RUHRGAS AG v. MARATHON OIL CO.
In 1976, Marathon Oil Company and Marathon International Oil Company acquired Marathon Petroleum Norge (Norge) and Marathon Petroleum Company (Norway) (MPCN). Following the acquisition, Norge assigned its license to produce gas from the North Sea's Heimdal Field to MPCN, which then contracted to sell 70 percent of its share of the Heimdal gas production to a group of European buyers, including Ruhrgas AG. MPCN's sales agreement with Ruhrgas and the other European buyers provided that disputes would be settled by arbitration in Sweden. In 1995, Marathon Oil Company, Marathon International Oil Company, and Norge sued Ruhrgas in Texas state court, asserting state-law claims of fraud, tortious interference with prospective business relations, participation in breach of fiduciary duty, and civil conspiracy. Ruhrgas removed the case to the District Court, asserting three bases for federal jurisdiction. Ruhrgas then moved to dismiss the complaint for lack of personal jurisdiction, or lack of authority over the parties. Marathon moved to remand the case to the state court for lack of federal subject-matter jurisdiction, or lack of authority over the category of claim in the suit. The District Court granted Ruhrgas' motion. Noting that Texas' long-arm statute authorizes personal jurisdiction to the extent allowed by the Due Process Clause of the U.S. Constitution, the court addressed the constitutional question and concluded that Ruhrgas' contacts with Texas were insufficient to support personal jurisdiction. In reversing, the en banc Court of Appeals held that, in removed cases, district courts must decide issues of subject-matter jurisdiction first, reaching issues of personal jurisdiction only if subject- matter jurisdiction is found to exist.
Is a federal district court barred from dismissing a removed case for lack of personal jurisdiction without first deciding its subject-matter jurisdiction?
Legal provision: 28 U.S.C. 1331
No. In a unanimous opinion delivered by Justice Ruth Bader Ginsburg, the Court held that in cases removed from a state court to federal court there is "no unyielding jurisdictional hierarchy requiring the federal court to adjudicate subject-matter jurisdiction before considering a challenge to personal jurisdiction." Customarily, however, a federal court would first resolve doubts about its jurisdiction over the subject matter. Justice Ginsburg wrote, "[w]here...a district court has before it a straightforward personal jurisdiction issue presenting no complex question of state law, and the alleged defect in subject matter jurisdiction raises a difficult and novel question, the court does not abuse its discretion by turning directly to personal jurisdiction."
Argument of Charles Alan Wright
Chief Justice Rehnquist: We'll hear argument next in Number 98-470, Ruhrgas v. Marathon Oil Company.
Mr. Wright: Mr. Chief Justice, and may it please the Court:
This case presents a single technical jurisdictional procedural issue.
It is a case clearly of first impression here, it would not be here if you had ruled on it before, but despite all those negatives, I submit that the case raises important issues both about the efficient functioning of the district courts and about the proper relation between courts of the States and courts of the United States.
Although I view it as a case of first impression, I believe that a line of cases from this Court has established a rule of law, and that from that rule of law we can find the answer to this particular issue, and the rule of law that I believe your cases support is that a Federal court may make a wide variety of decisions prior to determining whether or not it has subject matter jurisdiction of the case, but that it may not decide any issue that relates to the merits of the case.
We believe that that is the line that was clearly drawn in Steel Co. and a line that has been drawn in many of the other cases.
Your cases say that the... that a court can pass on the issue of class certification without deciding whether or not it has subject matter jurisdiction, that was Amchem, of course, that a court can hold that a lower court properly exercised its discretion in declining to use pendent jurisdiction without deciding whether pendent jurisdiction existed under the circumstances of the case; that a court can order Younger abstention, though it hasn't decided whether it has subject matter jurisdiction, that was Ellis v. Dyson; that a court can rule on a tag bar to habeas corpus without deciding whether there was a prisoner in custody, whether there is a final... an independent adequate judgment reason that would bar review by any Federal court.
We believe that there is a line of cases that provide the rule by which this case is to be measured.
Then, immediately I ask myself, should there be an exception to that rule of law where, as here, the issue that the Federal court decided, without deciding whether it had subject matter jurisdiction, is one that would have preclusive effect so that it would bar a State court from making an independent judgment on that?
I submit that there should not be an exception to the usual rule on those grounds.
Chief Justice Rehnquist: Mr. Wright, the majority in the court of appeals in this case reversed the district court, did it not?
Mr. Wright: Yes, sir.
Chief Justice Rehnquist: And the dissenters said that they would uphold... that they would affirm the district court.
Mr. Wright: Yes, Your Honor.
Chief Justice Rehnquist: So it would have come out differently in the district court if the dissenters' views had prevailed.
Mr. Wright: That is correct, Justice... Mr. Chief Justice.
Justice O'Connor: Mr. Wright, you're not arguing that the Constitution requires one approach or another, are you?
Mr. Wright: I... Justice O'Connor, I'm not arguing that at all.
My submission is that district courts ought to have discretion on these matters and decide what is the most efficient and expeditious way to dispose of the case so long only as they do not get into the merits of the case without having first decided that they have subject matter jurisdiction to determine the merits.
Justice Kennedy: When we write the opinion, should we say that that discretion should be exercised in a way so that personal jurisdiction is usually decided after subject matter jurisdiction, all other things being equal?
Mr. Wright: It seems to me you could well write the opinion that way.
Justice Kennedy: Well, should we?
Mr. Wright: If I were writing it I would not write it that way.
I would write it simply as a general grant of discretion to the district courts to decide which issue they are going to resolve first.
I would not impose on them any rigid ordering, but as long as the ordering is simply a presumptive priority for subject matter jurisdiction I think that could be perfectly...
Justice Kennedy: Well, is there not a value to Federalism in deciding subject matter jurisdiction first in an instance like this, so that in the event it does not exist, the State can address its own long-arm statute?
Mr. Wright: I wonder if I could answer that by putting to you a hypothetical.
Justice Kennedy: So long as you answer the hypothetical for me.
Unidentified Justice: [Laughter]
Mr. Wright: I'm surely going to answer the hypothetical.
In fact, I think it's self-answering.
I hope so.
