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REERS v. DEUTSCHE BAHN AG

June 3, 2004.

CAROLYN REERS, in her capacity as Personal Representative of the Estates of SUSANNE AMORE, deceased, and SALVATORE MICHAEL AMORE, deceased, KATHRYN MEYERS-TONUCCI, Individually and in her capacity as Personal Representative of the Estate of JEANNE MEYERS AMORE, deceased, and GEORGE GUERTIN, in his capacity as Personal Representative of the Estates of EMILY JEANNE AMORE, deceased, and MICHAEL B. AMORE, deceased, Plaintiffs, -against- DEUTSCHE BAHN AG, a Republic of Germany Corporation, DEUTSCHE BAHN REISE & TOURISTIK AG, a Republic of Germany Corporation, DEUTSCHE BAHN AUTOZUG AG, a Republic of Germany Corporation, DEUTSCHE BAHN NACHTZUG AG, a Republic of Germany Corporation, MR. VOLKER, an Individual, ACCOR SA, a Republic of France Corporation, COMPAGNIE INTERNATIONALE DES WAGONS-LITS, a Republic of France Corporation, and ISD-DSG GmbH, a Republic of Germany Corporation, Defendants


The opinion of the court was delivered by: MIRIAM CEDARBAUM, Senior District Judge

OPINION

Defendants Deutsche Bahn AG ("Deutsche Bahn"), Deutsche Bahn AutoZug AG ("AutoZug"), Deutsche Bahn Reise & Touristik AG ("R&T"), Janz Volker, Accor S.A. ("Accor"), and Compagnie Internationale des Wagons-Lits ("CIWLT"), move to dismiss the complaint on various grounds, including sovereign immunity, lack of personal jurisdiction, and forum non conveniens. For the following reasons, the motions are granted. BACKGROUND

  This case arises from the death of five members of the Amore family in a train accident in France. According to the allegations of the complaint, which are accepted as true for the purposes of this motion, the Amores embarked in Paris on an overnight train to Munich on November 6, 2002. The train was operated by the French national railway, Société Nationale Chemins de Fer Francais ("SNCF"), but the railcar to which the Amores were assigned, Railcar 120, was owned and operated by AutoZug, a subsidiary of defendant Deutsche Bahn, the nationally owned rail operator of Germany.

  Shortly before two in the morning, the kitchenette of Railcar 120 caught fire. According to plaintiffs, defendant Volker, an employee of defendant R&T and the attendant assigned to Railcar 120 that night, started the fire and, failing to extinguish it, abandoned his post without warning the sleeping passengers in Railcar 120. The complaint further alleges that employees of Accor and CIWLT, who were working in cars adjacent to Railcar 120, failed to timely warn and evacuate the Amores after defendant Volker fled.

  The fire quickly raged out of control, blocking the railcar's interior exits and preventing twelve passengers, including the Amores, from escaping. Although the fire was soon detected and the train stopped, rescue workers were unable to enter Railcar 120 because Volker had locked the exterior doors of the railcar from the inside. The passengers trapped inside their individual compartments were unable to break the windows. By the time firefighters arrived and gained access to Railcar 120, the twelve passengers inside were dead.

  Plaintiffs, one of whom is suing individually and all of whom are suing as representatives of the estates of the Amore family, filed this wrongful death and survival action against Volker and a number of corporate defendants connected either directly or through their subsidiaries to the operation of the train on which the Amores were traveling in France. Plaintiffs assert claims of negligence, product liability, and breach of implied warranty. Plaintiffs also seek punitive damages.

  On December 11, 2003, plaintiffs consented to the dismissal of two corporate defendants, Accor North America and Stinnes Corporation. Plaintiffs have agreed to dismiss Deutsche Bahn Nachzug, a defendant named in the caption and discussed in the complaint, but whom plaintiffs concede does not exist. Plaintiffs have also agreed to dismiss ISD-DSG GmbH, which did not exist at the time of the accident and is in liquidation. The remaining defendants now move to dismiss the complaint. DISCUSSION

  The Deutsche Bahn defendants move to dismiss based on sovereign immunity, lack of personal jurisdiction, forum non conveniens, and the principle of abstention. The Accor defendants move to dismiss the complaint for lack of personal jurisdiction, forum non conveniens, and failure to state a claim.

