# Respondents Brief — Ruhrgas Ag v. Marathon Oil Co.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Respondents Brief
- **Published:** January 1, 1999
- **Citation:** 526 U.S. 574

## Text

e TT ae

Supreme Court, U. 8.
FILED

IN THE
Supreme Court of the United States

OCTOBER TERM, 1998

RuHRGAS, A. G.,

* Petitioner,
MARATHON OIL COMPANY,
MARATHON INTERNATIONAL OIL COMPANY,
AND MARATHON PETROLEUM NORGE A/S,

Respondents.

On Writ of Certiorari to the
United States Court of Appeals
for the Fifth Circuit

BRIEF FOR RESPONDENTS

DAVID L. SHAPIRO CLIFTON T. HUTCHINSON *
1575 Massachusetts Avenue J. GREGORY TAYLOR
Cambridge, MA 02138 DAVID J. SCHENCK
(617) 491-2758 DEREK S. HOLLINGSWORTH
Of Counsel Hud HES & Luce, L. L. P.
1717 Main Street
Suite 2800

Dallas, Texas 75201
(214) 939-5500

Attorneys for Respondents
February 24, 1999 ounsel of Record

WILSON - Epes PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTION PRESENTED

In a case properly filed in state court and removed
by the defendant to federal court, may a district court
ignore a challenge to federal subject matter jurisdic-
tion, conduct discovery, and enter an order of dis-
missal without first ruling on a motion to remand for
lack of subject matter jurisdiction?

(i)

ii

RULE 29.6 DISCLOSURE

Marathon Oil Company is a subsidiary of USX
Corp. Marathon International Oil Company is wholly-
owned by Marathon Oil Company. Marathon Petro-
leum Norge A/S is a Norwegian corporation whose
stock is held by a wholly-owned affiliate of Marathon
International Oil Company.

TABLE OF CONTENTS

QUESTION PRESENTED ..0.........2.......ccc-c-sceesseeeseen scenes

RULE 29.6 DISCLOSURE .....................-:0..c-sessseesnsseeeeeees

— VU ̃ — ——

I.

II.

III.

THE SIGNIFICANCE OF ARTICLE III AND
THE MADISONIAN COMPROMISE |...

THE EXISTENCE OF FEDERAL SUBJECT
MATTER JURISDICTION IS A PRELIMI-
NARY AND NECESSARY THRESHOLD
är *

THE NEED TO DETERMINE SUBJECT
MATTER JURISDICTION AT THE THRES-
HOLD IS ESPECIALLY EVIDENT IN RE-
.

A. Statutory Limits On Removal Protect The
Plaintiff's Choice Of Forum And Reflect The
Threshold Nature Of Subject Matter Juris-
.

B. Judicial Limits On Removal Require Strict
Statutory Construction And Resolution Of
All Doubts In Favor Of Remane

IGNORING SUBJECT MATTER JURISDIC-
TION IS NEITHER CONSTITUTIONAL NOR
--- ——

(iii)

10

14

14

17

19

iv

TABLE OF CONTENTS—Continued

A. Subject Matter Jurisdiction Is Fundament-
ally Different From All Other Categories Of
TTT TING is AES

B. Deciding Other Issues Without Subject Mat-
ter Juris'ction Deprives State Courts Of
Their Itesiuwal Jurisdictio nn

C. “Efficiency Jurisdiction” Would Be Ineffi-
cient And Invite Abuse

CTS ——ñ—

v

TABLE OF AUTHORITIES

CASES Page
Ahearn v. Charter Township, 100 F.3d 451 (6th

J „„ 18
American Home Assurance Co. v. Insular Under-

writers Corp., 494 F.2d 317 (Ist Cir. 1974) 18

American Investors Life Ins. Co. v. Webb Life Ins.
Agency, 876 F. Supp. 1278 (S.D. Fla. 1995) 23
American Pictures, Ine. v. Morgan, 371 F. Supp.

I. 4 23
Anderson v. Yungkau, 329 U.S. 482 (1947) 15
Aquafaith Shipping, Ltd. v. Jarillas, 968 F.2d 806

rr . 27
Bank One v. United States, 157 F.3d 397 (5th Cir.

1E 20
In re Bear River Drainage Dist., 267 F.2d 849

(10th Cir 1959) 18, 22
Bender v. Williamsport Area Sch. Dist., 475 U.S.

. 16
Boyer v. Snap-on Tools Corp., 913 F.2d 108 (3d

1 oe a SV a EN 19
Briscoe v. Bell, 432 U.S. 404 (1977) eee an eee 16

Brown v. Francis, 75 F.3d 860 (3d Cir. 1996) 18, 19
Burnham v. Superior Court, 495 U.S. 604 (1990) 23
Burns v. Windsor Ins. Co., 31 F.3d 1092 (11th Cir.
19943) 17, 18
Caterpillar, Inc. v. Lewis, 117 S. Ct. 467 (1996) 13
Caterpillar, Inc. v. Williams, 482 U.S. 886 (1987).. 26
Chesapeake & Ohio Ry. Co. v. Cockrell, 232 U.S.

rr 27
City of Indianapolis v. Chase Nat'l Bank, 314 U.S.

e 9,12
Clark v. Paul Gray, Inc., 306 U.S. 583 (1939) 2 16
Colorado v. Symes, 286 U.S. 510 (19327 23
Cook v. Weber, 698 F.2d 907 (7th Cir. 1983 18
Cutler v. Rae, 48 U.S. (7 How.) 729 (18499 16
Data Disc. Inc. v. Systems Tech. Assoc., Inc., 557

F.2d 1280 (9th Cir. 1977) 22
Duncan v. Stuetzle, 76 F.3d 1480 (9th Cir. 1996).. 18
Ex parte McCardle, 7 U.S. (7 Wall.) 506 (1869) 10

FDIC v. Meyer, 510 U.S. 471 (1994) 20

vi
TABLE OF AUTHORITIES—Continued
Page
Foremost Ins. Co. v. Richardson, 457 U.S. 668
rec 25
FW/PBS, Inc. v. City of Dallas, 493 U.S. 215
ST ERR AE oR tae SSeS La 16
Grace v. American Century Ins. Co., 109 U.S. 278
reren 2 10
Healy v. Ratta, 292 U.S. A 12, 18
Insurance Corp. of Ireland, Ltd. v. Compagnie des
Bauzites de Guinee, 456 U.S. 694 (1982) mn 20
International Assoc. of Entrepreneurs of Am. v.
Anooff, 58 F.3d 1266 (8th Cir. 1995)... 18
International Primate Protection Leaque v. Admin-
istrators of Tulane Educ. Fund, 500 U.S. 72
|) Sa OE ee er Te td ee 15, 19
Juidice v. Vail, 480 U.S. 327 (197 16
Leroy v. Great W. United Corp., 443 U.S. 173
r a A TO ES oS 20
Lerecon, Inc. v. Milberg Weiss Bershad Hynes &
Lerach, 118 S. Ct. 956 (1998) ..... 15
Liberty Mutual Ins. Co. v. Ward Trucking Corp.,
48 F.3d 742 (34 Cir. 1994) ~................................... 16
Louisville & Nashville R.R. Co. v. Mottley, 211
, a eee 16
In re Lowe, 102 F.3d 731 (4th Cir. 1996) 18
Mansfield, C. & L.M. Ry. Co. v. Swan, 111 US. 379
/ TTT 21, 12, 16
Marathon Oil Co. v. Ruhrgas A.G., 145 F.3d 211
(5th Cir. 1998) (en bane)ʒ ee. 12, 22, 23
Mitchell v. Maurer, 293 U.S. 237 (1933) 16
National Iranian Oil Co. v. Ashland Oil, Inc., 817
ee ee eee Gy OD ce . 27
News-Teran, Inc. v. City of Garland, 814 F.2d 216
ET . Bae ted 17
Nichols v. Southeast Health Plan, 859 F. Supp. 553
, certain, — CaP etal 22
Owen Eanin. and Erection Co. v. Kroger, 487 U.S.
1 ted tanens R
Pacheco de Perez v. AT&T Co., 139 F.3d 1368
ee BM a ad.) Sd Sad 18

vii
TABLE OF AUTHORITIES—Continued

Page
Perkins v. Benguet Consol. Mining Co., 342 U.S.