Let us suppose that in this case our only argument for Federal jurisdiction was fraudulent joinder and therefore diversity, an argument that Norge should not have been a party and then there would have been complete diversity, and that the basis of the argument for fraudulent joinder is that even if there was personal jurisdiction with regard to the claims of Marathon there was not personal jurisdiction with regard to the claims of Norge.
And let us suppose that the Federal court says no, you were wrong, there is personal jurisdiction over Norge's claim, therefore Norge is properly a party, therefore there is no diversity, and remands the case to the State court.
In my submission we could not then come in and seek to relitigate the issue in State court of whether there was personal jurisdiction of the claims of Norge against us.
That would have been an issue determined by a Federal court and, under Baldwin v. Iowa Traveling Men, we would be barred from ever raising that again.
That would mean that the State court would never have had an opportunity to pass on that issue of personal jurisdiction.
Justice Kennedy: Well, my question is directed to this.
It seems that you give no weight at all to subject matter jurisdiction as having some sort of a priority over personal jurisdiction, assuming both are of equivalent difficulty.
And isn't there a Federal interest in allowing the State in an instance somewhat like this to have the first opportunity to address its own long-arm statute... assuming there's subject matter jurisdiction, personal jurisdiction... in the district court or questions of equal difficulty?
Mr. Wright: Of course, there's always a Federalism.
Justice Kennedy: Because you indicate there is some discretion, and I want to know what are the determinants in guiding that discretion?
Mr. Wright: Well, I think that an important determinant in guiding the discretion would be the extent to which this would require the Federal court to pass on difficult issues of State law, the extent to which the questions of personal jurisdiction are intertwined with the question of subject matter jurisdiction, as, indeed, we think they are here, that all those would be relevant considerations in deciding which issue you would address first.
Chief Justice Rehnquist: You go further, I take it, than the dissenters in the court of appeals.
As I understand their position, it was the presumptively you decide the subject matter jurisdiction first, but it's not an iron-clad rule.
The majority said it's an iron-clad rule.
You would say basically just leave the whole thing up to the district court.
Mr. Wright: As the lawyer for Ruhrgas, I would say we are very happy with the rule announced by Judge Higginbotham and the dissenters in the Fifth Circuit.
If I were sitting in my office writing an article, I would say that there ought to be a general discretion.
Justice Ginsburg: And yet there are many authors who have distinguished subject matter jurisdiction as being the most basic from personal jurisdiction, which those authors have ranked along with, say, venue, as a merely dilatory defense, suggesting that there is a hierarchy here, and that subject matter jurisdiction is the more basic.
Mr. Wright: Justice Ginsburg, I would say that I would not agree with them, that I would agree on the great importance of subject matter jurisdiction.
My friends do me the honor of quoting from one of my books in which I in turn quoted ex-Justice Curtis, the questions of jurisdiction are questions of power as between the Central Government and the States.
I believe that deeply, but I do not think that personal jurisdiction is some sort of second-class issue.
It is an issue that stems from the Constitution, from the Due Process Clause, and I do not think that you can say that Article III takes priority over the Fifth Amendment.
Justice Ginsburg: I was quoting your text when I used the word dilatory.
Mr. Wright: I imagined that I recognized the words.
Justice Breyer: I take it the point of your hypothetical was that sometimes in deciding the subject matter case, whether removal was proper, a district judge would decide a host of State law questions, personal jurisdiction questions, all kinds of other questions.
Mr. Wright: Yes, Your Honor.
Justice Breyer: All right.
Chief Justice Rehnquist: So who's to say?
Justice Breyer: In other words, if your interest is in protecting the State, who's to say?
It depends on the case.
Justice Kennedy: Is that the...
Mr. Wright: That is exactly my submission.
I could give another example.
Suppose a suit in State court asking $50,000 in damages for breach of contract and $1 million in punitive damages.
The case goes to the Federal court, diversity being present.
The Federal judge says, in this State, the State law does not allow punitive damages in a breach of contract action, therefore the amount in controversy is not satisfied, therefore I am remanding.
I think that the plaintiff in that case would not be allowed to claim in State court that it could get punitive damages.
Obviously, that would not be a binding declaration as to what the law of that State was to be for the future, but as between the parties to that litigation, that it would have issue-preclusive effect.
Justice Ginsburg: Mr. Wright, as to the preclusive effect, imagine that this case had been dismissed for want of personal jurisdiction.
Plaintiffs begin all over again in State court, and they say, State court, the first thing we want you to do is to give us a declaration that there is personal jurisdiction, and the reason that you're not bound by that Federal court is, they lacked subject matter jurisdiction, and that is open to collateral attack, so that your premise about the preclusive effect is wrong.
The Federal court would be accomplishing nothing, because it wouldn't bind the State court.
Mr. Wright: Justice Ginsburg, I don't believe that the party would be allowed in State court to challenge the preclusive effect of the judgment by saying that the Federal court lacked jurisdiction to issue that judgment.
I think of Chico County as a case that you can't challenge in a second proceeding whether there was jurisdiction in the first proceeding.
Chief Justice Rehnquist: But how about Trinese v. Sunshine Mining.
Didn't that say you could challenge basis of jurisdiction?
Mr. Wright: It did, yes.
Chief Justice Rehnquist: That you could relitigate the issue of jurisdiction if the first court had not had jurisdiction.
Mr. Wright: I'm sorry, Justice Rehnquist, I'm not prepared on that case.
Justice Scalia: Well, I'm not sure that's right, either.
Justice O'Connor: The...
Justice Scalia: But all of those cases, in any event, involved a court that reached the merits, which assumes that it has jurisdiction.
Here you have a court which never even assumed that it has jurisdiction.
Even if your ordinary rule is that it can't be attacked collaterally where it has proceeded with an affirmance of its jurisdiction, it's proceeded to the merits.
Here you have a case that doesn't fall into that pattern.
You have a case where even the court issuing it says, you know, I don't really know if we have jurisdiction.
Why should any subject... why should any later court... it decided the case on a different jurisdictional issue, and therefore never spoke to its own subject matter jurisdiction.
Mr. Wright: Well, I go back, Justice Scalia, to I think it's 1803, McCormick v. Sullivan, that after a judgment in a Federal court you cannot resist enforcement on the grounds that in fact there was no diversity.
