IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________

No. 96-20361

_______________

MARATHON OIL COMPANY,

MARATHON INTERNATIONAL OIL COMPANY,

and

MARATHON PETROLEUM NORGE A/S,

Plaintiffs-Appellants/

Cross-Appellees,

VERSUS

A.G. RUHRGAS,

Defendant-Appellee/

Cross-Appellant.

_________________________

Appeal from the United States District Court

for the Southern District of Texas

_________________________ June 22, 1998

Before POLITZ, Chief Judge, KING, JOLLY, HIGGINBOTHAM, DAVIS,

JONES, SMITH, DUHÉ, WIENER , BARKSDALE, EMILIO M. GARZA, DeMOSS,

BENAVIDES, STEWART, PARKER, and DENNIS, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Today we decide whether, on removal from a state court, a

district court has discretion to resolve a challenge to personal

jurisdict ion before ruling on a legally more difficult question

concerning its alleged lack of subject-matter jurisdiction. We

conclude that, at least in remove d cases, district courts should2

dec ide issues of subject-matter jurisdiction first and, only if

subject-matter jurisdiction is found to exist, reac h issues of

personal juris diction. Accordingly, we vacate the judgment and

remand with instruction to rule on th e motion to remand to state

court for lack of subject-matter jurisdiction.

I.

Marathon Oil Company, Marathon International Oil Company, and

Marathon Petroleum Norge A/S (collectively “Marathon”) sued

Ruhrgas, a German gas supplier, under various tort theories in

Texas sta te court. The alleged torts arose from Ruhrgas's

relationship with Marathon Petro leum Company Norway (“MPCN”), a

Marathon affiliate that is the equitable owner of a portion of the

Heimdal natural gas field in the North Atlantic. Marathon

Petroleum Norge A/S (“Norge”), as a Norwegian company, is required

by law to hold legal title to MPCN's interest in the field.

MPCN entered into a sale agreement with Ruhrgas and other gas

buyers whereby, for a premium price, the buyers would purchase

MPCN's gas from the Heimdal field. This agreement provides that

any disputes between MPCN and the buyers will be resolved through

arbitration in Sweden.

At some point after the agreement was signed, the price of gas

fell, and the buyers, including Ruhrgas, refused to pay MPCN the

premium contract price. MPCN instituted arbitration proceedings in1 Marathon Oil Company owns Marathon International Oil Company, which in

turn owns Norge and MPCN. MPCN is not a party to this suit.

2 Ruhrgas cross-appealed, contending that it should have been entitled to

an order compelling the plaintiffs to arbitrate.

3 Sweden, whereupon MPCN's affiliates 1 instituted these tort suits

against Ruhrgas in Texas state court. They allege that Ruhrgas

conspired to monopolize the gas market, tortiously interfered with

MPCN's business opportunities, and committed other, similar torts,

which had the effect of harming them, as lenders to MPCN.

Ruhrgas removed the case to federal court, asserting diversity

jurisdiction under 28 U.S.C. § 1332(a), federal arbit ration

jurisdiction under 9 U.S.C. § 205, and federal question

jurisdiction under 28 U.S.C. § 1331 based on the federal common law

of international relations. Ruhrgas moved to dismiss for lack of

personal jurisdiction and, in the alternative, requested a stay of

proceedings pending arbitration. Marathon moved to remand to state

court, asserting a lack of federal subject-matter jurisdiction, and

opposed compelled arbitration.

The district court determined that, under the caselaw of this

circuit, it had discretion to address personal jurisdiction before

reaching the legally more difficult subject-matter jurisdiction

issue. Finding personal jurisdiction lacking, the court dismissed

the action and otherwise denied Ruhrgas's motion to com pel

arbitration. Marathon appealed, arguing that, on a motion to

remand, t he district court should have considered subject-matter

jurisdiction before deciding personal jurisdiction. 2

A panel of this court determined that the district court3 Marathon Oil Co. v. Ruhrgas, A.G.

, 115 F.3d 315, 318 (5th Cir.) (citing

Villar v. Crowley Maritime Corp. , 990 F.2d 1489 (5th Cir. 1993); A sociacion Nacional

de Pescadores v. Dow Quimica

, 988 F.2d 559 (5th Cir. 1 993); Walker v. Savell

, 335 F.2d 536 (5th Cir. 1964)), cert. denied , 118 S. Ct. 413 (1997).

4 Id. (citing Ziegler v. Champion Mortgage Co.

, 913 F.2d 228 (5th Cir. 1990)).

5 See Marathon Oil Co. v. Ruhrgas, A.G.

, 129 F.3d 746 (1997) (granting

rehearing en banc).

4 lacked subject-matter jurisdiction, and thu s it vacated the

dismissal for lack of personal jurisdiction and remanded with

instruction to remand to state court. Although acknowledging that

“in some instances we have permitted the dismissal of an action for

lack of personal jurisdiction without considering the question of

subject matter ju risdiction,” 3 the panel concluded that “[t]he

appropriate course [for a federal court] is to examine for subject

matter jurisdiction constantly and, if it is found lacking, to

remand to state court if appropriate, or otherwise dismiss.” 4

After the Supreme Court denied certiorari, we granted en banc

review. 5 We now take this opportunity, as an en banc court, to

reconcile the conflicting circuit precedent cited by the panel and

to explain a district court’s obligation concerning which challenge

it should decide first when confronted with a removed case in which

the existence of subject-matter jurisdiction is q uestionable and

personal jurisdiction is contested. We conclude that the court

should proceed to consider the issue of subject-matter jurisdiction

(even if that is the more legally difficult issue) before

proceeding to address whether it (or, for that matter, the state

court) would have personal jurisdiction over the protesting

defendant.5 II.

“[F]ederal courts, as opposed to state trial courts of general

jurisdiction, are courts of limited jurisdiction marked out by

Congress.” A ldinger v. Howard

, 427 U.S. 1, 15 ( 1976). The

Constitution provides that “[t]he judicia l Power of the United

States, shall be vested in one supreme court, and in such inferior

Courts as the Congress may from time to time ordain and establish.”

U.S. C ONST

. art. III, § 1. “This language reflects a deliberate

compromise[, known as the Madisonian Compromise,] reached at the

Constitutional Convention between those who thought that the

establishment of lower federal co urts should be constitutionally

mandatory and those who thought there should be no federal courts

at all except for a Supreme Court with, inter alia

, appellate

jurisdiction to rev iew state court judgments.” R I CHARD H. F ALLON

,

ET AL

., H ART & W ECHSLER ' S THE F EDERAL C OURTS AND THE F EDERAL S YSTEM 348 (4th

ed. 1996).

The effect of the compromise is this: “Only the jurisdiction

of the Supreme Court is derived directly from the Constitution.

Every other [federal] court . . . derives its jurisdiction wholly

from the authority of Congress. That body may give, withhold or

restrict such jurisdiction at its discretion, provided it be not

extended beyond the boundaries fixed by the Constitution.” Kline

v. Burke Constr. Co. , 260 U.S. 226, 234 (1922). Accordingly, “we

should proceed with caution in construing constitutio nal and

statutory provisions dealing with the jurisdiction of the federal

courts,” Victory Carriers, Inc. v. Law , 404 U.S. 202, 212 (1971),6 See Tafflin v. Levitt

, 493 U.S. 455, 458 (1990); see also Robb v. Connolly

,

111 U.S. 624, 637 (1884) (Harlan, J.) (“Upon the State courts, equally with the

courts of the Union, rests the obliga tion to guard, enforce, and protect every right

granted or secured by the Constitution of the United States . . . .”).

6 because the Constitution leaves Congress the policy choice

concerning how far the federal courts' jurisdiction should extend.

Under our federal constitutional scheme, the state courts are

assumed to be equally capable of deciding state and federal

issues. 6 To the extent that Congress elects to confer only limited

jurisdiction on the federal courts, state cou rts become the sole

vehicle for obtaining initial review of some federal and state

claims. C f., e.g., Victory Carriers

, 404 U.S. at 21 2. Where

Congress has given the lower federal courts jurisdiction over

certain controversies, “'[d]ue regard for the rightful independence

of state governments, which should actuate federal courts, requires

that they scrupulously confine their own jurisdiction to the

precise limits which [a federal] statute has defined.'” I d.

(quoting Healy v. Ratta , 292 U.S. 263, 270 (1934)).

The importance of both the lower federal courts'

constitutional and statutory subject-matter jurisdiction should not

be underestimated. “Because of their unusual nature, and because

it would not simply be wrong but indeed would be an

unconstitutional invasion of the powers reserved to the states if

fed eral courts were to entertain cases not within their

jurisdiction

, the rule is well settled that the party seeking to

invoke the jurisdiction of a federal court mu st demonstrate that

the case is within the competence of that court.” 13 C H ARLES A.7 See, e.g.

, Mansfield, C. & L.M. Ry. v. Swan , 111 U.S. 379, 382 (1884)

(stati ng that “the rule [that a court not act outside its jurisdiction],

springing from the nature and limits of the judicial power of the United States

, is inflexible and without exception”) (emphasis added).

7 W RIGHT ET AL

. , F E DERAL P RACTICE AND P ROCEDURE § 3522, at 61-62

(2d ed. 1984) (emphasis added). 7

When a federal court acts outside its statutory subject-matter

jurisdiction, it violates the fundamental constitutional precept of

limited federal power. See Oliver v. Trunkline Gas Co. , 789 F.2d

341, 343 (5th Cir. 1986) (Higginbotham, J.). “Federal courts are

courts of limited jurisdiction by origin and design, implementing

a basic principle of our system of limited government. In sum, we

do not visit a mere technicality upon the parties [by remanding to

state court because t heir case falls outside the jurisdictional

statutes]. Rather, we uphold a basic tenet of the American system

of diffused political and judicial power.” Id.

