OBB Personenverkehr AG v. Sachs, No. 13-1067, 577 U.S. __ (2015) [click for opinion]

Carol Sachs, a California resident, purchased a Eurail pass over the Internet from a Massachusetts-based travel agent.  While using that pass to board a train in Austria operated by OBB Personenverkehr AG (“OBB”), the Austrian state-owned railway, Sachs fell to the tracks and suffered traumatic personal injuries.  She sued OBB in federal district court in California.  OBB moved to dismiss, claiming that the suit was barred by the Foreign Sovereign Immunities Act (“FSIA”).  Under the FSIA, foreign states and their agencies are shielded from suit in United States courts unless the suit falls within one of the statute’s specifically enumerated exceptions.

Sachs argued that her suit fell within the Act’s commercial activity exception, which abrogates sovereign immunity for suits “based upon a commercial activity carried on in the United States by [a] foreign state,”28 U.S.C. §1605(a)(2).  According to Sachs, her suit was “based upon” the Massachusetts-based travel agent’s sale of the Eurail pass in the United States, and the travel agent’s sale of that pass could be attributed to OBB through common law principles of agency.  

The district court held that Sachs’s suit did not fall within § 1605(a)(2) and dismissed the suit, but the en banc Ninth Circuit reversed.  The Ninth Circuit first concluded that the Eurail pass sale by the travel agent could be attributed to OBB through common law principles of agency, and then determined that Sachs’s suit was “based upon” that Eurail pass sale because the sale established a single element necessary to recover under each cause of action brought by Sachs.  The Supreme Court reversed.

Although the FSIA does not itself define the phrase “based upon,” the Supreme Court relied on its decision in Saudi Arabia v. Nelson, for that purpose.  There, the Court held that the “based upon” inquiry requires a court to determine the “particular conduct on which the action is ‘based,’” and identified that conduct by looking to the “gravamen of the complaint.”

The Ninth Circuit used a different approach.  It found that the “based upon” inquiry was satisfied because the sale of the Eurail pass provided “an element” of each of Sachs’s claims.  The Supreme Court explained that Nelson is flatly incompatible with such a one-element approach, which necessarily requires a court to identify all the elements of each claim before finding that the claim falls outside § 1605(a)(2).  The Nelsoncourt did not undertake such an exhaustive claim-by-claim, element-by-element analysis.

As opposed to adopting a one-element test, the Nelson court zeroed in on the core of the plaintiffs’ suit—the conduct that actually injured the plaintiffs—to identify the conduct that the suit was “based upon.”  Here, all of Sachs’s claims turned on the same tragic episode in Austria, allegedly caused by wrongful conduct and dangerous conditions in Austria, which led to injuries suffered in Austria.  However Sachs framed her suit, the incident in Innsbruck, Austria, remained at its foundation.

The decision of the Ninth Circuit was reversed.