Diversity was... existence of diversity was not challenged in the first proceeding, but your Court held that a final judgment is not to be attacked for lack of subject matter jurisdiction.
Justice Ginsburg: But here, it is attacked in the first proceeding, and the court says, well, I can pick and choose.
I'm not going to deal with subject matter jurisdiction, just personal jurisdiction.
The State then says, fine, it's never been litigated, so we will litigate it and we will decide for the first time that there was no subject matter jurisdiction and therefore nothing else that was done in that action counts.
Mr. Wright: It was...
Justice Scalia: So you would have a delightful, quite parallel situation.
The Federal court will have decided the personal jurisdiction question for the State courts, and the State courts will have decided the subject matter jurisdiction question for the Federal courts.
I like it.
Unidentified Justice: [Laughter]
Mr. Wright: Well, I don't think I do.
I like judgments of Federal courts to stand and not be challenged on lack, ground of lack of subject matter jurisdiction.
Justice Kennedy: But why isn't that exactly the respondents' point?
They say this does show the intrusive effect on the State court system, which is why you have to reach subject matter jurisdiction, they say always first.
Other people might say most of the time first.
You seem to think that it doesn't make much difference.
Mr. Wright: Well, I'd, as I suggested a moment ago, be perfectly content with saying that mostly you consider it first, but look at a case such as Caterpillar...
Justice Breyer: But why?
Justice Stevens: Why is that?
Mr. Wright: Why is...
Justice Kennedy: Why should we usually consider subject matter jurisdiction first?
Mr. Wright: It is a threshold issue, but threshold issues not always have to be considered first.
That is what specifically was said in Lambrix v. Singletary.
Justice Breyer: What is the source... are you finished answering him?
Mr. Wright: Yes.
Justice Breyer: What is the source, which I've often wondered, of rules of law that say you always have to decide some question of a certain kind first, for example, jurisdiction before merits?
I mean, I've never seen anything in the Constitution that says that.
I don't think Madison wrote about it.
I haven't seen a statute that says it.
Is it from the brooding omnipresence in the sky?
Unidentified Justice: [Laughter]
Justice Breyer: I mean, where does it come from?
Mr. Wright: I think it comes, Justice Breyer, from Article III, that the judicial power of the United States extends only to certain kinds of cases, and that therefore you have to find out whether this is a case that is within your jurisdiction, but you have to do that before you decide the merits.
You don't have to do that before you decide whether to refuse class certification, and you don't have to have subject matter jurisdiction from the beginning.
This is Caterpillar v. Lewis, in which not only was there no subject matter jurisdiction at the time the case was commenced, but when the nondiverse defendant Lane was dismissed, it would have been too late to remove the case to Federal court if the...
Justice Kennedy: Did we get that one right, in your view?
Mr. Wright: You did, exactly right, all nine of you.
Justice Scalia: Well, I wasn't sure.
Unidentified Justice: [Laughter]
Justice Ginsburg: There was some compelling practical consideration in that case, though, was there not?
There had been an entire trial, and after the trial there was perfect diversity.
It would have been I think strange to send that thing back to start from square 1.
Mr. Wright: I agree completely.
I'd be a tenth vote for that proposition, Justice Ginsburg.
That was a very compelling case, but I think that the considerations of efficiency and economy on which you expressly relied in your opinion in that case are always considerations that courts have to take into account.
They will be most compelling, as in your case, where there had been a finished trial, but that doesn't mean that they do not exist at an earlier stage in the litigation.
My friends undertake to dismiss Caterpillar in a footnote on page 13 of their brief by saying it really didn't amount to anything; it's not at all like this case, where there is a continuing lack of jurisdiction.
I submit that's not an accurate description of this case.
There is no lack of jurisdiction in this case.
The issue simply has not been decided.
The en banc court expressly vacated so much of the panel decision as it passed on subject matter jurisdiction and remanded the case for the district court to decide whether it had subject matter jurisdiction.
That decision has not yet been made, so it can't be looked at as a case with continuing lack of subject matter jurisdiction but as a case in which the issue of subject matter jurisdiction has not yet been determined.
Justice Ginsburg: But in your view it need never be determined, because if the district court is right that she could dismiss for personal jurisdiction and that binds the State court, then subject matter jurisdiction is never determined, and properly so.
Mr. Wright: I agree entirely with that, and I think the same thing is true in Amchem, that subject matter jurisdiction never has to be decided because you hold that the class should not have been certified, and so you don't pass on the both constitutional and statutory objections to subject matter jurisdiction that were present in that case.
If there are no further questions, I will reserve my time.
Argument of Clifton T. Hutchinson
Chief Justice Rehnquist: Thank you, Mr. Wright.
Mr. Hutchinson, we'll hear from you.
Mr. Hutchinson: Thank you, Mr. Chief Justice.
May it please the Court:
What petitioner proposes here is to ignore a first principle.
The carefully defined and limited power of Federal courts.
Efficiency jurisdiction is wrong for three reasons.
First, it violates fundamental constitutional principles allocating judicial power between the States and the Federal Government; second, it negates congressional policy favoring remand; and third, and ironically, it's inefficient.
Federal courts can't act without power.
Justice O'Connor: Well, he... Mr. Wright gave several examples of situations where courts, apparently properly and with our approval in some instances, have decided certain things other than subject matter jurisdiction before reaching the merits, and that have disposed of the case insofar as the Federal court is concerned.
For instance, class certification...
Mr. Hutchinson: In Amchem.
Justice O'Connor: as we've just heard.
Now, what about those cases?
And he recited several others, pendent jurisdiction, Younger abstention and so on.
Mr. Hutchinson: The abstention cases, Justice O'Connor, involve situations where the Federalism issues aren't raised.
There, the Court is declining jurisdiction when it has jurisdiction.
In the Lambrix case...
Justice O'Connor: Well, without deciding, in some instances, like class certification, without even deciding whether there's subject matter jurisdiction.
Mr. Hutchinson: Class certification is a different issue, Justice O'Connor.
In the Amchem case, what the court said is that the certification issue was a logical antecedent to a determination of subject matter jurisdiction.
Before justiciability could be analyzed in the Amchem case, which was the issue that was being raised by one segment of the class, the court had to determine exactly what is this class so that it can then address subject matter jurisdiction.
And in fact I think Amchem is a very good illustration of efficiency jurisdiction.
