OPINION
This case presents the question of whether an instrumentality of a foreign nation may be held liable for negligent torts committed by a scholarship student trainee in the United States. We hold that the Foreign Sovereign Immunities Act precludes federal jurisdiction for such an action and reverse the district court’s judgment against Saudi Arabian Airlines (“Saudia”).
I. Facts and Procedural History
Fahad Abdullah Maghrabi (Maghrabi) is a subject of the Kingdom of Saudi Arabia who received a scholarship from an ongoing Sau-dia training program to study English and aircraft maintenance in the United States. Saudia provided Maghrabi with money for various living expenses, including clothing, medical and dental insurance, and books and tools needed for school. Saudia did not withhold taxes from any of the payments it made to Maghrabi as it normally does for its U.S. employees. Maghrabi was not promised he would be employed by Saudia after finishing his studies in the United States. Rather, he would be eligible to be considered for em
Maghrabi signed a “Personal Responsibility” statement as a condition to participating in the training program which reads as follows:
I, the undersigned, understand that while I am in the United States as a student, I am solely responsible for my actions. If I intend to drive while in the United States, I will obtain a valid driver’s license for the State in which I reside and will acquire sufficient insurance for protection against personal liability and property damage.
I understand that Saudia’s sole interest in my activities in the United States is to have me meet the academic standards of my school and that Saudia does not supervise or control my personal conduct while in the United States. I further understand that my personal conduct is my own responsibility and that failure to conduct myself properly may be considered by Saudia in any subsequent offer of employment.
I further understand that the choice of whether to purchase or rent any vehicle is entirely up to me and that I am solely responsible for the costs of such vehicle, including the purchase price, rental and any insurance I may be required to carry.
Maghrabi studied English at Northrop University in Santa Monica, California from June 1990 to September 1991. He then moved to San Antonio, Texas, where he studied airframe and power mechanics at the Hallmark Institute of Technology, graduating on January 15, 1993. After graduation but before his scheduled return to Saudi Arabia on February 4, 1993, Maghrabi personally purchased a round-trip ticket from San Antonio to Los Angeles.
Saudia employees, unlike student trainees, are eligible for discounted travel on U.S. airlines. Maghrabi received neither reimbursement nor discount for his air travel from Saudia. He flew to Los Angeles on January 22,1993 and personally rented a ear from Budget. On January 26, 1993, in Malibu, California, Maghrabi negligently crashed his rented automobile into John Randolph’s motorcycle, injuring his knee, left hand and pelvis.
John and Johanne Randolph filed this action against Maghrabi, Saudia, and Budget in Los Angeles Superior Court to recover damages for John Randolph’s injuries and Jo-hanne Randolph’s loss of consortium. Sau-dia, a corporation wholly owned by the Saudi Arabian government, removed the action to federal district court pursuant to 28 U.S.C. § 1441(d) and asserted the Foreign Sovereign Immunities Act as a defense.
The district court denied Saudia’s and granted Randolph’s motion for summary judgment, ruling as a matter of law that Maghrabi was a Saudia employee acting within the scope of his employment at the time of the accident.
After a bench trial on damages, the district court entered a judgment of $914,253.83 against Saudia and $30,000 against Budget Rent-A-Car (“Budget”). Both Budget and Saudia appealed.
II. Jurisdiction Under the Foreign Sovereign Immunities Act
The threshold issue in this case is whether jurisdiction exists. Although neither party challenged the district court’s jurisdiction on appeal, we are obliged to raise sua sponte issues concerning district courts’ subject matter jurisdiction. Benavidez v. Eu,
The Foreign Sovereign Immunities Act (“FSIA”) is the exclusive basis for federal jurisdiction over a suit involving an agency or instrumentality of a foreign state. Export Group v. Reef Industries,
The FSIA creates a statutory presumption that a foreign state is immune from suit unless one of the exceptions to immunity enumerated in 28 U.S.C. §§ 1605 to 1607 applies. 28 U.S.C. § 1604. Once a plaintiff offers evidence that an exception to immunity applies, the defendant bears the burden of proving by a preponderance of the evidence that the exception does not apply. Siderman de Blake v. Republic of Argentina,
Under the FSIA, an “agency or instrumentality of a foreign state” includes a corporation wholly owned by a foreign state, such as Saudia. 28 U.S.C. § 1603(b). Thus, Saudia is immune from suit unless a statutory exception exists.
A. The Commercial Activity Exception.
The district court exercised jurisdiction under the FSIA “commercial activity” exception contained in 28 U.S.C. § 1605(a)(2), which provides that a foreign sovereign is not immune to suits:
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.
