Sachs v. Republic Austria

• Citation: 737 F.3d 584
• Decision Date: 06 December 2013
• Docket Number: No. 11–15458.,11–15458.
• Parties: Carol P. SACHS, Plaintiff–Appellant, v. REPUBLIC OF AUSTRIA; OBB Holding Group; OBB Personenverkehr AG, Defendants–Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

737 F.3d 584

Carol P. SACHS, Plaintiff–Appellant,

v.REPUBLIC OF AUSTRIA; OBB Holding Group; OBB Personenverkehr AG, Defendants–Appellees.

No. 11–15458.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted En Banc March 21, 2013.

Filed Dec. 6, 2013.

Geoffrey Becker, Becker & Becker, Lafayette, CA, for Plaintiff–Appellant.

Juan C. Basombrio, Dorsey & Whitney LLP, Irvine, CA, for Defendant–Appellee.

Appeal from the United States District Court for the Northern District of California, Vaughn R. Walker, District Judge, Presiding. D.C. No. 3:08–cv–01840–VRW.

Before: ALEX KOZINSKI, Chief Judge, STEPHEN REINHARDT, DIARMUID F. O'SCANNLAIN, BARRY G. SILVERMAN, SUSAN P. GRABER, KIM McLANE WARDLAW, RAYMOND C. FISHER, RONALD M. GOULD, MARSHA S. BERZON, JOHNNIE B. RAWLINSON, and ANDREW D. HURWITZ, Circuit Judges.

OPINION

GOULD, Circuit Judge:

We must decide whether a resident of the United States has a domestic forum in which to bring a claim against a foreign common carrier, operated by a foreign sovereign entity, that sells tickets through a third-party agent or subagent in the United States. Carol P. Sachs filed a complaint against OBB Personenverkehr AG (OBB) in the United States District Court for the Northern District of California. Sachs sought damages for traumatic injuries that she sustained while trying to board an OBB train in Innsbruck, Austria.

The district court granted OBB's motion to dismiss for lack of subject-matter jurisdiction, concluding that OBB, as an instrumentality of the Republic of Austria, was immune from suit under the Foreign Sovereign Immunities Act of 1976 (FSIA). On appeal, Sachs argues that under the first clause of the FSIA's commercial-activity exception, the district court has subject-matter jurisdiction over her claims. We agree. A foreign-state owned common carrier, such as a railway or airline, engages in commercial activity in the United States when it sells tickets in the United States through a travel agent regardless of whether the travel agent is a direct agent or subagent of the common carrier. Under the FSIA, federal courts of the United States will have subject-matter jurisdiction over actions against a foreign sovereign common carrier that engages in commercial activity of this kind as long as the plaintiff's claims are based upon that activity.

I

OBB Personenverkehr AG is a separate legal entity wholly owned by OBB Holding Group, a joint-stock company created by the Republic of Austria. OBB Holding Group is wholly owned by the Austrian Federal Ministry of Transport, Innovation, and Technology. OBB's main function is to operate passenger rail service within Austria. Like many of its counterparts in other European countries, OBB is a member of the Eurail Group, which is an association organized under Luxemburg law. According to OBB, Eurail Group is responsible for marketing and selling rail passes. Eurail passes are marketed to non-European residents, as they cannot be used by residents of Europe and nearby countries.

In early March 2007, Sachs purchased a four-day Eurail pass from the Rail Pass Experts (RPE) for travel in Austria and the Czech Republic. RPE is located in Massachusetts, but Sachs bought the Eurail pass online through the RPE website. Sachs's Eurail pass listed various disclaimers, including that “the issuing office is merely the intermediary of the carriers in Europe and assumes no liability resulting from the transport.” The Eurail pass also stated that it is “non-transferable and only valid upon presentation of a passport or a valid travel document replacing the passport.”

In late April 2007, Sachs arrived in Innsbruck, Austria, and presented her Eurail pass to OBB to purchase a couchette reservation for her trip from Innsbruck to Prague. Although Sachs would have been able to board the train to sit in an unassigned seat with the Eurail pass that she bought from RPE, she paid the 30.90 fee to upgrade her pass and reserve a couchette bed. The Eurail pass required customers to pay separately for upgrades of this kind.

When Sachs tried to board the train, she fell between the tracks. Her legs were crushed by the moving train. As a result of these injuries, both of Sachs's legs were amputated above the knee. Sachs alleges that OBB caused her injuries by negligently moving the train while she attempted to board. OBB disputes this allegation, claiming that the train was already moving when Sachs tried to board.

Sachs filed suit against OBB in the United States District Court for the Northern District of California.¹ Her complaint asserts claims for negligence; strict liability for a design defect; strict liability for failure to warn about a design defect; breach of implied warranty of merchantability; and breach of implied warranty of fitness. To support these claims, Sachs alleges (a) that she purchased the Eurail pass through OBB's agent Eurail and the American-based company RPE; (b) that through the Eurail pass OBB agreed to provide railway transportation to Sachs during her April 2007 visit to Austria; and (c) that OBB, as a common carrier, owed her a duty of “utmost care.”