As Judge Becker pointed out, that was a wonderfully efficient case.
Judge Becker called it a humongous class of asbestos cases, but, he said, the court can't go beyond its power, and that's what it did when it certified these cases.
Justice O'Connor: What if the subject matter jurisdiction issue turned on some fact-finding that would take place at trial?
What's the court going to do then, and yet here's a personal jurisdiction issue just sitting there, right there, that the court could decide.
What's it going to do?
Mr. Hutchinson: The court doesn't have the power, Justice O'Connor, to decide that issue until it determines that it has the capacity to decide the case, and that comes from the fundamental difference between subject matter jurisdiction...
Justice O'Connor: So you say it would have to go to trial and determine these factual questions despite the lack of personal jurisdiction.
Mr. Hutchinson: Justice O'Connor, you can... I think there are hypotheticals that you can come up with that make it difficult for a court to determine subject matter jurisdiction.
I think that is rare.
I think Professor Wright himself has indicated those are rare situations.
Chief Justice Rehnquist: Well, what if we have the rare case?
Mr. Hutchinson: In the rare case the court has to undertake whatever procedures it has to to resolve whatever antecedent issues it has to in order to get to that nub issue of subject matter jurisdiction, and I...
Justice O'Connor: In other words, you want to support a per se rule no matter what.
You have no exceptions, in your view.
Mr. Hutchinson: The exceptions, Justice O'Connor, are those which have been established in the cases, for example, the inherent power cases, which deal with the court's authority to manage its docket and to manage proceedings before it.
But when a court goes beyond that, beyond that inherent power to maintain the status quo, then it is exceeding its power under Article III, and if...
Justice Scalia: Do you subscribe to that even when it is not a removal case, even when the alternative is not the same case proceeding in State court, or is it just in these removal situations?
Mr. Hutchinson: Justice Scalia, I think it applies... from a constitutional standpoint it would apply across the board.
Justice Scalia: So in all cases, even if it's not a removal case, where there is a personal jurisdiction issue and a subject matter jurisdictional issue, you would say that the Federal court has to decide the subject matter jurisdiction first, or else it has no authority to pronounce on personal jurisdiction?
Mr. Hutchinson: Yes, Justice Scalia, I would.
Now, in the removal cases there are some factors that are particularly aggravating.
There is more potential for abuse.
There is the situation, kind of an anomalous situation that a defendant has removed to Federal court claiming subject matter jurisdiction and then, as in this case, tells the district judge, I have removed it to you asserting subject matter jurisdiction, but you don't even have to address it.
You can circumvent it.
Justice Stevens: Mr. Hutchinson...
Justice Kennedy: May I ask you this question about, there are two possible bases for challenging subject matter jurisdiction.
Justice Stevens: One would be that the plaintiff does not have standing, and the other would be that the question is so frivolous that it doesn't merit review at all.
Which must be decided first, as between those two?
Mr. Hutchinson: Insubstantiality and statutory standing, or constitutional standing.
Justice Stevens: Constitutional standing and insubstantiality.
Mr. Hutchinson: Justice Stevens, I think that was part of the questions that were discussed at some length in the Steel Co. case, which is whether you can...
Justice Stevens: No... well, okay.
Mr. Hutchinson: The issue of what type...
Justice Stevens: There the court would have a choice, you'd say.
Mr. Hutchinson: Constitutional versus statutory standing.
And I would submit to the Court in one sense that's two sides of the same subject matter jurisdictional coin, and that's very different from the situation we have here, subject matter jurisdiction and the power of the court and the...
Justice Stevens: No, the...
Mr. Hutchinson: and the defense of the party.
Justice Scalia: But Justice Stevens is correct that we do use what you might call an efficiency model whenever we allow a dismissal on jurisdictional grounds because the Federal claim is frivolous.
I mean, you're... without looking into whether there is subject matter jurisdiction for... you know, for other reasons, we just say the Federal claim is frivolous, and as Steel Co. makes clear, that is regarded as a jurisdictional dismissal.
What is there to be said for that except efficiency?
Mr. Hutchinson: What is to be said to that, Justice Scalia, to distinguish it, is that the court is looking at subject matter jurisdiction.
It may be applying an efficiency factor.
Justice Souter: Yes, but it's not looking to Article III jurisdiction, is it?
It's looking to the statute, isn't it?
Mr. Hutchinson: It may be.
It may be.
Justice Souter: Well, and if it does that, and if that is proper, then in effect we've already decided the issue as to whether the Article III point always and under all circumstances must take precedence.
Mr. Hutchinson: I don't quite follow that, Justice Souter.
The... it seems to me the... when you're saying it's insubstantial you're saying it's not a case or controversy under Article III, otherwise you...
Justice Souter: Well, we are saying in the first instance that it's a frivolous claim in relation to the statute under which it is brought.
That may be a basis for that kind of an efficiency dismissal.
Justice Stevens: You're not saying... excuse me.
You're not saying it's not a case or controversy.
You're saying the Federal basis for the controversy is so frivolous there was merit to it.
The example, of course, is the census case we just decided.
There's clearly a controversy there, but avoiding the standing issue the Court said, well, there's no merit to the Federal claim, so it dismissed for want of jurisdiction without reaching a jurisdictional standing question.
Mr. Hutchinson: But what the Court did there was address its capacity to act, its power to act over the case, and that's very different from the individual right...
Justice Stevens: But it clearly had power to act over the case.
It could have decided that case ahead of the other one.
It surely had power before it decided the first case to decide the second case.
You wouldn't deny that.
Mr. Hutchinson: The Court has to have power before it can act.
I would not.
Chief Justice Rehnquist: Well, how about Rule 12(b), the way it lists the various defenses.
And number 1, of course, is lack of jurisdiction over the subject matter; number 2, lack of jurisdiction over the person, and it goes on, and that has not been treated necessarily as a hierarchical thing.
It seems to me that gives the courts considerable discretion as to which of those defenses to take up first.
Mr. Hutchinson: But it has been treated hierarchically.
Chief Justice Rehnquist: Has it?
Mr. Hutchinson: In the rule itself.
Justice Kennedy: Well...
Mr. Hutchinson: Some of the defenses are waivable, some are not.
Some must be decided first.