Since the panel issued its opinion, the Supreme Court has

reminded us that our jurisdiction must be considered at the outset

of a case. This Term, the Court rejected what the Ninth Circuit

had labeled the “'doctrine of hypothetical jurisdiction'” SS the

process of “'assuming' [Article III] jurisdiction for the purpose

of deciding the merits” of a case. S teel Co. v. Citizens for a

Better Env't

, 118 S. Ct. 1003, 1012 (1998) (majority o pinion)

(quoting United States v. Troescher

, 99 F.3d 933, 934 n.1 (9th Cir.

1996)). The Steel Co. Court remarked:

This is essentially the posit ion embraced by several

Courts of Appeals, which find it proper to proceed

immediately to the merits question, despite

jurisdictional objections, at least where (1) the merits8

question is more readily resolved, and (2) the prevailing

party on the merits would be the same as the prevailing

party were jurisdiction denied. . . .

We decline to endorse such an approach because it

carries the courts beyond the bou nds of authorized

judicial action and thus offends fundamental principles

of separation of powers. This conclusion should come as

no surprise, since it is reflec ted in a long and

venerable line of our cases. “Without jurisdiction the

court cannot proceed at all in any cause. Jurisdiction

is power to declare the law, and when it ceases to exist,

the on ly function remaining to the court is that of

announcing the fact and dismissing the cause.” E x parte

McCardle , 7 Wall. 506, 514, 19 L. Ed. 264 (1868). . . .

T he requirement that jurisdiction be established as a

threshold matter “spring[s] from the nature and limits of

the judicial power of the United States” and is

“inflexible and without exception.” M ansfield,

C. & L.M.R. Co. v. Swan

, 111 U.S. 379, 382, 4 S. Ct. 510,

28 L. Ed. 462 (1884).

. . .

“[E]very federal appellate court has a special

obligation to 'satisfy itself not only of its

own jurisdiction, but also that o f the lower

courts in a cause under revi ew,' . . . .”

Arizonans for Official English v. Arizona

,

. . . 117 S. Ct. 1055, 1071

. . . (1997). . . .

Id. at 1012-13.

T he rule that we first address our jurisdiction is so

fundamental that “we are obliged to inquire sua sponte whenever a

doubt arises as to the existence of fed eral jurisdiction.”

Mt. Healt hy City Sch. Dist. Bd. of Educ. v. Doyle , 429 U.S. 274,

278 (1977) (citations omitted). “The general rule is that the

parties cannot confer on a federal court jurisdiction that has not

been vested in that court by the Constitution and Congress. This

means that the parties cannot wai ve lack of [subject-matter]

j urisdiction by express consent, or by conduct, or even by9

estoppel; the subject matter jurisdiction of the federal courts is

too basic a concern to the judicial system to be left to the whims

and tactical concerns of the litigants.” 13 W R IGHT ET AL

., supra

,

§ 3522, at 66-68 (citations omitted); see, e.g.

, Insurance Corp. of

Ireland, Ltd. v. Compagnie des Bauxites de Guinee

, 456 U.S. 694,

702 (1982).

III.

Ruhrgas does not dispute that a federal district court must

determine its jurisdiction before proceeding to the merits of the

case. It contests only the proposition that the federal court must

reach the issue of s ubject-matter jurisdiction before reaching a

challenge to personal jurisdictio n. Ruhrgas argues that the

district court may decide the personal jur i sdiction challenge

first, because “jurisdiction is jurisdiction is jurisdiction.”

Because a federal district court must have both subject-matter

jurisdiction over the removed controversy and personal jurisdiction

over the defendant, so the argument goes, the court should have

discretion to decide the easier jurisdictional challenge first, to

save judicial resources and to avoid tougher legal issues. We find

Ruhrgas's advocacy of a discretionary rule in the removal context

unpersuasive, as we explain.

A.

Although the personal jurisdiction requirement is a

“fundamental principl[e] of jurisprudence,” Wilson v. Seligman

,10

144 U.S. 41, 46 (1892), without which a court cannot adjudicate,

the requirement of personal jurisdiction, unlike that of subjectmatter jurisdiction, “may be intentionally waived, or for various

reasons a defendant may be estopp ed from raising the issue.”

Insurance Corp. of Ireland

, 456 U.S. at 704; see also F ED

. R. C IV

.

P. 12(h). The defendant's ability to waive the defense arises from

the reality that “[t]he requirement that a court have personal

jurisdiction flows not from Art. III, but from the Due Process

Clause

. . . . It represe nts a restriction on the judicial power

not as a matter of sovereignty, but as a matter of individual

liberty.” Insurance Corp. of Ire land , 456 U.S. at 702; s ee also

Omni Capital Int'l v. Rudolf Wolff & Co., Ltd. , 484 U.S. 97, 104

(1987) (quoting the same).

The Supreme Court has carefully elucidated th e distinctions

between subject-matter and personal jurisdiction:

Subject-matter jurisdiction, then, is an Art. III as

well as a statutory requirement ; it functions as a

restriction on federal power, and contribut es to the

characterization of the federal sovereign. Certain legal

consequences directly follow from this. For example, no

action of the parties can confer subject-matter

jurisdiction upon a federal court. Thus, the consent of

the parties is irrelevant, principles of estoppel do not

apply, and a party does not waive the requirement by

failing to challenge jurisdiction early in the

proceedings. Similarly, a court, including an appellate

court, will raise lack of subject-matter jurisdiction on its own motion. '[T]he rule, springing from the nature

and limits of the judicial power of the United States is

inflexible and without exception, which requires this

court, of its own motion, to deny its jurisdiction, and,

in the exercise of its appellate power, that of all other

courts of the United States, in all cases where such

jurisdiction does not affirmatively appear in the

record.' Mansfield, C. & L.M. R. Co. v. Swan , 111 U.S.

379, 382 (1884).8 Following oral argument in the instant en banc proceeding, the Supreme

Court once again has reminded us of the distinction between restrictions on

subject-matter jurisdiction inherent in Article III and those that operate as an

external limitation on an Ar ticle III court's adjudication. S ee Calderon v.

Ashmus , 118 S. Ct. 1694, 1697 n.2 (1998).

11 Non e of this is true with respect to personal

jurisdiction.

Ins urance Corp. of Ireland , 456 U.S. at 702 (emphasis added)

(citations omitted). The Court therefore has indicated that

“jurisdiction” is not a lways “jurisdiction.” The distinction is

that subject-matter jurisdictional requirements prevent our

overreaching into the powers that the Constitutio n and Congress

have le ft to the state courts, while personal jurisdiction

requirements prevent both state and federal courts from upsetting

the defendant's settled expectations as to where it can reasonably

anticipate being sued. See id. at 702-04. 8

The Steel Co. majority opinion plainly contemplates

Article III jurisdi ction in its use of the term “jurisdiction.”

See Steel Co.

, 118 S. Ct. at 1013 (“Justice STEVENS' arguments

. .

. asserting that a court m ay decide the cause of action befor e

resolving Article III jurisdiction S S are readily refuted.”).

Although that case dealt with the easier issue of whether a federal

court could pretermit questions about its subject-matter

jurisdiction in order to reach a case's “merits,” the teachings of

Ste el Co. SS combined with the reasons we discuss in more detail

below SS counsel against a discretionary rule in the case before us.9 “It has long bee n the rule that principles of res judicata apply to

jurisdictional determinations SS both subject matter and personal. See C hic o t

County Drainage Dist. v. Baxter State Bank , 308 U.S. 371 (1940); S toll v

. Gottlieb

, 305 U.S. 165 (1938).” I nsurance Corp. of Ireland

, 456 U.S. at 702 n.9;

see also Picco v. Global Marine Drilling Co.

, 900 F.2d 846, 850 (5th Cir. 1990)

(citing the same).

1 0 Cf., e.g., Tafflin v. Levitt

, 493 U.S. 455, 458 (1990) (“Under [our]

syst em of dual sovereignty, we have consistently held that state courts have

inherent authority, and are thus presumptively competent, to adjudicate claims

arising under the laws of the United States.”); M artin v. Hunter's Lessee

, 14 U.S. (1 Whe at.) 304, 342 (1816) (“It was foreseen, that in the exercise of

their ordinary jurisdiction, state courts would incidentally take cognisance of

(continued...)

12 B.

A federal court's dismissal for lack of personal jurisdiction

affects the state court from which a case was removed in a way that

a remand for lack of subject-matter jurisdiction does not. As

Ruhrgas concedes, dismiss al for a lack of personal jurisdiction

adjudicates the matter between the parties and is binding on the

state court. 9

It follows that in the removal context, when a federal

district court that lacks federal subject-matter jurisdiction

dismisses instead for want of personal jurisdict ion, it

impermissibly wrests that decision from the state courts. This

follows from the fact that because, after remand, such a case would

have to remain within the state courts, see, e.g.

, Healy

, 292 U.S.

at 270, questions of personal jurisdiction necessarily would fall

within the state courts' exclusive, residual jurisdiction. Those

courts are entitled to their own, independent SS and absent a

controlling Supreme Court decision SS even conflicting interpretation

of their state' s long-arm statute and of the minimum contacts

requirements of the federal Due Process Clause. 10(...continued)

c ases arising under the constitution, the laws and treaties of the Un ited

States.”).

1 1 Implicit in Ruhrgas's advocacy of a discretionary rule in the removal

context is the notion that a defendant's right of removal is of the same dignity

a s the plaintiff's choice of forum. “The defendant's right to remove and the

plaintiff's right to choose the forum are not equal, [however,] and uncertainties

are resolved in favor of remand.” 16 J AMES W. M OORE ET AL

., M OORE ' S F EDERAL P RACTICE

§ 107.05, at 107-24 through 107-25 & nn. 5, 6 (3d ed. 1997) (citing Shamrock Oil

& Gas Corp. v. Sheets

, 313 U.S. 100, 104-07 (1941)). This presumption in favor

of remand underscore s that in the removal context, where the plaintiff chose

state court, that court's interest in adjudicating the issue of personal

jurisdiction, absent federal subject-matter jurisdiction, must be given special

consideration.

