Sachs v. Republic of Austria

• Decision Date: 26 September 2012
• Docket Number: No. 11–15458.,11–15458.
• Citation: 695 F.3d 1021
• Court: U.S. Court of Appeals — Ninth Circuit
• Parties: Carol P. SACHS, Plaintiff–Appellant, v. REPUBLIC OF AUSTRIA; OBB Holding Group; OBB Personenverkehr AG, Defendants–Appellees.

695 F.3d 1021

2012 Daily Journal D.A.R. 13,470

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.

Submitted June 13, 2012.^*

Filed Sept. 26, 2012.

Geoffrey Becker, Becker & Becker, Lafayette, CA, for appellant Carol P. Sachs.

Juan C. Basombrio, Dorsey & Whitney LLP, Costa Mesa, CA, for appellees OBB Personenverkehr, AG.

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: RONALD M. GOULD, RICHARD C. TALLMAN, and CARLOS T. BEA, Circuit Judges.

Opinion by Judge TALLMAN; Concurrence by Judge BEA; Dissent by Judge GOULD.

OPINION

TALLMAN, Circuit Judge, announcing the judgment of the Court:

In this case we consider what acts may be attributed to a foreign state in applying the commercial activity exception to immunity under the Foreign Sovereign Immunities Act.

Carol Sachs sued Austrian-owned OBB Personenverkehr after sustaining personal injuries as a result of her attempt to board a moving train in Innsbruck. The district court ruled that the commercial activity exception to the Foreign Sovereign Immunities Act did not apply and dismissed Sachs's suit for lack of subject matter jurisdiction. Sachs appeals the district court's order. We have jurisdiction under 28 U.S.C. § 1291 and we affirm.

I

In March 2007, Sachs purchased a Eurail pass in California from Rail Pass Experts, a company based in Massachusetts. A Eurail pass is a train ticket that allows passage on various railways of the Eurail Group, an association of thirty-one European railway transportation providers. Sachs's pass permitted travel in Austria and the Czech Republic. In April Sachs traveled to Austria, where she intended to originate her journey, and there purchased a sleeper upgrade to her ticket at a local train station. A few days later, on April 27, 2007, Sachs arrived at the Innsbruck train station and attempted to board a moving train. She fell to the tracks through a gap in the platform and suffered injuries that ultimately required the amputation of both legs above the knee.

OBB Personenverkehr (“OBB”) is the Austrian national railway. OBB Holding Group (“Holding Group”) owns 100% of OBB's stock. The Republic of Austria created Holding Group under Austrian railway law, and the Republic's Federal Ministry of Transport, Innovation and Technology is the sole shareholder of Holding Group. OBB is not required to pay income or corporate tax and, through its parent Holding Group, forwards all profits to the Austrian government.

The Eurail Group (“Eurail”) is an association organized under Luxembourg law. OBB and thirty other European railways own Eurail. Eurail is a distinct legal entity and employs its own management and employees. Eurail is tasked with, among other things, the marketing and sale of Eurail passes.

Sachs filed a complaint in the Northern District of California against the Republic of Austria, Holding Group, and OBB. She asserted claims of negligence, design defect,failure to warn, and breach of the implied warranties of merchantability and fitness, premising federal jurisdiction on diversity. Holding Group was not served and is not a party to this case. The Republic of Austria and OBB moved to dismiss based on lack of subject matter jurisdiction. Sachs did not oppose Austria's motion and the district court granted it. The district court at first did not rule on OBB's motion, instead calling for supplemental briefing on whether the actions of Rail Pass Experts could be imputed to OBB. On January 28, 2011, the district court granted OBB's motion to dismiss after concluding that OBB was immune from suit. This appeal followed.

II

The “sole basis” by which courts in the United States may obtain jurisdiction over foreign states is the Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. § 1602 et seq.Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989). Under the FSIA, foreign states are presumptively immune from suit in federal and state courts, subject to a number of exceptions. Embassy of the Arab Republic of Egypt v. Lasheen, 603 F.3d 1166, 1169 (9th Cir.2010); see also28 U.S.C. § 1604. These exceptions are found in 28 U.S.C. § 1605 and § 1607, Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 488, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983), and “focus on actions taken by or against a foreign sovereign.” In re Republic of Phil., 309 F.3d 1143, 1150 (9th Cir.2002). The exceptions include actions in which the foreign state has waived its immunity, 28 U.S.C. § 1605(a)(1), and actions involving the foreign state's successor interest in property located in the United States, id. § 1605(a)(4). “The two most commonly invoked exceptions to immunity, however, are those for commercial acts and for tortious acts.” Wolf v. Fed. Republic of Ger., 95 F.3d 536, 541 (7th Cir.1996) (citing 28 U.S.C. § 1605(a)(2) & (a)(5)).¹

Sachs, as the party bringing suit against a foreign state, must offer evidence that an exception to immunity applies. See Joseph v. Office of Consulate Gen. of Nigeria, 830 F.2d 1018, 1021 (9th Cir.1987). If she does so, OBB would bear the burden of establishing by a preponderance of the evidence that the exception does not apply. See id. We review de novo a district court's determination regarding sovereign immunity under the FSIA. Corzo v. Banco Cent. de Reserva del Peru, 243 F.3d 519, 522 (9th Cir.2001).