/ /! 23
Philbrook v. Glodgett, 421 U.S. 707 (197557 16
Plaquemines Tropical Fruit Co. v. Henderson, 170

rr... 9
Rhulen Agency, Inc. v. Alabama Ins. Guar. Ass'n,

896 F.2d 674 (2d Cir. 199) 18, 22
Robb v. Connolly, 111 U.S. 624 (1884) 23
Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100

(1941) — 11. 12, 18
Steel Co. v. Citizens for a Better Env’t, 118 S. Ct.

r ty passim
Stock West, Inc. v. Confederated Tribes, 873 F.2d

RIE ATEN Se 21
Summit Health v. Pinhas, 500 U.S. 322 (1991) 20
Tafflin v. Levitt, 493 U.S. 455 (1990)' 24
Thermtron Prods. v. Hermansdorfer, 423 U.S. 336

renner 17
Transaero, Inc. v. La Fuerza A eren Boliviana, 162

Renee... 22
Transit Cas. Co. v. Certain Underwriters at Lloyd's

of London, 119 F.3d 619 (8th Cir. 1997) 18
United States v. Rice, 327 U.S. 742 (194) 17, 28
Vasquez v. Alto Bonito Gravel Plant Corp., 56 F.3d

. 19
Wisconsin Department of Corrections v. Schacht,

66 U.S.L.W. 4531 (U.S. June 22, 199) 20
Ziealer v. Champion Mort. Co., 913 F.2d 228 (5th

een 16
Zines v. eee Spree 455 U.S. 385

(1982) biden 20

CONSTITUTIONAL PROVISION
TE .. passim
STATUTES AND RULES
ACT OF SEPT. —— . 8,14
9 U.S.C. § 202 1 ; 27

28 U.S.C. § 1441 (bb a 17

viii

TABLE OF AUTHORITIES—Continued

Page
28 U.S.C. § 144 ee salinities 14
e : 17
i cccttivactcccicercsiistitiiniitiendscdindnlaiudilinnae 14
r eee 15, 17, 19
ft ES | . eee 16, 28
Gir... ee ee 27
RESTATEMENT (SECOND) OF JUDGMENTS § 27
RRR SS ET A, CR Se ET CERT a BEE 22
FED. R. Civ. P. 12 (b) (2 rere 4, 15
ehh 22
renner . 15
OTHER AUTHORITIES

ZECHARIAH CHAFEE, IR., SOME PROBLEMS OF
. ee 25
MICHAEL G. COLLINS, Article III Cases, State
Court Duties, and the Madisonian Compromise,
-) , 2% een 8
RICHARD H. FALLON, ET AL., HART AND WECHS-
LER’s THE FEDERAL COURTS AND THE FEDERAL
EE OY re ees passim
JoHN P. FRANK, Historical Bases of the Federal
Judicial System, 13 LAW & CONTEMP. PRoss. 8
8 A ee ee 6, 7
JAMES F. LIEBMAN & WILLIAM F. RYAN, “Some
Effectual Power’: The Quantity and Quality of
Decisionmaking Required of Article III Courts,

98 CoLuM. L. REV. 696 (1999771: 7
CHARLES ALAN WRIGHT, LAW OF FEDERAL Cours
OY Rg ES SS SR es 26, 29

CHARLES ALAN WRIGHT, Restructuring Federal
Jurisdiction: The American Law Institute Pro-
posals, 26 WASH. & LEE L. REV. 185 (1969) ....14, 24, 26

CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE

AND PROCEDURE §§ 1350, 3522, 3723 _............. 12, 15, 27
ARTICLES OF CONFEDERATION, ARTICLE IX 6
RECORDS OF THE FEDERAL CONVENTION (Max Far-

rand ed. 19877 4 L? @&e

IN THE
Supreme Court of the United States
OCTOBER TERM, 1998
No. 98-470
RUHRGAS, A. G.,
1 Petitioner,

MARATHON OIL COMPANY,
MARATHON INTERNATIONAL OIL COMPANY,
AND MARATHON PETROLEUM NorcE A/S,

Respondents.

On Writ of Certiorari to the
United States Court of Appeals
for the Fifth Circuit

BRIEF FOR RESPONDENTS

STATEMENT OF THE CASE
A. Factual Background

On July 6, 1995, Respondents Marathon Oil Com-
pany (“Marathon”), Marathon International Oil
Company (“MIOC”), and Marathon Petroleum Norge
(“Norge”) filed this case in Texas state court, alleg-
ing conspiracy, fraud, and participation in a breach
of fiduciary duty. Marathon and MIOC alleged that
Petitioner Ruhrgas, A. G. (“Ruhrgas”) defrauded
them into loaning hundreds of millions of dollars for

2

the development of the Heimdal gas field, which is
located in the North Sea. These allegations were based
on misrepresentations and fraudulent omissions con-
tained in hundreds of letters sent by Ruhrgas to
Marathon and MIOC in Houston, Texas over a multi-
year period. Ruhrgas officials also traveled to Mara-
thon’s Houston, Texas headquarters for three in-
person meetings concerning the gas field matter.

Norge is a Norwegian corporation and an affiliate
of Marathon and MIOC. It owns the production li-
cense for the Heimdal field. Norge alleges that the
value of its license has been diminished by Ruhrgas’
refusal to permit the sale of Heimdal gas to any buy-
ers except members of Ruhrgas’ cartel, known as the
“Consortium.” Norge also alleges that Ruhrgas par-
ticipated with its joint venture partner, Statoil (the
Norwegian oil and gas company), in breaches of
fiduciary duties Statoil owed to Norge. These mat-
ters, too, were the subject of the three in-person
Houston meetings and numerous correspondence di-
rected to Respondents in Texas.

Respondents’ claims arise from, or directly relate
to, deliberate contacts by Ruhrgas with the forum
state—Texas. Furthermore, Ruhrgas has maintained
employees in Houston for many years. None of Re-
spondents’ claims present a federal question ; instead,
they are garden-variety tort claims arising under
Texas law.

B. Procedural History

After Respondents filed this lawsuit in Texas state
court, Ruhrgas removed the case to federal district
court for the Southern District of Texas on August
21, 1995. A week later it filed, among many other

3

motions, a motion to stay pending arbitration based
on an arbitration clause contained in a contract be-
tween Ruhgras and Marathon Petroleum Company
(Norway), a non-party affiliate of the Marathon Re-
spondents. On September 15, 1995, Respondents filed
a Motion to Remand, raising the absence of federal
subject matter jurisdiction.

Respondents asked the district court to stay all
activity in the case until it had considered its subject
matter jurisdiction, urging that a simple facial exam-
ination of the pleadings revealed no basis for federal
removal jurisdiction. J.A. 137. Ruhrgas then sought
an order staying consideration of subject matter
jurisdiction until it had conducted “discovery” in sup-
port of its notice of removal and in connection with
its assertion that the court lacked personal jurisdic-
tion. The court withheld a ruling on the remand
question and permitted Ruhrgas to conduct the re-
quested discovery. Thereafter, on November 17, 1995,
the court, noting the absence of any arbitration agree-
ment between the parties, denied Ruhrgas’ motion to
stay pending arbitration. The alleged existence of
such an agreement had been Ruhrgas’ principal argu-
ment in support of federal subject matter jurisdic-
tion. Nevertheless, on March 29, 1996, the district
court entered an order dismissing the case for lack of
personal jurisdiction and denying as moot the motion
to remand.