13 A federal court's decision t hat it lacks subject-matter

jurisdiction, by contrast, returns the case to the state court so

that it can adjudicate or dismiss. That decision does not intrude

on “[t]he power reserved to the states, under the Constitution, to

provide for the determination of controve rsies in their courts

. . . .” Healy , 292 U.S. at 270.

Contrary, therefore, to Ruhrgas's statement at oral argument

that we are merely “reliev[ing] the state court of th e burden of

ruling on personal jurisdiction,” the discretionary rule threatens

the Article III principles of separation of powers and federalism

in the context of a r emoved case. In sum, a federal court can

remand a removed case for lack of subject-matter jurisdiction

without offending the right and residual power of a state court to

adjudicate, or dispose of, that case, but the federal court cannot

do the same by assuming that it has subject-matter jurisdiction in

order to reach an easier personal jurisdiction issue. 11

C.14

The usurpation of the state courts' residual jurisdiction to

adjudicate the personal jurisdiction question is not the only

reason for eschewing a discretionary rule in the removal context.

A discretionary rule may also create incentives for defendants to

subvert the orderly scheme for removing cas es by acting

opportunistically.

State-court def endants who face, at the margin of existing

precedent, a more plaintiff-friendly due-process/minimum-contacts

jurisprudence in state court could, under the discretionary rule,

manufacture a convoluted theory of federal subject-matter

jurisdiction, remove to federal court, and then take advantage of

a stricter interpretation of personal-jurisdiction requirements in

federa l court, to have the case dismissed rather than remanded.

The effect may be not only to reward the defendant's manipulation

but also to make our interpretation of the state long-arm statute,

and of the federal minimum contacts analysis, the default for the

state courts in this circuit, whereas in the usual course, these

state courts would be entitled to have their own interpretation of

state and federal law, which would be reviewable only by the state

courts and ultimately by the Supreme Court.

D.

We also find the discretionary rule unpersuasive in this case

because its justification SS judicial efficiency SS is less weighty than

are other, c onstitutionally based concerns. A principled

discretionary rule also may not be very efficient.15

First, our desire for efficiency cannot override separationof-powers concerns. The latter rationale is of constitutional

import, while the former is not: “[S]eparation of powers was

adopted in the Con stitution 'not to promote efficiency but to

preclude the exercise of arbitrary power.' Time has not lessened

the concern of the Founders in devising a federal system which

would likewise be a safeguard aga inst arbitrary government.”

Bartkus v. Illinois

, 359 U.S. 121, 137 (1959) (quoting Myers v.

United States

, 272 U.S. 52, 240, 293 (192 6) (Brandeis, J.,

dissenting)). Indeed, this court has forcefully recognized this

distinction: “We are fully aware of the inefficiency and expense

to which these [parties] are being subjected. . . [but w]e cannot

avoid this result [of remanding to state court for lack of subjectmatter jurisdiction], for the rules of federal jurisdiction, while

sometimes technical and counterintuitive, are strict and

mandatory.” Oliver , 789 F.2d at 343 (Higginbotham, J.).

Second, even if we were to fashion a discretionary rule, there

is no certainty that it would be more convenient to district courts

than the formulation we adopt today. Because we would wish to draw

a discretionary rule in harmony with the constitutional principles

that we have outlined, any resulting rule often would cause

district courts to spend more time and effort than previously,

when considering whether personal jurisdiction should be decided

before subject-matter jurisdiction. In any given case, it might be

more efficient for a district court to address the tough legal

i ssues of subject-matter jurisdiction rather than to engage i n a16

difficult balancing inquiry regarding personal jurisdiction.

IV.

Therefore, as the panel stated, in a case such a s this one,

“[t]he appropriate course is to examine for sub ject matter

jurisdiction constantly and, if it is found lacking, to remand to

state court if appropriate, or otherwise dismiss.” M arathon

,

115 F.3d at 318 (citing Ziegler v. Champion Mortgage Co.

, 913 F.2d

228 (5th Cir. 1990)). Such a methodology respects the limits that

Congress has placed on the federal courts to adjudicate cases. It

also accords the proper respect to the state courts, as the

residual courts of general jurisdiction, to make the personal

jurisdiction inquiry when we lack either constitutional or

statutory subject-matter jurisdiction over a removed case. S ee

Healy , 292 U.S. at 270.

V.

A.

Our holding n ot only is supported by the aforementioned

constitutional precepts, but also is grounded in our prior caselaw.

Today we follow our holding in Ziegler v. Champion Mortgage Co.

,

913 F.2d 228, 229-30 (5th Cir. 1990).

In Ziegler

, a plaintiff sued in state court alleging a breach

of contract. S ee id. at 229. The defendants removed, asserting

diversity jurisdiction. S ee id. When the plaintiff moved to

remand because diversity jurisdiction was lacking, defendant17

Champion Mortgage moved to d ismiss for want of personal

jurisdiction. S ee id. That motion to dismiss was granted; the

m otion to remand was never addressed, because the district court

concluded that its dismissal rendered the remand motion moot.

See id. Final judgment was entered for the other defendants on the

merits, and the plaintiff appealed. We sua sponte found complete

diversity lacking and vacated the judgment. See id.

In doing so, we reiterated that “[f]ederal courts are courts

of limited jurisdiction; therefore, we have a constit utional

obligation to satisfy ourselves that subject matter jurisdiction is

proper before we enga ge in the merits of an appeal.” I d. Our

action of vacating the dismissal of Champion Mortgage for lack of

personal jurisdiction established that th e district court should

have resolved subject-matter jurisdiction before entertaining the

attack on personal jurisdiction.

The Ziegler court was aware that this part of its ruling could

be perceived to be in tension with Walker v. Savell

, 335 F.2d 536,

538 (5th Cir. 1964), in which we had stated that “the federal court

had a right to consider the motion to quash service and determine

the jurisdictional question before remanding the case to the state

court.” I d. T he Ziegler court, however, found W alker

distinguishable, because Walker dealt only wi th a choice between

deciding a personal jurisdiction challenge and a remand motion

based on a defect in r emoval jurisdiction, not one based on a

defect in subject-matter jurisdiction. S ee Ziegler

, 913 F.2d

at 230.1 2 See Walker

, 335 F.2d at 539 (observing that “this case was, under the terms

of the removal statute, unquestionably in the district court even though later

subject to a proper motion for remand”).

18 “It is beyond doubt that alt hough the parties can waive

defects in removal, they cannot waive the requirement of original

subject matter jurisdiction SS in other words, they cannot confer

jurisdiction where Congress has not granted it.” B aris v. Sulpicio

Lines, Inc.

, 932 F.2d 1540, 1546 (5th Cir. 1991). The defendant in

Walker was unable to remove to federal court not because there was

no federal su b ject-matter jurisdiction, but because 28 U.S.C.

§ 1441(b) prohibits removal by an in-state defendant in diversity

cases. 12 Such a removal defect is waivable if not timely asserted

by the plaintiff. S ee 28 U.S.C. § 1447(c); In re Shell Oil C o.

,

932 F.2d 1518, 1522-23 (5th Cir. 1991).

Contrariwise, in this case, neither party contends that the

plaintiffs challenged removal on the basis that the defendant had

failed to meet the waivable requirements of the removal statutes.

Rather, the plain tiffs argue that the district court would lack

subject-matter jurisdiction had the plaintiffs originally brought

this case in federal court. Such an objection is not subject to

waiver, see Baris

, 932 F.2d at 1546, and is, as explained above, a

more fundamental concern of the district court than is a waivable

defect.

When subject-matter jurisdiction is not in question,

accordingly, we continue to believe that the district court should

enjoy the freedom outlined in W alker to decide which waivable

jurisdictional defect to address in the first instance. “Thus,19

resting as it does on the broader issue of subject matter

jurisdiction, our decision today does not affect this Court's

holding in Walker v. Savell .” Ziegler , 913 F.2d at 230.

B.

Ruhrgas also argues that our rejection of the discretionary

rule would be inconsistent with the well-settled principle that

federal co urts have jurisdiction to conduct discovery, to issue

sanctions, to hold a trial, and to assess costs, even though they

may lack subject-matter jurisdiction. S ee, e.g.

, Willy v. Coastal

Corp.

, 503 U.S. 131, 135-36 (1992 ) (upholding F E D

. R. C IV

. P. 11

sanctions even though the district court eventually concluded that

it lacked Article III jurisdiction). The flaw with this argument,

however, is that the functions to which Ruhrgas points do not have

the adverse consequences of making a case-dispositive decision for

the state court.

Should a federal court without statutory subject-matter

jurisdiction issue sanctions, assess costs, hold a tr ial, or

conduct discovery, any subsequent remand and proceedin g s that

follow in state court will remain unaffected by those federal court

actions. Such is not the case when a federal court dismisses for

want of personal jurisdiction. In the instant case, for example,

the dismissal for lack of personal jurisdiction not only ends all

federal court litigation, but also ends all litigation in the state1 3 Given existing caselaw, the federal court's determination that there was

no personal jurisdiction would be preclusive on the state court from which the

case was removed. See supra note 9 (citing cases).

1 4 In accordance with our rule of orderliness, subsequent panels cannot

overrule prior panels, absent en banc review or a change in law by Congress or the

Supreme Court. S ee, e.g., Lowrey v. Texas A & M Univ. Sys.

, 117 F.3d 242, 247 (5th

Cir. 1997). Accordingly, Z iegler remains good law, even in the face of Villar and

Asociacion Nacional . Nonetheless, and especially in view of the fact that the

Asociacion Nacional and Villar panels apparently were unaware of Ziegler

, we use this en banc opportunity to eliminate any confusion.

The panel in Jones v. Petty-Ray Geophysical Geosource, Inc.