 I. Sovereign Immunity

  Deutsche Bahn argues that this court has no subject matter jurisdiction over the claims against it, because it is an agency or instrumentality of a foreign sovereign and therefore immune from suit pursuant to the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1603-10. As previously noted, Deutsche Bahn is the national rail operator of Germany, wholly owned by the German government.

  The FSIA provides foreign states with immunity from suits in American courts, subject to certain exceptions. See Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 489 (1983). Section 1603 states that immunity extends not only to political subdivisions, but also to agencies and instrumentalities of a foreign state, defined as:
[A]ny entity . . . (1) which is a separate legal person, corporate or otherwise, and (2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and (3) which is neither a citizen of a State of the United States . . . nor created under the laws of any third country.
28 U.S.C. § 1603(b). Once a defendant makes a prima facie showing that it is an agency or instrumentality of a foreign state, the plaintiff must demonstrate that a statutory exception to immunity applies. See Cargill Int'l S.A. v. M/T Pavel Dybenko, 991 F.2d 1012, 1016 (2d Cir. 1993).

  Plaintiffs concede that Deutsche Bahn is an instrumentality of the Republic of Germany. They argue, however, that two of the FSIA's exceptions remove the cloak of immunity from Deutsche Bahn in this case.

  The FSIA provides, in relevant part:
A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case —
(1) in which the foreign state has waived its immunity either explicitly or by implication . . .; [or]
(2) in which the action is based upon a commercial activity carried on in the United States by the foreign state; or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States. . . .
28 U.S.C. § 1605(a).

  Plaintiffs argue that Deutsche Bahn waived its immunity pursuant to § 1605(a)(1) when Germany signed the Convention Concerning International Carriage by Rail ("COTIF"), a treaty that regulates litigation arising from railway transportation in signatory countries. Plaintiffs claim, and defendants concede, that each signatory of COTIF, including Germany, has waived its sovereign immunity with respect to damage claims arising from its railway transportation activities in other signatory countries. Each signatory nation has also agreed that personal injury actions arising from railway accidents can be filed only in the country in which the injury occurred. See Convention Concerning International Carriage by Rail (May 9, 1980), app. A, art. 52, § 1. Plaintiffs recognize that the United States is not a signatory of this treaty, but argue that this explicit waiver of immunity from suit in signatory countries is an implied waiver of immunity from suit in the United States within the meaning of the FSIA.

  Plaintiffs' reading of § 1605(a)(1) is too broad. The Second Circuit has stated that the FSIA's implied waiver provision should be construed narrowly, see Transatlantic Shiffahrtskontor GmbH v. Shanghai Foreign Trade Corp., 204 F.3d 384, 391 (2d Cir. 2000), and that such waivers should not be found absent a showing of the sovereign defendant's intention to waive immunity, see, e.g., Cargill, 991 F.2d at 1017. Here, Germany's ratification of COTIF constitutes a very narrow waiver of sovereign immunity: signatory nations have not consented to suit in any signatory nation, but only in the courts of the country in which the injury giving rise to the suit occurred. Plaintiffs provide no justification for finding that through such a limited waiver, Germany and its instrumentalities have impliedly waived sovereign immunity for lawsuits arising in nonsignatory jurisdictions and in countries other than the country in which the injury giving rise to the suits occurred.

  Plaintiffs also contend that this suit falls under § 1605(a)(2), the commercial activities exception to sovereign immunity. Because it is undisputed that the Amores purchased their train tickets in Europe, and that all of the wrongdoing alleged in the complaint occurred in Europe, the only subcategory of the commercial activities exception potentially applicable here is the third, which removes sovereign immunity when an action is based upon "an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States." 28 U.S.C. § 1605(a)(2).

  The parties do not dispute that Deutsche Bahn's provision of rail transportation in Europe is a commercial activity. The significant question is whether the negligence, product defects, and breach of warranty that allegedly contributed to the fire in Railcar 120 — the acts upon which the complaint is predicated — had direct effects in the United States.