Respondents and Ruhrgas both appealed to the
Fifth Circuit. On June 10, 1997, a Fifth Circuit
panel found that Ruhrgas (a) had not met its burden
of showing an agreement to arbitrate, (b) had not
shown fraudulent joinder, and (c) had not shown
that the suit raised a federal question by virtue of the
federal common law of international relations. Thus,

4

there was no subject matter jurisdiction. The court
remanded the case to the state court from which it
was improvidently removed. This Court denied
certiorari on November 10, 1997, but the Fifth Cir-
cuit voted to rehear the case en banc.

On en banc rehearing, the Fifth Circuit limited
itself to the question whether a federal district court
may dispose of a case on a Rule 12(b)(2) motion
challenging personal jurisdiction without addressing
whether it had subject matter jurisdiction under Ar-
ticle III and the governing statutes. Concluding that
subject matter jurisdiction is a threshold issue, the
court remanded to permit the district court to deter-
mine whether such jurisdiction existed. Claiming
this ruling presented a conflict with the Second Cir-
cuit, Ruhrgas again sought certiorari. This Court
granted the Petition on December 7, 1998.

SUMMARY OF ARGUMENT

This case exemplifies why federal subject matter
jurisdiction must be determined as a threshold issue.
This action was filed in a Texas state court, by two
Texas residents and an alien, asserting claims based
on Texas law arising from conduct occurring, in sig-
nificant part, in Texas. Four years later, the case
remains stuck in a federal procedural quagmire, and
no federal court ever has found a basis for subject
matter jurisdiction. To say, as Ruhrgas does, that
such a result is compelled by judicial “efficiency” is
outrageous.

Federal courts are courts of limited jurisdiction,
deriving their judicial authority from Article III of
the Constitution. This constitutional grant of author-
ity involves two important principles: (1) The scope
of federal subject matter jurisdiction is limited by

5

Article III itself; and (2) Authority to determine the
jurisdiction of inferior federal courts within that
scope is delegated to Congress. These two principles
are deeply rooted in notions of federalism. The con-
cerns they reflect become especially pronounced when
a litigant attempts to remove a case from state to
federal court. For a federal court sitting in a re-
moved case to ignore a challenge to its authority
over the subject matter simply because the court be-
lieves it might be easier“ or more efficient” is
irreconcilable with the fundamental allocation of
judicial power within our federal system.

For every case originally filed in federal court, the
first and fundamental question the court must address
is whether it possesses constitutional and statutory
subject matter jurisdiction over the case. And this
threshold question is even more important in cases
removed from state courts, for if it even “appears”
that the answer is negative, the case shall“ be re-
manded promptly. The inquiry may not always be
“easy,” but difficulty of decision is no substitute for
subject matter jurisdiction, and federal law provides
an answer for difficult cases: all doubts must be re-
solved in favor of remand. To further minimize inter-
ference with the state courts, the federal removal
statutes were drafted to render a remand order un-
appealable. Following remand, of course, the state
court is fully capable of deciding all other issues in
the case, including questions—whether easy or hard—
about the reach of the state’s long-arm statute.

Ruhrgas argues that the approach it advocates
would promote efficiency in the administration of the
federal courts. This argument is flawed in at least
two respects. First, Ruhrgas’ approach would in fact
be inefficient for a number of reasons, especially given

6

the multi-factor analysis that would ensue whenever
a federal court was asked to ignore its subject matter
jurisdiction. Second, and more fundamentally, the
approach contemplates that the most basic limitation
on federal court authority, which goes to the core of
the allocation of judicial power between the federal
government and the states, may be ignored in the
name of administrative efficiency.

ARGUMENT

I. THE SIGNIFICANCE OF ARTICLE III AND THE
MADISONIAN COMPROMISE

The delicate balance of state and federal court
authority that would be upset by Ruhrgas’ proposals
should be viewed in light of the compromise that first
gave rise to national“ courts. While the framers of
the Constitution had little difficulty authorizing a
federal judiciary—albeit a judiciary of carefully
limited subject matter jurisdiction—the Constitu-
tional Convention hotly debated the desirability of
establishing inferior federal courts. Indeed, before
the Convention, there were only very limited national
courts.! The controversy reflected the basic constitu-

1 For instance, Article IX of the Articles of Confederation
authorized a mechanism to resolve certain disputes between
the states. That procedure was rarely invoked. See RICHARD
H. FALLON ET AL., HART AND WECHSLER’S THE FEDERAL
COURTS AND THE FEDERAL SYSTEM 6 n.31 (4th ed. 1996)
[hereinafter “HART & WECHSLER”’]; John P. Frank, Histori-
cal Bases of the Federal Judicial System, 13 LAW & CONTEMP.
Pross. 3, 8 & n.32, 33 (1948). Article IX also authorized the
Congress to appoint courts to try piracies and felonies on the
high seas. State courts invariably were appointed for this
purpose. Appeals from these courts were heard by a na-
tional judicial body—at first a Congressional committee and
then “The Court of Appeals in Cases of Capture.” Hart &

WECHSLER at 6-7; Frank, 13 LAW & CONTEMP. PrRoBs. at 8

n.32.

7

tional tension about the allocation of powers between
the states and the new federal government.

Proponents of increased national power (“Nation-
alists“) led by James Madison and Edmund Randolph,
proposed a clause establishing a “National Judiciary
. . . to consist of one or more supreme tribunals, and
of inferior tribunals.” ? The first elause created little
controversy, but there was a “strong sentiment”
against the creation of inferior federal courts of
original jurisdiction. Frank, 13 LAW & CONTEMP.
Pross. at 10. Many at the Convention wished to leave
“all litigation at the trial stage to the state courts.”
Id. John Rutledge, speaking for a group of delegates
adverse to expanded national power, flatly opposed the
creation of any lower federal courts, saying: “State
tribunals might and ought to be left in all cases to
decide in the first instance, the right to appeal to the
supreme national tribunal being sufficient to secure
the national rights and uniformity of judgments.”
1 RECORDS OF THE FEDERAL CONVENTION at 124.°

Despite Madison’s spirited defense of ini rior
federal courts, Rutledge’s motion to eliminate chem
prevailed. Madison responded with a compromise that
would authorize Congress to create inferior federal
courts and, by necessary implication, to limit their
subject matter jurisdiction within the confines of

2 Madison’s journal record from May 29, 1787 session, in 1
RECORDS OF THE FEDERAL CONVENTION at 21 (Max Farrand
ed. 1937) (emphasis added).

3 Roger Sherman of Connecticut apparently agreed. He
added that inferior courts would prove to be too costly. HART
& WECHSLER at 8; 1 RECORDS OF THE FEDERAL CONVENTION
at 124-25.

Article III.“ After more spirited debate, the Madi-
sonian Compromise, as it came to be known, even-
tually carried the day.

The authority delegated to Congress by the Madi-
sonian Compromise was implemented by the Judiciary
Act of 1789,° which established a system of inferior
federal courts with specific jurisdiction, The Judi-
ciary Act fell short of vesting federal jurisdiction to
the full extent allowed by Article III.“ Subsequent
congressional actions have redefined federal jurisdic-
tion, first expanding and then, for the last century,

41 RECORDS OF THE FEDERAL CONVENTION at 125. And
some delegates may have understood the language of the
compromise to enlist state courts for “national purposes”
rather than create new “national” courts. James F. Liebman
& William F. Ryan, “Some Effectual Power”: The Quantity
and Quality of Decisionmaking Required of Article III Courts,
98 CoLuM. L. REv. 696, 717 (1998); see also Michael G.
Collins, Article III Cases, State Court Duties, and the Madi-
sonian Compromise, 1995 WIS. L. REV. 39, 120 (“The practice
of appointing state courts as federal courts, common at the
time of the Convention, may therefore have been understood
by some delegates as the natural reference of the Compro-
mise’s language.).

5 Pierce Butler of South Carolina argued that the establish-
ment of lower federal courts would cause the states to “revolt
at such encroachments.” 1 RECORDS OF THE FEDERAL CONVEN-
TION at 125.

Act of Sept. 24, 1789, 1 Stat. 73.

