Exxon Mobil Corporation v. Saudi Basic Industries Corporation

PRECEDENTIAL
UNITED STATES
COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 02-2130
EXXON MOBIL CORPORATION;
EXXON CHEMICAL ARABIA, INC.;
MOBIL YANBU PETROCHEMICAL
COMPANY, INC.
v.
SAUDI BASIC INDUSTRIES
CORPORATION
Appellant
On Appeal from the
United States District Court
for the District of New Jersey
D.C. Civil Action No. 00-cv-03841
(Honorable William H. Walls)
Argued December 9, 2003
Before: AMBRO, FUENTES and
CHERTOFF, Circuit Judges
(Filed March 24, 2004)
Gregory A. Castanias, Esq. (Argued)
William K. Shirey II, Esq.
Jones Day
51 Louisiana Avenue, N.W.
Washington, D.C. 20001
Kenneth R. Adamo, Esq.
Michael W. Vary, Esq.
Leozino Agozzino, Esq.
Jones Day
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Attorneys for Appellant
Elizabeth J. Sher, Esq.
Pitney, Hardin, Kipp & Szuch
P.O. Box 1945
Morristown, NJ 07962
James W. Quinn, Esq. (Argued)
David J. Lender, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue, 27th Floor
New York, NY 10153
Andrew S. Pollis, Esq.
David J. Michalski, Esq.
Hahn, Loeser & Parks
3300 BP America Building
200 Public Square
Cleveland, OH 44114
K.C. Johnson, Esq.
Exxon Mobil Corporation
800 Bell Street, Suite 1686J
Houston, TX 77002
Attorneys for Appellees

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OPINION OF THE COURT
AM BRO, Circuit Judge
Saudi Basic Industries Corporation
(“SABIC”) appeals from the District
Court’s order denying its motion to
dismiss, based on sovereign immunity, the
claims of two ExxonMobil subsidiaries,
Mobil Yanbu Petrochemical Company
(“Yanbu”) and Exxon Chemical Arabia,
Inc. (“ECAI”). We do not reach the
foreign sovereign immunity question,
however, because we determine that the
Rooker-Feldman doctrine bars federal
subject matter jurisdiction over the
subsidiaries’ claims, which have been
already decided in state court.
I.
Facts and Procedural Posture
In 1980, SABIC and the Exxon
(now ExxonMobil) subsidiaries formed
two joint venture entities. One, called
Yanpet, was the joint venture between
SABIC and Yanbu, and another, called
Kemya, was the joint venture between
SABIC and ECAI. Two decades later, the
parties began to dispute the propriety of
royalties SABIC had charged to the joint
venture entities for the sublicense to a
polyethylene manufacturing method called
the Unipol® process. In September 2000
SABIC sued Yanbu and ECAI in the
Delaware Superior Court seeking a
declaratory judgment that these royalty
charges did not violate the joint venture
agreements with Yanbu and ECAI. Later
that same month ExxonMobil, Yanbu, and
ECAI countersued SABIC in the United
States District Court for the District of
New Jersey (Civil Action No. 00-3841),
seeking the converse declaratory
judgment—that SABIC had overcharged
the joint venture entities for the sublicense
in violation of the joint venture
agreements.
In January 2002, Yanbu and ECAI
filed an answer to SABIC’s state court
complaint, asserting as counterclaims the
same claims they had filed in their federal
court complaint. In March 2003, after a
two-week trial in the Delaware Superior
Court, the jury returned a $416,880,764
verdict against SABIC in favor of
ExxonMobil. SABIC has appealed the
verdict, which is currently pending in the
Delaware Supreme Court.
Prior to the state court trial, SABIC
moved to dismiss ExxonMobil’s federal
court action, asserting foreign sovereign
immunity. The District Court denied the
motion on April 3, 2002. Saudi Basic
Indus. Corp. v. ExxonMobil Corp., 194 F.
Supp. 2d 378 (D.N.J. 2002). Though the
order also addressed other issues in that
action, SABIC appeals only from the
sovereign immunity decision.
II.
Jurisdiction
A. Appellate Jurisdiction
We generally do not have
jurisdiction to review interlocutory
decisions such as the denial of a motion to