, 954 F.2d 1061,

1066 (5th Cir. 1992), also mentioned, in d ictum

, that Walker supports a discretionary rule. That observation was not essential to the holding.

Accordingly, that case (shorn of its dictum ) remains unaffected by our decision

today.

20 court to which the case would otherwise be remanded. 13

C.

1.

We granted en banc review in part to resolve the conflicting

precedents of this court, for Ziegler conflicts with Villar v.

Crowley Maritime Corp.

, 990 F.2d 1489, 1494 (5th Cir. 1993), and

Asociacion Nacional de Pescadores v. Dow Quimica , 988 F.2d 559,

566-67 (5th Cir. 1993). 14

In Asociacion Nacional

, the district court denied plaintiffs'

motion to rem and for want of subject-matter jurisdiction and

proceeded to dismiss for lack of personal jurisdictio n. See

Asociacion Nacional , 988 F.2d at 563. On appeal, a panel of this

court decided that the court had erred in f ailing to remand, as

the re was no federal subject-matter jurisdiction. S ee id.

at 563-66. Instead of vacating the dismissal for lack of personal

jurisdiction and remanding w ith instructions to remand to state

court, the panel affirmed. See id. at 566-67.15 Although Ziegler was decided three years prior to Asociacion Nacional

and Villar , neither opinion mentions Ziegler

.

21 The panel began its analysis by noting the “conceptually

troubling” proposition that we could “su stain[] an order by the

district court in a case over which the court did not have subject

matter jurisdiction.” I d. at 566. Unaware, however, that Z iegler

had already foreclosed an expansion of Walker f or the very

“conceptually troubling” reasons that the Asociacion Nacional panel

had identified, t he panel expanded W alker 's holding and affirmed

the dismissal for lack of personal jurisdiction. Id. at 566-67.

A month after Asociacion Naci onal , still another panel

overlooked Ziegler 's decision not to extend W alker

. In V illar

,

990 F.2d at 1494, we opined that “[i]n Walker

, we clearly held that

district courts have the power to rule on motions challenging

personal jurisdiction before reaching motions to remand.” Id.

For the reasons explained above, Ziegler 's interpretation of

Walker is the better one. Indeed, had the V illar and Asociacion

Nacional panels made their decisions in the knowledge, and with the

benefit, of Ziegler 's analysis, 15 they too may have reached a

different result.

2.

Ruhrgas argues that tur ning back the reach of W alker would

conflict with the view of the Second Circuit, which has adopted a

discretionary rule. S ee Cantor Fitzgerald, L.P. v. Peaslee

,1 6 See also Cantor Fitzgerald

, 88 F.3d at 155 (“In our opinion, the District

Court properly exercised its discretion in first deciding the m otion to dismiss for

lack of personal jurisdiction over the defendants before considering the question

of federal subject-matter jurisdiction.”)

. The Seventh Circuit, as well,

mentioned and assumed a Villar -type interpretation of Walker

, but ultimately

e xpressed no opinion on the matter. S ee Allen v. Ferguson

, 791 F.2d 611, 616

(7th Cir. 1986) (“[E]ven assuming arguendo that the Walker rule is correct, we

find that the district court erred in deciding Ferguson's motion to dismiss for

want of personal jurisdiction before de termining whether there was complete

diversity.”). That court also stated, in passing, that the district court could

have dis c retion to decide an easier personal jurisdiction challenge before

addressing questions about its subject-matter jurisdiction when the federal and

state courts' standards for personal jurisdiction would render the same

conclusion that no personal jurisdiction exists. See id . at 615.

Although this rule is appealing because it recognizes the comity interests

inherent in any exercise of the district court's discretion, ultimately we find

this conclusion “conceptually troubling.” A sociacion Nacional

, 988 F.2d at 566.

Admittedly, when we have proper jurisdiction, we often apply state courts'

interpretations of their own laws under a “no harm, no foul” type rule (That is,

we assume the state court would not change its interpretation of its own law in

the case before us). When we lack subject-matter jurisdiction, however, we

should leave the state courts free to apply their own law, as well as federal

law, as they have interpreted it in the past, or as they wish to reinterpret it

in the present.

22 88 F.3d 152, 155 (2d Cir. 1996). 1 6 We find Ruhrgas's concerns

unjustified; its reliance on Cantor Fitzgerald is misplaced, as we

now explain.

First, Cantor Fitzger ald conflicts with an earlier Second

Circuit opinion, Rhulen Agency, Inc. v. Alabama Ins. Guar. Ass'n

,

896 F.2d 674 (2d Cir. 1990), in which that court held that “[t]he

court below mistakenly passed on the asserted absence of personal

jurisdiction over the Guaranty Association defendants. Where, as

here, the defendant moves for dismissal under Rule 12(b)(1), Fed.

R. Civ. P., as well as on other grounds, 'the court should consider

the Rule 12(b)(1) challenge first since if it must dismiss the

complaint for lack of subject matter jurisdiction, the accompanying

defenses and objections become moot and do not need to be

determined.'” I d. at 678 (quoting 5 C HARLES A. W RIGHT & A RTHUR M ILLER

,1 7 Compare Rhulen

, 896 F.2d at 675-76 (“[T]he order below will be affirmed

but on the ground that the Court lacks subject ma tter jurisdiction, which

precludes consideration of the existence of personal jurisdiction.”), with Cantor

Fitzgerald , 88 F.3d at 155.

1 8 The Cantor Fitzgerald court also relied on Can v. United States

, 14 F.3d

160, 162 n.1 (2d Cir. 1994), and Bi v. Union Carbid e Chems. & Plastics Co.,

984 F.2d 582, 584 n.2 (2d Cir. 1993). Neither of these cases, however, supports

Cantor Fitzgerald 's holding. C an discusses which subject

- matter jurisdiction

challenge a district court should address first. See Can , 14 F.3d at 162 n.1.

Bi adopts no rule, but instead addresses subject-matter jurisdiction before

considering personal jurisdiction. See Bi , 984 F.2d at 584 n.2.

23 F EDERAL P RACTICE AND P ROCEDURE § 1350 (1st ed. 1969)). In light of

Rhulen

, the Second Circuit appears to have internally inconsistent

views on this issue. 17

Second, the Cantor Fitzgerald court g r ounded its holding

primarily on Browning-Fer ris Indus. v. Muszynski , 899 F.2d 151,

159-60 (2d Cir. 1990). 18 M u szynski was one of the cases adopting

the now-discredited “doctrine of hypothetical

jurisdiction” SS finding that a fed eral court could reach an easier

merits question before addressing a harder subject-matter

jurisdiction challenge. S ee Steel Co.

, 118 S. Ct. 1012 (citing

Muszynski for this proposition). Once a court has determined that

it can pretermit its jurisdiction to reach the merits, the decision

to pretermit subject-matter jurisdiction to reach personal

jurisdiction is easily made. As the Second Circuit has recently

recognized, however, Muszynski is no longer good law after S teel

Co. S ee Fidelity Partners, Inc. v. First Trust Co.

, 1998 U.S. App.

LEXIS 8072, at *14-*15 (2d Cir. Apr. 27, 1998) (Nos. 97-9589L, 97-

963CON).

In sum, not only are the cases that Ruhrgas cites to support

i ts advocacy of a discretionary rule in a case such as ours24

“conceptually troubling,” Asociacion Nacional

, 988 F.2d at 566, but

they are also aberrational. Accordingly, we decline to follow

their lead and instead adopt the reasoning of Ziegler and Rhulen

.

VI.

We now address some of Ruhrgas's other arguments.

Specifically, we discuss the fairness implications for the removing

defendant; the applicability of the minimum-contacts analysis in

determining whether subject-matter jurisdiction exists; and the

argument that our rule may have the effect of unnecessarily

entangling the federal courts in difficult issues of state law and

the state courts in issues of federal law.

A.

We are mindful that the personal-jurisdiction requirement

embodies a rule of fundamental fairness for defendants. S ee Burger

King Corp. v. Rudzewicz

, 471 U.S. 462, 471-72 (1985). We therefore

appreciate Ruhrgas's argument that it would be unfair to force the

defendant, which we assume arguendo is not subject to personal

jurisdiction in any court, to litigate, upon removal, subjectmatter jurisdiction in federal court only to be forced to return to

state court to litigate personal jurisdiction there (if federal

subject-matter jurisdiction is found not to exist).

We find this argument ultimately unpersuasive, however. The

defendant 's action in seeking to invoke the jurisdiction of the

federal courts, through removal, indicates its willingness SS indeed,1 9 See Carpenter v. Wichita Falls Indep. Sch. Dist.

, 44 F.3d 362, 365 (5th

Cir. 1995) (citing Wilson v. Republic Iron & Steel Co. , 257 U.S. 92 (1921)).

2 0 We recognize that there may be a few instances in which “the

jurisdictional facts are too intertwined with the merits to permit the [remand

motion] determination to be made independently

. . . [thus forcing the court to]

leave the jurisdictional determination to trial.” 2 J AMES W. M OORE ET AL

., M OORE ' S

F EDERAL P RACTICE § 12.30[3], at 12-37 (3d ed. 1998). Although many of the same

considerations we express today may apply to such cases, other concerns may arise

as well. Because the instant case deals solely with the decision to exercise

discretion to address personal jurisdiction first because the l egal issues of

subject-matter jurisdiction are more complex than the legal issues surrounding

personal jurisdiction, we have no occasion to opine on wh a t rule should apply

when the facts needed to support subject-matter jurisdiction are so “intertwined

with the merits” of the case that they must await trial.

We also do not mean to straightjacket the district courts by designating

what proceedings they may conduct, o r in what order those proceedings must be

conducted, when there is a pending issue as to subject-matter jurisdiction.

Accordingly, while the Ruhlen court and professors Wright and Miller opine that

a court should consider a rule 12(b)(1) challenge first, see supra

, we read this

to mean that the court must rule on the subject-ma tter jurisdiction challenge

first. In their discretion, however, the courts are free to allow various

aspects of the proceedings to go forward, as efficiency and fairness may dictate.

