Ruhrgas Ag v. Marathon Oil Co.

• Decision Date: 17 May 1999
• Docket Number: 98470
• Parties: 145 F.3d 211, reversed and remanded. SUPREME COURT OF THE UNITED STATES470 RUHRGAS AG, PETITIONER v. MARATHON OIL COMPANY et al. ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT [
• Court: U.S. Supreme Court

526 U.S. 574

119 S.Ct. 1563

143 L.Ed.2d 760

145 F.3d 211, reversed and remanded

SUPREME COURT OF THE UNITED STATES

No. 98 470

RUHRGAS AG, PETITIONER v MARATHON OIL COMPANY et al.

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

[May 17, 1999]

Justice Ginsburg delivered the opinion of the Court.

This case concerns the authority of the federal courts to adjudicate controversies. Jurisdiction to resolve cases on the merits requires both authority over the category of claim in suit (subject-matter jurisdiction) and authority over the parties (personal jurisdiction), so that the court's decision will bind them. In Steel Co. v. Citizens for Better Environment, 523 U.S. 83 (1998), this Court adhered to the rule that a federal court may not hypothesize subject-matter jurisdiction for the purpose of deciding the merits. Steel Co. rejected a doctrine, once approved by several Courts of Appeals, that allowed federal tribunals to pretermit jurisdictional objections "where (1) the merits question is more readily resolved, and (2) the prevailing party on the merits would be the same as the prevailing party were jurisdiction denied." Id., at 93. Recalling "a long and venerable line of our cases," id., at 94, Steel Co. reiterated: "The requirement that jurisdiction be established as a threshold matter is'inflexible and without exception,' " id., at 94 95 (quoting Mansfield, C. & L. M. R. Co. v. Swan, 111 U.S. 379, 382 (1884)); for "[j]urisdiction is power to declare the law," and " '[w]ithout jurisdiction the court cannot proceed at all in any cause,' " 523 U.S., at 94 (quoting Ex parte McCardle, 7 Wall. 506, 514 (1869)). The Court, in Steel Co., acknowledged that "the absolute purity" of the jurisdiction-first rule had been diluted in a few extraordinary cases, 523 U.S., at 101, and Justice O'Connor, joined by Justice Kennedy, joined the majority on the understanding that the Court's opinion did not catalog "an exhaustive list of circumstances" in which exceptions to the solid rule were appropriate, id., at 110.

Steel Co. is the backdrop for the issue now before us: If, as Steel Co. held, jurisdiction generally must precede merits in dispositional order, must subject-matter jurisdiction precede personal jurisdiction on the decisional line? Or, do federal district courts have discretion to avoid a difficult question of subject-matter jurisdiction when the absence of personal jurisdiction is the surer ground? The particular civil action we confront was commenced in state court and removed to federal court. The specific question on which we granted certiorari asks "[w]hether a federal district court is absolutely barred in all circumstances from dismissing a removed case for lack of personal jurisdiction without first deciding its subject-matter jurisdiction." Pet. for Cert. i.

We hold that in cases removed from state court to federal court, as in cases originating in federal court, there is no unyielding jurisdictional hierarchy. Customarily, a federal court first resolves doubts about its jurisdiction over the subject matter, but there are circumstances in which a district court appropriately accords priority to a personal jurisdiction inquiry. The proceeding before us is such a case.

I

The underlying controversy stems from a venture to produce gas in the Heimdal Field of the Norwegian North Sea. In 1976, respondents Marathon Oil Company and Marathon International Oil Company acquired Marathon Petroleum Company (Norway) (MPCN) and respondent Marathon Petroleum Norge (Norge). See App. 26.1 Before the acquisition, Norge held a license to produce gas in the Heimdal Field; following the transaction, Norge assigned the license to MPCN. See Record, Exhs. 61 and 62 to Document 64. In 1981, MPCN contracted to sell 70% of its share of the Heimdal gas production to a group of European buyers, including petitioner Ruhrgas AG. See Record, Exh. 1 to Document 63, pp. 90, 280. The parties' agreement was incorporated into the Heimdal Gas Sales Agreement (Heimdal Agreement), which is "governed by and construed in accordance with Norwegian Law," Record, Exh. B, Tab 1 to Pet. for Removal, Heimdal Agreement, p. 102; disputes thereunder are to be "exclusively and finally settled by arbitration in Stockholm, Sweden, in accordance with" International Chamber of Commerce rules, id., at 100.

