OBB v. Sachs: A Smart Result

Over two months ago, I argued that OBB v. Sachs was “an easy call” with regard to the commercial activity exception.  I contended that the case was controlled by Saudi Arabia v. Nelson, 507 U.S. 349 (1993), and that “the Supreme Court should simply apply Nelson . . . and order the dismissal of Sachs’ lawsuit.”  Today, a unanimous Court did just that.  The Court applied Nelson and reversed the judgment of the Ninth Circuit.  The Court got it right.

The Court not only got it right, but it also cleaned up a key part of FSIA jurisprudence.  In my post a few months ago, I stated the following with regard to the gravamen vs. elements approach in Nelson:

[W]hile Nelson contained sloppy language that could be interpreted to support an elements approach (Nelson, 507 U.S. at 357), the Nelson Court clearly used a gravamen approach.  It did not methodically review Nelson’s sixteen causes of action to determine whether some of the claims contained elements that required proof of commercial activity in the United States.  Instead, Nelson used a gravamen analysis, as reflected by its discussion of the failure to warn claim . . . . In other words, with regard to Nelson, one should do as the Court did, and not as the Court said.  Its actual holding makes clear that gravamen is the proper method of analysis.  However, the sloppy “elements” language in Nelson has indeed caused confusion in FSIA jurisprudence over the years, and Sachs is the perfect opportunity to clean it up.

In its opinion today, the Court echoed this analysis:

The Ninth Circuit apparently derived its one-element test from an overreading of one part of one sentence in Nelson, in which we observed that “the phrase [‘based upon’] is read most naturally to mean those elements of a claim that, if proven, would entitle a plaintiff to relief under his theory of the case.” 507 U. S., at 357. . . . [O]ur analysis in Nelson is flatly incompatible with a one-element approach. A one-element test necessarily requires a court to identify all the elements of each claim in a complaint before that court may reject those claims for falling outside §1605(a)(2). But we did not undertake such an exhaustive claim-by-claim, element-by-element analysis of the Nelsons’ 16 causes of action, nor did we engage in the choice-of-law analysis that would have been a necessary prelude to such an undertaking. . . .  Nelson instead teaches that an action is “based upon” the “particular conduct” that constitutes the “gravamen” of the suit.

Accordingly, the Supreme Court has now “cleaned up” the gravamen vs. elements issue, and has made it clear that a gravamen approach constitutes the governing mode of jurisdictional analysis under the FSIA.  Its conclusion is correct under Nelson, and is also a good result for all of the reasons I have previously identified.

Finally, the Court declined to reach the attribution issue in Sachs.  Since the commercial activity issue resolved the case, the Supreme Court’s decision was wise.  The attribution issue was complicated, and had the potential to yield a host of unintended consequences in FSIA jurisprudence.  The Court will eventually need to revisit attribution under the FSIA, but sidestepping the issue here was a sensible exercise of judicial restraint.

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