  In Martin v. Republic of South Africa, 836 F.2d 91 (2d Cir. 1987), the Second Circuit held that personal injuries suffered by an American abroad as a result of the tortious conduct of a foreign sovereign cannot provide a basis for finding an exception to immunity under § 1605(a)(2), see id. at 95. In that case, appellant alleged that he was injured in a car accident in South Africa and was denied timely medical care because he was black. See id. at 92. He returned home a quadriplegic, and argued that the pain, suffering, and financial loss that he consequently suffered in the United States were direct effects of South Africa's tortious conduct. But because appellant suffered his injuries and became a quadriplegic in South Africa, the court reasoned that "it cannot be said that the effects of South Africa's acts occurred `in the United States.'" Id. at 94. The court drew on the reasoning of the leading Second Circuit case to parse the meaning of "direct effect in the United States," Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300 (2d Cir. 1981). Texas Trading held that Nigeria's repudiation of contracts with American corporations had a direct effect in the United States because the plaintiffs' financial loss occurred here: the contracts provided for payment in the United States from a New York bank, and the plaintiffs were injured when Nigeria withheld that payment. See id. at 312; see also Martin, 836 F.2d at 94. The Texas Trading court also suggested that cases involving personal injuries sustained by Americans abroad are both analytically distinct from and easier to resolve than contract claims by corporations. The court noted that personal injuries are "undoubtedly . . . `direct' effects," Texas Trading, 647 F.2d at 312, and that when an individual is injured overseas, "it is easy to locate the `effect' outside the United States" id. at 312 n.35.

  Texas Trading also approved the reasoning of Harris v. VAO Intourist, Moscow, 481 F. Supp. 1056 (E.D.N.Y. 1979), a wrongful death action arising from the death of an American citizen in a fire in a Moscow hotel. In rejecting the plaintiff's argument that the commercial activities exception of the FSIA barred the defendants' claim of sovereign immunity, Judge Weinstein wrote:
Obviously the negligent operation of a hotel in Moscow causing the death of a United States resident has effects in the United States; here it leaves aggrieved relatives in this country. But the precise issue is not whether the fire had any effect here, but whether it had a "direct effect" in the United States within the meaning of the statutory language. Indirect injurious consequences within this country of an out-of-state act are not sufficient contacts to satisfy the "direct effect" requirement of section 1605(a)(2).
Id. at 1062. See also Close v. Am. Airlines, 587 F. Supp. 1062, 1064-65 (S.D.N.Y. 1984) (holding that an American citizen could not recover for injuries caused abroad by a foreign airline).

  Plaintiffs allege that Deutsche Bahn's conduct outside the United States caused the losses suffered here by the Amores' surviving relatives, as well as economic losses to Deutsche Bahn itself resulting from a decline in its United States business following extensive publicity about the accident. But the direct effects of the conduct alleged were the deaths of the Amores in France, and the cases cited above demonstrate that those extraterritorial effects do not provide an exception to Deutsche Bahn's sovereign immunity. Therefore, the claims against Deutsche Bahn are dismissed for lack of subject matter jurisdiction.

 II. Personal Jurisdiction

  Plaintiffs bear the burden of establishing that the court may exercise personal jurisdiction over the remaining defendants CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986) When, as here, a motion to dismiss for lack of personal jurisdiction is decided before discovery and without an evidentiary hearing, a plaintiff need only make a prima facie showing of personal jurisdiction. See DiStefano v. Carozzi N. Am., Inc., 286 F.3d 81, 84 (2d Cir. 2001). All pleadings and affidavits are construed in the light most favorable to the plaintiffs, and all doubts are resolved in their favor. See id.

  A federal court sitting in diversity must apply the law of the forum state in determining whether it may exercise personal jurisdiction over an out-of-state defendant. Savin v. Ranier, 898 F.2d 304, 306 (2d Cir. 1990). If the applicable statute of the forum state allows the court to exercise personal jurisdiction, the court must then determine whether the constitutional standards of due process are met. Id.