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dismiss. Under the collateral order
doctrine,1 however, we have recognized
exceptions to this rule. One well-
established exception is for orders denying
motions to dismiss for reasons of
immunity. See, e.g., In re Montgomery
County, 215 F.3d at 373 (citing Nixon v.
Fitzgerald, 457 U.S. 731 (1982)). Thus,
we have appellate jurisdiction over the
District Court’s denial of SABIC’s motion
to dismiss based on sovereign immunity.
B. Rooker-Feldman Doctrine
D e te rm ining that ap pella te
jurisdiction is proper in a case does not
end our jurisdictional inquiry. We have a
“continuing obligation to sua sponte raise
the issue of subject matter jurisdiction
when it is in question.” Desi’s Pizza, Inc.
v. City of Wilkes-Barre, 321 F.3d 411, 420
(3d Cir. 2003) (citing Bracken v.
Matgouranis, 296 F.3d 160, 162 (3d Cir.
2002)). We focused at oral argument on
whether federal subject matter jurisdiction
over this case fails under the Rooker-
Feldman doctrine because ExxonM obil’s
claims have already been litigated in state
court. Aided by post-argument letter
briefs submitted by the parties, we
conclude the answer is yes.
The Rooker-Feldman doctrine,
derived from two Supreme Court
cases—Rooker v. Fidelity Trust Co., 263
U.S. 413 (1923), and District of Columbia
Court of Appeals v. Feldman, 460 U.S.
462 (1983)—prevents lower federal courts
from “sit[ting] in direct review of the
decisions of a state tribunal.” Gulla v.
North Strabane Twp., 146 F.3d 168, 171
(3d Cir. 1998). Because Congress has
conferred jurisdiction to review a state
court’s decision only on the Supreme
Court, see 28 U.S.C. § 1257, lower federal
courts lack the power to decide claims in
which “the relief requested . . . requires
determining that the state court’s decision
is wrong or . . . void[ing] the state court’s
ruling.” Desi’s Pizza, 321 F.3d at 419
(quoting FOCUS v. Allegheny County
Court of Common Pleas, 75 F.3d 834, 840
(3d Cir. 1996)). As we recently explained,
“a claim is barred by Rooker-Feldman
under two circumstances: first, if the claim
was ‘actually litigated’ in state court prior
to the filing of the federal action or,
second, if the claim is ‘inextricably
intertwined with [the] state adjudication.’”
Desi’s Pizza, 321 F.3d at 419 (quoting
Parkview Assocs. P’ship v. City of
Lebanon, 225 F.3d 321, 325 (3d Cir.
2000)).
1The collateral order doctrine excepts a
“narrow range” of interlocutory decisions
from the general rule that only final orders
are appealable. In re Montgomery County,
215 F.3d 367, 373 (3d Cir. 2000) (citing
Cohen v. Beneficial Indus. Loan Corp.,
337 U.S. 541, 545–46 (1949)). To be an
appealable collateral order, it must
“conclusively determine the disputed
issue, the issue must be completely
separate from the merits of the action, and
the decision must be effectively
unreviewable on appeal from a final
judgment.” Id. (citing Coopers & Lybrand
v. Livesay, 437 U.S. 463, 468 (1978)).

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The state level decision need not be
of its highest court. The Rooker-Feldman
doctrine applies equally to final decisions
of lower state courts. FOCUS, 75 F.3d at
840.
Here there is no dispute that
ExxonMobil’s claims are identical to the
claims upon which the Delaware Superior
Court reached a final judgment. Thus,
though our Court takes a narrow view of
the Rooker-Feldman doctrine, Parkview
Assocs. P’ship, 225 F.3d at 326, litigating
ExxonMobil’s claims to final judgment in
state court presents the “paradigm situation
in which Rooker-Feldman precludes a
federal district court from proceeding.”
E.B. v. Verniero, 119 F.3d 1077, 1090–91
(3d Cir. 1997) (describing a case in which
the federal court plaintiff sought an
injunction directing that a state court order
not be carried out).
ExxonMobil argues that the
“actually litigated” circumstance does not
trigger Rooker-Feldman because the
March 2003 state court judgment was not
reached prior to ExxonMobil’s filing of
the federal action in August 2000. It cites
to Desi’s Pizza, in which we said Rooker-
Feldman bars a claim “if the claim was
‘actually litigated’ in state court prior to
the filing of the federal action,” 321 F.3d
at 419. But we do not read this language
as imposing a new requirement that, in
order for the “actually litigated” trigger to
apply, the plaintiff’s federal claims must
be filed after the state claims reach a final
judgment. In deciding whether a claim
was “actually litigated” in state court for
Rooker-Feldman purposes, we have
consistently looked to the substance of the
state court’s judgment compared to the
plaintiff’s claims in the federal action. See
Parkview Assocs. P’ship, 225 F.3d at
325–36; Gulla, 146 F.3d at 173. Filing the
latter before the state court judgment does
not escape Rooker-Feldman’s grasp. The
only timing relevant is whether the state
judgment precedes a federal judgment on
the same claims. Desi’s Pizza itself is
illustrative because there the state court
reached final judgment after the plaintiff
filed claims in federal court. Yet we
decided that the plaintiff’s claims were not
“actually litigated” because neither its state
court pleadings nor the state court’s
judgment discussed or referenced the
claims it filed in federal court. If in Desi’s
Pizza we had intended to adopt a new
requirement that the state court must reach
a final judgment prior to the filing of the
federal action in order for the “actually
litigated” trigger to apply, we had a full
opportunity to do so. Furthermore, were
we to find that the Rooker-Feldman
“actually litigated” trigger did not apply to
federal actions filed prior to the state
court’s final judgment, we would be
encouraging parties to maintain federal
actions as “insurance policies” while their
state court claims were pending. This
defe ats an “elemen tary principle”
underpinning the Rooker-Feld m an
doctrine—“that a party’s recourse for an
adverse decision in state court is an appeal
to the appropriate state appellate court, and
ultimately the Supreme Court under §
1257, not a separate action in federal
court.” Parkview Assocs. P’ship, 225 F.3d
at 324.

