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Given the pundits’ reasons for the recent stock market gyrations, it seems appropriate that the first forum-selection case decided by the U.S. Supreme Court this year involves an oil company. Subsidiaries of Exxon Mobil Corp. and Saudi Basic Industries Corp. (SABIC), an entity 70% owned by the Saudi Arabia government and 30% owned by private investors, entered into a joint venture decades ago. A few years ago, Exxon and SABIC began to dispute certain licensing royalties that SABIC had charged to the joint venture. Dispute provides view of forum-selection scenarios This dispute provides a backdrop for a couple of typical forum-selection scenarios: The parties begin to lose faith that the dispute will be resolved short of litigation, and attention turns to where the dispute ought to be litigated. Someone will be the first to file. Here, SABIC won that race, by filing a declaratory judgment action against Exxon subsidiaries in Delaware superior court. Having been sued in a forum that was not its first choice, and lacking the possibility of removing the Delaware action to federal court, Exxon, the loser in the race to the courthouse, and its subsidiaries, filed a reactive lawsuit in an alternative forum, the U.S. District Court for the District of New Jersey, hoping to obtain a favorable judgment there. Exxon then filed counterclaims against SABIC in the Delaware state court action. The Exxon-SABIC dispute also could have presented a somewhat different forum-selection scenario. For example, instead of filing the reactive federal lawsuit, Exxon might have decided to take its chances in the Delaware court action, hoping to prevail on its counterclaim in state court. If Exxon loses the state court action, it could then decide to file an action in federal court. Both scenarios raise two important issues: preclusion and the venerable Rooker-Feldman doctrine. In Exxon Mobil Corp. v. Saudi Basic Industries Corp., 125 S. Ct. 1517 (2005), decided on March 30, the Supreme Court discussed the Rooker-Feldman issue. The Rooker-Feldman doctrine has been applied directly by the Supreme Court to bar federal jurisdiction only twice: in its namesake cases-in 1923 in the Rooker case ( Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923)), and in 1983 in the Feldman case ( District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983)). Nonetheless, the doctrine has assumed increasing importance during the last few forum-jockeying decades as the loser of a state court case seeks to avoid its fate by trying to persuade a federal court that the state court judgment violates the loser’s federal rights. Simply stated, the Rooker-Feldman doctrine generally eliminates the viability of this tactic because it bars an unsuccessful litigant from seeking essentially to review a state court judgment in a federal district court. In Rooker, for example, the losers of a state court case then file suit in a federal court to have the state court judgment declared null and void. In Rooker, the Supreme Court ruled that the federal district court lacked subject-matter jurisdiction over such suits because the plaintiffs were in effect appealing a state court judgment. Federal district courts generally lack appellate jurisdiction. For example, the federal district court jurisdictional grants generally provide for solely original jurisdiction. See, e.g., 28 U.S.C. 1331 (granting district courts original jurisdiction over federal questions cases). As the courts in Rooker and Feldman explained, Congress has vested only the U.S. Supreme Court with appellate jurisdiction to reverse or modify a state court judgment. See 28 U.S.C. 1257. Accordingly, a federal district court lacks jurisdiction over a case in which the relief the plaintiff seeks is essentially an attack on the state court judgment. Rather, if the losing party in state court believes that its federal rights are in jeopardy, it may seek certiorari in the U.S. Supreme Court under 28 U.S.C. 1257. How did the Rooker-Feldman issue arise in Exxon? SABIC responded to the federal action by moving to dismiss, alleging immunity under the Foreign Sovereign Immunities Act. The New Jersey district court denied the motion, and SABIC appealed to the 3d U.S. Circuit Court of Appeals. By the time the 3d Circuit held oral argument, the Delaware state court judgment, in favor of Exxon, had been entered. The 3d Circuit raised the Rooker-Feldman issue sua sponte. It noted that there was federal jurisdiction over Exxon’s suit when it was filed, but queried whether jurisdiction was extinguished upon entry of the Delaware court judgment. The 3d Circuit ruled that Rooker-Feldman applied, rejecting Exxon’s argument that the prejudgment filing of the federal action precluded the application of the doctrine. Although Exxon won on its counterclaims in the Delaware action, it wanted to keep the federal action alive in the event that SABIC won its appeal in the Delaware state courts. The 3d Circuit characterized Exxon’s federal lawsuit as an “insurance policy,” and it decided that Rooker-Feldman applied to discourage parties from