7 Congress never has conferred the full jurisdictional power
of Article III to the lower federal courts. F. g., Owen Equip.
and Erection Co. v. Kroger, 437 U.S. 365, 371-74 (1978);
see also HART & WECHSLER at 32. Most of the history of suc-
cessive Judiciary Acts since the 1789-1802 period is a study
in careful drafting of boundaries to, and the placement of
limitations on, federal district court jurisdiction,

9

generally restricting the scope of federal trial court
authority.“ Throughout this history, however, Con-
gress has carefully balanced states’ rights against fed-
eral power by specifically defining and restricting the
jurisdictional reach of federal courts. E. g., Plaque-
mines Tropical Fruit Co. v. Henderson, 170 U.S. 511,
514-15 (1898); City of Indianapolis v. Chase Nat’l
Bank, 314 U.S. 63, 76 (1941). Fundamental to this
balance is the principle that federal courts may not
act without power over the case. Indeed, by 1883,
this Court had recognized a “presumption” that lower
federal courts were without subject matter jurisdic-
tion over the case “unless the contrary affirmatively

8 To be sure, federal district court jurisdiction as delineated
in the Judiciary Acts has seen periods of growth. Reconstruc-
tion Congresses enacted a series of statutes extending the
jurisdiction of the federal courts, and as HART & WECHSLER
state, [mlost sweepingly, the Judiciary Act of 1875 con-
ferred on the federal judiciary a general jurisdiction over all
cases ‘arising under’ federal law.” Jd. at 86. However, as
federal judicial business exploded, “Congress finally re-
sponded to the crisis with the Judiciary Acts of 1887-88,
which put a series of curbs on access to the lower federal
courts,” and thereby substantially fixed the framework of
the contemporary federal system. Id. at 37.

Since the 1887-88 Acts, the general trend has been for Con-
gress to be careful about lower federal court jurisdiction.
For instance, in the Lochner era, Congress proceeded to rein
in lower federal court jurisdiction as a result of federal courts
engaging in “broader and potentially more intrusive scrutiny
of state and federal legislation.” Jd. at 38. Since that time,
apart from jurisdictional grants in newly-created federal
causes of action, the most significant changes with respect to
lower federal court jurisdiction appear to have been increases
in the amount-in-controversy requirements for diversity cases
and the elimination of such requirements in federal question
cases. Id.

10

appears.” Grace v. American Century Ins. Co., 109
U.S. 278, 283-84 (1883).

Thus the Constitution left to Congress two basic
determinations: whether to establish inferior federal
courts, and the extent of their subject matter juris-
diction (within the limited authority conferred by
Article III). This constitutional decision is especially
significant to this case. It means that the threshold
issue of federal judicial competence includes both the
question whether the case falls within Article III it-
self and the question whether Congress has in fact
authorized the exercise of federal judicial authority
in the particular case. An affirmative answer to both
questions is required in order to satisfy the limits
imposed by the founders and to ensure that the inter-
ests of the states are properly protected. Judge Smith
and a majority of the Judges serving on the Fifth
Circuit correctly determined that without such an
affirmative answer, a federal district court cannot
proceed.

II. THE EXISTENCE OF FEDERAL SUBJECT MAT-
TER JURISDICTION IS A PRELIMINARY AND
NECESSARY THRESHOLD QUESTION

Mindful of these historical considerations, this
Court consistently has observed that federal subject
matter jurisdiction is a threshold consideration. E. g.,
Steel Co. v. Citizens for a Better Env’t, 118 S. Ct.
1003, 1012-13 (1998). Without such jurisdiction
over a case, an inferior federal court “cannot proceed
at all.” Ex parte McCardle, 74 U.S. (7 Wall.) 506,
514 (1869). Rather, “the only function” properly
available to a court without federal subject matter
jurisdiction “is announcing that fact and dismissing
for in a removed case, remanding] the cause.” Id.

11

This restriction springs directly “from the nature and
limits of the judicial power of the United States”
embodied in the Madisonian Compromise. Mansfield,
C. & L. M. Ry. Co. v. Swan, 111 U.S. 379, 382 (1884).

Indeed, this Court has long recognized that if a
federal district court assumes the power to act in a
case where Congress has not authorized inferior court
action, it violates Article III, the Compromise that led
to it, and more generally, the “power reserved to the
states under the Constitution.” Shamrock Oil & Gas
Corp. v. Sheets, 313 U.S. 100, 108-09 (1941). This
concept of subject matter jurisdiction is not at all
“protean” and is fundamentally different from other
matters that have been denominated “jurisdictional,”
such as personal jurisdiction (including amenability
to service of process) or improper venue.“ Federal
courts, as opposed to state courts, may reach the is-
sues in a case only if there is both constitutional and
statutory authority for subject matter jurisdiction.

Because of their unusual nature, and because it
would not simply be wrong but indeed would be
an unconstitutional invasion of the powers re-
served to the states if federal courts were to
entertain cases not within their jurisdiction, the
rule is well settled that the party seeking to in-

® See HART & WECHSLER at 1583-85. Ruhrgas, at pp. 21-24
of its brief, invokes decisions of this Court dealing with ques-
tions of abstention and supplemental jurisdiction to support
its argument that the federal courts have discretion to bypass
questions of subject matter jurisdiction when convenience
dictates. But those cases could not be more inapposite. They
all involve instances in which subject matter jurisdiction
exists, and the question is whether, as a matter of carefully
confined discretion, considerations of federalism warrant a
discretionary decision not to exercise that jurisdiction, at
least before a state court has had an opportunity to act.

12

voke the jurisdiction of a federal court must
demonstrate that the case is within the compe-
tence of that court.”

This rule is not new—it is precisely the compromise
Madison envisioned. As this Court recently observed
in Steel Co.: “This conclusion should come as no sur-
prise, since it is reflected in a long and venerable line
of our cases. The requirement that jurisdiction
be established as a threshold matter ‘spring[s] from
the nature and limits of the judicial power of the
United States’ and is ‘inflexible and without excep-
tion.“ un Whether a statutory grant of subject mat-
ter jurisdiction can or should be considered before
addressing the ultimate reach of Article III might
be debatable; however, Steel Co. confirms that sub-
ject matter jurisdiction under Article III must be
present at the threshold.” E. g., Steel Co., 112 S. Ct.
at 1022 (Stevens, J., concurring). The point, as re-
flected in the Madisonian Compromise, Article III
and the Tenth Amendment, is that both Article III
and congressional authorization to act must be pres-
ent before an inferior court may assume power over

10 Marathon Oil Co. v. Ruhrgas, A.G., 145 F.3d 211, 216
(5th Cir. 1998) (en banc) (quoting 13 CHARLES ALAN
WRIGHT FT AL., FEDERAL PRACTICE AND PROCEDURE § 3522, at
61-62 (2d ed. 1984)) (emphasis added by the court).

11 Steel Co. v. Citizens for a Better Env’t, 118 S. Ct. 1008,
1012 (1998) (quoting Mansfield, C. & L.M. Ry. Co. v. Swan,
111 U.S. 379. 382 (1884)). Ruhrgas' citation of Stee! Co.,
Pet. Brief at 15, as referring to both subject matter jurisdic-
tion and personal jurisdiction is incorrect since the case (and
the quotation) plainly refer only to subject matter jurisdic-
tion.

12 F. g., City of Indianapolis v. Chase Nat'l Bank, 314 U.S.
63. 76-77 (1941); Shamrock Oi] & Gas Corp., 313 U.S. at 108-
09; Healy, 292 U.S. at 270.

13

the case and reach any issue other than subject mat-
ter jurisdiction.