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ExxonMobil also argues that
Rooker-Feldman should not apply in this
case because it is not a party to the action
in Delaware state court, in which only its
subsidiaries, Yanbu and ECAI, are
defendants. Indeed, we have consistently
(and recently) held that Rooker-Feldman
does not bar claims of plaintiffs who were
not parties to the state court proceeding.
See Nat’l R.R. Passenger Corp. v. Pa. Pub.
Util. Comm’n, 342 F.3d 242, 257 (3d Cir.
2003); Marks v. Stinson, 19 F.3d 873, 886
n.11 (3d Cir. 1994). But we have also
noted that this limiting principle of the
Rooker-Feldman doctrine “has a close
affinity to the principles embodied in the
legal concepts of claim and issue
preclusion.” Valenti v. Mitchell, 962 F.2d
288, 297 (3d Cir. 1992). Claims and
issues decided against an entity bind also
its parties in privity, including wholly-
owned subsidiaries. Lubrizol Corp. v.
Exxon Corp., 929 F.2d 960, 966 (3d Cir.
1991). Underscoring this common sense
privity principle is the fact that
ExxonMobil’s interest in its federal claims
is identical to its subsidiaries’ interest in
their state court claims, because its right to
recover is derivative of its subsidiaries’
right to recover. Indeed, both Yanbu and
ECAI are co-plaintiffs with ExxonMobil
in the federal action.
As ExxonMobil’s federal claims
were “actually litigated” in state court, we
need not analyze whether, under the
alternative prong of the Rooker-Feldman
doctrine, they were “inextricably
intertwined with a previous state court
adjudication.” Parkview Assocs. P’ship,
225 F.3d at 327. We simply note that our
case presents an equally clear application
of the “in extrica bly intertw ined”
circumstance, which exists when “federal
relief can only be predicated upon a
conviction that the state court was wrong,”
id. at 325, or when “the federal court
must . . . take action that would render [the
state court’s] judgment ineffectual,”
FOCUS, 75 F.3d at 840. By its own
admission, ExxonMobil seeks to maintain
its federal action as an “insurance policy”
in order to relitigate the overcharge issue if
SABIC prevails in its efforts to overturn
the state court verdict in favor of
ExxonMobil. If that were to happen,
ExxonMobil’s federal action would
squarely be seeking to invalidate a final
judgment of the state court, the very
situation contemplated by Rooker-
Feldman’s “inextricably intertwined” bar.
* * * * *
Because ExxonMobil’s federal
claims were identical to the claims in
which the Delaware Superior Court
reached a final judgment, they are barred
by the Rooker-Feldman doctrine. Even
within our Court’s narrow confines for
Rooker-Feldman, this case is easily
cabined. We cannot imagine a more
classic invocation of the Rooker-Feldman
jurisdictional bar than to preclude a party
from maintaining a federal action as an
“insurance policy” in case the state trial
court decision in that party’s favor is
overturned by an appellate state court. We
therefore vacate those aspects of the
District Court’s order addressing Civil

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Action No. 00-3841, the subject of this
appeal, and remand with instructions to
dismiss that action for lack of subject
matter jurisdiction.

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