The commercial activity exception only applies when “the particular conduct giving rise to the claim in question actually constitutes or is in connection with commercial activity.” Joseph v. Office of Consulate Gen. of Nig.,
In addition, the plaintiffs cause of action must arise from the defendant’s commercial activity in the United States. Gould, Inc. v. Mitsui Mining & Smelting Co.,
Here, a student trainee on a Saudia scholarship took a trip away from his Texas school to California at his own expense. While there, he negligently drove a privately-rented vehicle and injured a motorcyclist. The specific acts of which plaintiff complains did not arise out of Saudia’s commercial activity in the United States. Accordingly, even though Saudia did not raise this issue either in district court or on appeal, we find that the district court clearly erred in exercising jurisdiction under 28 U.S.C. § 1605(a)(2).
B. The Tortious Activity Exception to the FSIA.
1. General Principles
The district court should have analyzed jurisdiction under 28 U.S.C. § 1605(a)(5), the tortious activity exception to
in which money damages are sought against a foreign state for personal injury or death, or damage to or loss of property, occurring in the United States and caused by the tortious act or omission of that foreign state or of any official or employee of that foreign state while acting within the scope of his office or employment....
28 U.S.C. § 1605(a)(5).
In order to find that a foreign sovereign can be sued under the tortious activity exception, the court must find: (1) that the tortious acts of individual employees of the sovereign were undertaken while in the scope of employment, and (2) that the claim is not based upon the exercise or failure to exercise a discretionary function. Joseph,
Although the district court did not examine jurisdiction under the tortious activity exception, the cross-motions for summary judgment involved whether Maghrabi was a Sau-dia employee acting within the scope of his employment — the same inquiry necessary to determine the existence of jurisdiction under this exception.
We review a district court’s grant of summary judgment de novo. Warren v. City of Carlsbad,
2. Employee Relationship
The question of whether Maghra-bi was a Saudia employee is governed by California law. 28 U.S.C. § 1606; First Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba,
When interpreting state law in the absence of state court decisions on point, we must predict how the highest state court would decide the issue. Arizona Elec. Power Coop., Inc. v. Berkeley,
The California Labor Code defines an employee as one engaged “to do something for the benefit of the employer or a third person.” Cal. Lab.Code § 2750 (West 1989). Under California law, whether a person is an employee depends on the degree of control the purported employer has a right to exercise over that person. Burlingham v. Gray,
At the time of the accident, Ma-ghrabi was a “student trainee” attending American schools on scholarship. Maghrabi lived in the United States for over two and one-half years, taking classes to develop the general skills needed to work in aircraft maintenance. Saudia paid his tuition at the schools he attended to study English and aircraft maintenance. Saudia provided Ma-ghrabi a living allowance, as well as money for clothing, books, tools, and medical and dental insurance. Maghrabi also received bonuses and penalties based upon his academic performance. Before he could even be considered for future employment with Saudia, Maghrabi had to return to Saudi Arabia and successfully complete additional training. Importantly, the initiation of Ma-ghrabi’s relationship with Saudia did not dis
Maghrabi was not engaged “to do something for the benefit of’ Saudia. Cal. Lab. Code § 2750 (West 1989). Rather, Maghrabi was learning English and aircraft maintenance for his own benefit. While it is true that Saudia may ultimately benefit from training students like Maghrabi, this benefit is not the sort of benefit normally engendered in an employment contract. See Blackman v. Great Am. First Sav. Bank,
Several courts have held that student trainees are not “employees” under the Fair Labor Standards Act (FLSA) because the organization training them receives no immediate benefit from their training, even though the trainees form a labor pool from which the organization can fulfill its hiring needs. See Walling v. Portland Terminal Co.,
Scholarship sponsors often exercise a certain degree of control over the students who receive their scholarships, including terminating the scholarship if the student’s grades fall below a designated level or if the student acts in derogation of other scholarship terms. However, imposition of scholarship conditions is far from the direction and supervision found in the traditional employment setting. The theory of respondeat superior would have to be stretched beyond recognition to hold scholarship sponsors vicariously liable for the torts of their beneficiaries. Such a result would be contrary to analogous California law, federal law, public policy and common sense. We do not believe the California Supreme Court would so hold.
Certainly, in some circumstances student trainees may truly be employees. That is not the case here. Under California law as applied to the facts before us, Maghrabi was not a Saudia employee at the time of the accident. The district court erred in so finding.
