                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


3-24-2004

Saudi Basic Ind v. Exxon Corp
Precedential or Non-Precedential: Precedential

Docket No. 02-2130




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Recommended Citation
"Saudi Basic Ind v. Exxon Corp" (2004). 2004 Decisions. Paper 882.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/882


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                     PRECEDENTIAL    Gregory A. Castanias, Esq. (Argued)
                                     William K. Shirey II, Esq.
      UNITED STATES                  Jones Day
     COURT OF APPEALS                51 Louisiana Avenue, N.W.
   FOR THE THIRD CIRCUIT             Washington, D.C. 20001

                                     Kenneth R. Adamo, Esq.
                                     Michael W. Vary, Esq.
           No. 02-2130               Leozino Agozzino, Esq.
                                     Jones Day
                                     North Point
                                     901 Lakeside Avenue
 EXXON MOBIL CORPORATION;            Cleveland, OH 44114
EXXON CHEMICAL ARABIA, INC.;
MOBIL YANBU PETROCHEMICAL                  Attorneys for Appellant
       COMPANY, INC.
                                     Elizabeth J. Sher, Esq.
                v.                   Pitney, Hardin, Kipp & Szuch
                                     P.O. Box 1945
   SAUDI BASIC INDUSTRIES            Morristown, NJ 07962
       CORPORATION
                                     James W. Quinn, Esq. (Argued)
                         Appellant   David J. Lender, Esq.
                                     Weil, Gotshal & Manges LLP
                                     767 Fifth Avenue, 27 th Floor
                                     New York, NY 10153
        On Appeal from the
    United States District Court     Andrew S. Pollis, Esq.
   for the District of New Jersey    David J. Michalski, Esq.
 D.C. Civil Action No. 00-cv-03841   Hahn, Loeser & Parks
   (Honorable William H. Walls)      3300 BP America Building
                                     200 Public Square
                                     Cleveland, OH 44114
     Argued December 9, 2003
                                     K.C. Johnson, Esq.
                                     Exxon Mobil Corporation
                                     800 Bell Street, Suite 1686J
  Before: AMBRO, FUENTES and         Houston, TX 77002
    CHERTOFF, Circuit Judges
                                           Attorneys for Appellees
   (Filed March 24, 2004)
                                                agreements with Yanbu and ECAI. Later
                                                that same month ExxonMobil, Yanbu, and
      OPINION OF THE COURT                      ECAI countersued SABIC in the United
                                                States District Court for the District of
                                                New Jersey (Civil Action No. 00-3841),
                                                seeking the converse declaratory
AM BRO, Circuit Judge
                                                judgment—that SABIC had overcharged
       Saudi Basic Industries Corporation       the joint venture entities for the sublicense
(“SABIC”) appeals from the District             in violation of the joint venture
Court’s order denying its motion to             agreements.
dismiss, based on sovereign immunity, the
                                                       In January 2002, Yanbu and ECAI
claims of two ExxonMobil subsidiaries,
                                                filed an answer to SABIC’s state court
Mobil Yanbu Petrochemical Company
                                                complaint, asserting as counterclaims the
(“Yanbu”) and Exxon Chemical Arabia,
                                                same claims they had filed in their federal
Inc. (“ECAI”). We do not reach the
                                                court complaint. In March 2003, after a
foreign sovereign immunity question,
                                                two-week trial in the Delaware Superior
however, because we determine that the
                                                Court, the jury returned a $416,880,764
Rooker-Feldman doctrine bars federal
                                                verdict against SABIC in favor of
subject matter jurisdiction over the
                                                ExxonM obil. SABIC has appealed the
subsidiaries’ claims, which have been
                                                verdict, which is currently pending in the
already decided in state court.
                                                Delaware Supreme Court.
                  I.
                                                       Prior to the state court trial, SABIC
    Facts and Procedural Posture                moved to dismiss ExxonMobil’s federal
                                                court action, asserting foreign sovereign
       In 1980, SABIC and the Exxon
                                                immunity. The District Court denied the
(now ExxonMobil) subsidiaries formed
                                                motion on April 3, 2002. Saudi Basic
two joint venture entities. One, called
                                                Indus. Corp. v. ExxonMobil Corp., 194 F.
Yanpet, was the joint venture between
                                                Supp. 2d 378 (D.N.J. 2002). Though the
SABIC and Yanbu, and another, called
                                                order also addressed other issues in that
Kemya, was the joint venture between
                                                action, SABIC appeals only from the
SABIC and ECAI. Two decades later, the
                                                sovereign immunity decision.
parties began to dispute the propriety of
royalties SABIC had charged to the joint                             II.
venture entities for the sublicense to a
                                                                Jurisdiction
polyethylene manufacturing method called
the Unipol® process. In September 2000          A.     Appellate Jurisdiction
SABIC sued Yanbu and ECAI in the
                                                       We generally do not have
Delaware Superior Court seeking a
                                                jurisdiction to review interlocutory
declaratory judgment that these royalty
                                                decisions such as the denial of a motion to
charges did not violate the joint venture