The rule to which this Court has adhered for more
than 100 years remains in effect today.“ In every
federal case, the “first question” necessarily is that
of subject matter jurisdiction, for if Congress has not
granted such jurisdiction to the inferior courts, it is
useless, if not improper, to enter into any discussion
of other questions.” Ex parte McCardle, 74 U.S. at
515. So primary is this single issue that even on
writ of error or appeal, “the first and fundamental
question is that of jurisdiction.” Mansfield, 111 U.S.
at 382.“

13 Ruhrgas’ reliance (pp. 18, 19, 28, 38) on Caterpillar, Inc.

v. Lewis, 519 U.S. 61 (1996), is wholly misplaced. In that
case, this Court held that even if subject matter jurisdiction
was lacking when the district court erroneously denied a
motion to dismiss, a decision on the merits should be upheld
so long as subject matter jurisdiction did exist at the time
judgment was rendered. This holding has no bearing on the
question whether a federal court may properly ignore a con-
tinuing lack of subject matter jurisdiction in order to reach
and decide other issues in the case.

Similarly irrelevant in the present case are this Court’s
decisions, discussed at pp. 13-15 of Ruhrgas’ brief, holding
that a federal court has “jurisdiction to determine jurisdic-
tion” and may take whatever action is appropriate (including
the issuance of discovery orders and contempt sanctions) with
respect to the making of that determination. Of course, a
court must have such authority; it does not follow, however,
that a federal court also has authority to take actions „re-
lated to the proper determination of subject matter jurisdic-
tion or unnecessary to preserve the status quo while it under-
takes that task.

1¢ The “purity” of Article III jurisdiction remains unalloyed
when the balance of state and federal authority is at stake.
None of the “dilution” cases cited in Steel Co. challenged state
court original jurisdiction.

14

III. THE NEED TO DETERMINE SUBJECT MATTER
JURISDICTION AT THE THRESHOLD IS ESPE-
CIALLY EVIDENT IN REMOVED CASES

The necessity of determining federal subject matter
jurisdiction at the outset exists in every case. In the
removal context, however, the underlying principles
of federalism become especially important. Pursuant
to 28 U.S.C. § 1446, a defendant may remove a case
from a state court simply by filing a Notice of Re-
moval in the appropriate federal district court. Once
the defendant files a copy of the notice with the clerk
of the affected state court, federal law commands
“the State court shall proceed no further unless and
until the case is remanded.” 28 U.S.C. § 1446(d).
The simplicity of this procedure, however, offers a
potential for abuse well beyond the imagination
of anyone at the Constitutional Convention. Accord-
ingly, Congress and the federal courts have placed
strict limits on removal to maintain federalism’s deli-
cate balance.

A. Statutory Limits On Removal Protect The Plain-
tiff’s Choice Of Forum And Reflect The Threshold
Nature Of Subject Matter Jurisdiction

Congress first authorized removal in the Judiciary
Act of 1789 and, since that time, has restricted re-

moval jurisdiction and placed firm guidelines on the
procedure to curb abuse. To prevent improvident

15 See generally Charles Alan Wright, Restructuring Fed-
eral Jurisdiction: The American Law Institute Proposals, 26
WASH. & LEE L. REV. 185, 203 (1969) (decrying “outrageous
practice” of stopping a state court “in its tracks by a frivo-
lous petition for removal“).

15

removal it has established several safeguards. The
first is the primacy of federal subject matter juris-
diction: “If at any time before final judgment it
appears that the district court lacks subject matter
jurisdiction, the case shall be remanded.” 28 U.S.C.
§ 1447(c) (emphasis added). Such language in a
jurisdictional statute “creates an obligation imper-
vious to judicial discretion.” Lexecon, Inc. v. Milberg
Weiss Bershad Hynes & Lerach, 118 S. Ct. 956, 962
(1998) (citing Anderson v. Yungkau, 329 U.S. 482,
485 (1947)). Indeed, this Court has observed that
“ ‘the literal words of § 1447(c) ... give no discretion
to dismiss rather than remand an action.’ The stat-
ute declares that, where subject matter jurisdiction
is lacking, the removed case ‘shall be remanded.’ ”
International Primate Protection League v. Adminis-
trators of Tulane Educ. Fund, 500 U.S. 72, 89
(1991). The body of precedent from this Court com-
manding all federal courts to scrutinize assiduously
subject matter jurisdiction at each stage of litigation
—trial and appellate—and to dismiss cases not prop-

16 This concept is mirrored in Fed. R. Civ. P. 12(h) (3),
which provides: “Whenever its appears by suggestion of the
parties or otherwise that the court lacks jurisdiction over the
subject matter, the court shall dismiss the action.” Not sur-
prisingly, lack of subject matter jurisdiction is the first de-
fense listed in Rule 12(b). And as noted in one leading
treatise: “[W]hen a [Rule 12(b)] motion is based on more
than one ground, the court should consider the Rule 12(b) (1)
challenge first since if it must dismiss the complaint for lack
of subject matter jurisdiction, the accompanying defenses and
objections become moot and do not need to be determined.”
5A CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE &
PROCEDURE § 1350, at 209-10 (2d ed 1990).

16

erly before them is overwhelming.” Likewise, the
courts of appeals have embraced this concept as an
imperative, holding that the appropriate course (even
on appeal) is to examine for subject matter jurisdic-
tion constantly and, if it is found lacking, to order
remand to the state court."

The second congressional safeguard stresses the fi-
nality of a remand for lack of subject matter juris-
diction, underscoring the notion that because state
courts are the repositories of general jurisdiction, a
remand cannot harm the defendant: “An order re-
manding a case to the State court from which it was
removed is not reviewable on appeal or otherwise
.. . . 28 U.S.C. § 1447(d).% This bright line rule
applies “no matter how plain the legal error.” Bris-

17 See, e.g., Cutler v. Rae, 48 U.S. (7 How.) 729 (1849);
Mansfield, C. & L. M. Ry. Co. v. Swan, 111 U.S. 379 (1884) ;
Louisville & Nashville R. R. Co. v. Mottley, 211 U.S. 149
(1908) ; Mitchell v. Maurer, 293 U.S. 237 (1934); Clark v.
Paul Gray, Inc., 306 U.S. 583 (1939); Philbrook v. Glodgett,
421 U.S. 707 (1975); Juidice v. Vail, 430 U.S. 327 (1977);
Bender v Williamsport Area Sch. Dist., 475 U.S. 534 (1986) ;
FW/PBS, Inc. v. City of Dallas, 493 U.S. 215 (1990).

18 See, e.g., Ziegler v. Champion Mort. Co., 913 F.2d 228
(5th Cir. 1990); Liberty Mut. Ins. Co. v. Ward Trucking
Corp., 48 F.3d 742 (3d Cir. 1995).

19 In most cases involving a remand, state courts will have
concurrent jurisdiction. In the very rare instance of a re-
mand of a case in which federal subject matter jurisdiction
is exclusive, an objection to state court authority over the
subject matter may be made on remand and, if denied, may
then be made the subject of a certiorari petition in this Court.
Of course in the present case, there is no doubt of the state
court’s jurisdiction over the subject matter.

17

coe v. Bell, 432 U.S. 404, 414 n.18 (1977). % As this
Court has pointed out, the rule was intended to avoid
“prolonged litigation of questions of jurisdiction of
the district court to which the cause is removed.”
United States v. Rice, 327 U.S. 742, 751 (1946).

As a final check, Congress has strictly drafted the
removal statute to limit a defendant’s right to re-
move. Although federal question cases are generally
removable, diversity cases may be removed only if
none of the defendants resides in the state in which
the suit was filed originally. See 28 U.S.C. § 1441(b).
A defendant may remove a case only within 30 days
from the time it becomes removable, or the opportun-
ity to remove is lost. See 28 U.S.C. § 1446(b). Con-
gress also authorized the entry of fee awards against
a removing defendant where removal is later deter-
mined to have been improvident—even if the removal
was made in good faith. See, e.g., 28 U.S.C.
§ 1447(c); News Texan, Inc. v. City of Garland, 814
F.2d 216, 220 (5th Cir. 1987). As the Eleventh Cir-
cuit has observed, such restrictions confirm that the
plaintiffs choice of forum and the defendant’s right
to remove are not “on equal footing.” Burns v. Wind-
sor Ins. Co., 31 F.3d 1092, 1095 (11th Cir. 1994).