  Because this lawsuit does not arise out of any activity by the nonresident defendants within the state of New York, plaintiffs rely on New York's "general jurisdiction" provision, N.Y. C.P.L.R. § 301. Personal jurisdiction over a corporation exists pursuant to § 301 if the corporation is "engaged in such a continuous and systematic course of `doing business' [in New York] as to warrant a finding of its `presence in this jurisdiction.'" Laufer v. Ostrow, 55 N.Y.2d 305, 309-10 (1982) (quoting McGowan v. Smith, 52 N.Y.2d 268, 272 (1981)). Section 301 jurisdiction, which subjects a nondomiciliary corporation to suits unrelated to its contacts with New York, is appropriate only if the corporation does business in New York "not occasionally or casually, but with a fair measure of permanence and continuity." Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 58 (2d Cir. 1985) (quoting Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267 (1917)).

  As discussed in greater detail below, plaintiffs fail to make a prima facie showing of personal jurisdiction over AutoZug and R&T. There are also serious questions whether this court can exercise jurisdiction over Accor and CIWLT.

 A. The Remaining Deutsche Bahn Defendants

  AutoZug and R&T are two German corporations whose principal business is long-distance passenger train travel in Europe. R&T is a wholly owned subsidiary of an entity called DB Personenverkehr, which is itself a wholly owned subsidiary of Deutsche Bahn. AutoZug is a wholly owned subsidiary of R&T. Thus, each subsidiary exists several rungs down the corporate ladder from Deutsche Bahn.

  Plaintiffs have alleged no direct contacts between AutoZug and New York, and only one such contact between R&T and New York. Specifically, plaintiffs allege that R&T contracted directly with U.S. airlines which have operations in New York to develop "rail and fly" packages for U.S. customers. This allegation is insufficient because it does not show that R&T conducted a continuous course of business in New York, or even that R&T solicited or executed these contracts in New York. The existence of contractual relationships with entities that happen to have operations in New York does not establish § 301 jurisdiction, because it does not show extensive conduct directed toward or occurring in New York. See Mantello v. Hall, 947 F. Supp. 92, 98 (S.D.N.Y. 1996).

  Plaintiffs also rely on mere department and agency theories to argue that jurisdiction over these defendants is proper. Each of these is discussed in turn below. 1. AutoZug and R&T as "Mere Departments" of Deutsche Bahn

  First, plaintiffs contend that these German subsidiaries are "mere departments" of Deutsche Bahn, and accordingly share the jurisdictional contacts of their parent. See Volkswaaenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120-22 (2d Cir. 1984). A corporate entity that is present in New York will be considered a "mere department" of a foreign parent, so as to expose the parent to personal jurisdiction in New York, "only if the foreign parent's control is pervasive enough that the corporate separation is more formal than real." Palmieri v. Estefan, 793 F. Supp. 1182, 1187 (S.D.N.Y. 1992) (quoting H. Heller & Co. v. Novacor Chemicals Ltd., 726 F. Supp. 49, 54 (S.D.N.Y. 1988)). This theory, of course, requires an initial finding that Deutsche Bahn itself is doing business in New York, and plaintiffs offer a number of alternative theories to support such a finding: that Deutsche Bahn itself has numerous direct contacts with New York, that Deutsche Bahn is doing business through other mere departments located in New York, or that Deutsche Bahn is doing business through various New York-based agents.

  There is a serious problem with plaintiffs' attempt to premise personal jurisdiction over the German subsidiaries on Deutsche Bahn's contacts with New York. Deutsche Bahn is immune from suit in the United States. By alleging that these subsidiaries are mere departments of Deutsche Bahn, plaintiffs are alleging that the subsidiaries are not separate corporate entities at all, but rather alter egos of an immune entity. If, as plaintiffs insist, the subsidiaries' independent corporate form is a mere facade, and Deutsche Bahn exerts pervasive control over them, then the entities must share Deutsche Bahn's immunity. Cf. U.S. Fid. & Guar. Co. v. Braspetro Oil Servs. Co., No. 97 Civ. 6124 (JGK), 1999 WL 307666, at *11 (S.D.N.Y. May 17, 1999), aff'd, 199 F.3d 94, 97 (2d Cir. 1999) (finding that the defendant, a corporate subsidiary of a subsidiary of Petrobras, an instrumentality of Brazil, was also an alter ego of Petrobras, and would have been entitled to sovereign immunity under ...


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