Supreme Court to Hear Eurail Case on Foreign Entity Liability

The new Supreme Court term will include high-level discussions of affirmative action, free association and religious liberty. But the first Monday in October is starting with a suit about a Eurail pass. Specifically, the court will consider whether selling a Eurail pass in the U.S. through a subagent makes the Austrian rail service subject to liability in a U.S. court for an accident in which an American plaintiff lost her legs outside Innsbruck. And therein lies an important question about the relationship between U.S. courts and foreign entities, not coincidentally the subject of a new book by Justice Stephen Breyer.

If the American servicemen who halted a terrorist attack on a train in France are the poster boys for European train travel, Carol Sachs is the unlucky opposite. In March 2007, she bought her Eurail pass through a website owned by Rail Pass Experts, a Massachusetts-based company that was authorized to make the sale by Eurail Group, itself a joint venture of 30 European rail companies. In April 2007, she upgraded her unassigned seat ticket to get a couchette, and tried to board the train from Innsbruck to Prague. She fell between the tracks, and her legs were crushed by the moving train.

Being an American, Sachs sued OBB, the Austrian rail company, in a federal court in California. OBB said it couldn’t be sued, because it’s an arm of the Austrian government. The Foreign Sovereign Immunities Act bars lawsuits against sovereign governments, their agents and their majority-owned subsidiaries. As far as OBB was concerned, that was the end of the case.

But the act contains an exception. The traditional doctrine of sovereign immunity depends on the idea that individual sovereigns can’t be sued in their own courts, and enter foreign nations on the mutual understanding that they haven’t given up their right not to be sued there, either.

In the modern era, states don’t always act like regal sovereigns. Sometimes they do business. The Foreign Sovereign Immunities Act says that immunity doesn’t apply if the suit is “based upon a commercial activity carried on in the United States by the foreign state.” To win, then, Sachs had to show two things: that the sale of the Eurail pass was commercial activity by OBB and, if so, that her injuries were based upon that activity.

The federal district court rejected Sachs’s suit, but the U.S. Court of Appeals for the 9th Circuit, sitting en banc, allowed it to go forward. It reasoned that the Massachusetts website that sold Sachs her pass was an agent of Eurail Group, which was in turn an agent of OBB. Then it said that Sachs’s claims were “based upon” the sale because she was arguing that by selling her the Eurail pass, OBB assumed the legal duties of a common carrier, which must not behave negligently toward a passenger.

So why did the Supreme Court take the case of OBB Personenverkehr AG v. Sachs? The court generally prefers to take cases where the courts of appeals are divided.

When the court asked the U.S. solicitor general to weigh in, which it sometimes does when the justices are not sure whether to hear a case, the solicitor general, Donald Verrilli, recommended against it. He said there was no circuit split on whether a foreign sovereign could be held liable for the actions of an independent agent. And he said that whether Sachs’s claims were based upon her purchase of the Eurail pass was complicated by the fact that the 9th Circuit was given only a “cursory and incomplete” account of the relevant California law.

The best explanation of court’s desire to take the case is that it is in a phase of trying to clarify what it considers important questions of relations between the U.S. courts and foreign governments. In 2013, the court held foreigners cannot sue foreigners in the U.S. courts for events that occurred outside the U.S. in violation of international law, unless the conduct significantly touches upon the U.S. The basis for Kiobel v. Royal Dutch Petroleum was Justice Anthony Kennedy’s concern that the U.S. does not in essence conduct foreign policy by ruling on the legality of foreign government’s conduct. The legal basis for the decision was a presumption that U.S. laws do not apply outside U.S. territory unless they say they do — a principle that Kennedy said expressed respect for foreign sovereigns.

It’s not only Kennedy who’s concerned about this. In his new book, “The Court and the World,” Breyer spends a good deal of time emphasizing the principle of “comity,” in the sense of broad respect by one sovereign jurisdiction for another.

Holding the Austrian railroad liable under California law for an injury to an American that occurred in Austria might not trigger a major international incident. But it might embody disrespect for the kind of comity that Breyer likes and that the court unanimously endorsed in Kiobel. Did the Austrian government — not to mention the other participants in the Eurail Group — really think that by selling train tickets in the U.S. they were making themselves liable to American tort law, with rules and obligations and damages that are very different from European norms? The answer almost certainly is no.

The court is hearing the Eurail pass case to try to keep control of how U.S. laws implicate foreign sovereigns. Given that concern, it would not be surprising to see the judgment of the 9th Circuit reversed — and Sachs be unable to apply U.S. law to her Austrian accident.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Topics Lawsuits California USA Europe