B. Judicial Limits On Removal Require Strict Statu-
tory Construction And Resolution Of All Doubts In
Favor Of Remand

As noted above, Congress has not been alone in
checking abuse of the removal mechanism. Under
this Court’s guidance, the federal judiciary has been

20 A defendant may appeal a remand based on something
other than a lack of subject matter jurisdiction. Thermtron
Prods., Inc. v. Hermansdorfer, 423 U.S. 336, 344-45 (1976).
This, again, demonstrates that the subject matter jurisdiction
inquiry is qualitatively different.

18

careful to ensure that the limitations on federal judi-
cial authority embodied in Article III and the Madi-
sonian Compromise are respected and that the lower
federal courts confine themselves to cases in which
Congress has authorized them to proceed, leaving all
other cases to the state courts. E.g., Healy, 292 U.S.
at 269-71. The courts have been especially cautious
in the removal context. As this Court stressed in its
unanimous Shamrock Oil decision, “the power re-
served to the states under the Constitution to provide
for the determination of controversies in their courts,
may be restricted only by the action of Congress in
conformity to the Judiciary Articles of the Constitu-
tion.” 313 U.S. at 108-09. This policy, noted the
Court, requires strict construction of the removal
statutes. Id.

The courts of appeals have consistently read the
removal statutes strictly so as to require lower fed-
eral courts “scrupulously to confine their own juris-
diction to precise statutory limits.“ * In cases where
the plaintiff and defendant clash over subject matter
jurisdiction, the courts of appeals require that all
doubts be resolved in favor of remand.” Accordingly,

21 Ahern v. Charter Township, 100 F.3d 451, 454 (6th Cir.
1996) ; see also, e.g., American Home Assurance Co. v. In-
sular Underwriters Corp., 494 F.2d 317, 319 (Ist Cir. 1974) ;
Rhulen Agency, Inc. v. Alabama Ins. Guar. Ass'n, 896 F.2d
674, 678 (2d Cir. 1990) ; Brown v. Francis, 75 F.3d 860, 864-
65 (3d Cir. 1996) ; In re Lowe, 102 F.3d 731, 734-35 (4th Cir.
1996) ; Cook v. Weber, 698 F.2d 907, 909 (7th Cir. 1983) ;
International Assoc. of Entrepreneurs of Am. v. Angoff, 58
F.3d 1266, 1270 (8th Cir. 1995) ; Duncan v. Stuetzle, 76 F.3d
1480, 1485 (9th Cir. 1996) ; In re Bear River Drainage Dist.,
267 F.2d 849, 851 (10th Cir. 1959); Burns v. Windsor Ins. Co.,
31 F.3d 1092, 1095 (11th Cir. 1994).

22 See, e.g., Pacheco de Perez v. AT&T Co., 139 F.3d 1368
(11th Cir. 1998); Transit Cas. Co. v. Certain Underwriters

19

where the subject matter jurisdiction question is “dif-
ficult,” the federal judiciary already has devised a

simple but effective means of resolvi i :
— ving the issue:

IV. IGNORING SUBJECT MATTER JURISDICTI
ON IS
NEITHER CONSTITUTIONAL NOR EFFICIENT

Despite the established rule that doubts as to sub-
ject matter jurisdiction be resolved in favor of re-
mand, Ruhrgas offers this Court a new solution:
permit the federal district court to ignore “difficult”
issues of subject matter jurisdiction if ruling on an
easier” personal jurisdiction question would dispose
of the case. Ruhrgas argues that this approach is
justified in the name of judicial efficiency because it
gives federal courts more discretion to dispose of a
case, and it Spares state courts from having to rule
on personal jurisdiction issues. Like “futility juris-
diction” ** and “hypothetical jurisdiction,” = how-
ever, there is simply no constitutional, statutory or
policy support for Ruhrgas’ new concept of “efficiency
jurisdiction.” Cf. 28 U.S.C. § 1447 (e).

at Lloyd’s of London, 119 F.3d 619 (8th Cir. 1997

’ ; b ); Brown
v. Francis, 75 F.3d 860 (3d Cir. 1996); Vasquez v. Alto
Bonito Gravel Plant Corp., 56 F.3d 689 (5th Cir. 1995);
Boyer v Snap-on Tools Corp., 918 F.2d 108 (3rd Cir. 1990).

23 Under Ruhrgas’ view, even “easy” ti paren
are a “burden” for state court judges. eee, “4

24 See International Primate Protection Lea i
istrators of Tulane Educ. Fund, 500 U.S. 72. 88.85 2
(remanding ease to state court for lack of subject matter ju-
risdietion pursuant to mandatory language of § 1447 (e) de-
spite argument that remand would be futile).

25 See Steel Co. v. Citizens for a Better Env’t, 118

‘ S. Ct.
1003, 1012-13 (1998) (holding subject matter jurisdiction
could not be assumed through “hypothetical jurisdiction” in
order to reach a dispositive merits question).

20

A. Subject Matter Jurisdiction Is Fundamentally Dif-
ferent From All Other Categories Of Jurisdiction

Ruhrgas argues at some length that because its
amenability to service of process is a personal juris-
diction question, a federal district court should be
free to choose which “jurisdictional” issue to enter-
tain first. But the banner of “jurisdiction” can be
flown over a variety of issues and defenses that
might eventually arise in a case.?“ Only a court
with subject matter jurisdiction over the case, how-
ever, has the power to decide any of them. “Neither
personal jurisdiction nor venue is fundamentally pre-
liminary in the sense that subject-matter jurisdiction
is, for both are personal privileges of the defendant,
rather than absolute strictures on the court.” Leroy
v. Great W. United Corp., 443 U.S. 173, 180 (1979).

The idea of “efficiency jurisdiction” ignores the
critical distinction between subject matter and per-
sonal (or any other) jurisdiction. As this Court ex-
plained in Insurance Corp. of Ireland, Ltd. v. Com-
pagnie des Bauæites de Guinee:

26 F. g., FDIC v. Meyer, 510 U.S. 471, 475 (1994) (treating
sovereign immunity as “jurisdictional”); Summit Hea’th,
Ltd. v. Pinhas, 500 U.S. 322, 330-31 (1991) (holding conduct
reached by antitrust laws was a “jurisdictional” issue) ; Zipes
v. Trans World Airlines, Inc., 455 U.S. 385, 393 (1982) (ad-
dressing and ultimately rejecting argument that filing period
under statute was jurisdictional“); Bank One v. United
States, 157 F.3d 397, 402-03 (5th Cir. 1998) (treating limi-
tations under Quiet Title Act as “jurisdictional”). Justice
Breyer’s opinion for the Court in Wisconsin Department of
Corrections v. Schacht, 66 U.S.L.W. 4531 (U.S. June 22,
1998) demonstrates that jurisdictional defenses, such as per-
sonal jurisdiction or, as in that case, the Eleventh Amend-
ment, are considered after jurisdiction over the case.

21

Subject-matter jurisdiction, then, is an Art. III
as well as a statutory requirement; it functions
as a restriction on federal power, and contrib-
utes to the characterization of the federal sov-
ereign. Certain legal consequences directly fol-
low from this. For example, no action of the
parties can confer subject-matter jurisdiction
upon a federal court. Thus, the consent of the
parties is irrelevant, principles of estoppel do not
apply, and a party does not waive the require-
ment by failing to challenge jurisdiction early in
the proceedings. Similarly, a court, including an
appellate court, will raise lack of subject-matter
jurisdiction on its own motion. “[T]he rule,
springing from the nature and limits of the judi-
cial power of the United States is inflexible and
without exception, which requires this court, of
its own motion, to deny its jurisdiction, and, in
the exercise of its appellate power, that of all
other courts of the United States, in all cases
where such jurisdiction does not affirmatively ap-
pear in the record.”