filing protective actions while their claims are pending in a state court. Here, the 3d Circuit takes an excursion into the “inextricably intertwined” aspect of the Rooker-Feldman doctrine to justify holding that the doctrine applies no matter when the action is filed. In Feldman, two graduates of a law school not accredited by the American Bar Association petitioned the District of Columbia Court of Appeals to waive a court rule that required District of Columbia bar applicants to have graduated from a law school approved by the ABA. After the D.C. high court denied their waiver request, the plaintiffs filed a second lawsuit in the U.S. District Court for the District of Columbia. The Supreme Court in Feldman first observed that the district court lacked authority to review a final judicial determination of the D.C. courts. Thus, the Supreme Court next stated the “crucial question” was whether the proceedings in the D.C. court were “judicial in nature.” The court concluded that the D.C. court had acted in both a judicial and a legislative capacity. When applying the accreditation rule to the plaintiffs, the D.C. court had acted judicially. To the extent that the plaintiffs’ federal court action sought review of the denial of their petition for the waiver, the federal district court therefore lacked subject-matter jurisdiction over the complaint. However, the Supreme Court found that challenges to the constitutionality of a state court bar rule do not necessarily require a federal district court to review a final state court judgment in a judicial proceeding. Accordingly, such a rule could be contested in an original federal court action so long as the plaintiffs did not seek review of the rule’s application in their particular case. The next step in the analysis is to take a look at the plaintiffs’ complaint to determine whether any aspect of it is subject to federal court jurisdiction. In Feldman, the plaintiffs had alleged that the D.C. court had acted arbitrarily in denying their waiver, because the court had formerly granted waivers to other graduates of unaccredited law schools. That allegation, though it could be construed as a challenge to the District of Columbia Bar rule, could not be pursued in federal court because it was “inextricably intertwined with the District of Columbia Court of Appeals decisions, in judicial proceedings, to deny the [plaintiffs'] petitions.” The 3d Circuit determined that if Exxon lost its appeal in Delaware state court, it would be endeavoring in the federal action to invalidate the state court judgment. According to the 3d Circuit, this is “the very situation” contemplated by the Rooker-Feldman “inextricably intertwined” jurisdictional bar. The Supreme Court reversed. The court affirmed that the pendency of an action in a state court is not a bar to concurrent proceedings concerning the same matter in a federal court. Thus, where there is parallel state and federal litigation, “ Rooker-Feldman is not triggered simply by the entry of the judgment in state court.” The court noted that the comity or abstention doctrines may in certain circumstances permit or even require the federal court to stay or dismiss the federal action in favor of state court litigation. Not easy to get rid of concurrent jurisdiction However, properly invoked concurrent jurisdiction does not vanish simply because the state court reaches judgment on the same, or a related, question while the case remains pending in a federal court. On the other hand, the court’s Rooker-Feldman analysis would have barred a post-judgment federal court filing by Exxon, the second scenario discussed at the outset. More importantly, and here is the court’s civil procedure lesson, the correct doctrine to invoke in the concurrent filing situation is preclusion, not Rooker-Feldman. The Supreme Court reminds us that disposition of the federal action, once the state court adjudication is complete, would be governed by preclusion law. The Full Faith and Credit Act, 28 U.S.C. 1738, requires the federal court to give the same preclusive effect to a state court judgment as another court of that state would give. Preclusion has nothing to do with jurisdiction, but rather is an affirmative defense. “In parallel litigation, the federal court may be bound to recognize the claim-and issue-preclusive effects of the state-court judgment, but federal jurisdiction over an action does not terminate automatically on the entry of judgment in the state court.” The court concluded by finding that Exxon’s conduct in filing a reactive federal lawsuit did not represent the Rooker-Feldman’s “paradigm situation.” Indeed, contrary to the 3d Circuit’s criticism of Exxon’s strategy, the Supreme Court found that there is nothing necessarily inappropriate about filing protective actions. The Exxon case makes it clear that practitioners will have to bone up on the better-known, but often difficult to apply, preclusion law. Georgene Vairo is a professor of law and William M. Rains fellow at Loyola Law School, Los Angeles. She can be reached at [email protected].

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