Supreme Court Update: OBB Personenverkehr AG v. Sachs (13-067) and Order List

December 4, 2015 Supreme Court Update

Greetings, Court fans!

If you blinked, you might have missed it, but the Court handed down its first signed opinion of the Term this week in OBB Personenverkehr AG v. Sachs (13-1067), unanimously holding that an Austrian railroad was immune from suit under the Foreign Sovereign Immunities Act ("FSIA").

Carol Sachs, a resident of Berkeley, California, bought a Eurail pass online from a Massachusetts travel agent to use during her upcoming travels to Austria. While attempting to board a train in Innsbruck, she fell onto the tracks, and a moving train crushed her legs. Sachs sued OBB Personenverkehr AG ("OBB")—Austria's national railroad—in the Northern District of California for negligence, strict liability, and breach of the implied warranties of merchantability and fitness. The FSIA bars domestic lawsuits against foreign governments and their agencies unless a specific exception applies. As an agency of the Austrian government, OBB claimed sovereign immunity and moved to dismiss. The district court agreed with OBB, and a divided panel of the Ninth Circuit affirmed. But after rehearing en banc, the Ninth Circuit reversed, adopting Sachs's argument that her suit fell within an exception to sovereign immunity for actions "based upon a commercial activity carried on in the United States by the foreign state." 28 U.S.C. § 1605(a)(2). The Court, applying common law agency principles, held that the Massachusetts-based travel agent's sale of a Eurail pass could be attributed to OBB and constituted a "commercial activity carried on in the United States." It further held that Sachs's tort claims were "based upon" that commercial activity for purposes of Section 1605(a)(2) because the sale transaction formed an element of each of the causes of action Sachs pursued. Accordingly, it held OBB was not immune from suit in the United States.

FALSCH!, cried the Supreme Court, in a unanimous opinion authored by the Chief. Sachs's suit was not "based upon" the sale of the Eurail pass for purposes of Section 1605(a)(2) under the Court's previous interpretation of that provision in Saudi Arabia v. Nelson, 507 U.S. 349 (1993). In Nelson, an American couple sued the Saudi Arabian government for torts its state-owned hospital allegedly committed against the husband while he was employed there. The Saudi government claimed immunity under the FSIA. The Nelsons argued that Section 1605(a)(2) applied because their claims were "based upon" the Saudi government's commercial activities in the United States when it recruited Mr. Nelson for work at the hospital and signed an employment contract with him. The Nelson court rejected this argument. Instead, it "zeroed in on the core" of plaintiffs' suit, namely "the Saudi sovereign acts that actually injured" the plaintiffs. Since all the allegedly tortious conduct and resulting injuries occurred in Saudi Arabia, the Court held that the Nelsons' claims, at core, were "based upon" those actions, not upon any commercial activity in the United States.

Applying Nelson to this case, the Court reiterated that an action is "based upon" the conduct that forms the "gravamen of the complaint." The conduct constituting the "essentials" of Sachs's suit "plainly occurred abroad." All her claims turned on the same accident in Austria, caused by allegedly wrongful conduct and dangerous conditions in Austria, which led her to suffer injuries in Austria. Therefore, her suit was not "based upon" the sale of the Eurail pass, which was not in itself a wrongful act. Accordingly, OBB was immune from suit. Any other approach to the case, the Court said, would allow plaintiffs to evade the FSIA's restrictions through artful pleading. Having held that OBB was immune under the FSIA, the Court did not reach the issue of whether common law agency principles can be used in FSIA cases to attribute the conduct of a US-based third party (here, the travel agent) to a foreign government or agency (here, OBB). While the Court stressed that its holding was limited to suits where the gravamen of each claim is found in the same place, it is clear that in this case, OBB can safely say "Auf Wiedersehen" to the California courts.

On to orders. Just this afternoon, the Court granted cert in four new cases:

CRST Van Expedited v. EEOC (14-1382), which asks whether a dismissal of a Title VII case, based on the EEOC's failure to satisfy its pre-suit obligations, can form the basis of an attorney's fee award to the defendant under 42 U.S.C. 2000e-5(k);

Betterman v. Montana (14-1457), which asks whether the Sixth Amendment's Speedy Trial Clause applies to the sentencing phase of a criminal prosecution, protecting a criminal defendant form inordinate delay in final disposition of his case.

Universal Health Services v. Escobar (15-7), which asks whether the "implied certification" theory of legal falsity under the FCA is viable and, if so, whether a government contractor's reimbursement claim can be legally "false" under that theory if the provider failed to comply with a statute, regulation, or contractual provision that doesn't state that it is a condition of payment; and

Puerto Rico v. Franklin CA Tax-Free Trust (15-233) & Acosta-Febo v. Franklin CA Tax-Free Trust (15-255), which ask whether Chapter 9 of the federal Bankruptcy Code, which does not apply to Puerto Rico, nonetheless preempts a Puerto Rico statute creating a mechanism for the Commonwealth's public utilities to restructure their debts.

A couple of cases also inched closer to likely cert grants this week. On Monday, the Court granted a motion to extend the time for opposing certiorari in U.S. v. Texas (15-674), the Obama administration's appeal of a Texas District Court's injunction against its deferred-action immigration policy. Why would an order extending time signal a likelihood that the case would be heard this term? The twenty-six states challenging the policy (and therefore opposing certiorari) had asked for a thirty-day extension but the Solicitor General opposed, noting that an extension that long would mean that, if the Court chose to grant cert, the case could not be heard this term. The Court therefore granted only an eight-day extension, which signals that it is prepared to hear the case and issue a decision by the end of the term. In a border case of a different sort, the Court (after multiple relistings) invited the SG to weigh in on the petition for certiorari in Hernandez v. Mesa (15-118), which asks (1) whether a formalist or functionalist analysis governs the extraterritorial application of the Fourth Amendment's prohibition on unjustified deadly force, as applied to a cross-border shooting of an unarmed Mexican citizen in an enclosed area controlled by the United States; and (2) whether qualified immunity may be granted or denied based on facts – such as the victim's legal status – unknown to the officer at the time of the incident.

Finally, the Court also took the rare step earlier this week of granting an injunction pending appeal to the Ninth Circuit in Akina v. Hawaii (15-551). Petitioners in Akina sought to enjoin the counting of ballots cast in, and the certification of the winners of, an election intended to select delegates to a convention that would draw up "governance documents" for a Native Hawaiian government. Registration to vote in this election was restricted to "Native Hawaiians," and Petitioners claim the election is racially discriminatory and violates the Fifteenth Amendment. The Supreme Court has now precluded the vote from going into effect until the Ninth Circuit has the chance to complete its review of the case. Justices Ginsburg, Breyer, Sotomayor and Kagan would have denied the petition.

That's all for this week. Until the next, thanks for reading!