Injury in Innsbruck Raises Question of U.S. Courts' Reach

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By Kimberly Robinson
The U.S. Supreme Court kicked off its 2015 term with arguments over the reach of the American judicial system (OBB Personenverkehr AG v. Sachs, U.S., No. 13–1067, argued 10/5/15).

The justices spent most of their time trying to figure out if they could stay in their comfort zone—and look only to what the U.S. Constitution requires—or if they had to apply special rules for corporations owned by foreign states.

In the end, most justices seemed skeptical of allowing a California woman who lost her legs while boarding a train in Innsbruck, Austria, to sue the Austrian-owned railroad in the U.S.

As Justice Ruth Bader Ginsburg put it: “There is one contact with the United States. A pass is bought from a travel agent in Massachusetts, a pass covering 30–odd railroads. That's all that happened in the United States. All of the relevant conduct, the tortious conduct occurred abroad.”

Private Versus State-Owned

Although the court agreed to hear argument on two questions, the court didn't even get to the second. That's because the justices were trying to wrap their heads around what standard to apply to the first one: Under the Foreign Sovereign Immunities Act, is a tort claim for personal injuries occurring in a foreign country “based on” conduct occurring in the U.S. such that a lawsuit can be brought there?

The state-owned railroad—which lost below—argued that it is immune from suit under the act, 28 U.S.C. §§1602 et seq. That law generally prohibits foreign countries and their “instrumentalities” from being sued in the U.S.
But the en banc U.S. Court of Appeals for the Ninth Circuit (82 U.S.L.W. 882, 12/17/13) said that the railroad could be sued under an exception to that prohibition—the “commercial activity” exception at 28 U.S.C. §1605(a)(2).

That exception allows for a foreign state to be sued in the U.S. when the lawsuit “is based upon a commercial activity carried on in the United States by the foreign state.”

Justices Antonin Scalia, Anthony M. Kennedy and Elena Kagan all wondered if that requirement was any different than that required for specific jurisdiction over private corporations.

After all, Kagan pointed out, Congress generally intended to prohibit U.S. suits against foreign states. But when foreign states act like corporations, Congress intended to treat them like corporations, she said.

She noted that the FSIA's “based on” language wasn't all that different from the “arising out of” language that the court uses to analyze jurisdiction over private corporations.

But Edwin S. Kneedler from the Department of Justice—which first urged the court not to hear the railroad's case (84 U.S.L.W. 289, 9/8/15) and then sided with the railroad at oral argument—said that the FSIA is meant to have a specific meaning.

The statute has defined terms that govern the inquiry—it doesn't just incorporate long arm statutes or due process clause requirements, Kneedler said.

He noted that the FSIA has additional “territorial limits.”

For example, another FSIA exception allows a foreign state to be sued in the U.S. in a tort action, but only if the tort occurred in the U.S., Kneedler said. The commercial activity exception is supposed to work the same way, he argued.
But the language in the FSIA and personal jurisdiction tests is “virtually synonymous,” Kagan countered.

True enough, said Kneedler. But the FSIA analysis occurs in a “sensitive context”: whether U.S. courts should be dragged into conflicts involving a foreign country's activities on its own soil, Kneedler said.

‘Virtual Presence' Enough?

But the whole argument over whether to treat the Austrian-owned railroad as a run-of-the-mill private corporation was somewhat of an academic question, Ginsburg said.

Regardless of whether there would or wouldn't be personal jurisdiction, the court shouldn't decide the case along those lines, Kneedler said.

The court hasn't yet determined whether a “virtual presence”—the plaintiff here bought her railroad ticket online—is sufficient for personal jurisdiction, Kneedler said. This isn't the case where the court should decide that question, he argued.

What's at Stake?

If the court is supposed to apply special rules for state-owned businesses, what should they be, Justice Samuel A. Alito Jr. asked.

Under the court's previous decisions, the justices should ask, “What is the gravamen of the complaint?” Dorsey & Whitney LLP's Juan C. Basombrio said.

Basombrio, of Costa Mesa, Calif., argued for the railroad.

He said that at heart, this case was a tort action that should be heard by Austrian courts—not a contract action that should be litigated in the U.S.

The complaint here has failure-to-warn claims, which are contract claims, Alito noted. Is that just artful pleading, he wanted to know.

Yes, Basombrio replied. That's why the court shouldn't focus on the elements of the claims themselves, but rather the gist of the action, he said.

If you walk out onto the street and ask anyone what this case is about, they are going to say it's about a terrible accident that occurred in Austria, Basombrio said.

But veteran Supreme Court practitioner Jeffrey L. Fisher of Stanford Law School—arguing for the plaintiff—said that test was too amorphous.

He also suggested that it was contrary to what happens now. It is “utterly common” for U.S. courts to hear cases where the duty was created in the U.S., but the injury took place abroad, Fisher said.

He noted that the type of ticket that the plaintiff purchased online now has a forum selection clause. So you are never going to see this case again, he said.

“What you're really deciding is what the law should be in the mainstream FSIA cases, like finance, like contracts,” Fisher said.

What about the situation where a U.S. citizen is hired “as an engineer to go and do oil and gas exploration and then something happens abroad?” Fisher asked.

That case has typically been allowed to go forward in the U.S., Fisher said. But if you apply the “gravamen” test, “that would seem to bounce all of these cases out” of U.S. Courts.

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