“The district court is free to decide the best way to deal with [matters covered

by rule 12(b)], because neit her the federal rules nor the statutes provide a

prescribed course.” 2 M OORE ET AL

., supra , § 12.50, at 12-102 through 12-103.

25 its preference SS to litigate the issue of subject-matter

jurisdiction, a question on which it has the burden of proof. 19 Had

the issue of personal jurisdiction been more easily resolved in its

favor than was the question of subject-matter juris diction, the

defendant had the option to save itself the time and expense of

litigating federal subject-matter jurisdiction by litigating the

easily-resolved personal jurisdiction challenge in the state courts

before removal. In any case, the fundamental-fairness requirement

of personal jurisdiction will still be examined SS by either state or

federal court SS after the district cour t has made its inquiry into

subject-matter jurisdiction. 20

B.26

Ruhrgas also argues that, in cases like the instant one, our

determination of subject-matter jurisdiction depends on an analysis

of personal jurisdiction. S ee Villar

, 990 F.2d at 1494-95.

Because we are going to have to conduct the minimum contacts

inquiry in any event, Ruhrgas avers, we might as well do it at the

outset.

Specifically, R uhrgas contends that Norge is included as a

plaintiff solely to defeat federal diversity jurisdiction. One of

the ways in which Ruhrgas attempts to prove tha t Norge has been

“fraudulently joined” is to show that Norge could assert no claims

against it. S ee Marathon

, 115 F.3d at 319. To show that Norge has

no viable claim, Ruhrgas argues that Norge could not subject

Ruhrgas to se rvice of process SS that is, personal jurisdiction SS in

Texas state court.

Assuming, arguend o

, that Villar correctly found that the

minimum contacts analysis is relevant to a fraudulent joinder

analysis, it does not alter our obligation to decide questions of

subject-matter jurisdiction a t the outset. For instance, assume

that the district court determines that because Norge cannot serve

Ruhrgas, Norge has been fraudulently joined. It does not follow

that we should allow the district court the discretion to address

personal jurisdiction first. Rather, in such a case, given the

principles we have outlined above, the district court should find

federal diversity subject-matter jurisdiction to exist, and proceed

to decide the personal jurisdiction challenge without fear of

trampling on the state courts' residual domain.2 1 See Schlobohm v. Schapiro

, 784 S.W.2d 355, 357 (Tex. 1990) (interpreting

the Texas long-arm statute to reach the federal constitutional limit).

27 C.

Ruhrgas maintains that the rule we adopt could entangle

f ederal courts unnecessarily in difficult decisions of state law

joinder, and state courts in the federal law of personal

jurisdiction. Specifically, Ruhrgas first argues that it plans to

raise fraudulent joinder to establish diversity jurisdiction; the

court's analysis will require the resolution of complex areas of

state law. Second, Ruhrgas claims that the question of personal

jurisdiction does not interfere with the state courts' autonomy, as

the Texa s long-arm statute reaches as far as the Constitution

permits; 21 the inquiry, thus, is one of constitutional, not state,

law.

Although we appreciate Ruhrgas's first argument, our adoption

of it would create incentives for defendants in Ruhrgas's position

to act opportunistically in the removal context. Essentially, the

defendant's argument is that because it plans to invoke a

convoluted theory of subject-matter jurisdiction to support

removal SS one requiring difficult interpretations of state law SS we

should dispense with its need to prove that federal subject-matter

jurisdiction exists and proceed to grant it a dismissal for lack of

personal jurisdiction. We find that argument unappealing.

We dispense with Ruhrgas's se cond argument even more

expeditiously. As we have already described, Article III envisions

state courts as the default for all claims, based in both state and2 2 Cf. Taffl in , 493 U.S. at 467 (“[W]e note that, far from disabling or

frustrating federal interests, '[p]ermitting state courts to entertain federal

causes of action facilitates the enforcement of federal rights.'”) (quoting Gulf

Offshore Co. v. Mobil Oil Corp. , 453 U.S. 473, 478 n.4 (1981)).

28 fed eral law. S ee Healy

, 292 U.S. at 270; supra part II. Where

Congress has not extended federal subject-matter jurisdiction, we

should respect the Article III default of residual state court

jurisdiction. S ee, e.g.

, 13 W RIGHT ET AL

., supra

, § 3522, at 61-62.

Therefore, although the ultimate issue might prove to be one of

federal law, we may not deprive state courts of their authority to

pass on that question. 22

VII.

A.

We end by noting that our ruling today applies only to removed

cases and is otherwise limited as mentioned above. Cases brought

originally in the federal courts may raise other issues that we do

not face in the instant case, so any opinion as to those issues

would, as a consequence, be premature.

B.

We also understand that the district court's decision to

address the personal jurisdiction question at the outset was

r easonably made, given the state of our existing preced ent.

Because of the novelty of some of the subject-matter jurisdiction

claims, and because our court has been understandably pre-occupied

in reconciling the confused state of our precedent concerning a2 3 Although the district court may consider the panel opinion persuasive on

the question of subject-matter jurisdiction, that opinion has been vacated and thus

is no longer binding precedent, see 5 TH C IR

. R. 41.3; United States v. Manges

, 110

F.3d 1162, 1173 (5th Cir. 1997), c ert. denied

, 118 S. Ct. 1675 (1998), and we express no opinion on that issue.

2 4 Ruhrgas's motion to strike the plaintiffs' response to the amici filings

is DISMISSED as moot.

29 district court's obligations, we remand the issue of whether there

exists federal subject-matter jurisdicti on to the able district

court for its determination in the first instance. 23

The judgment is VACATED, and this cau se is REMANDED with

instruction to address the motion to remand to state court for lack

of federal subject-matter jurisdiction, and for other proceedings,

as appropriate, consistent with this opinion. 24

ENDRECORDPATRICK E. HI GGINBOTHAM, Circuit Judge, with whom KING, JOLLY,

DAVIS, JONES, DUHE’, and BARKSDALE, Circuit Judge s, join,

dissenting:

Until the decision of the panel in this case, affirmed today

by the majority, no appellate court in the United States had held

that federal district courts may never dismiss a case for lack of

personal jurisdiction without first deciding their subject matter

jurisdiction. We elaborate the principles behind the regimen that

had been in place in our circuit, concluding that the majority’s

claim of federalism on the facts before us is impoverished, a cape

for unauthorized appellate rule making.

I.

Mar athon Oil Company (MOC) is an Ohio corporation with its

principal place of business in Houston, Texas. In 1976, MOC’s

affiliate, Marathon International Oil (MIO), purchased two European

concerns, Pan Ocean and its subsidiary Pan Norge, who collectively

h eld a North Sea gas production license. Pan Ocean later became

Marathon Petroleum Norway (MPN), whil e Pan Ocean Norge was later

renamed Marathon Petroleum Norge (Norge). The gas production

license gave the Marathon companies the rights to 24% of the

Heimdal gas field in the North Sea.

According to the Marathon plaintiffs, starting in the 1970’s,

Ruhrgas, A.G.; Statoil; and vario us other European companies

secretly conspired to monopolize the gas market in Western Europe.

Ruhrgas is Germany’s primary gas production firm, while Statoil,31

Norway’s state-owned gas company, has held since 1975 a 40%

interest in the Heimdal field. The plaintiffs allege that the

conspirators planned to control the Western European gas market by

channeling a large portion of Nor th Sea gas reserves through

Ruhrgas’s production facilities in Germany.

As part of this “plan,” Ruhrgas entered into an agreement in

1984 with MPN con cerning the Heimdal gas field. Pursuant to the

Heimdal Agreement, MPN was to drill gas from the Heimdal field and

transfer it to the Ruhrgas plant in Germany. In exchange, Ruhrgas

promised to provide MPN with premium prices for its gas and

guaranteed pipeline transportation tariffs. The Heimdal Agreement

contained a clause binding its signatories to arbitra tion in

Stockholm, Sweden, under Norwegian law. The plaintiffs claim that

Ruhrgas never had any intention of honoring its commitments under

the Agreement.

The Marathon plaintiffs in this case, MOC, MI O, and Norge,

were not formal parties to the Agreement, and they purport not to

be seeking its enforcement in this litigation. Rather, the

plaintiffs allege that Ruhrgas’s representations regarding the

Agreement duped them into investing in their subsidiary, MPN, $300

million for the development of the Heimdal field and the erection

of an underseas pipeline to the Ruhrgas plant in Germany.

According to the plaintiffs, this investmen t played right into

Ruhrgas’s hands; after having expended such enormous sums to

construct a pipeline between the Heimdal field and the Ruhrgas

plant, the Marathon companies had no choice but to sell the Heimdal32

gas to Ruhrgas on terms dictated by Ruhrgas. Norge additionally

asserts that the value of its license to produce Norwegian gas,

dependant upon the Ruhrgas-MPN contract, was also held hostage by

Ruhrgas.

Allegedly, Ruhrgas later faile d to honor the premium prices

and tariffs that it had promised to MPN. Thereafter, MOC, MIO, and

Norge sued Ruhrgas in Texas state court for fraud,

misrepresentation, civil conspiracy, and tortious interference with

business relationships. Ruhrgas removed the case to federal court,

invoking both diversity and federal question jurisdiction, as well

as the statutory provision for the removal of cases relating to

arbitration agreements falling under the Convention on the

Recognition and Enforcement of Foreign Arbitral Awards, see 9

U.S.C. § 205. Once in federal court, Ruhrgas moved for a stay of

proceedings pending the European arbitration of MPN’s case, but the

district court denied Ruhrgas’s request. Ruhrgas then moved to

dismiss the case for lack of personal jurisdiction and on grounds

of forum non conveniens

, while Marathon countered by moving to

remand for lack of subject matter jurisdiction. The district

court, relying on long-standing Fifth Circuit precedent, see, e.g.