III

The parties agree that the only exception relevant to this appeal is the commercial activity exception, which deprives foreignsovereigns of immunity in any case “in which the action is based upon a commercial activity carried on in the United States by the foreign state.” 28 U.S.C. § 1605(a)(2). There is no dispute that OBB, as an “agency or instrumentality” of Austria, id. § 1603(a), constitutes a “foreign state” for the purposes of the FSIA.

Sachs's argument for jurisdiction is scattershot but is premised upon the fact that the sale of the Eurail pass by Rail Pass Experts is a commercial activity that should be imputed to OBB. Both parties agree that the purchase of the Eurail pass is the only commercial activity within the United States relevant to this case. But OBB denies that it was commercial activity by the state because any connection between Rail Pass Experts and OBB is so attenuated.

A.

We previously grappled with the question of which acts could be attributed to a foreign state under the FSIA in Doe v. Holy See, 557 F.3d 1066 (9th Cir.2009) (per curiam), cert. denied,––– U.S. ––––, 130 S.Ct. 3497, 177 L.Ed.2d 1089 (2010). John V. Doe, the plaintiff in that case, brought vicarious liability claims, among others, against the Holy See for the actions of its subordinates, including the Archdiocese of Portland, Oregon (Archdiocese), the Catholic Bishop of Chicago (Bishop), and the Order of the Friar Servants (Order). Doe alleged that Father Ronan, a member of the Order and priest in the Archdiocese, had sexually assaulted him when he was a teenager. Id. at 1069. The district court held that the commercial activity exception to immunity did not apply but that the tortious act exception did, thus granting it jurisdiction. Id. at 1071. The Holy See countered that it retained immunity from suit because the acts of the Archdiocese, the Bishop, and the Order could not properly be imputed to it for jurisdiction purposes. Id. at 1076.

On appeal, we recognized that “in applying the jurisdictional provisions of the FSIA, courts will routinely have to decide whether a particular individual or corporation is an agent of a foreign state.” Id. at 1079. We looked for guidance in First National City Bank v. Banco Para El Comercio Exterior de Cuba (Bancec), 462 U.S. 611, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983). In Bancec, the Supreme Court considered the inverse situation from the one we faced in Holy See—that is, when the actions of a foreign state could be attributed to its subordinate. Id. at 620, 103 S.Ct. 2591. The Cuban government had established Bancec as an official credit union, owned all of its stock, and supplied its capital. Id. at 613–14, 103 S.Ct. 2591. In 1960 Cuba nationalized all U.S. property in the country, including banks. Citibank had previously issued Bancec a letter of credit related to a sugar sale but, when Bancec presented the letter for payment, Citibank paid the amount sought less the value of its expropriated Cuban branches. Id. at 614–15, 103 S.Ct. 2591. Bancec then brought suit in federal district court seeking to collect on the full value of the letter of credit and Citibank counterclaimed. Id. at 615, 103 S.Ct. 2591.

The Court considered whether Bancec was liable on Citibank's expropriation claim; jurisdiction was not at issue in the case. Id. at 619–21, 103 S.Ct. 2591. As we noted in Holy See, the Supreme Court “recognized a presumption of ‘separate juridical status' ” for subordinates of foreign states. 557 F.3d at 1077 (quoting Bancec, 462 U.S. at 624, 103 S.Ct. 2591) (brackets omitted). The Court clarified that this presumption will be negated only (1) “where a corporate entity is so extensively controlled by its owner that a relationship of principal and agent is created” or (2) where recognizing the presumption “would work fraud or injustice.” Bancec, 462 U.S. at 629, 103 S.Ct. 2591 (internal quotation marks omitted). Relying on the second, equitable prong, the Court held Bancec liable because recognizing its separate status would permit Cuba, the true beneficiary behind the by-then-defunct bank, to enforce the bank's claim against Citibank while simultaneously avoiding jurisdiction on the creditor's counterclaim against the Cuban government. Id. at 630–32, 103 S.Ct. 2591.

We expressly adopted this analysis in Holy See and extended it to the jurisdiction phase of the FSIA, joining the...