Chief Justice Rehnquist: Is there authority in case law to that effect?
Mr. Hutchinson: Justice Scalia, I was actually referring to Professor Wright's treatise, that is correct.
Justice Scalia: Is that res judicata here, too?
Unidentified Justice: [Laughter]
Mr. Hutchinson: It is not.
It is not, Justice Scalia, but I thought the... some of the language...
Justice Ginsburg: Mr. Hutchinson, subject matter jurisdiction is preserved and it can be raised later and later, so it's the most holy one in that respect.
But there is no... in Rule 12(b) it says, the only economy thing in the rule is, if you've got one, try to bring them all at the same time, except if you leave out subject matter jurisdiction and one or two others, that you could bring those up later, but that's all that Rule 12(b) says.
It says, here are these pre-answer defenses.
You can bring these up by motion pre-answer, and you should if you bring one, bring all the others that you have at the same time, except there are certain ones that you don't... that are saved out even if you don't bring them.
That's all that Rule 12 says.
It doesn't say that you must bring subject matter jurisdiction, and if you bring... you can't bring personal jurisdiction.
It doesn't have any of that kind of ranking.
Mr. Hutchinson: Well, what I was referring to, Justice Ginsburg, was Rule 12(h), which indicates that a defense of lack of jurisdiction over the person, improper venue, insufficiency of process, all those things can be waived, but... but jurisdiction, subject matter jurisdiction...
Justice Ginsburg: Yes, because there's always jurisdiction over the person by consent, so there's that difference, but how does it relate to the issue that's before us, and you have been talking largely in the abstract.
One response that I give to your floodgates, oh, this is going to be deceptive, you're predicating rather dumb district judges.
I mean, if subject matter jurisdiction is phony, the district judge is going to say, get rid of it.
Justice O'Connor: Send it back.
Justice Ginsburg: I mean, diversity, is there diversity, is there a Federal question on the face of the complaint?
Every... I thought everybody agreed that in most cases the lack of subject matter jurisdiction is clear, so you don't get this floodgate.
On the other hand, there is what Justice O'Connor referred to as a rare case, which I looked at this case and said, well, maybe this is it, in that this party, Norge, that's alleged to be fraudulently joined as a plaintiff, that's all bound up with the merits of this case, so you may not be able to sort out whether there was a sham party there inserted simply to block diversity until you get to the merits and to see whether this Norge has any real substance.
Mr. Hutchinson: That suggests, though, Justice Ginsburg, that... that a court has... may re... pre-try a case in determining remand, and that would be against congressional policy, that if all doubts are to be resolved...
Justice Ginsburg: Well, let's not talk about policy, about specifics.
The district judge said, gee, you can't create an absence of diversity in a phony way any more than you can create with... so I have to see whether there is really diversity, and there is really diversity if Norge doesn't belong in this litigation, but I can't tell that in this complicated picture till we get some kind of evidentiary hearing.
Mr. Hutchinson: But in this case the only evidence in the case was that Norge owned the license, and that that license was damaged by the acts of Ruhrgas.
That was the only evidence before the court.
It was, indeed, a simple question.
The... and that's the irony of this case, is that the subject matter jurisdiction questions were easy.
Justice Ginsburg: Well, why was it so easy when the Fifth Circuit itself, the majority said, gee, we're a little uncertain about that panel that held there was no subject matter jurisdiction, so we think it better go back to the district court to decide?
If it was all that easy, then the majority of the court of appeals surely would have said, yeah, the panel got it right, there's no subject matter jurisdiction.
But they took the extraordinary step of saying, we're not going to go back to that panel decision.
We want the district judge to explore all these questions, so if you were right about it was easy, then why didn't the panel decision stand?
Mr. Hutchinson: I can't speak to the dissenters, or why they didn't allow the panel...
Justice Ginsburg: I'm talking about the court, the majority, not the dissenters.
The court could have said, subject matter jurisdiction has to be handled first, and the panel had it right, there was no subject matter jurisdiction.
Isn't that what the three-judge panel decided, that there was no...
Mr. Hutchinson: Yes, Justice Ginsburg, the majority could have done that, but they decided to return it to the district court, and I don't know why.
Justice Stevens: May I ask, just to understand the purity of your position, if the attack on personal jurisdiction had been insufficient service of process that challenged the way in which the process... would you still say that could not be decided before the subject matter jurisdiction issue?
In other words, take this example.
Supposing you have attack on the line item veto case, and you want to challenge the standing of the plaintiff, and the motion to dismiss has two grounds, one he doesn't have standing, all sorts of... secondly, they didn't leave the summons at the right person at the... wherever it should have been left.
Must the judge decide the standing issue before deciding whether service was proper, in your view?
Mr. Hutchinson: In my view, yes, Justice Stevens, that the court first must satisfy itself it has Article III power over the case before it can address subject matter jurisdiction.
Justice Breyer: Why, just... I've always wondered this, and I'm not saying there's no answer to it, but if all these cases, indeed, where it's Article III power versus the merits, they all are cases in which it's arguable both ways whether there is or there isn't the Article III power.
We're only talking about cases in which a district judge could be reasonably uncertain.
So if this is so holy that you have to decide the question of power first, why don't you have to have an immediate appeal?
I mean, suppose the district judge were to get it wrong?
Suppose, horror of horrors, he were to think there is Article III power to hear this case, and he's wrong, there isn't; why is he permitted to go ahead with the merits before all that's finally resolved on appeal, perhaps by certiorari?
Mr. Hutchinson: Courts can get it wrong, Justice Breyer, but the fact is they have to get it; they have to determine...
Justice Breyer: Why?
Mr. Hutchinson: They have to make that determination...
Justice Breyer: Why?
In other words, why is it that it's absolutely incumbent upon the district judge to decide every difficult, no matter how difficult question of Article III power first, including yours here, before going on to another easy question, that it isn't incumbent upon the system to decide that question definitively first?
Mr. Hutchinson: Because of Article III and the limited power of the Federal courts.
If you allow the court to exercise power before it determines that it has power, then it has exceeded...
Justice Breyer: Exactly.
So why don't we have to have appeals and certiorari, and really get it solved before we can go ahead to the merits?
It's a constitutional matter, after all.
Why don't you have to have a full range of appeals first?
