Ruhrgas AG v. Marathon Oil Co.

In 1976, Marathon Oil Co. and Marathon International Oil Co. acquired Marathon Petroleum Company Norway (MPCN) and Marathon Petroleum Norge (Norge). After the acquisition, Norge assigned its license to produce gas in the Heimdal Field to MPCN. In 1981, MPCN agreed to sell 70% of its share of the Heimdal gas production to Ruhrgas AG (defendant). Marathon Oil Co., Marathon International Oil Co., and Norge (collectively, Marathon) (plaintiffs) sued Ruhrgas in Texas state court. Ruhrgas removed the case to the United States District Court for the Southern District of Texas. Subsequently, Ruhrgas made a motion to dismiss the complaint for lack of personal jurisdiction, while Marathon moved to remand the case to the state court for lack of federal subject-matter jurisdiction. The district court dismissed the case for lack of personal jurisdiction on the grounds that Ruhrgas lacked sufficient contacts with Texas. A panel of the United States Court of Appeals for the Fifth Circuit concluded that the issue of subject-matter jurisdiction should have been decided before personal jurisdiction. It then rejected Ruhrgas’ arguments in support of federal subject-matter jurisdiction, vacated the judgment of the district court, and remanded the case to the state court. On its own motion, the Fifth Circuit granted rehearing en banc, vacating the panel decision. The en banc court held that, in removed cases, district courts must decide issues of subject-matter jurisdiction first, reaching issues of personal jurisdiction only after subject-matter jurisdiction is found to exist. The United States Supreme Court granted certiorari to resolve a conflict between the circuits.