3. Scope of Employment
Even if Maghrabi could be considered an employee, the record fails to show he was acting within the scope of his employment at the time of the accident. The question of whether Maghrabi was acting within the scope of employment is governed by Cali
Under the California doctrine of re-spondeat superior, an employer may be held hable for the tortious acts of its employees when they are acting within the scope of their employment. Cal. Civ.Code § 2338 (West 1985); Mary M. v. City of Los Angeles,
The first condition is satisfied if the tort is engendered by or arises from the work. Id. at 298,
The district court seems to have concluded that because Maghrabi was in the United States as part of a Saudia training program, Saudia should be liable for all his foreseeable torts, and it was foreseeable he would get into a traffic accident while in the United States. This is not the law. If Ma-ghrabi was a Saudia employee, he must have been acting within the scope of his employment at the time of the accident for Saudia to be vicariously liable for his negligence. Where the employee’s conduct has substantially deviated from his or her duties, it is unjust to hold the employer liable. Le Elder v. Rice,
Randolph argues that California courts frequently rely upon workers’ compensation cases in tort cases. See id. at 967-68,
Without expressing any opinion whether the analogy to workers’ compensation is appropriate in this case, we find that these doctrines would not support Randolph’s position even if they were to apply. The “commercial traveler” rule holds that “[e]mployees whose work entails travel away from the employer’s premises are ... within the course of their employment continuously during the trip, except when a distinct departure on a personal errand is shown.” IBM Corp. v. Workers’ Compensation Appeals Bd.,
Randolph argues the IBM case applies in this case where Maghrabi traveled to the Los Angeles area, “perhaps to visit friends,” before returning to Saudi Arabia after an extended stay in the United States. However, in contrast to IBM, Maghrabi was not on a brief assignment away from his home: he had lived in America for over two and one-half years. In further contrast, there is no evidence in the record that Maghrabi ever sought Saudia’s permission for his trip or that Saudia even knew about the trip beforehand.
Even with the “commercial traveler” rule, the trip still must have some connection to work. The rule is generally applicable “only in those cases in which the employee’s traveling was a part of the employee’s work, that is, a part of the service to be performed by the employee for the employer,” such as a traveling salesman. Hartford Accident & Indem. Co. v. Workers’ Compensation Appeals Bd.,
Randolph also resorts to the “bunkhouse” rule. Under this rule, an employee who fives on his employer’s premises is acting within the scope of his employment even while engaged in leisure activity if he is making a reasonable use of the employer’s premises. Argonaut Ins. Co. v. Workmen’s Compensation Appeals Bd.,
As Saudia correctly argues, Randolph failed to carry his burden of proof to establish Maghrabi was acting in the course of his employment at the time of the accident. All of the evidence in the record supports the opposite conclusion. The district court erred in granting Randolph summary judgment.
Randolph failed to show that Maghrabi was a Saudia employee acting within the course of his employment when he negligently injured Randolph. Thus, the requirements of tortious activity exception to the FSIA were not met.
C. Conclusion.
As a matter of law, neither the commercial activity nor the tortious activity exceptions apply to this case. Thus, Saudia is immune from suit under the FSIA. The district court was without jurisdiction and erred in entering judgment against Saudia. Because determination of these issues resolves Sau-dia’s liability, we need not discuss the other issues raised by Saudia on appeal.
III. Claims against Budget
In considering the Randolph’s separate claim against Budget, the district court held that Cal. Veh.Code § 17151(a) (West 1971), which limits recovery against the owner of an automobile to $15,000 per person injured as a result of an accident, did not prohibit Jo-hanne Randolph’s separate action against Budget. The court reasoned that her loss of consortium claim constitutes a separate injury arising from the accident sufficient for her to recover under § 17151(a) apart from her husband’s recovery under that section. On that basis, the court entered judgment against Budget for $30,000.
Original jurisdiction did not lie in federal court for this claim because Budget’s maximum liability ($30,000) failed to satisfy the $50,000 jurisdictional requirement of 28 U.S.C. § 1332(a). A district court may exercise supplemental jurisdiction over claims which are “so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III....” 28 U.S.C. § 1367. However, when original jurisdiction does not exist for the principal claim, federal courts may not exercise supplemental jurisdiction over the remaining pendent claims. Simply put, failure of original jurisdiction precludes application of supplemental jurisdiction.
Where a Court of Appeals finds a defendant to be an immune sovereign under the FSIA, all pendent state claims must be either dismissed or remanded to state court. Security Pac. Nat’l Bank,
IY. Conclusion
Because neither the commercial activity nor the tortious activity exception to the FSIA applies to this case, no federal jurisdiction exists for the Randolphs’ claims against Saudia. Because there is no cause of action giving rise to original federal jurisdiction, all other claims must be remanded to state court. Therefore, the judgment of the district court against Saudia and Budget is reversed. The claims against Saudia are dismissed. We remand all remaining claims to the district court with instructions to remand the remaining causes of action to the Los Angeles Superior Court.
Notes
. The definition of the term "employee” in the FLSA is extremely broad. See American Airlines,