None of this is true with respect to personal
jurisdiction.
456 U.S. 694, 702 (1982) (emphasis added and cita-
tions omitted).
Unlike subject matter jurisdiction,” personal ju-
risdiction can be conferred by agreement,” can readily

27 F. g., Steel Co, 118 S. Ct. at 1012-13; Stock West, Inc. v.
Confederated Tribes, 873 F.2d 1221, 1225 & 1228-29 (9th
Cir. 1989) (stressing that federal subject matter jurisdiction
is presumed to be lacking and also stressing that, unlike per-
sonal jurisdiction, subject matter jurisdiction requirement
cannot be conferred by contract or waived).

28 Stock West, 873 F.2d at 1228-29.

22

be waived by the defendant * and can be pretermitted
by the court until trial when it overlaps with a
decision on the merits.“ Such a defense has no bet-
ter claim to being considered in advance of the ques-
tion of who has the power over the case than any of
the other issues that might be said to have “juris-
dictional” significance.

B. Deciding Other Issues Without Subject Matter
Jurisdiction Deprives State Courts Of Their
Residual Jurisdiction

When a federal court acting without subject mat-
ter jurisdiction dismisses a case for lack of personal
jurisdiction, it impermissibly wrests that decision
from the state courts. Pursuant to their residual

29 F. g., Transaero, Inc. v. La Fuerza Aerea Boliviana, 162
F.3d 724, 729 (2d Cir. 1998); Fep. R. Civ. P. 12 (h) (1).

30 F. g., Data Disc, Inc. v. Systems Tech. Assoc., Inc., 557
F.2d 1280, 1285 (9th Cir. 1977).

31 The Second and Fifth Circuits have required federal dis-
trict courts to address a challenge to its jurisdiction over the
case before reaching a personal jurisdiction defense. See, e. g.,
Rhulen Agency, Inc. v Alabama Ins. Guar. Ass'n, 896 F.2d
674, 678 (2d Cir. 1990); Marathon Oil Co. v. Ruhrgas, 145
F.3d 211, 215 (5th Cir. 1998) (en banc); see also Nichols v.
Southeast Health Plan, 859 F. Supp. 553, 559 (S.D. Ala.
1993) (“A federal court lacking subject matter jurisdiction
cannot rule on other pending motions.”) (citing Jn re Bear
River Drainage Dist., 267 F.2d 849 (10th Cir. 1959) ).

32 Although a dismissal for lack of personal! jurisdiction is
not a decision having “claim preclusive” effect, such a decision
will have “issue preclusive” effect, i. e., it will preclude reliti-
gation of the issue of personal jurisdiction in a subsequent
action on the same claim governed by the same law. See R-
STATEMENT (SECOND) OF JUDGMENTS § 27, cmt. b and illus.
8 (1982).

23

(and general) jurisdiction, state courts are entitled to
interpret both their own long-arm statute and (sub-
ject to this Court’s review) the minimum contacts
requirement of the federal Due Process Clause.“
See Marathon Oil Co. v. Ruhrgas, 145 F.3d 211, 216
(5th Cir. 1998) (en banc). As Justice Harlan put it:
“Upon the State courts, equally with the courts of the
Union, rests the obligation to guard, enforce and pro-
tect every right granted or secured by the Constitu-
tion of the United States. Robb v. Connolly, 111

33 State courts invariably have a special interest in inter-
preting and applying their own long-arm statutes. Indeed,
the long-arm statutes in some states do not reach even to
the limits of the Due Process Clause. See, e.g., American
Investors Life Ins. Co. v. Webb Life Ins. Agency, 876 F. Supp.
1278, 1280 (S.D. Fla. 1995). And the availability of long-
arm statutes in other states is restricted to certain individuals
See, e.g., American Int'l Pictures, Inc. v. Morgan, 371 F. Supp.
528, 531 (D. Miss. 1974) (recognizing that Mississippi's long-
arm statute is available only to state residents). These differ-
ences reflect more than technical nuances; they exemplify the
kinds of policy decisions that should be left to state courts. Cf.
Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 440-41
(1952). As this Court recognized in Colorado v. Symes, “‘it is
axiomatic that the right of the states, consistently with the
Constitution and laws of the United States, to make and en-
force their own laws is equal to the right of the federal gov-
ernment to exert exclusive and supreme power in the field
that by virtue of the Constitution belongs to it.” 286 U.S.
510, 518 (1932).

Moreover, only at its limits does a state’s long-arm statute
implicate federal due process questions. Of course, any state
procedure, at its limits, can present such a question. None-
theless, these still are all fundamentally questions of state
law. Cf. Burnham v. Superior Court, 495 U.S. 604 (1990)
(plurality).

24

U.S. 624, 637 (1884); see also Tafflin v. Levitt, 493
U.S. 455, 458 (1990). Ruhrgas now asks the Court to
sacrifice the states’ right to decide disputes within
their power on the altar of efficient judicial adminis-
tration.

C. “Efficiency Jurisdiction” Would Be Inefficient And
Invite Abuse

The discretionary approach Ruhrgas advocates
supposedly is “efficient” because (1) it frees a
federal district court from having to address a “dif-
ficult” subject matter jurisdiction issue, and (2) it
frees a state court from having to address an “easy”
personal jurisdiction issue. But degree of difficulty
cannot create the authority to decide an issue, even
in the name of efficiency. See Steel Co., 118 S. Ct. at
1012-13. And, as a practical matter, “difficult” ques-
tions of subject matter jurisdiction are so rare as to
render the argument virtually moot.

The fact is that while this issue [of federal ques-
tion jurisdiction] raises fascinating intellectual
problems, and provides marvelous examination
questions for law professors to use, in practice it
is of almost no significance. I doubt if I see as
many as one reported decision a year in which
there is any serious question whether the case is
or is not within federal question jurisdiction. In
the real world almost all cases fall within stereo-
32 for which the answer is perfectly
clear.

* Charles Alan Wright, Restructuring Federal Jurisdic-
tion: The American Law Institute Proposals, 26 WASH. &
L&E L. REV. 185, 201 (1969). “Federal courts should not dis-
place state responsibility and choke the federal judicial docket
on the basis of federal concerns that in truth are only ‘imag-

Nevertheless, Ruhrgas urges a multi-factor “effi-
ciency” test that would add extraordinary uncertainty
to the process and lend itself to continuing contro-
versy.“ According to Ruhrgas, the factors that ap-
pear to be relevant to this approach include (but are
not necessarily limited to) the following: (1) Is the
question of subject matter jurisdiction “harder” than
the question of personal jurisdiction? (2) Is the
question of subject matter jurisdiction one involving
a limitation of federal authority under Article III
itself, or one arising under a statute? (3) Is the
question of personal jurisdiction one of federal law
under the due process clause or of state long-arm
law? (4) Is the claim of subject matter jurisdiction
made in good faith? (5) Which issue, if either,
would, or might, require the court to look into the
merits of the case? Given the need to examine these
and other questions under Ruhrgas’ approach, the
costs of a “discretionary,” multi-factor approach
clearly exceed the benefits.

inary.“ Foremost Ins. Co. v. Richardson, 457 U.S. 668, 685-
86 (1982) (Powell, J., dissenting, joined by Berger, C.J.,
Rehnquist and O’Connor, J.J.).

Ruhrgas efficiency arguments fail to account for any of
the practical considerations of the rule’s application. The
test advocated by the Fifth Circuit dissent in this case incor-
porates a series of factors that would authorize an inferior
court to ignore the question of subject matter jurisdiction.
It did not suggest that these factors would be exclusive or
offer any predictable means of determining the weight given
to each of the factors. It could take years, if not decades, to
bring any predictability to a new legal standard of jurisdic-
tional “efficiency.”

