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Supreme Court case could drag foreign countries into U.S. legal system

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A personal injury lawsuit the U.S. Supreme Court will take up later this year could have wide implications for foreign governments indirectly doing business in the United States.

Experts say the case, ÖBB-Personenverkehr A.G. vs. Carol P. Sachs, is unique because it involves a national railroad company owned by the Austrian government, and generally these cases aren't heard in U.S. courts.

Californian Carol Sachs was injured on a visit to Austria in 2009 when she fell through a gap in a railway platform trying to board a train in Innsbruck and lost both legs.

According to her suit, alleging negligence, liability and breach of implied warranties against ÖBB-Personenverkehr A.G., Ms. Sachs alleged the train moved suddenly while she was boarding, causing her to fall.

In the United States, the Foreign Sovereign Immunities Act of 1976 forbids anyone from suing a foreign government in U.S. courts.

The U.S. Department of Justice supported the Austrian railway's stance that the U.S. law bars such suits. In its brief filed with a U.S. appeals court, the Justice Department argued that the Massachusetts travel agent who sold Ms. Sachs her Internet ticket was not operating directly under the direction or control of the Austrian national railway.

The Justice Department spokesman declined further comment on the case because it is an “ongoing matter.”

A divided 9th U.S. Circuit Court of Appeals ruled in December that Ms. Sachs could pursue her claim in the United States because she bought her railway ticket from a Massachusetts-based Internet travel site and thus conducted the business transaction in the U.S.

The Supreme Court agreed earlier this month to hear an appeal from the Austrian railway that U.S. courts have no authority in this case.

If the justices side with Ms. Sachs, “It's going to leave other countries wide open to lawsuits if they are doing any business in the United States,” said David E. Pilcher, a Monrovia, Calif.-based independent risk management, insurance, claims and litigation consultant “This is going to blur the laws.”

Since most foreign governments are self-insured, a case like this is not likely to affect insurance underwriting, Mr. Pilcher said.

Juan Basombrio, a partner at Costa Mesa, Calif.-based Dorsey & Whitney L.L.P., who represents the railway, told a Financial Advisor Magazine blogger in January that a Supreme Court decision could affect a wide array of industries — including travel, construction, and telecommunications — that conduct business with foreign nations.

Mr. Basombrio could not be reached for comment.

Benjamin Shatz, a partner at Los-Angeles-based Manatt, Phelps & Phillips L.L.P., also argued that Ms. Sachs' suit belongs in a European court in a brief filed with the appeals court on behalf of the International Rail Transport Committee.

“European railways will be forced to change their business practices to avoid exposure to American lawsuits,” Mr. Shatz wrote in the brief. “Such changes are likely to make it more inconvenient for Americans to purchase international railway passage.” He declined to comment further.