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Supreme Court to Review Commercial Exception Under FSIA

In 2013, the Ninth Circuit agreed to rehear Sachs v. Republic of Austria (737 F.3d 584) and, after the rehearing, reversed its previous decision, issued in September 2012. Upon rehearing, the Ninth Circuit held that a foreign company conducting substantial commercial activity in the United States is not immune from suit under the Foreign Sovereign Immunities Act ("FSIA").1 On January 23, 2015, the Supreme Court granted certiorari to hear the appeal from OBB Personenverkehr AG ("OBB"), an Austrian train company.2

The plaintiff, Carol Sachs, suffered permanent injuries while trying to board an OBB train. She had purchased a Eurail pass through a Massachusetts travel agency and then brought suit against OBB, an Austrian government-owned company, in the United States. The Supreme Court will decide if Sachs' claim can be brought against the Austrian company via the commercial activity exception in the FSIA, which holds that a foreign state is not immune from suits for "an act performed in the United States in connection with a commercial activity of the foreign state elsewhere."3

The Ninth Circuit decided the following issues: (1) whether the Massachusetts travel agency's sale of OBB rail passes constituted commercial activity in the U.S., and (2) whether Sachs' claim was based on that commercial activity.4 The Ninth Circuit ruled that the travel agency was, in fact, an agent of OBB when it sold Eurail passes to American customers and held OBB was conducting commercial activity in the U.S. The Court also held that Sachs' purchase of the ticket created a relationship with OBB and that such a purchase was a required part of her claim against OBB.5

The dissent to the Ninth Circuit's 2013 opinion argued that "a foreign sovereign does not engage in commercial activity in the United States when a subagent over which it exercises no direct control sells tickets for passage on a common carrier wholly owned by that sovereign."6 Additionally, the dissenters argued that Sachs' liability claims were not based on any events related to the sale of her rail ticket in the United States.

The majority and dissent in the Ninth Circuit's rehearing of the Sachs case had different interpretations about the scope of the commercial activity exception under the FSIA. In a report, OBB argued that the majority's interpretation was too broad and would subject "a foreign government-owned carrier to jurisdiction in U.S. courts every time an American books international travel from a domestic travel agent."7 Despite the U.S. Solicitor General discouraging the Supreme Court from granting certiorari, the Court will hear the case and will clarify the "commercial activity exception" under the FSIA.

If you have any questions regarding this subject or this posting, please contact James E. Miller ([email protected]) or Michael Ols ([email protected]). We can also be reached toll-free at (866) 540-5505.

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