Mr. Hutchinson: Because Congress has spoken to that in a removal case, and they've said if... in remand, it cannot be appealed, and I think that...
Justice Breyer: Of course, you're not giving me the answer correctly that I'm looking for, which is it would be totally impractical.
Now, is that relevant?
Mr. Hutchinson: No, Justice Breyer.
Efficiency can never trump constitutional principles.
Justice Kennedy: But there's a constitutional principle that the defendant's asserting with reference to personal jurisdiction as well.
Suppose you have somebody who's sued in Texas, who says I've never been in Texas, and they say, oh, you negotiated a deal there.
No, I did that in San Francisco, just a factual determination.
Was he ever in the State of Texas, was it in San Francisco or Houston where he had the one deal that he negotiated in the United States.
Justice Scalia: He's from overseas.
Justice Kennedy: He says, you have no constitutional power over me.
But you would say, well, we want you to go to Houston and spend hundreds of thousands of dollars on attorneys litigating subject matter jurisdiction first.
That, it seems to me, is a serious abridgement of his personal right not to be subject to the jurisdiction of the court, and you just sweep that under the rug.
Mr. Hutchinson: It is an individual right, and that's what distinguishes it from the institutional integrity of subject matter jurisdiction.
But there's a practical side to this as well, because in this context it is the defendant who makes that selection.
Here, defendant has said, I have an easy question...
Justice Kennedy: Well, but of course, you apply your rule across the board, even to nonremovable cases, so in my hypothetical you were sued in the district court originally and you still say he has to submit himself to the subject matter jurisdiction argument by hiring attorneys and making special appearances and so forth.
That's not the rationale of the statutes that... of the constitutional provision that gives you protection against a court asserting jurisdiction over you if it has no personal jurisdiction under the Fourteenth Amendment.
Mr. Hutchinson: Every defendant is going to be inconvenienced, but the sanctity of the Federalism system must take priority over that determination, and we're not, in our situation, saying that personal jurisdiction is not important, it shouldn't be decided.
It will be.
But in the...
Justice Kennedy: What authority do you have for the standpoint that Federalism takes precedence over personal freedom?
Mr. Hutchinson: Over the right of the individual?
Justice Kennedy: What case do I cite when I write the opinion that has that...
Mr. Hutchinson: I would...
Justice Scalia: statement in it?
Mr. Hutchinson: I would cite those cases that define what is a jurisdictional prerequisite for the case... for the court to act.
The Zipes case, which said it is a jurisdictional prerequisite if it can't be waived, if it can't be established by estoppel.
I would cite Republic National Bank and Landgraf for the principle that a jurisdictional prerequisite speaks to the power of the court, not to the rights of the parties.
I would cite the Caspari case for the principle that a jurisdictional prerequisite must be raised by the court sua sponte.
None of those apply to personal jurisdiction.
Some of the points, Justice O'Connor, you raise in some of the cases that you mention, the Lambrix case, for example, the Lambrix case dealt with the Teague rule.
In the Caspari case, that very issue was raised by this Court, is the Teague rule a threshold jurisdictional issue, and the Court said no.
It's waivable, and therefore it doesn't rise to the level of a prerequisite that has to be considered by the Court.
In the Amchem case, the class certification was logically antecedent to a finding of subject matter jurisdiction.
In the inherent power cases, such as... or Willy actually wasn't an inherent power case.
It was a sanctions case.
That was the court's power to manage that was being invoked, and there are limits to that power, as this Court found in the Catholic Conference case.
In the Catholic Conference case the district court had ordered discovery, and it was a contempt motion in connection with that discovery, and the Catholic Conference case said the discovery sought in that case was not for the purpose of determining subject matter jurisdiction.
Therefore, it exceeded the court's power.
Justice Stevens: May I ask you to comment on another consideration that occurs to me as I think about the problem.
Sometimes the jurisdictional issue, like the standing question, will raise a serious constitutional question, whereas the personal jurisdiction may merely be a matter of fact, or interpreting the provision of State law.
What about commenting on our policy of trying to avoid constitutional, difficult constitutional questions when there's another principal basis for decision available?
Mr. Hutchinson: I'm familiar with that line of cases, Justice Stevens, but again I don't think that rule can be taken this far, and to say that you... the Court goes into a balancing...
Justice Stevens: You'd say that even though there's no personal jurisdiction we have an obligation to address the difficult constitutional question.
Mr. Hutchinson: You have... my... yes, Justice Stevens.
Justice Stevens: You must decide it before you...
Mr. Hutchinson: You must decide it first.
And what is proposed here...
Justice Ginsburg: Then you're withdrawing from one thing you said in your brief, which I... you said, if the subject matter jurisdiction question is real tough... this is on page 18, 19 of your brief, if it's real tough, there's a simple solution.
Don't decide it.
So you said I think twice in your brief that subject matter jurisdiction doesn't have to be decided by the Federal court.
If they find it a tough question, they should just send the whole thing back to the State court.
I think you're... are you modifying that, because here you seem to say they must decide it?
Mr. Hutchinson: Justice Ginsburg, in a removed case, the courts are uniform in saying that doubts should be resolved in favor of remand in order to follow the dictates of Congress in the removal statutes, and as this Court recognized in the International Primate, these are mandatory statutes, and that's what we meant in our brief, that when there are doubts, those doubts should be resolved in favor of remand.
Justice Ginsburg: Well, what does that mean...
I don't understand what you just said.
Does it mean that, as you seem to imply here, the court says, subject matter jurisdiction case, messy here, we maybe have it, maybe we don't, but resolve that doubts in favor of remand, remand.
We decide nothing.
Would that be a proper way for a Federal court to behave?
Mr. Hutchinson: No, Justice Ginsburg, but there are different types of cases in which this could be resolved.
For example, the case cited, the American National Red Cross case, where there is a question of the interpretation of a 1900 Federal charter that was a purely legal issue that had been resolved differently by different circuits.
There it may be a difficult question, but it's not a question of resolving factual doubts or State law doubts, it's a question of looking at the language of a charter and interpreting it.
In this case, there were questions of State law intertwined with the factual situation, intertwined with questions of the constitutional due process, so the court had to address factual issues, and those factual issues should be resolved in favor of remand.