OBB filed a motion to dismiss on June 21, 2010, arguing that it was entitled to sovereign immunity under the FSIA. In the alternative, OBB also argued that Sachs's complaint should be dismissed for forum non conveniens, lack of personal jurisdiction, and international comity. After a hearing and supplemental briefing on the motion, the district court granted OBB's motion to dismiss for lack of subject-matter jurisdiction on foreign-sovereign-immunity grounds. Sachs v. Republic of Austria, No. C 08–1840 VRW, 2011 WL 816854, at *4 (N.D.Cal. Jan. 28, 2011) (unpublished). The district court concluded that Sachs had not shown a connection between OBB and RPE sufficient to create a principal-agent relationship. As a result, the district court found that RPE's commercial activity in the United States could not be imputed to OBB. Sachs timely appealed.

A divided three judge panel of this court affirmed. Sachs v. Republic of Austria, 695 F.3d 1021, 1029 (9th Cir.2012). The majority of judges agreed on result but not reasoning. Relying on our previous decision in Doe v. Holy See, 557 F.3d 1066 (9th Cir.2009) (per curiam), the majority opinion concluded that RPE's sale of the Eurail pass could not be imputed to OBB for purposes of establishing jurisdiction under the FSIA's commercial-activity exception. Sachs, 695 F.3d at 1025–26. The concurrence agreed that the district court properly dismissed the case for lack of subject-matter jurisdiction, but it argued that Holy See was inapposite because that case addressed a different exception under the FSIA. Instead, the concurrence argued that Sachs's claim failed under Sun v. Taiwan, 201 F.3d 1105 (9th Cir.2000), because Sachs did not allege facts sufficient to show that her claims were “based upon” the sale of the Eurail pass in the United States. Sachs, 695 F.3d at 1029–30 (quoting 28 U.S.C. § 1605(a)(2)). The dissent explained that both Holy See and Sun were distinguishable from Sachs's case and that the plain language of the FSIA permits jurisdiction over OBB. Id. at 1032–33.

We ordered rehearing en banc to clarify whether the first clause of the FSIA commercial-activity exception applies to a foreign sovereign when a person purchases a ticket in the United States from a travel agency for passage on a commercial common carrier owned by that foreign state.

II

We review de novo the district court's determination of immunity under the FSIA. Embassy of the Arab Republic of Egypt v. Lasheen, 603 F.3d 1166, 1170 (9th Cir.2010). A defendant asserting foreign sovereign immunity “may make either a facial or factual challenge to the district court's subject matter jurisdiction.” Terenkian v. Republic of Iraq, 694 F.3d 1122, 1131 (9th Cir.2012), cert. denied,––– U.S. ––––, 134 S.Ct. 64, 187 L.Ed.2d 27 (2013). A facial challenge argues only that the facts as alleged in the complaint are insufficient to state a claim. Id. A factual challenge disputes the truth of the allegations that would otherwise be sufficient to invoke federal jurisdiction. Id.

OBB's challenge is factual. OBB submitted documentary evidence and a declaration to prove OBB's status as an agency or instrumentality of the Austrian government and to dispute the truth of Sachs's allegations that RPE sold the ticket as an authorized agent of OBB. Sachs submitted her own declaration and evidence to support her claim of jurisdiction under the FSIA's commercial-activity exception. When the district court relies on such evidence for its decision, we generally treat the jurisdictional attack as factual. See Holy See, 557 F.3d at 1073. For such a factual challenge, we must determine (1) whether Sachs has carried her burden to prove, by offering evidence, that the commercial-activity exception to foreign sovereign immunities applies and (2) whether OBB has carried its burden to prove, by showing a preponderance of evidence, that the exception is not applicable. See Terenkian, 694 F.3d at 1131–32.

III

The doctrine of foreign sovereign immunity has its roots in the common law, tracing back to the Supreme Court's decision in Schooner Exchange v. McFaddon, 11 U.S. 116, 7 Cranch 116, 3 L.Ed. 287 (1812), which extended “virtually absolute immunity to foreign sovereigns as ‘a matter of grace and comity.’ ” Samantar v. Yousuf, 560 U.S. 305, 311, 130 S.Ct. 2278, 176 L.Ed.2d 1047 (2010) (quoting Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 486, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983)). After Schooner Exchange, federal courts routinely deferred to the State Department on whether to assume jurisdiction over an action against a foreign sovereign or its instrumentality. Republic of Austria v. Altmann, 541 U.S. 677, 689, 124 S.Ct. 2240, 159 L.Ed.2d 1 (2004).² In 1952, the State Department adopted a “restrictive” theory of sovereign immunity. Samantar, 560 U.S. at 312, 130 S.Ct. 2278....