OBB Personenverkehr AG v. Sachs

In this case, the Supreme Court will consider how to determine when an entity is an agency of a foreign state for purposes of the FSIA’s commercial activity exception. See Brief for Petitioner, OBB at i. OBB argues that the express language of the FSIA limits the commercial activity exception to foreign states and agencies or instrumentalities of foreign states, which includes government-owned corporations like OBB, but excludes common law agents. See id. at 40-43. OBB contends that REP does not satisfy the FSIA’s more stringent definition of agency. See id. Sachs argues that the Court should interpret the FSIA in light of common-law agency principles, and that REP and OBB have a clear principal-agent relationship. See Brief for Respondent, Carol P. Sachs at 12-13.

Additionally, the Court will determine whether a tort claim for a personal injury that occurred outside of the United States can be “based upon” the sale of the travel ticket, which occurred within the United States. See Brief for Petitioner at i. OBB posits that the Court should start its analysis by determining the particular conduct, or gravamen, that Sachs’ tort claim is based on. See id. at 27–29, 33. OBB argues that the gravamen of the Sachs’ complaint is her falling while boarding the train in Austria, which has no connection with the United States and therefore fails the based upon requirement. See id. at 33. But Sachs argues that she does not need to satisfy a “gravamen test,” but rather, she needs to satisfy only a “one-element test.” See Brief for Respondent at 37–38, 46–47. Under this test, Sachs argues, the Court need only consider whether OBB’s relevant conduct in the United States, the ticket sale, constitutes an element of the allegedly tortious conduct. See id. at 46.

WHAT IS “AGENCY” UNDER THE FSIA?

DOES THE FSIA DEFINE "AGENCY?”

OBB contends that the proper way to determine whether OBB is an agent of a foreign state is to examine the definitions section of the FSIA. See Brief for Petitioner at 38. OBB argues that the FSIA “carefully define[s]” the meaning of “foreign state,” and likewise indicates that the definition of foreign state applies to the commercial activity exception. See id. at 38–39. OBB acknowledges that this definition encompasses agencies or instrumentalities of foreign states, such as OBB, but concludes that the definition excludes common law agents. See id. at 40–41. In short, OBB asserts that FSIA “agencies” exhibit only the enumerated characteristics presented in FSIA § 1603(b), to the exclusion of “travel agents.” See id. at 41–42. OBB supports its position by examining the history of sovereign immunity and the creation of the FSIA. See id. at 58–59. OBB explains that before Congress enacted the FSIA, various factors were evaluated to determine whether sovereign immunity should apply to an agent of a foreign state, which resulted in unclear and non-uniform application that the FSIA sought to rectify. See id.

Sachs counters, arguing that the definitions section of the FSIA produces incongruous outcomes, in which foreign states conducting business in the United States could avoid the reach of American courts by acting through third parties. See Brief for Respondent at 18. Sachs posits that the definitions section that OBB is depending on is meant to determine which “entities are eligible for sovereign immunity and not which entities may act as an agent of a foreign state.” Id. at 10. Sachs also argues that if only the definitions section of the FSIA is used to define the terms in question, the definitions of “foreign state” and “agency” will fall short of the FSIA’s intentions. See id. at 20. For example, Sachs asserts that the definition of “agency” excludes state citizens. For purposes of federal diversity jurisdiction, corporations are citizens. As such, Sachs argues, “if [a foreign state] establishes a [state created] subsidiary in the United States to conduct its business, it would not” be subject to jurisdiction,” thereby “turn[ing] the FSIA on its head.” See id. at 21. Finally, Sachs notes that of the eight courts of appeal to address the FSIA’s commercial activity exception, every one has applied common-law agency principles. See id. at 13.

DOES PRECEDENT PRECLUDE LIMIT THE APPLICATION OF COMMON LAW AGENCY PRINCIPLES?

OBB argues that if the Court goes beyond the FSIA’s definitions, then the Court should apply its decision in First National City Bank v. Banco Para el Comercio Exterior de Cuba, 462 U.S. 611 (1983) (“Bancec”). See Brief for Petitioner at 27. OBB argues that the attribution analysis in Bancec—“where a corporate entity is so extensively controlled by its owner that a relationship of principal and agent is created”—is the relevant inquiry. See id. at 51. OBB asserts that RPE’s actions are not under the extensive control of OBB and thus no jurisdiction exists. See id. at 53. In support, OBB contends that there is no evidence that OBB and RPE acted in a principal-agent relationship or that OBB even knew of RPE’s existence. See id.

However, Sachs argues that Bancec does not directly apply to the case at hand because Bancec “dealt with piercing the veil of a foreign state’s ‘corporate affiliates,’” which involved different considerations and a less stringent test. See Brief for Respondent at 22. Sachs posits that if the law was the way OBB contends, “then foreign states conducting business in the United States could evade jurisdiction simply by acting through third-party agents,” which would undercut the FSIA’s purpose. See id. at 10.

HOW IS THE “BASED UPON” REQUIREMENT FOR COMMERCIAL ACTIVITY SATISFIED?

OBB contends that the “based upon” requirement of the FSIA’s commercial activity exception is not met. See Brief for Petitioner at 18. OBB argues that the only commercial activity that occurred in the United States was the purchase of the train ticket by Sachs from a distant party. See id. at 19. OBB states, quoting the Court’s opinion in Saudi Arabia v. Nelson, 507 U.S. 349 (1993), that the analysis begins “by identifying the particular conduct,” or gravamen, “on which the [plaintiff’s] action is ‘based,’” but that the “activities that lead to the conduct that eventually injured the [plaintiff] . . . are not the basis for the [plaintiff’s] suit.” See id. at 19–20, 28. OBB argues that all of the claims alleged by Sachs arise from her fall at the train station and not from the commercial activities in the United States. See id. at 20. In its reply brief, OBB argues that Sachs’ suggestion of using the one-element test would in effect overrule Nelson and go against the text of the FSIA. See Reply Brief for Petitioner at 9-10.

Sachs counters that her action is based upon OBB’s commercial activity of operating a railroad, which has substantial contact to the United States. See Brief for Respondent at 23, 24, 31. Sachs argues that the based upon requirement does not have to refer to the gravamen but rather only has to refer to one element of the action. See id. at 30. Sachs states that the language of the commercial activity exception, 28 U.S.C. § 1605(a)(2), uses the terms “activity” and “act” to differentiate between continuous activity and isolated commercial acts in the United States. See id. at 30. Sachs contends that both activities and acts with substantial connection to the United States satisfy the statutory language. See id. Hence, Sachs concludes this one-element test for the based upon requirement is satisfied because of OBB’s commercial activity in running the railway. See id. Sachs further contends that OBB’s reliance on a geographic tie is mistaken and that instead “based upon” covers matters that are only partially connected to the act. See id.