                                            2
dismiss.    Under the collateral order             2002)). We focused at oral argument on
doctrine,1 however, we have recognized             whether federal subject matter jurisdiction
exceptions to this rule.        One well-          over this case fails under the Rooker-
established exception is for orders denying        Feldman doctrine because ExxonM obil’s
motions to dismiss for reasons of                  claims have already been litigated in state
immunity. See, e.g., In re Montgomery              court. Aided by post-argument letter
County, 215 F.3d at 373 (citing Nixon v.           briefs submitted by the parties, we
Fitzgerald, 457 U.S. 731 (1982)). Thus,            conclude the answer is yes.
we have appellate jurisdiction over the
                                                          The Rooker-Feldman doctrine,
District Court’s denial of SABIC’s motion
                                                   derived from two Supreme Court
to dismiss based on sovereign immunity.
                                                   cases—Rooker v. Fidelity Trust Co., 263
                                                   U.S. 413 (1923), and District of Columbia
B.       Rooker-Feldman Doctrine                   Court of Appeals v. Feldman, 460 U.S.
                                                   462 (1983)—prevents lower federal courts
        D e te rm ining that ap pella te
                                                   from “sit[ting] in direct review of the
jurisdiction is proper in a case does not
                                                   decisions of a state tribunal.” Gulla v.
end our jurisdictional inquiry. We have a
                                                   North Strabane Twp., 146 F.3d 168, 171
“continuing obligation to sua sponte raise
                                                   (3d Cir. 1998). Because Congress has
the issue of subject matter jurisdiction
                                                   conferred jurisdiction to review a state
when it is in question.” Desi’s Pizza, Inc.
                                                   court’s decision only on the Supreme
v. City of Wilkes-Barre, 321 F.3d 411, 420
                                                   Court, see 28 U.S.C. § 1257, lower federal
(3d Cir. 2003) (citing Bracken v.
                                                   courts lack the power to decide claims in
Matgouranis, 296 F.3d 160, 162 (3d Cir.
                                                   which “the relief requested . . . requires
                                                   determining that the state court’s decision
                                                   is wrong or . . . void[ing] the state court’s
     1
    The collateral order doctrine excepts a        ruling.” Desi’s Pizza, 321 F.3d at 419
“narrow range” of interlocutory decisions          (quoting FOCUS v. Allegheny County
from the general rule that only final orders       Court of Common Pleas, 75 F.3d 834, 840
are appealable. In re M ontgomery County,          (3d Cir. 1996)). As we recently explained,
215 F.3d 367, 373 (3d Cir. 2000) (citing           “a claim is barred by Rooker-Feldman
Cohen v. Beneficial Indus. Loan Corp.,             under two circumstances: first, if the claim
337 U.S. 541, 545–46 (1949)). To be an             was ‘actually litigated’ in state court prior
appealable collateral order, it must               to the filing of the federal action or,
“conclusively determine the disputed               second, if the claim is ‘inextricably
issue, the issue must be completely                intertwined with [the] state adjudication.’”
separate from the merits of the action, and        Desi’s Pizza, 321 F.3d at 419 (quoting
the decision must be effectively                   Parkview Assocs. P’ship v. City of
unreviewable on appeal from a final                Lebanon, 225 F.3d 321, 325 (3d Cir.
judgment.” Id. (citing Coopers & Lybrand           2000)).
v. Livesay, 437 U.S. 463, 468 (1978)).

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

                                                4
        ExxonM obil also argues that                 225 F.3d at 327. We simply note that our
Rooker-Feldman should not apply in this              case presents an equally clear application
case because it is not a party to the action         of the “in extrica bly intertw ined”
in Delaware state court, in which only its           circumstance, which exists when “federal
subsidiaries, Yanbu and ECAI, are                    relief can only be predicated upon a
defendants. Indeed, we have consistently             conviction that the state court was wrong,”
(and recently) held that Rooker-Feldman              id. at 325, or when “the federal court
does not bar claims of plaintiffs who were           must . . . take action that would render [the
not parties to the state court proceeding.           state court’s] judgment ineffectual,”
See Nat’l R.R. Passenger Corp. v. Pa. Pub.           FOCUS, 75 F.3d at 840. By its own
Util. Comm’n, 342 F.3d 242, 257 (3d Cir.             admission, ExxonMobil seeks to maintain
2003); Marks v. Stinson, 19 F.3d 873, 886            its federal action as an “insurance policy”
n.11 (3d Cir. 1994). But we have also                in order to relitigate the overcharge issue if
noted that this limiting principle of the            SABIC prevails in its efforts to overturn
Rooker-Feldman doctrine “has a close                 the state court verdict in favor of
affinity to the principles embodied in the           ExxonM obil. If that were to happen,
legal concepts of claim and issue                    ExxonMobil’s federal action would
preclusion.” Valenti v. Mitchell, 962 F.2d           squarely be seeking to invalidate a final
288, 297 (3d Cir. 1992). Claims and                  judgment of the state court, the very
issues decided against an entity bind also           situation contemplated by Rooker-
its parties in privity, including wholly-            Feldman’s “inextricably intertwined” bar.
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                           Because ExxonMobil’s federal
ExxonMobil’s interest in its federal claims          claims were identical to the claims in
is identical to its subsidiaries’ interest in        which the Delaware Superior Court
their state court claims, because its right to       reached a final judgment, they are barred
recover is derivative of its subsidiaries’           by the Rooker-Feldman doctrine. Even
right to recover. Indeed, both Yanbu and             within our Court’s narrow confines for
ECAI are co-plaintiffs with ExxonMobil               Rooker-Feldman, this case is easily
in the federal action.                               cabined. We cannot imagine a more
                                                     classic invocation of the Rooker-Feldman
       As ExxonMobil’s federal claims
                                                     jurisdictional bar than to preclude a party
were “actually litigated” in state court, we
                                                     from maintaining a federal action as an
need not analyze whether, under the
                                                     “insurance policy” in case the state trial
alternative prong of the Rooker-Feldman
                                                     court decision in that party’s favor is
doctrine, they were “inextricably
                                                     overturned by an appellate state court. We
intertwined with a previous state court
                                                     therefore vacate those aspects of the
adjudication.” Parkview Assocs. P’ship,
                                                     District Court’s order addressing Civil

                                                 5
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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