,

Walker v. Savell

, 335 F.2d 536 (5th Cir. 1964), op ted to decide

first Ruhrgas’s challenge to personal jurisdiction. The court

granted Ruhrgas’s motion to dismi ss for lack of personal

jurisdiction, rendering the plaintiffs’ motion to remand moot. The

court later denied Ruhrgas’s motion to reconsider its pre vious

decision not to stay all proceedings pending arbitration.33

Both parties appealed. Despite the fact that the district

court had dismissed the case for want of personal jurisdiction, a

p anel of our court held that it could not ignore the plaintiffs’

challenge to subject matter jurisdiction. S ee Marathon Oil Co. v.

Ruhrgas, A.G.

, 115 F.3d 315, 317-19 (5th Cir. 1997). Concluding

that subject matt er jurisdiction was indeed lacking, the panel

vacated the judgment of the district court and ordered the case

remanded to state court.

II.

A.

No rule of civil procedure denies a federal district court the

discretion to dismiss a case for want of jurisdiction by footing

its decision upon a lack of personal juris diction rather than

subject matter jurisdiction. A range of discretion to choose the

basis for a dismissal for want of jurisdiction has long been

recognized, and no court, until the panel opinion, had said

otherwise. See, e.g.

, Wilson v. Belin , 20 F.3d 644, 651 n.8 (5th

Cir.), cert. denied

, 513 U.S. 930 (1994); Villar v. Crowley

Maritime Corp.

, 990 F.2d 1489, 1494 (5th Cir. 1993), cert. denied

,

510 U.S. 1044 (1994); Asociacion Nacional de Pescadores v. Dow

Quimica

, 988 F.2d 559, 566-67 (5th Cir. 1993), cert. denied

, 510

U.S. 1041 (1994); Jones v. Petty-Ray Geophysical Geosource, Inc.

,

954 F.2d 1061, 1066 (5th Cir.), cert. denied

, 506 U.S. 867 (1992);2 5 The majority opinion misreads the fa cts of W alker

. The

majority contends that Walker dealt only with the technical scope

of the removal statute, for “[t]he defendant in Walker was unable

to remove to federal court not because there was no federal

subject-matter jurisdiction, but because 28 U.S.C. § 1441(b)

prohibits removal by an in-state defendant in diversity cases.”

Majority op. at 18. Yet there were two defendants in W alker

. The

in-state defendant removed by invoking federal question

jurisdiction, and the out-of-state defendant did so by citing

diver sity jurisdiction. S ee Walker

, 335 F.2d at 538 (“Asserting

that a separable controversy was alleged against Savell , arising

under the laws of the United Stat es, and in view of the nonresident status of Associated Press, the suit was removed to United

States Distri ct Court . . . .”). W alker makes no mention of the

in-state defendant rule because that rule was irrelevant.

2 6 Bo t h Cantor and Allen agreed that district courts have

discretion to dismiss for lack of personal jurisdiction in lieu of

remanding for a lack of subject matter jurisdiction. It is true,

as the majority opinion notes, that Cantor cites to a case advocating the now-overruled “hypothetical jurisdiction” doctrine.

See Cantor

, 88 F.3d at 155 (citing Browning-Ferris In dus. v.

Muszynski

, 899 F.2d 151 (2d Cir. 1990). Yet C antor did not premise

its holding on the notion of “hypothetical jurisdiction,” and the

sensible comments the Cantor court made about personal jurisdiction

were untouched by Steel Co. v. Citizens for a Better Environment

, 118 S. Ct. 1003, 1012 (1998). The majority’s conclusion that

Cantor conflicted with the earlier Second Circuit opinion in Rhulen

Agency, Inc., v. Alabama Ins. Guar. Ass’n , 896 F.2d 674 (2d Cir.

1990), is in error. Cantor expressly distinguished Rhulen on the

basis that the personal jurisdictional defect in R hulen was not

easier to resolve than the defect in subject matter jurisdiction.

The majority opinion makes no mention of the fact that Cantor

treated and distinguished Rhulen

. Judge Newman was a member of

both panels. Our view of Second Circuit law is controlled by what

that circuit says it is.

Altho ugh the A llen court declined to embrace “the broader

reading of Walker ,” Allen

, 791 F. 2d at 615, the A llen court at

(continued...)

34 Walker

, 335 F.2d 536. 25 The practice has been so commonplace that

only two other circuits have even had the occasion to address the

issue, despite its regular appearance on the dockets of federal

trial courts across the country. S ee, e.g.

, Cantor Fitzgerald,

L.P. v. Peaslee

, 88 F.3d 152, 155 (2d Cir. 1996 ) ; Allen v.

Ferguson

, 791 F.2d 611, 615 (7th Cir. 1986). 2 6 Practices do not(...continued)

least assumed that in certain circumstances a district court could

dismiss for want of personal jurisdiction rather than remand for a defect in subject matter jurisdiction. Otherwise, it need never

have conducted an analysis of the relative complexities of the

alleged jurisdictional defects before it. See id. at 616.

27 The majority opinion relies heavily on Z iegler v. Champion

Mortgage Co. , 913 F.2d 228 (5th Cir. 1990). Judge Gee in Ziegler

was presented with a merits judgment rendered against two

defendants, both of whom were from the same state as the plaintiff.

The third defendant had long since been dismissed for a want of

personal jurisdiction, a dismissal that was not before Judge Gee.

The Ziegler panel thus did the obvious thing and vacated the

judgment for a want of diversity jurisdiction. A suggestion that

the situation facing Judge Gee is somehow analogous to the one

before us is mistaken.

35 become legitimate by virtue of their long standing. Yet for the

simple truth that we stand on the shoulders of those before us, if

for no other reason, we mus t be hesitant when we act on recent

flashes of “new” insight to the fundamentals of governance. 27

The majority reverses course a nd holds that district courts

possess no discretion to decide issues of personal jurisdiction

before those of subject matter jurisdiction. This contention

inexplicab ly relies upon an obvious and settled, but irrelevant

proposition: federal courts are without the authority to decide the

merits of a case when they lack subject matter jurisdiction. S ee,

e.g.

, B. Inc. v. Miller Brewing Co.

, 663 F.2d 545, 548 (Former 5th

Cir. 1981). Relatedly, the argument continues, courts must raise

the is sue of subject matter jurisdiction s ua sponte

, see, e.g.

,

Trizec Proper ties, Inc. v. United States Mineral Prods. Co. , 974

F.2d 602 (5th Cir. 1992); and parties may not wai ve defects in

subject matter jurisd iction, s ee, e.g.

, California v. LaRue

, 409

U.S. 109, 112 n.3 (1972). The argument points to a recent decision36

of the Supreme Court repudiating the practice of “‘assuming’

[subject matter jurisdiction] for the purpose of deciding the

m erits.” S teel Co. v. Citizens for a Better Environment

, 118 S.

Ct. 1003, 1012 (1998). The S teel Co. Court stressed that “the

requirement that jurisdiction be established as a threshold matter

. . . is ‘inflexible and withou t exception,’” i d. (quoting

Mansfield, C. & L.M.R. Co. v. Swan

, 111 U.S. 379, 382 (1884)), and

that “‘[w]ithout jurisdiction the court cannot procee d at all in

any cause,’” id. (quoting Ex parte McCardle

, 74 U.S. (7 Wall.) 506,

514 (1868)). The plain lack of relevance in this contention teases

us to look for more, for surely more there must be.

Ultimately the majority derives from this case law an ordering

of jurisdictional concepts headed by subject matter jurisdiction,

with the corr elative that federal courts must always resolve

challenges to subject matter jurisdiction before challenges to

personal jurisdiction. The contention that subject matter

jurisdiction exists above personal jurisdiction in some hierarchy

of jurisdictional importance is untenable. It sees personal

jurisdiction in a subordinate role, nig h a merit determination.

This contention misunderstands jurisdiction. Justice Holmes put it

succinctl y: “The foundation of jurisdiction is physical power.”

McDonald v. Mabee

, 243 U.S. 90, 91 (1917). Personal and subject

matter jurisdiction do not differ in relevant ways. As we will

explain, a federal district court is powerless to decide the merits

of a case if it lacks either subject matter or personal

jurisdiction. Both jurisdictional requirements are rooted in37

con stitutional commands of case or controversy and due process.

And both are implemented by the Congress. As Justice O'Connor

recognized in Commodity Futures Trading Comm'n. v. Schor

, 478 U.S.

833 (1986), Article III protects both personal and structured

interests.

It simply cannot be gainsaid that “[t]he validity of an order

of a federal cour t depends upon that court’s having jurisdiction

over both the subject matter and the parties.” I nsurance Corp. v.

Compagnie des Bauxites

, 456 U.S. 694, 701 (1982) (emphasis added);

see also Stoll v. Gottlieb

, 305 U.S. 165, 171-72 (1938). As the

Supreme Court noted in 1937, personal jurisdiction is as integral

to the power of a federal court as is subject matter jurisdiction:

Counsel for the petitioner assume t hat the presence of the

defendant was not an element of the court’s jurisdiction as a

federal court; but the assumption is a mistaken one. By

repeated decisions in this Court it has been adjudged that the

presence of the defendant in a suit in personam , such as the

one now under discussion, is an essential element of the

jurisdiction of a district (formerly circuit) court as a

federal court, and that in the absence of this element the

court is powerless to proceed to an adjudication

.

Em ployers Reinsurance Corp. v. Bryant , 299 U.S. 374, 382 (1937)

(footnote omitted and emphasis added). Indeed, the requirement

that federal courts possess personal jurisdiction over the parties

is not derived from extralegal judicial concerns about fairness or

equity; rather, it is rooted in the Due Process C lause of the

Constitution. See Compagnie des Bauxites , 456 U.S. at 702.

