Metropolitan News-Enterprise


Monday, December 9, 2013


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Austria’s National Railway Not Immune From Suit in U.S.—Court




The Foreign Sovereign Immunities Act’s commercial-activity exception allows suit in the United States for injuries sustained as a result of the alleged negligence of a foreign country’s national railway, the Ninth U.S. Circuit Court of Appeals ruled en banc Friday.

An 8-3 majority of the court ruled for the plaintiff, Carol Sachs, allowing her to sue the Republic of Austria and its railway in the U.S. District Court for the Northern District of California. A three-judge panel, split 2-1, had ruled otherwise on Sept. 26 of last year.

Judge Ronald Gould, writing for the en banc court, said the exception applies because the U.S.-based commercial activity alleged by the plaintiff—the sale of Eurail passes in this country by a U.S.-based company—was conducted on behalf of a foreign government. The dissenters argued that the ticket sales were too disconnected from the railway operations that led to the plaintiff’s injuries for the exception to apply.

 The FSIA prohibits courts in this country from exercising jurisdiction over a foreign government, or over an entity that is majority-owned or controlled by a foreign government, unless one of several listed exceptions applies.  One such exception allows a federal court to hear an “action…based upon a commercial activity carried on in the United States by the foreign state.”

Plaintiff Injured

Sachs filed her suit after a fall at the Innsbruck rail station in 2007 resulted in injuries requiring amputation of both of her legs above the knees. Sachs, who purchased an Austria-and-Czech Republic Eurail Pass in California, alleges she fell through a gap in the platform as she was running to catch a moving train.

The seller of the pass was Rail Pass Experts, a Massachusetts-based agent for Eurail Group, which is owned by the 31 railway companies that participate in Eurail. Eurail passes allow unlimited travel on some or all 31 of the railways for a specified period of time, depending on the type of pass purchased.

Austria’s national railway, OBB Personenverkehr AG, is wholly owned by a holding company that was established by Austrian law. The government is the sole owner of the holding company, and receives all of the railway’s profits.

U.S. District Judge Vaughn R. Walker of the Northern District of California, since retired, asked for briefing on whether the actions of Rail Pass Experts could be imputed to the railway for purposes of the commercial-activity exception, then ruled that OBB was immune under FSIA.

Gould, the dissenter on the original panel, disagreed. He concluded that the relationship between the railway and Rail Pass Experts was sufficient to impute the sale of the ticket to the railway, and that the nexus between Sachs’ claims and the sale of Eurail passes in the United States was sufficient to show that the tort claims were “based upon” that activity.

Cases Cited

The judge cited two cases from other circuits.

In Barkanic v. General Administration of Civil Aviation of the Peoples Republic of China (2d Cir. 1987) 822 F.2d 11, the court concluded that the commercial-activity exception applied to a  Chinese airline based on the sale of a plane ticket in the United States by a third-party agent. In Kirkham v. Société Air France (D.C. Cir. 2005) 429 F.3d 288, the court applied the commercial-activity exception to a suit against Air France which was based on the sale of airline tickets through a D.C. travel agency for travel in France.

Gould’s opinion was joined by Judge Stephen Reinhardt, Barry G. Silverman, Susan P. Graber, Kim McLane Wardlaw, Marsha S. Berzon, and Andrew D. Hurwitz and Senior Judge Raymond C. Fisher.

Judge Diarmuid F. O’Scannlain dissented. He argued that while the sale of the Eurail [ass was commercial activity, that activity was not “carried on in the United States by the foreign state” and thus fell outside the statutory exception.

Chief Judge Alex Kozinski and Judge Johnnie B. Rawlinson joined in O’Scannlain’s opinion, while Kozinski wrote separately to argue that there was “another, simpler way to affirm the district court”

He explained:

“Because plaintiff’s claim arises from events that transpired entirely in Austria, it isn’t ‘based upon’ commercial activity carried on in the United States….This would be true even if Austria were itself selling train tickets from a kiosk in Times Square.”

Allowing Sachs to sue in a U.S. court for injuries suffered in Austria, he wrote, “makes as much sense as forcing Mrs. Palsgraf to litigate her case in Vienna.”

The case is Sachs v. Republic of Austria, 11-15458.


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