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KERN v. OESTERREICHISCHE ELEKTRIZITAETSWIRTSCHAFT AG

November 15, 2001

RUDOLPH KERN AND ANGELA KERN, INDIVIDUALLY AND ON BEHALF OF THE ESTATE OF ERICH KERN, PLAINTIFFS,
v.
OESTERREICHISCHE ELEKTRIZITAETSWIRTSCHAFT AG, WAAGNER BIRO AG, SWOBODA KAROSERIE AG, BAUBEDARFSZENTRUM STADLBAUER AG, GLETSCHERBAHNEN KAPRUN AG, ABC CORPORATIONS 1-10, JOHN DOES 1-10, DEFENDANTS, LTC (RET) JOHN S. HABBLETT, ET AL., PLAINTIFFS, V. OESTERREICHISCHE ELEKTRIZITAETSWIRTSCHAFT AG, WAAGNER BIRO AG, SWOBODA KAROSERIE AG, BAUBEDARFSZENTRUM STADTBAUER AG, GLETSCHERBAHNEN KAPRUN AG, ABC CORPORATIONS 1-10, JOHN DOES 1-10, DEFENDANTS.



The opinion of the court was delivered by: Shira A. Scheindlin, United States District Judge.

  OPINION AND ORDER

OE AG moved to dismiss the action against it on numerous grounds. The parties have since agreed to narrow the focus of the motion to the question of whether the Foreign Sovereign Immunity Act precludes this Court's jurisdiction over OE AG. Plaintiffs thus claim that jurisdiction is proper under 28 U.S.C. § 1605(a)(1),(2) (exceptions to foreign sovereign immunity). For the reasons set forth below, OE AG's motion to dismiss on the ground of foreign sovereign immunity is granted.

I. BACKGROUND

In November 2000, plaintiffs' decedents died in a ski train fire on Kitzsteinhorn mountain in Kaprun, Austria that killed 155 tourists and employees of the ski operation. See OE AG's Annual Report for the Year 2000 ("Annual Report") at 37, Ex. B to Plaintiff's Preliminary Opposition to OE AG's Motion to Dismiss Based on Sovereign Immunity ("Pl. Opp'n.").

A. The Parties

Plaintiffs John S. Habblett and Suzanne K. Habblett lost their daughter, Jennifer Kirkpatrick Habblett Goodridge, and two grandchildren, Michael and Kyle Goodridge, in the accident. Plaintiffs Rudolf and Angela Kern's son, Erich Kern, also died in the accident. Plaintiffs Dick Baker and Carol Baker, not named in the caption, lost their daughter, Carrie Lynn Baker.

The Habbletts and the Kerns filed separate actions on January 11, 2001, setting forth the same causes of action against numerous defendants including OE AG. See 1/11/01 Habbletts' Complaint; 1/11/01 Kerns' Complaint (both "Complaint" or "Compl."). The Bakers filed a complaint against the same defendants on January 31, 2001, also stating the same causes of action. 1/31/01 Bakers' Complaint (also "Complaint" or "Compl."). Defendant OE AG (a.k.a. Verbundgesellschaft or Verbund, see Compl. ¶ 13) is an Austrian holding company for a "series of associated companies" in industries ranging from engineering, energy and environmental technology to telecommunications and tourism. Annual Report at 36. The Austrian Republic owns 51% of the shares of OE AG. 8/10/01 OE AG's Answers to Interrogatories ("FSIA Interrog.") No. 1 at 3. OE AG is the largest individual shareholder (45%) in defendant Gletscherbahnen Kaprun Aktiengesellschaft ("GBK"), the Austrian company that directly operated the ski train on Kitzsteinhorn Mountain (the "ski train").*fn1 See Annual Report at 37; Compl. ¶ 17.

Defendant Waagner Biro AG is an Austrian steel and mechanical engineering corporation, which allegedly designed, built and maintained the ski train. See Compl. ¶ 14. Defendant Swoboda Karoserie AG is an Austrian corporation that allegedly provided certain repair services for the train. See id. ¶ 15.

Defendant Baubedarfszentrum Stadlbauer AG, which plaintiffs allege owns a controlling share of defendant Swoboda Karoserie AG, is allegedly one of Austria's leading wholesalers and retailers of building material, tiles and safety devices. See id. ¶ 16. Defendants ABC Corporations 1-10, and John Does 1-10, are "fictitious names for individuals and corporations whose actual identity [sic] is as of yet unknown, but will be identified through discovery." Id. ¶ 18.

B. Related Non-Parties and Events

Various other entities and events are relevant in this action. Austrian Hydro Power AG ("AHP") is an Austrian company that is 85%-owned by OE AG. See OE AG's Motion to Dismiss on FSIA Grounds ("Def. Mot.") at 2. During the past few years, AHP transacted a series of nine cross-border leases which closed in New York and in which OE AG served as guarantor (the "leasing transactions"). See FSIA Interrog. No. 15 at 21; see also Part II.A.2, infra. The leases contain provisions waiving sovereign immunity for disputes arising from the agreements, and agreeing to the application of New York law. See id.

Tauern Touristik GmbH ("TT") is one of OE AG's wholly-owned subsidiaries. See Annual Report at 37. TT carries out "marketing and utilization" for OE AG's tourism business. Id. Plaintiffs allege that TT marketed Austrian skiing in the United States, and that this marketing induced plaintiffs' relatives to ski in Kaprun, Austria. See Pl. Opp'n. at 9. Plaintiffs further allege that OE AG funded TT's marketing efforts in the United States. Id. OE AG has denied that it funded any of TT's advertising or promotional efforts in the United States. See FSIA Interrog. No. 12 at 18.

C. Procedural History

When it became apparent that OE AG planned to rely on a sovereign immunity defense, plaintiffs sought jurisdictional discovery on that issue. This Court ordered that OE AG provide to Magistrate Judge Theodore Katz for in camera review the following items: (1) the table of contents for the closing binders relating to certain leasing transactions, (2) the intended use provisions of the governing agreements, and (3) any forum selection, choice of law or immunity waiver clauses in the closing binders of each transaction. See 9/10/01 Amended Discovery Order ("9/10/01 Discovery Order"); 8/29/01 Transcript at 29-30. In addition, the Court ordered that OE AG provide a sworn statement as to whether OE AG had funded any promotional activities of Austrian skiing or hiking in the United States, and whether OE AG provided funding to TT for promoting Austrian skiing or hiking in the United States. See 9/10/01 Discovery Order at 2.

Judge Katz received briefs and opposition papers relating to the discovery order, and granted further limited discovery of materials relating to the leasing transactions that closed in New York during 1999-2001. See 10/11/01 Order of Magistrate Judge Theodore Katz ("10/11 Katz Order") at 1. Judge Katz subsequently reviewed the materials and concluded that none of the information provided any support for plaintiffs' theory that the funds derived from the leasing transactions were intended to fund skiing activities at the site of the accident. See 10/23/01 Order of Magistrate Judge Theodore Katz ...


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