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Law School Case Brief

Exxon Mobil Corp. v. Saudi Basic Indus. Corp. - 544 U.S. 280, 125 S. Ct. 1517 (2005)

Rule:

The Rooker-Feldman doctrine is confined to cases of the kind from which the doctrine acquired its name: cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments. The Rooker-Feldman doctrine does not otherwise override or supplant preclusion doctrine or augment the circumscribed doctrines that allow federal courts to stay or dismiss proceedings in deference to state-court actions.

Facts:

Two subsidiaries of an American corporation formed joint ventures with a Saudi corporation. When a dispute arose over royalties that the Saudi corporation had charged the joint ventures, the Saudi corporation pre-emptively sued the subsidiaries in the Delaware Superior Court, seeking a declaratory judgment that the royalties were proper. About 2 weeks later, the American corporation and the subsidiaries countersued in the United States District Court for the District of New Jersey, alleging that the Saudi corporation had overcharged the joint ventures for sublicenses. Before the trial in the state court, the Saudi corporation moved to dismiss the federal suit. After the federal court denied the motion, the Saudi corporation took an interlocutory appeal. The state court entered a judgment on a jury verdict of over $400 million in favor of the subsidiaries. The Saudi corporation appealed the judgment to the Delaware Supreme Court. On interlocutory appeal, over 8 months after the state-court jury verdict, the United States Court of Appeals for the Third Circuit, on its own motion, raised the question whether subject-matter jurisdiction over the federal suit failed under the Rooker-Feldman doctrine because the American corporation's claims had already been litigated in state court. The court of appeals did not question the district court's subject-matter jurisdiction at the outset of the suit but held that federal jurisdiction had terminated when the state trial court entered judgment on the jury verdict. 

Rooker v Fidelity Trust Co. held that federal district courts were empowered to exercise only original, not appellate, jurisdiction and that Congress had empowered the Supreme Court of the United States alone to exercise appellate authority to reverse or modify a state-court judgment. Thus, federal district Courts lacked jurisdiction over suits seeking reversal or modification of state-court judgments.

Issue:

Did the federal appellate court properly hold that federal jurisdiction had terminated when the state trial court entered judgment on the jury verdict?

Answer:

No.

Conclusion:

The judgment was reversed and the case was remanded for further proceedings. The Supreme Court of the United States held that the American corporation and the subsidiaries plainly had not repaired to federal court to undo the state court judgment that was ultimately entered in its favor. Rather, it appeared that the American corporation and the subsidiaries filed suit in federal district court (only two weeks after the Saudi corporation filed in Delaware state court and well before any judgment in state court) to protect itself in the event it lost in state court on grounds (such as the state statute of limitations) that might not have precluded relief in the federal venue. The Court clarified that the Rooker-Feldman doctrine did not prevent the district court from exercising jurisdiction when American corporation and the subsidiaries filed the federal action because the pendency of an action in the state court was no bar to proceedings concerning the same matter in a federal court having jurisdiction. Moreover, the doctrine did not emerge to vanquish jurisdiction after American corporation and the subsidiaries prevailed in the Delaware courts because disposition of the federal action, once the state-court adjudication was complete, would be governed by preclusion law and preclusion was not a jurisdictional matter. Thus, the lower court erred in concluding that the Rooker-Feldman doctrine precluded exercise of its federal subject-matter jurisdiction.

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