Justice Ginsburg: Well, I don't understand what you're answering me, because I thought from your brief you say that when the question is tough, accordingly where the subject matter jurisdiction question is difficult, the Federal judiciary already has devised a simple but effective means of resolving the issue, remand.
Now, that's not what the Fifth Circuit did.
It sent it back to the district judge and they said, you figure out the subject matter jurisdiction question.
But according to what you've just said, if the principle is resolve doubts in favor of remand, then the Fifth Circuit en banc was wrong to burden the district judge with deciding the issue.
Mr. Hutchinson: The Fifth Circuit deferred to the district judge to make that decision in the first instance.
Justice Ginsburg: Instructed her to make it.
It didn't defer to it.
She said, I don't want to make it.
I want to decide personal jurisdiction.
Mr. Hutchinson: But they could have decided at the Fifth Circuit.
They sent it back down.
I don't think that goes against what we're arguing here today.
Justice Ginsburg: Well, what you just argued is that the district judge should have resolved the doubts in favor of no jurisdiction and just remanded without any decision, saying it's a tough question, a tough question, we're going to remand.
Mr. Hutchinson: Doubt should be resolved in favor of remand.
Justice Ginsburg: Is that what that means?
Does doubt, resolving doubts mean it's a tough question, we don't have to decide it, we resolve the doubt in favor of remand, and never decide subject matter jurisdiction?
Mr. Hutchinson: That's not what it means.
It depends on the question.
Justice Ginsburg: Well, let's take this question.
Let's take the three bases on which Federal jurisdiction was asserted in this case.
What should the district judge have done?
Mr. Hutchinson: She should have remanded.
Justice Ginsburg: After deciding what?
Mr. Hutchinson: After deciding subject matter jurisdiction, because...
Justice Ginsburg: Grappling with each one of those three complicated...
Mr. Hutchinson: Complicated issues, and arbitration where there was no arbitration agreement, and the very first filing by Ruhrgas was that there was no such agreement.
Justice Ginsburg: Well, you're saying it's all that easy, but certainly the Fifth Circuit didn't treat it that way.
Mr. Hutchinson: The Fifth Circuit dissenters didn't treat it that way.
The panel did.
Justice Ginsburg: But no... the Fifth Circuit en banc wiped out the panel decision, which held there was no... if it had been all that easy, they should have let the panel decision stand, but they didn't.
The majority didn't let a panel decision stand that said there is no subject matter jurisdiction.
They said, this issue needs a thorough airing, and sent it back to the district court.
Mr. Hutchinson: They sent it back to the district court for resolution.
And I don't know their rationale for doing that rather than deciding it immediately, but it is, I think, an easy issue.
Justice Souter: Mr. Hutchinson, to me, at least, your position is a little stronger when you confine it to the removal situation.
I want to be clear on one thing.
Do you base your Federalism argument simply on the dignitary interest of the State in being able to take, in effect, first crack at subject matter jurisdiction if that's possible, or does your argument rest on a further suggestion that there is likely to be a different... difference in result depending on where the State courts or Federal courts decide the personal jurisdiction?
Do you suggest that the State courts are more likely to find the personal jurisdictional prerequisites present?
Mr. Hutchinson: No, not precisely that point, Justice Souter.
What I'm saying is that they may decide it differently, and...
Justice Souter: You're just saying in a close case in which courts could reasonably go either way, it's better to let the State court have the first chance if that's possible.
Mr. Hutchinson: Yes.
Justice Souter: So that's essentially a dignitary kind of argument.
Mr. Hutchinson: It is in part, but...
Chief Justice Rehnquist: Is there any sense among the practicing bar in Texas that the State courts are more likely to find personal jurisdiction than the Federal courts are?
Mr. Hutchinson: No, but the burden of proof is different.
Chief Justice Rehnquist: What is the difference?
Mr. Hutchinson: The burden of proof is, under the Kawasaki case in the Texas supreme court, the burden of proof is on the defendant to disprove every ground of personal jurisdiction, whereas the burden of proof applied in Federal court is, the burden of proof is on the plaintiff, so that's one difference.
Chief Justice Rehnquist: Well, that seems odd for some reason.
Justice Ginsburg: Mr. Hutchinson, isn't that a Federal, the whole thing a Federal question?
Here, the assertion is there is no power over me compatible with due process, and since the Texas statute goes the length of due process, we don't have to worry about it, we stop short of that.
It's a question of due process, and yet you're suggesting that the State court could have a burden of proof that makes it easier for a plaintiff to assert jurisdiction over a defendant than in the Federal court.
I would think that that, since it's a Federal constitutional question, would have to come out the same way with the same burdens in both courts, and if the Texas courts have said something different, the defendant has to negate jurisdiction, that's...
Mr. Hutchinson: Justice Ginsburg, what I think the point here in this particular case is that the issues of due process are intertwined with State law and with the factual situation, because one of the issues in the due process argument was, under the Texas long-arm statute was, was there a tort in Texas?
I think the court got this wrong, but the issue that the court addressed was, was there a completed tortious act within the State which involved an analysis of tort law as well as the facts, so that...
Chief Justice Rehnquist: I think you've answered the question, Mr. Hutchinson.
Justice O'Connor: Thank you.
Mr. Hutchinson: Thank you, Mr. Chief Justice.
Rebuttal of Charles Alan Wright
Chief Justice Rehnquist: Mr. Wright, you have 10 minutes remaining.
Mr. Wright: Thank you, Mr. Chief Justice.
Let me first speak to the issue that was just discussed about burden of proof.
We did not discuss that in our briefs.
We didn't think it important enough.
The Fifth Circuit in fact has held that the Texas burden rule is, quote, exactly the sort of State procedural accessory that Federal courts are not bound to don whenever they enter the diversity courtroom.
That's Product Promotions 495 F. 2d 483.
The Texas supreme court has held that if a plaintiff does not allege that defendant has performed a specific act in Texas, then the mere finding or allegation that defendant is a nonresident is enough to carry his burden of proof, so I really think the burden of proof issue here is not significant.
I go back to Justice Kennedy's question to my friend: Suppose that pleading, the summons and complaint are served on Norge... as I pronounce it, and others have different pronunciations... in Germany, and they say, well, we've not been in Texas, we're not subject to the jurisdiction of the courts in Texas
Let us suppose that the case had been brought in Federal court.
