Exxon Mobil Corp. v. Saudi Basic Industries Corp.
2005 U.S. LEXIS 2929, 161 L. Ed. 2d 454, 544 U.S. 280 (2005)
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Rule of Law:
The Rooker-Feldman doctrine is confined to cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the federal district court proceedings commenced, where the federal suit invites district court review and rejection of those judgments.
Facts:
- In 1980, subsidiaries of Exxon Mobil Corporation and Saudi Basic Industries Corp. (SABIC) formed joint ventures to produce polyethylene in Saudi Arabia.
- Approximately twenty years later, a dispute arose over the amount of royalties SABIC was charging the joint ventures for sublicenses to a specific manufacturing method.
- SABIC maintained that the royalty charges were proper under the terms of their joint venture agreements.
- ExxonMobil contended that SABIC had overcharged the joint ventures for the sublicenses.
Procedural Posture:
- SABIC filed a lawsuit in Delaware Superior Court (a state trial court) against two ExxonMobil subsidiaries, seeking a declaratory judgment that its royalty charges were proper.
- Approximately two weeks later, ExxonMobil and its subsidiaries filed suit against SABIC in the U.S. District Court for the District of New Jersey, alleging SABIC had overcharged the joint ventures.
- In the federal action, the District Court denied SABIC's motion to dismiss.
- SABIC took an interlocutory appeal of the denial to the U.S. Court of Appeals for the Third Circuit.
- While the federal appeal was pending, the Delaware state case went to trial, resulting in a jury verdict and judgment of over $400 million in favor of the ExxonMobil subsidiaries.
- The Third Circuit, on its own motion, raised the Rooker-Feldman doctrine and held that federal jurisdiction was terminated by the entry of the state-court judgment, ordering the federal case dismissed.
- The Supreme Court of the United States granted certiorari to review the Third Circuit's decision.
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Issue:
Does the Rooker-Feldman doctrine strip a federal district court of subject-matter jurisdiction over an action simply because a state court renders a judgment in a parallel proceeding while the federal case is pending?
Opinions:
Majority - Justice Ginsburg
No. The Rooker-Feldman doctrine does not strip a federal court of jurisdiction simply because a state court reaches judgment first in a parallel case. The doctrine is narrowly confined to cases where a party that lost in state court initiates a subsequent federal lawsuit to overturn that adverse state-court judgment. It applies only when the federal action is a de facto appeal of a state court decision, commenced after the state proceedings have ended, and the injury complained of is the state judgment itself. When there is parallel litigation, the effect of a state-court judgment on a pending federal case is governed by preclusion principles under the Full Faith and Credit Act, not the Rooker-Feldman jurisdictional bar. The federal court's jurisdiction, properly invoked at the start of the case, does not vanish upon the entry of a judgment in the state court.
Analysis:
This decision significantly narrowed the Rooker-Feldman doctrine, correcting its over-expansion by lower federal courts. The Court clarified that the doctrine is not a broad rule of preclusion but a narrow jurisdictional bar aimed only at preventing federal district courts from acting as appellate courts for state judgments. By distinguishing Rooker-Feldman from preclusion law and abstention doctrines, the opinion provides a clearer framework for handling parallel state and federal litigation. This ensures that federal courts do not improperly dismiss cases over which they have valid subject-matter jurisdiction, reinforcing the distinct roles of jurisdictional rules and affirmative defenses like res judicata.
