The Supreme Court granted certiorari today in two cases; one is
of potential interest to the business community. Amicus briefs in support of the
petitioners are due on January 21, 1999, and amicus briefs in support of the
respondents are due on February 22 (because February 20 is a Saturday). Any
questions about this case should be directed to Alan Untereiner (202-778-0656)
or Donald Falk (202-778-0174) in our Washington office.
Federal Courts — Subject-Matter Jurisdiction — Personal
Jurisdiction. The Court granted certiorari in Ruhrgas AG v.
Marathon Oil Co., No. 98-470, to decide whether a federal district court
presiding over a case that has been removed from state court may dismiss the
case for lack of personal jurisdiction without first deciding the plaintiff's
motion to remand the case to state court for lack of subject-matter
Marathon Oil and affiliated companies sued Ruhrgas in Texas
state court, asserting tort claims relating to an agreement for the sale of
North Sea natural gas. Ruhrgas removed the case to federal district court,
asserting federal jurisdiction on three grounds: the Convention on the
Recognition of Foreign Arbitral Awards (see 9 U.S.C. § 205), federal common law,
and diversity of citizenship of the parties. Although Marathon moved for a
remand to state court, the district court dismissed the case on the ground that
it lacked personal jurisdiction. The district court held that it had discretion
to address personal jurisdiction without first resolving the more difficult
question of its subject-matter jurisdiction.
A panel of the Fifth Circuit reversed, holding that federal
subject-matter jurisdiction was lacking and directing that the case be remanded
to the state trial court for that court to determine the issue of personal
jurisdiction. 115 F.3d 315 (1997). After the Supreme Court denied certiorari,
118 S. Ct. 413 (1997), the Fifth Circuit sua sponte ordered the case reheard en
banc. Dividing 9-7, the court of appeals held that a district court hearing a
case that has been removed from state court must decide whether it has Article
III jurisdiction before addressing any challenge to personal jurisdiction; the
court remanded the case to the district court to address subject-matter
jurisdiction in the first instance, however. 145 F.3d 211 (1998). The Fifth
Circuit held that, in a federal system, subject-matter jurisdiction was
logically prior to personal jurisdiction. If a federal court in fact does not
have subject-matter jurisdiction, for it to decide the question of personal
jurisdiction "impermissibly wrests that decision from the state courts."
Id. at 218.
Judge Patrick Higginbotham and six of his colleagues would have
held that district courts have the discretion to dismiss a case for lack of
personal jurisdiction even where subject-matter jurisdiction is uncertain. The
dissenting opinion rejected the majority's assignment of priority to
subject-matter jurisdiction, and suggested that both subject-matter
jurisdiction, based in Article III, and personal jurisdiction, grounded in the
Due Process Clause, are "rooted in core constitutional precepts" and "are
critical to the power of a court." 145 F.3d at 229.
The Fifth Circuit's decision conflicts with Cantor
Fitzgerald, L.P. v. Peaslee, 88 F.3d 152 (2d Cir. 1996). Without
addressing the order in which jurisdictional challenges were resolved, other
courts of appeals appear to have permitted district courts to decide personal
jurisdiction without first deciding subject-matter jurisdiction.
Because state courts may tend to take a more expansive view of
their own personal jurisdiction than federal district courts, this case is
potentially important to businesses on either side of the procedural issue that
the Court will decide. The case is especially significant to businesses that may
not be subject to personal jurisdiction in every (or in any) State. The Fifth
Circuit's approach would prevent a defendant that removes its case to federal
court from achieving a final disposition of a clear-cut personal jurisdiction
issue unless it first prevails on the question of subject-matter jurisdiction.
Conversely, if the Supreme Court reverses the Fifth Circuit, businesses that
wish to litigate their claims in state court may be finally precluded from doing
so based on a personal jurisdiction ruling by a federal court that had no
subject-matter jurisdiction to hear the case.
This Mayer, Brown, Rowe & Maw Supreme Court Docket Report provides information and
comments on legal issues and developments of interest to our clients and
friends. The foregoing is not a comprehensive treatment of the subject matter
covered and is not intended to provide legal advice. Readers should seek
specific legal advice before taking any action with respect to the matters