36 Cf. ZPCHARIAH CHAFEE, In., SOME PROBLEMS OF EQUITY
312 (1950) (“The boundary between judicial power and null-
ity should also, if possible, be a bright line, so that very little

26

Finally, any imagined efficiency resulting from
Ruhrgas’ new theory would evaporate the moment a
federal district court makes the wrong decision. This
case provides the perfect illustration:

Respondents filed a state court petition stating
claims arising only under Texas tort law. The face
of their pleading raised no federal questions, and
diversity jurisdiction was lacking.“ The claims were
based, in part, on actions Ruhrgas made while physi-
cally present in Texas during meetings with Mara-
thon specifically related to the subject matter of the
litigation. The claims also were based on more than
100 letters and telexes sent by Ruhrgas to Marathon
and MIOC in Texas, and described a fraud-based
conspiracy that specifically targeted Respondents in
Texas. Had the parties remained in state court, there
would have been no briefing on federal subject: mat-
ter jurisdiction at all, and any personal jurisdiction
challenges could have been decided by the state court.

Instead of pursuing this undeniably efficient path,
Ruhrgas chose to remove the case to federal court,
necessarily making the process more complex and less
efficient. Making arguments it now admits were
“novel,” Ruhrgas asserted federal question jurisdic-
tion on the basis of an international convention that

thought is required to enable judges to keep inside it.”). To
the same effect, see Wright, supra note 34, at 187.

37 Clearly, Ruhrgas would have preferred that this case had
been filed by Respondents’ affiliate as a breach of contract
action. The plaintiff, however, is the master of the claims, and
if it chooses not to assert a federal claim, even if one is avail-
able, the defendant cannot remove on the basis of a federal
question. See Caterpillar, Inc. v. Williams, 482 U.S. 386, 392
(1987) ; CHARLES ALAN WRIGHT, LAW OF FEDERAL COURTS
229 (5th ed. 1994).

27

did not apply according to its own terms, and the
supposed federal common law of international rela-
tions.“ Ruhrgas also claimed that Norge had been
fraudulently joined as a plaintiff, even though Norge
unquestionably owns the production license for the
Heimdal field and is claiming Ruhrgas’ actions dam-
aged the value of that interest. All of these novel

38 The Convention on the Enforcement of Foreign Arbitral
Awards only applies in cases where there is a written arbi-
tration agreement between the parties. See 3 U.S.T. 2517:
National Iranian Oil Co. v. Ashland Oil, Inc., 817 F.2d 826,
334-35 (5th Cir. 1987) ; see also 9 U.S.C. § 202 (requiring dis-
pute to be between parties with an arbitration agreement
that is within the reach of the Federal Arbitration Act).
Affidavits attached to the removal papers proclaimed “Ruhr-
gas AG has never entered into any agreement with any of
the plaintiffs concerning. . any matters which are the sub-
ject of the First Amended Petition.” J.A. 121.

This Court never has recognized such a basis for federal
subject matter jurisdiction. If any such basis exists, however,
a private commercial dispute between corporations residing in
different countries is patently insufficient to invoke it. See
Aquafaith Shipping, Ltd. v. Jarillas, 963 F.2d 806, 809 (5th
Cir. 1992).

% Removing a non-diverse case from state to federal court
on an assertion of fraudulent joinder of a plaintiff has never
been authorized by Congress nor sanctioned by this Court. Cf.
Chesapeake & Ohio Ry. Co. v. Cockrell, 282 U.S. 146, 152
(1914). Where a plaintiff—or a group of plaintiffs—has ex-
ercised its right to assert a claim against a defendant, the
proper method of challenging that assertion is by seeking a
dismissal in state court. Cf. 14B CHARLES ALAN WRIGHT ET
AL., FEDERAL PRACTICE AND PROCEDURE § 3723, at 658 (3d ed.
1998) (concluding that the “confusion” surrounding fraudu-
lent misjoinder of partics “easily could be avoided by having
the removing party challenge the misjoinder in state court
before seeking removal“).

28

issues were briefed extensively by the parties. The
district court’s refusal to rule on these “difficult” is-
sues created by Ruhrgas can hardly be described as
efficient. Had the court simply resolved all doubts in
favor of remand (as required by federal law) and
returned the case to state court, the result would have
been unappealable.“

Instead, the district judge ignored the subject mat-
ter jurisdiction challenge and erroneously dismissed
the case for lack of personal jurisdiction. In 80 do-
ing, the court created an appealable decision, injecting
even more inefficiency into the process. Although the
original Fifth Circuit panel found there was no sub-
ject matter jurisdiction and ordered a remand, Ruhr-
gas dragged the controversy out even further by peti-
tioning this Court for certiorari. Upon denial of that
petition, the Fifth Cireut (on its own motion) elected
to hear the case again, and ultimately remanded to
the district court for a determination of subject mat-
ter jurisdiction. Displeased with that result, Ruhrgas
continued to prolong the controversy by seeking fur-
ther review.

In the four years of controversy since this case was
removed, this entire state law dispute could have been
disposed of in the state system. Instead, the federal
courts have yet to establish their jurisdiction over
the case, and merits discovery has not even begun.
Clearly, Ruhrgas’ proposed “efficiency jurisdiction”
has proven anything but efficient.

Furthermore, as Ruhrgas’ tortured subject matter
jurisdiction arguments make clear, the recognition of
discretionary “efficiency jurisdiction” merely invites

41 See United States v. Rice, 327 U.S. 742, 751 (1946); 28
U.S.C. § 1447 (d).

29

abuse. If Ruhrgas’ position is upheld, defendants na-
tionwide will use the result as a basis for removing
an action to federal court whenever there is even a
possibility of subject matter jurisdiction, and then
will press for a personal jurisdiction (or other “juris-
dictional”) ruling because the subject matter juris-
diction issue is “too hard.” Such a result would re-
place the limited subject matter jurisdiction of the
federal courts with a new era of forum shopping, and
would thus undermine the allocation of authority
between federal and state courts.

CONCLUSION

Questions of federal subject matter jurisdiction are
questions of constitutional law, and “efficiency” should
play little, if any, role in their resolution.

In 1864, former Justice Benjamin Curtis made
the still-timely reminder: Let it be remembered,
also, for just now we may be in danger of for-
getting it, that questions of jurisdiction were
questions of power as between the United States
and the several States.” There is a recurring
temptation to view questions of federal jurisdic-
tion as if they were simple procedural questions,
to be resolved in whatever fashion will best serve
the desirable goal of efficient judicial administra-
tion. But when it is remembered that the deli-
cate balance of a federal system is at stake, and
that expansion of the jurisdiction of the federal
courts diminishes the power of the states, it is
apparent that efficiency cannot be the sole or the
controlling consideration.

CHARLES ALAN WRIGHT, LAW OF FEDERAL Courts, at
2 (5th ed. 1994).

It is self-evident that a federal court first must have
jurisdiction over the case before it can proceed to rule

30

on other issues in the case. Ruhrgas’ request that this
Court recognize “efficiency jurisdiction” is an affront
to federalism, a model of inefficiency, and an invita-
tion for abuse. This Court should decline to recognize
it, confirm the threshold nature of federal subject
matter jurisdiction in federal courts, and affirm the

Fifth Circuit’s decision below.“

Respectfully submitted,
DAVID L. SHAPIRO CLIFTON T. HUTCHINSON *
1575 Massachusetts Avenue J. GREGORY TAYLOR
Cambridge, MA 02138 DAVID J. SCHENCK
(617) 491-2758 DEREK S. HOLLINGSWORTH

1717 Main Street

Suite 2800

Dallas, Texas 75201

(214) 939-5500

Attorneys for Respondents
February 24, 1999 * Counsel of Record

12 In a remarkable footnote at the end of its brief (p. 38
n.20), the Petitioner suggests that the judgment below should
be reversed and the judgment of the district court affirmed.
Respondents submit that the judgment below should be af-
firmed, but in no event would it be appropriate to order that
the judgment of the district court be affirmed. The question
of personal jurisdiction, which was also before the court of
appeals, has not been ruled on, either by the initial panel or
by a majority of that court sitting en banc, and is not within
the question presented to this Court.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0234%3A08. Public record. Not legal advice.