II

Marathon Oil Company, Marathon International Oil Company, and Norge (collectively, Marathon) filed this lawsuit against Ruhrgas in Texas state court on July 6, 1995, asserting state-law claims of fraud, tortious interference with prospective business relations, participation in breach of fiduciary duty, and civil conspiracy. See App. 33 40. Marathon Oil Company and Marathon International Oil Company alleged that Ruhrgas and the other European buyers induced them with false promises of "premium prices" and guaranteed pipeline tariffs to invest over $300 million in MPCN for the development of the Heimdal Field and the erection of a pipeline to Ruhrgas' plant in Germany. See id., at 26 28; Brief for Respondents 1 2. Norge alleged that Ruhrgas' effective monopolization of the Heimdal gas diminished the value of the license Norge had assigned to MPCN. See App. 31, 33, 357; Brief for Respondents 2. Marathon asserted that Ruhrgas had furthered its plans at three meetings in Houston, Texas, and through a stream of correspondence directed to Marathon in Texas. See App. 229, 233.

Ruhrgas removed the case to the District Court for the Southern District of Texas. See 145 F.3d 211, 214 (CA5 1998). In its notice of removal, Ruhrgas asserted three bases for federal jurisdiction: diversity of citizenship, see 28 U.S.C. § 1332 (1994 ed. and Supp. III), on the theory that Norge, the only nondiverse plaintiff, had been fraudulently joined;2 federal question, see §1331, because Marathon's claims "raise[d] substantial questions of foreign and international relations, which are incorporated into and form part of the federal common law," App. 274; and 9 U.S.C. § 205 which authorizes removal of cases "relat[ing] to" international arbitration agreements.3 See 145 F.3d, at 214 215; 115 F.3d 315, 319 321 (CA5), vacated and rehearing en banc granted, 129 F.3d 746 (1997). Ruhrgas moved to dismiss the complaint for lack of personal jurisdiction. Marathon moved to remand the case to the state court for lack of federal subject-matter jurisdiction. See 145 F.3d, at 215.

After permitting jurisdictional discovery, the District Court dismissed the case for lack of personal jurisdiction. See App. 455. In so ruling, the District Court relied on Fifth Circuit precedent allowing district courts to adjudicate personal jurisdiction without first establishing subject-matter jurisdiction. See id., at 445. Texas' long-arm statute, see Tex. Civ. Prac. & Rem. Code Ann. §17.042 (1997), authorizes personal jurisdiction to the extent allowed by the Due Process Clause of the Federal Constitution. See App. 446; Kawasaki Steel Corp. v. Middleton, 699 S. W. 2d 199, 200 (Tex. 1985). The District Court addressed the constitutional question and concluded that Ruhrgas' contacts with Texas were insufficient to support personal jurisdiction. See App. 445 454. Finding "no evidence that Ruhrgas engaged in any tortious conduct in Texas," id., at 450, the court determined that Marathon's complaint did not present circumstances adequately affiliating Ruhrgas with Texas, see id., at 448.4

A panel of the Court of Appeals for the Fifth Circuit concluded that "respec[t]" for "the proper balance of federalism" impelled it to turn first to "the formidable subject matter jurisdiction issue presented." 115 F.3d, at 318. After examining and rejecting each of Ruhrgas' asserted bases of federal jurisdiction, see id., at 319 321,5 the Court of Appeals vacated the judgment of the District Court and ordered the case remanded to the state court, see id., at 321. This Court denied Ruhrgas' petition for a writ of certiorari, which was limited to the question whether subject-matter jurisdiction existed under 9 U.S.C. § 205. See 522 U.S. 967 (1997).

The Fifth Circuit, on its own motion, granted rehearing en banc, thereby vacating the panel decision. See 129 F.3d 746 (1997). In a 9-to-7 decision, the en banc court 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." 145 F.3d, at 214. Noting Steel Co.'s instruction that subject-matter jurisdiction must be " 'established as a threshold matter,' " 145 F.3d, at 217 (quoting 523 U.S., at 94), the Court of Appeals derived from that decision "counsel against" recognition of judicial discretion to proceed directly to personal jurisdiction. 145 F.3d, at 218. The court limited its holding to removed cases; it perceived in those cases the most grave threat that federal courts would "usur[p] state courts' residual jurisdiction." Id., at 219.6

Writing for the seven dissenters, Judge Higginbotham agreed that subject-matter jurisdiction ordinarily should be considered first. See id., at 231. If the challenge to personal jurisdiction involves no complex state-law questions, however, and is more readily resolved than the challenge to subject-matter jurisdiction, the District Court, in the dissenters' view, should take the easier route. See ibid. Judge Higginbotham regarded the District Court's decision dismissing Marathon's case as illustrative and appropriate: While Ruhrgas' argument under 9 U.S.C. § 205 presented a difficult issue of first impression, its personal jurisdiction challenge raised "[n]o substantial questions of purely state law," and "could be resolved relatively easily in [Ruhrgas'] favor." 145 F.3d, at 232 233.

We granted certiorari, 525 U.S. __ (1998), to resolve a conflict between the Circuits7 and now reverse.

III

Steel Co. held that Article III generally requires a federal court...