If the position for which Marathon has been arguing here is right, it would be necessary for Norge to come in, litigate complicated and novel matters of Federal subject matter jurisdiction, when it says we have an easy personal jurisdiction objection, an objection that is constitutionally raised.
And what I think highlights the illogicality of that is that, as we know, if you are served and you believe that you are not subject to personal jurisdiction to the court of the State, you can simply refuse to go there, do nothing, and collaterally attack the judgment.
If you go there as in Baldwin and litigate the personal jurisdiction issue, you cannot then raise it in an enforcement action, but if you simply ignore the first action, you can then challenge any judgment.
I don't think that's what we want to encourage people to do.
We don't want them deciding for themselves what the law is and gambling that they will later be held to be right.
We want them to go into court and present their objection in an orderly way.
But if my defendant comes in and says, I'm not subject to your personal jurisdiction, Madam Federal Judge, it seems to me that it is wrong to say that that defendant must litigate issues of Federal subject matter jurisdiction rather than having the case dismissed because there is no in personam jurisdiction.
That, of course, I'm there positing, because my friend Mr. Hutchinson says his rule applies across the board to all cases, original and removed, and in an original jurisdiction case I think that would simply be an intolerable rule, and I don't think that it has much more logic to commend it when it is in a case that is in the Federal court by virtue of removal.
Justice Scalia: Do you acknowledge, Mr. Wright, that there's a stronger case for what Mr. Hutchinson proposes in the removal situation, or does it really come down to the same thing anyway, just a Federal court acting beyond its... allegedly acting beyond its subject matter jurisdiction?
Mr. Wright: Well... excuse me.
Justice Scalia, I think that the Federalism component becomes more significant when it is a removed case, that here is an issue that... here is a case that if it had not been wrongly taken to Federal court, as we presuppose a Federal lack of subject matter jurisdiction, that the State court would get to decide the matter, that there would be a dignitary interest in the State court there.
So I think yes, that is an element that has to be taken into the scales.
But I quoted, at page 23 of my opening brief, a sentence from Justice Black's opinion in Younger v. Harris that has for years been my mantra with regard to Federalism, that it means neither strict obeisance to State's rights, nor regarding the Federal Government as in control of everything.
It regards... it requires a sensitive recognition of the interests of each of the systems.
And I think that in the removal cases such as this one, that the efficiency considerations for the Federal court outweigh the dignitary interest of the State court in retaining the power to decide the issue.
If there are no further questions, I thank the Court.
Chief Justice Rehnquist: Thank you, Mr. Wright.
The case is submitted.
The honorable court is now adjourned until tomorrow at ten o'clock.
Argument of Speaker
Mr. Speaker: The opinion of the Court in No. 98-470, Ruhrgas versus Marathon Oil Company will be announced by Justice Ginsburg.
Argument of Justice Ginsburg
Mr. Ginsburg: This case concerns the order in which Federal Courts may take up jurisdictional issues in keeping with Article III of the Constitution.
The backsaw for today’s decision is a case resolved last term, Steel Company against Citizens for Better Environment.
We held in Steel Company that a Federal Court generally must satisfy itself of its jurisdiction over the subject-matter before it considers the merits of the case.
We now address this question, if the Steel Company instructs jurisdiction in generally proceeds merits in the dispositional order must subject-matter jurisdiction similarly proceed personal jurisdiction on the decisional line?
The controversy stems from a Norwegian North Sea gas production venture respondents are three-related companies.
I will call them collectively Marathon.
In the 1980s a Marathon affiliate contracted to sell gas from a certain North Sea Field to a group of European buyers including petitioner Ruhrgas, a German company. In 1995, Marathon filed suit in Texas State Court alleging among other things that Ruhrgas had defrauded it into investing money in the Norwegian gas production venture.
Ruhrgas moved the case from the Texas Court to a Federal District Court and then moved to dismiss the complaint asserting that it has no ties with and was not amenable to personal jurisdiction in Texas.
Marathon moved to remand the case to the State Court for lack of federal subject-matter jurisdiction urging that personal jurisdiction over Ruhrgas to be left open for the Texas Court to resolve.
The District Court concluding that Marathon’s complaint did not present circumstances adequately affiliating Ruhrgas or the North Sea gas venture with Texas dismiss the case for lack of personal jurisdiction.
The Court of Appeals from the Fifth Circuit sitting en banc vacated the dismissal order and removed cases the court held.
District Courts must be satisfied that they posses subject-matter jurisdiction before they reach challenges to personal jurisdiction.
Steel Company, the Court of Appeals said, counseled against skipping over subject-matter jurisdiction and proceeding directly to personal jurisdiction.
We reverse and cases removed from State Court to Federal Court as in cases originating in Federal Court there is no unyielding jurisdictional hierarchy requiring the Federal Court to decide whether it has subject-matter jurisdiction before taking up a challenge, the personal jurisdiction.
Subject-matter jurisdiction should come first to Fifth Circuit region because it is nonwaivable and delimits federal-court power, while restrictions on a court’s jurisdiction over the person are waivable and protect not state prerogatives but private rights.
That was the argument that Fifth Circuit rejected.
The two jurisdictional bedrocks, subject-matter jurisdiction and personal jurisdiction unquestionably differ in character, but the differences do not mean that subject-matter jurisdiction is ever and always the more fundamental.
Personal jurisdiction too is essential for without that the court is powerless to adjudicated case.
Marathon urges that the dignity of State Courts is at stake particularly in removed cases because the Federal Courts personal jurisdiction ruling may preclude the party from relitigating that issue in State Court.
Our opinion notes first that issue preclusion in State Court may also attend a Federal Court’s ruling regarding subject-matter jurisdiction, but of prime importance the opinion emphasizes Federal and State Courts are complimentary, not opposing systems for administering justice a State’s dignitary interest as consideration when a District Court exercises discretion in the case of this order, but District Courts may also consider potentially countervailing concerns of judicial economy and restraint.
In this case Ruhrgas has challenged the personal jurisdiction was straightforward and presented no conflicts question of state law while the alleged subject-matter jurisdiction raised harder questions.
The District Court therefore did not abuse its discretion by turning directly to personal jurisdiction.
The opinion of the Court is unanimous.