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From Products Liability Law Daily, December 1, 2015

High Court holds Austrian railway immune from suit by injured Eurail pass purchaser

By Susan Lasser, J.D.

Austria’s state-owned railway was immune to a personal injury suit brought by a California resident who, while traveling by a Eurail pass purchased in the United States through an online travel agent, was injured when she fell onto the tracks at a train station in Austria, the U.S. Supreme Court held, reversing a Ninth Circuit decision. The High Court determined that the Austrian operator was shielded by the Foreign Sovereign Immunities Act of 1978 (FSIA or the Act) because the woman’s suit did not fall within the Act’s commercial activity exception, one of the Act’s enumerated exceptions (OBB Personenverkehr A.G. v. Sachs, December 1, 2015, Roberts, J.).

Background. OBB Personenverkehr AG (OBB) is an Austrian passenger rail service operator owned by OBB Holding Group, a joint-stock company created by the Republic of Austria. OBB Holding Group in turn is wholly owned by the Austrian Federal Ministry of Transport, Innovation, and Technology. OBB, together with 29 other railways throughout Europe, is a member of the Eurail Group, an association responsible for the marketing and management of the Eurail pass program. Eurail passes are available only to non-Europeans, who may purchase them both directly from the Eurail Group and indirectly through a worldwide network of travel agents. The woman, a resident of California, purchased a rail ticket from The Rail Pass Experts, a Massachusetts company, through its website. After arriving in Austria, the woman paid for a separate upgrade fee from OBB to reserve a couchette bed. While attempting to board a train at a station in Innsbruck, Austria, she fell into a gap between the train and the boarding platform, and the moving train crushed both of her legs, causing them to be amputated above the knee.

The woman brought suit against OBB in a federal district court in California, asserting claims for negligence, strict liability design defect, strict liability failure to warn, breach of the implied warranty of merchantability, and breach of the implied warranty of fitness. On a motion for summary judgment, OBB argued that it was immune from suit under the FSIA, which “provides the sole basis for obtaining jurisdiction over a foreign state” in U.S. courts. The trial court agreed and dismissed the complaint. However, the U.S. Court of Appeals for the Ninth Circuit reversed the lower court, finding that the U.S. company’s sale of the Eurail pass in the United States could be imputed to OBB for the purpose of establishing that OBB carried on commercial activity in the United States

Petition. OBB appealed to the Supreme Court, arguing that the Eurail pass sale was not attributable to the railway, because the FSIA did not allow attribution through principles found in the common law of agency. The railway operator also argued that even if such attribution were permitted under the Act, the woman’s suit was not “based upon” the sale of the Eurail pass for purposes of the commercial activity exception.

Ruling. The U.S. Supreme Court, in a unanimous decision written by Chief Justice Roberts, held that the woman’s suit fell outside the commercial activity exception to the FSIA and was barred by sovereign immunity. Because the Court agreed with OBB’s second argument, it did not address the first.

The commercial activity exception provides in part that a foreign state does not enjoy immunity when “the action is based upon a commercial activity carried on in the United States by the foreign state.” While the FSIA does not explain the phrase “based upon,” the Court noted that its decision in Saudi Arabia v. Nelson, 507 U. S. 349, provided guidance. In that case, the Court said that the Act’s “based upon” issue first re­quired a court to “identify[ ] the particular conduct on which the [plaintiff’s] action is ‘based.’” In Nelson, the commercial activities, while leading to the injury-causing conduct, were not the particular conduct upon which the suit was based. Although the Ninth Circuit held that the injured woman’s claims in the current case were “based upon” the sale of the Eurail pass because the sale of the pass provided “an element” of each of her claims, the High Court explained that under Nelson, the mere sale of the Eurail pass established a single ele­ment of a claim and was insufficient to demonstrate that the claim was “based upon” that sale for purposes of the commercial activity exception. The Court rejected the Ninth Circuit’s one-element test, which necessarily requires a court to identify all the elements of each claim in a complaint before re­jecting those claims for falling outside of the exception. Rather, the Court explained that the Nelson case instructs that an action is “based upon” the “particular conduct” that constitutes the “gravamen” of the suit—i.e., the injury-causing acts or conduct. Thus, the conduct in the woman’s case, the Court said, “plainly occurred abroad.” Her claims were based upon the events in Austria, “allegedly caused by wrongful conduct and dangerous conditions in Austria,” which led to her injuries that occurred in Austria.

The woman contended that her failure-to-warn claim involved conduct in the United States because OBB should have alerted her to the dangerous conditions at the Austrian train station when the operator sold her the Eurail pass in the United States. However, the Court stated that under any theory of the case, there was nothing wrongful about the sale of the Eurail pass—“[w]ithout the existence of the unsafe boarding conditions in Innsbruck, there would have been nothing to warn [the woman] about when she bought the Eurail pass.” The Court concluded that no matter how the woman framed her lawsuit, the Innsbruck incident was the suit’s foundation. Any other approach would allow a plaintiff to evade the FSIA’s restrictions through artful pleading.

New argument rejected. The woman also argued that her suit was “based upon” “OBB’s overall commercial railway enterprise.” Her theory being that OBB’sentire railway enterprise constituted the “commercial activity” that had the requisite “substantial contact with the United States,” because OBB reaches out to American customers by mar­keting and selling Eurail passes in the United States. The High Court determined that this argument was never presented to any lower court and was, therefore, forfeited.

The Court ruled that the woman failed to demonstrate that her suit fell within the commercial activity exception to the FSIA and, therefore, OBB had sovereign immunity under the Act. As such, U.S. courts lacked jurisdiction over the suit.

The case is Docket No. 13-1067.

Attorneys: Juan C. Basombrio (Dorsey & Whitney LLP) for Republic of Austria and OBB Personenverkehr AG. Geoffrey Becker (Becker & Becker) for Carol P. Sachs.

Companies: Republic of Austria; OBB Holding Group; OBB PersonenverkehR AG.

MainStory: TopStory JurisdictionNews IndustrialCommercialEquipNews

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