Subject matter jurisdiction is best understood as a structural

right, for “it functions as a restriction on federal power, and

contributes to the characterization of the federal sovereign.” I d.28 Even this description of the difference between subject

matter and personal jurisdiction is an overstatement. Personal

jurisdiction can express territorial limits, akin to se c uring

sovereign interests. The structured protections of subject matter

jurisdictio n are heavily influenced by consent. S ee Pennoyer v.

Neff

, 95 U.S. 714 (1877); Commodity Futures Tr ading Comm'n , 278

U.S. 833.

38 Personal jurisdiction, on the other hand, is an “individual liberty

interest” which “represents a restriction on judicial power not as

a matter of sovereignty, but as a matter of individual liberty.”

Id. This difference accounts for the fact that personal

jurisdiction may be waived by the parties, whereas subject matter

jurisdiction may not. C ompare Commodity Futu res Trading Comm’n

,

478 U.S. at 850-51 (noting that structural rights may not be

waived), with Compagnie des Bauxites

, 456 U.S. at 703 (noting that

individual rights may be waived). 28 From this principle follows

naturally the rule that defects in subject matter jurisdiction must

be raised by a court sua sponte

, while deficiencies in personal

jurisdiction need not. Where the parties do not challenge personal

jurisdiction, their failure can b e construed as a functional

waiver, whereas parties cannot waive subject matter jurisdiction by

their silence. The simple fact that personal jurisdiction is

subject to waiver, ho wever, does not somehow function to elevate

subject matter jurisdiction in status. Both are critical to the

power of a court; both are rooted in core constitutional precepts.

There is sequence to be sure. Questions of standing and

subject matter jurisdiction are usually engaged at the outset of a

case, and often that is the most efficient way of going. The

majority’s effort to support a mandated sequence, however, rests on39

a flawed vision of the relationship between Article III and the

power of the inferior courts. It is true that Article III limits

disputes that Congress can assign to the federal courts, both in

terms of case or controversy and in terms of disputes finally

resolvable by courts. See, e.g.

, Lujan v. Defenders of Wildlife

,

504 U.S. 555 (1992); Hayburn’s Case , 2 U.S. (2 Dall.) 408 (1792).

It is equally true that Article III grants to Congress the

authority both to create inferior courts and to confer so much of

the jurisdiction authorized by Article III that Congress chooses.

The multi-purposed role of Article III with the hand of Congress at

every turn belies the assertion that personal jurisdiction enjoys

lesse r regard than subject matter jurisdiction -- Due Process as

opposed to Article III. Thus, when federal courts examine our

subject matter jurisdiction, we are ordina r ily construing the

jurisdiction-authorizing statutes present in Title 28 of the U.S.

Code, not Article III or any power flowing directly from it.

Indeed, one of the attacks upon jurisdiction pointed to here as a

defect in subject matter jurisdiction

-- a lack of complete

diversity

-- is not itself a requirement of Article III, but rather

suffers from want of a jurisdictional grant by Congress. In the

literal s ense then, personal jurisdiction rests more immediately

upon a constitutional command than does a want of complete

diversity. Contrary to the majority’s suggestion, there is no

subordinate role for personal jurisdiction in these fundamentals of

our federalism.40

Although the majority heavily relies upon the inapposite Steel

Co. decision, it is in fact the majority that cannot square its

opinion with recent Supreme Court jurisprudence. In Caterpillar,

Inc. v. Lewis

, 117 S. Ct. 467 (1996), a unanimous Court employed

long-stan ding precedent to hold that a district court’s judgment

may stand in a removed case even if the court lacked subject matter

jurisdiction at the time of removal, so long as the jurisdictional

defect was cured by the time of judgment. In C aterpillar

, upon

removal there was a lack of complete diversity between the parties,

but this defect was later cured by the district court’s subsequent

dismissal of a nondiverse defendant following a settlement between

the parties. Indeed, the plaintiff in C aterpillar explicitly

objected to jurisdiction shortly after removal, an objection that

was erroneously overruled by the trial court. The majority opinion

in this case travels against Caterpillar

, for its abs olutist

approach to subject m atter jurisdiction would suggest that every

decision entered by the Caterpillar district court follow ing the

improper removal, from the dismissal of the nondiverse party to the

entry of final judgment, was void. If the Supreme Court tolerates

a capture of jurisdiction through the dismissal of a settling party

by a court that lacked subject matter jurisdiction, surely it

permits a district court to dismiss a case for want of personal

jurisdiction, before considering a challeng e to subject matter

jurisdiction.

It is well settled that federal courts have jurisdiction to

determine their own jurisdiction. S ee, e.g.

, Szabo Food Serv.,2 9 Even assuming that there is, however, a hierarchy among

jurisdictional issues grounded upon the structural limits (“Article

III limits”) of the federal courts’ authority, as the majority

opinion asserts, no principle justifies a distinction between cases

removed to federal court and cases filed there originally. If the

majority opinion’s rule is true for removal, it is true for every

form of federal jurisdiction.

41 Inc. v. Canteen Corp.

, 823 F.2d 1073, 1078 (7th Cir. 1987). In the

end, the majority concludes t hat this “jurisdiction to determine

jurisdiction” does not encompass “jurisdiction to determine

personal jurisdiction”; that a court without sub ject matter

jurisdiction lacks the power to dismiss the case for lack of

personal jurisdiction. As we have stated, there is no authority,

either in the Constitution or the case law, to support this

conclusion. Ironically, if the district court lacked the power to

dismiss for want of perso nal jurisdiction because it lacked (had

not decided) subject matter jurisdiction, the dismissal would have

no binding effect on the state co urt. Yet binding effect is the

premise of the majority's invoking of federalism.

B.

Much is made here of the fact that this case was removed from

state court. Indeed, the majority opinion attempts to limit itself

to removal situations. 29 It is presumed that removal is an affront

to states’ interests and federalism. This argument fails to grasp

the centrality of removal in our complex of state and federal

courts. Removal jurisdiction is an integral part of our

federalis m, having been present since the Judiciary Act of 1789.

Sec. 14, The Judiciary Act of 1789 (1 Stat. 7 3). Indeed, in the30 Of course, we are to construe the removal statute narrowly.

See Willy v . Coastal Corp. , 855 F.2d 1160, 1164 (5th Cir. 1988).

Yet wh en removal applies, it places the state/federal forum

decision in the defendant’s hands.

42 famous and early debate about the scope of federal jurisdiction in

Martin v. Hunter’s Lessee

, 14 U.S. (1 Wheat.) 304 (1816), both

sides proceeded from the assumption that removal was a fundamental,

and noncontroversial, aspect of our federalist judi cial system.

See id. at 348-51 (Story, J.); id. at 378 (Johnson, J.,

concurring).

In 28 U.S.C. §§ 1331 & 1332, Congress allocated the concurrent

jurisdiction of the federal and state courts. Congress has

periodically expanded the scope of removal jurisdiction where it

was believed necessary to afford federal defendants or interests a

federal forum or otherwise to pro mote uniformity in federal law.

See, e.g.

, 28 U.S.C. § 1443 (civil rights removal statute). Under

this system, the statutory scheme is tilted toward adjudication of

removable cases in federal court, 30 for state pr oceedings may not

go forward unless both parties agree to forsake federal

jurisdiction. Under 28 U.S.C. § 1441, defendants (unless they are

local defendants) have the unilateral right to remove cas es from

the state courts. Similarly, if a plaintiff files a removable case

in federal court, there is no correspon ding statutory provision

permitting the defendant to remand the case to state court.

Accordingly, contrary to the position taken by the majority

opinion, there is no substantive distinction between cases removed

and those originally filed in federal court; both reflect a party’s43

choice not to proceed in state court. Neither situation represents

a constitutional misallocatio n of power to federal courts at the

expense of state courts.

Absent bad-faith removal, a federal court’s decision to

address a defect in perso nal jurisdiction before one in subject

matter jurisdiction therefore does not somehow frustr ate the

plaintiff’s choice of forum, for Con gress explicitly limits the

presumptive status of concurrent ju risdiction by defining a

defendant’s right of removal. Its federal defenses aside, a

defendant has a right equal to the plaintiff to invoke the

jurisdiction of the federal court for decision of the plaintiff’s

claims. Thus, so long as federal subject matter jurisdiction is

nonfrivolously invoked, federalism offers no reason to distinguish

between first engaging personal or subject matter jurisdiction.

The removal statute itself contemplates removal b efore any state

court adjudication of personal jurisdiction. C f. 28 U.S.C. § 1448

(permitting first service of process after removal); 14A Wright &

Miller § 3721, at 228-29 (“A defendant . . . may move to dismiss

for lack of personal jurisdiction after removal.”) (notice of

removal must be filed within thirty days of receipt of initial

pleading). Courts frustrate no federalism principles when they

address the constitutional issues of personal jurisdiction before

addressing subject matter jurisdiction in a removed case.

C.44

Of course, even though subject ma tter and personal

jurisdiction are of equal importance to a federal court, challenges

to one must inevitably be decided before challenges to the other.

That said, the choice of a district court, its exercise of

discretion, should be guided by familiar considerations. Here

concerns such as efficiency and avoiding abuse of rights of removal

become relevant

-- and indeed on the proper facts, so does

federalism.

State and federal courts are equally competent to decide

issues of personal jurisdiction, where those issues turn on federal

constitutional law. S ee Stone v. Powell , 428 U.S. 465, 493 n.35

(1976). In a diversity case, when a federal district court grants

a motion to dismiss for want of personal jurisdiction over a nonresident of the forum state, the ruling precludes the state court

from deciding again the personal jurisdictional issue. S ee Baldwin

v. Iowa State Traveling Men’s Assoc. , 283 U.S. 522, 524-27 (1931)

(concluding t hat federal court determinations as to personal

ju risdiction are r es judicata in subsequent litigation in state

court). Simultaneously, it leaves subject matter jurisdiction for

a second federal forum that has personal jurisdiction over the

parties. Yet although this reality of the rules of preclusion is

important, it is not determinative of whether a district court may

move directly to the issue of personal jurisdiction.

