commercial activity. The Court ultimately held that the Foreign Sovereign Immunity Act's "based upon" provision requires courts to identify the "particular conduct" upon which a plaintiff's claim is based.

Applying the Nelson analysis to the facts of this case, Chief Justice Roberts held that "the conduct constituting the gravamen of Sachs’s suit plainly occurred abroad". Justice Roberts also concluded that "[u]nder any theory of the case", there was "nothing wrongful about the sale of the Eurail pass standing alone". To support his arguments, Chief Justice Roberts cited a letter written by former Supreme Court Justice Oliver Wendell Holmes, Jr. to then-professor Felix Frankfurter, which explained that the "essentials of a personal injury narrative will be found at the point of contact — the place where the boy got his fingers pinched". Chief Justice Roberts wrote that "[a]t least in this case, that insight holds true". Therefore, Chief Justice Roberts concluded that Sach's suit did not fall within the commercial activity exception of the Foreign Sovereign Immunities Act, and that the Ninth Circuit's opinion should be reversed for lack of jurisdiction.

Analysis and commentary

Although some commentators suggested the Court's opinion may have a significant impact in tort cases involving foreign sovereigns, other commentators suggested the case's impact would be limited. Lyle Denniston, for example, noted that although "the case focused on one American and one incident, it may well have larger meaning" and that following the Court's opinion, foreign railroads "could rarely, if ever, be held accountable for causing injuries, or worse". However, Amy Howe wrote that the Court's decision "at first blush appears less momentous than we might have expected when the Court agreed to take the case on earlier this year". In The National Law Journal, Tony Mauro commented that the court's opinion was "the latest in a series of rulings in which the high court has limited the use of U.S. courts as a forum for adjudicating wrongs that took place primarily outside the country". Although she characterized the case as "a good decision by the Court", Ingrid Wuerth noted that the Court "left for another day" other cases "with less tangible injuries such as the misappropriation of trade secrets and other data or intellectual property-related actions, some of which may prove difficult to analyze under the Court’s gravamen test".

Following the publication of the Court's opinion, Dorsey & Whitney LLP partner Juan C. Basombrio, who argued the case before the Supreme Court on behalf of OBB Personenverkehr, issued a press release that praised the Court's decision to respect "the importance of international comity". The press release also noted that "[i]n a world that has become increasingly connected by international commercial transactions, and where there is also increasing friction in the relations between the United States and other nations, this is a seminal and important decision that will foster harmony between the United States and other nations at least in the commercial context". Stanford Law School professor Jeffrey Fisher, who argued on behalf of Carol Sachs at the Supreme Court, stated that he was "deeply disappointed in the court's ruling". Fisher wrote that he "hoped the court would consider — as if often does — the totality of respondent's arguments in support of the holding below", but that "[t]he court's failure to do so means that the Ninth Circuit and other courts still have not been given guidance concerning how to resolve cases like this".