In our view a district court should ordinarily first satisfy

itself of its subject matter jurisdiction. Nonetheless, we would

continue to hold that there are limited circumstances under which45

it may be mor e appropriate for the federal court to decide the

issue of personal jurisdiction first. The case before us today is

a good example.

When a challenge to personal jurisdiction is relatively

straightforward and does not involve complex state-law questions,

but the alleged defect in subject matter jurisdiction raises

difficult issues of law, a district court’s concerns for federalism

may give way to its self-restraint. In general, district courts

must avoid ruling on difficult, complex, or novel matters, if an

easier and equally appropriate ground for decision is available to

them. S ee Allen

, 791 F.2d at 615 (“Of course, in keeping with the

notions of judicial restraint, federal courts should not reach out

to resolve complex and controversial questions when a decision may

be based on a narrower ground.”). At the same time, resolving a

simple matter of personal j urisdiction, premised on federal

constitutional law, intrudes litt le upon the domain of state

courts. If a federal court should determine that an issue of

personal jurisdiction is resolved easily in favor of a defendant,

l ittle is accomplished, and much is wasted, by a remand to state

court to permit that tribunal to come to the same conclusion.

True, such a course of action “precludes” the state court from

deciding the issue of personal jurisdiction. Yet it is inevitable

in our dualistic but hierar chical system of federal and state

courts that the state courts will occasionally, for e fficiency’s

sake, be deprived of the opportunity to pass on certain matters

otherwise available to them; indeed, the very concept of3 1 The contours of the discretion that we would reaffirm mirror

closely the contours o f district courts’ discretion to exercise

their supplemental jurisdiction. S ee 28 U.S.C. § 1367(c)

(directing district cou rts to avoid supplemental claims that

predominate over federal claims or raise novel or complex issues of

state law).

46 supplemental jurisdiction is premised on this notion. See United

Mine Workers v. Gibbs

, 383 U.S. 715, 726 (1966) (“[Supplemental

jurisdiction’s] justification lies in considerations of judicial

economy, convenience, and fairness to litigants

. . . .”). 31 Where,

as here, the issue precluded from decision is a relatively simple

question of federal law, blind invocations of “federalism” should

give way to more sensible uses of judicial discretion. Of course,

efficiency concerns cannot offe r a justification for a federal

court to reach the merits of a dispute in the absence of federal

jurisdiction, persona l or subject matter. There must be

jurisdiction to decide the merits. That is what jurisdiction is.

See Oliver v. Trunkline Gas Co.

, 789 F.2d 341, 343 (5th Cir. 1986)

(a position reaffirmed by the Supreme Court a decade later). But

given that there exists no “jurisdictional hierarchy,” efficiency

concerns can instruct the decision to dismiss for a defect in one

jurisdictional basis as opposed to another.

Apart from the comparative simplicity of the challenges to a

case’s jurisdictional bases, other factors should inform a district

court’s decision to determine the order in which jurisdictional

defects are addressed. The majority suggests that defendants might

manufacture claims to subject matter jurisdiction in order to

obtain a federal forum to hear their attacks on personal47

jurisdiction. Yet as the cases dismissed by the majority have

recognized, district courts should opt t o address challenges to

personal juris diction only when removal is not frivolous and is

made in apparent good faith. See Pescadores , 988 F.2d at 566-67.

On the other hand, oftentimes the question of subject matter

jurisdiction turns in part upon the presence of personal

jurisdiction. In such situations, it is even more appropriate to

resolve the objections to personal jurisdiction first. S ee Villar

,

990 F.2d at 1494-95.

D.

We would reaffirm today that district courts possess

discretion to address challenges to personal jurisdiction before it

addresses subject matter jurisdiction. Courts typically should

first confirm their subject matter jurisdiction. However, we

believe that they may opt instead to resolve defects in personal

jurisdiction when the attack on personal jurisdiction pre sents a

qu estion of federal law that is far more easily resolved than a

challenge to su bject matter jurisdiction, when the defendant’s

removal is not frivolous and is made in apparent good faith, and

when the challenge to p ersonal jurisdiction does not raise

significant issues of state law or the attack on subject matter

jurisdiction does. Furthermore, in those situations in which the

question of subject matter jurisdiction turns in part upon the

presence of personal jurisdiction, it would again be appropriate to

resolve the objections to personal jurisdiction first.48

Recognizing that district courts possess a level of discretion

is enormously preferable to the majority’s altern ative, a

mechanical and rigid ordering of decisionmaking. We cannot see

around corners, nor can we predict the infinite variety of cases

that may one day come before our district courts. Rules that lack

flexibility are often vices in and of themselves when dealing with

trial courts. Given that we are not constitutionally compelled to

craft a rigid standard for determining the order in which

jurisdictional defects are addressed, we should eschew the

i nvitation to invent one through appellate rulemaking. The very

nature of the work of a federal trial judge here makes discretion

a value in itself. Relatedly, we must not forget that sequencing,

when required, has been by rulemaking, a cooperative enterprise of

Congress and of the courts. Indeed, the courts acting alone

crafted a set of rules for the exercise of pendent jurisdiction,

only to conclude that the enterprise was the task for Congress.

See Finley v. United States , 490 U.S. 545 (1989).

III.

Thus, we would hold that district courts possess discretion to

consider motions challenging personal jurisdiction before those

challenging subject matter jurisdiction. The sensible way in which

this discretion had operated in our circuit until the panel opinion

below is illustrated by the district court’s handling of this case.

On the one hand, the plaintiffs’ attack on subject matter

jurisdiction before the district court raised an issue of first49

impression in this circuit. Although they challenged subject

m a tter jurisdiction on multiple grounds, the plaintiffs’ most

troubling arguments were leveled against 9 U.S.C. § 205, which

permits removal in cases “relating to” international arbitral

agreements. According to the plaintiffs, their case in no way

“related to” such an agreement because they were not seeking to

enforce the underlying Heimdal Agreement between MPN and Ruhrgas.

Ruhrgas, on the other hand, contended that the phrase “related to”

pulls more cases into a federal court’s removal jurisdiction than

just those seeking to enforce the arbitral agreement itself.

Disregarding Ruhrgas’s other bases for removal, Ruhrgas’s

invocation of § 205 was certainly not frivolous. Furthermore,

cons idering the mountain of amicus filings before our court

criticizing t he panel’s interpretation of § 205, the plaintiffs’

opposition to federal subject matter jurisdiction was a difficult

one to address, implicating novel questions of law in this circuit.

Finally, the presence of subject matter jurisdiction, at least as

it related to diversity, turned in part on the question of the

fraudulent joinder of Norge, a foreign corporation, as a plaintiff

suing Ruhrgas , another foreign corporation. S ee Corporacion

Venezolana de Fomento v. Vintero Sales Corp.

, 629 F.2d 786, 790 (2d

Cir. 1980) (noting that the presence of aliens on both sides of the

case defeats diversity jurisdiction), cert. denied , 449 U.S. 1080

(1981). This issue overlapped with the question of personal3 2 Norge would have to establish personal jurisdiction over

Ruhrgas based on Ruhrgas’s contacts with Texas that were pertinent

to damaging the value of Norge’s licence to produce Norwegian oil.

3 3 Norge also asserted subject matter j urisdiction based on a

federal law of international rela t ions, insofar as Marathon’s

complaint implicated the actions of sovereign-owned Statoil, the

Norwegian gas company.

50 jurisd iction. 3 2 In the end, the issues of subject matter

jurisdiction are so complex that the majority opinion declines to

address them, despite the full treatment given to them by the panel

below. See Marathon Oil , 115 F.3d at 318 (describing the subject

matter jurisdiction issue as “formidable”). 33

On the other hand, Ruhrgas’s challenge to the court’s personal

jurisdiction was relatively straightforward. Ruhrgas contended

that it lacked the requisite minimum contacts with Texas to support

jurisdiction from a Texas court. Ruhrgas’s motion required the

district court only to consider the reach of the Texas long-arm

statute, Tex. Civ. Prac. & Rem. Code § 17.042, which is governed by

the federal Constitution’s Due Process Clause. S ee Kawasaki Steel

Corp. v. Middleton

, 699 S.W.2d 199, 200 (Tex. 1985). No

substantial questions of purely state law were prese nted.

Accordingly, the federal district court was at least as competent

as any state court to decide the personal jurisdictional issue. In

addition, as demonstrated below, the merits of Ruhrgas’s challenge

to personal jurisdiction could be resolved relatively easily in its

favor.

Thus, the district court, in taking up personal jurisdiction,

did not abuse what heretofore had been its discretion. Indeed, the51

maj ority does not suggest that it did. Although it parted from

standard practice in not first resolving the attack on subject

matter jurisdiction, the factors we have outlined above all

supported the court’s exercise of its discretion.

IV.

In the end, the majority’s opinion is nothing more than an

exercise in unauthorized judicial rulemaking. In the pursuit of a

vindica tion of its view of federalism principles, the majority

w ithdraws discretion from district courts and replaces it wit h a

rigid sequencing of decisions, despite the absence of any

constitutional, statutory, or jurisprudential compulsion to do so.

In doing so, the majority ignores the Congress and pays little

attention to the host of legal doctrines, from the Due-Process

basis of personal ju risdiction to the C aterpillar rule to the

concept of supplemental jurisdiction, that contradict its new rule

of procedure. The Federal Rules of Civil Procedure address the

issue of the order in which the defenses of lack of subject matter

and lack of personal jurisdiction will be raised. Rules 12 (b)(1)

and (2) include both as preliminary defenses. The Rules of Civil

Procedure regulate in v arious ways the order of conducting

proceedings, including various pre-trial disputes over discovery,

summary judgment, and trial itself. The majority does nothing more

than pronounce an addendum to Rule 12(b). This undertaking will

rightfully be criticized as an imperial view of judicial roles and

a confusion of life tenure with insight. We respectfully dissent.