Pennzoil v. Texaco, Inc., 481 U.S. 1 (1987)

JUSTICE MARSHALL, concurring in the judgment.

While I join in the Court’s disposition of this case, I cannot join in its reasoning. The Court addresses the propriety of abstention under the doctrine of Younger v. Harris, 401 U.S. 37 (1971). There is no occasion to decide if abstention would have been proper unless the District Court had jurisdiction. Were I to reach the merits, I would reverse for the reasons stated in the concurring opinions of JUSTICES BRENNAN and STEVENS, in which I join. But I can find no basis for the District Court’s unwarranted assumption of jurisdiction over the subject matter of this lawsuit, and upon that ground alone I would reverse the decision below.

Appellee Texaco, a Delaware corporation with its principal place of business in New York, was sued in the Texas state courts by appellant Pennzoil, a Delaware corporation with its principal place of business in Texas. Because there was no diversity of citizenship, Texaco could not remove Pennzoil’s action to Federal District Court, and the action was tried in the state court. After the adverse jury verdict, Texaco filed a complaint in the United States District Court for the Southern District of New York seeking to enjoin the execution of the Texas judgment, which was not yet final at the time the federal complaint was filed. Texaco filed its federal action without seeking relief from the bonding requirement in any Texas court. The Federal District Court in which Texaco filed sits in another State, more than half-way across the country from the locale in which the case was tried, in which the appeal would take place, and in which the judgment would be executed. Even if Texaco had possessed the power of removal on diversity grounds, it still would not have been entitled to proceed in the forum to which it brought its request for post-trial relief.

Counsel for Texaco suggested at oral argument that venue was proper in the Southern District of New York because Texaco’s corporate headquarters is located in that District, and it was there that a Chapter 11 petition would be filed should Texaco decide to take that step as a result of the adverse Texas judgment. Tr. of Oral Arg. 28, 29-30. Venue in actions not solely predicated upon diversity of citizenship is governed by 28 U.S.C. § 1391(b), which provides that venue is proper "only in the judicial district where all defendants reside, or in which the claim arose, except as otherwise provided by law." As we have said,

it is absolutely clear that Congress did not intend to provide for venue at the residence of the plaintiff or to give that party an unfettered choice among a host of different districts.

Leroy v. Great Western United Corp., 443 U.S. 173, 185 (1979). Texaco has offered no authority in support of its novel proposition that the situs of plaintiff’s potential Chapter 11 petition is a factor to be considered in the determination of venue in a federal civil rights action.

The District Court found that venue was proper in the Southern District of New York on the ground that "[t]he claims arose in this District." 626 F.Supp. 250, 252 (1986). The District Court did not explain how Texaco’s claims, which challenged a Texas state law bonding provision limiting Texaco’s opportunity to stay execution of a Texas judgment against property located in Texas, could be said to arise in the Southern District of New York. Pennzoil’s failure to move to dismiss for lack of venue, and to contest the District Court’s venue determination in the Court of Appeals, precludes any disposition on that ground here, but the clear absence of venue in the District Court further strengthens the odor of impermissible forum-shopping which pervades this case.

But no matter in which federal court Texaco’s complaint was filed, jurisdiction to hear the case would have been lacking. It is a well-settled principle that federal appellate review of judgments rendered by state courts can only occur in this Court, on appeal or by writ of certiorari. See District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413, 416 (1923); see also Atlantic Coast Line R. Co. v. Locomotive Engineers, 398 U.S. 281, 296 (1970). Both the Court of Appeals and appellee here recognize the relevance of this rule. See 784 F.2d 1133, 1141-1142 (CA2 1986); Brief for Appellee 44. It is said, however, that this principle applies only to review of the substance of state judgments, and that the federal action now before us involved solely a constitutional challenge to procedures for enforcement of the state judgment, totally apart from the merits of the state court action itself. Id. at 45-46; 784 F.2d at 1144-1145. In the circumstances of the present case, I find this asserted distinction completely unconvincing.

As we have said, "[i]f the constitutional claims presented to a United States district court are inextricably intertwined" with the merits of a judgment rendered in state court, "then the district court is in essence being called upon to review the state court decision. This the district court may not do." District of Columbia Court of Appeals v. Feldman, supra, at 483-484, n. 16. While the question whether a federal constitutional challenge is inextricably intertwined with the merits of a state court judgment may sometimes be difficult to answer, it is apparent, as a first step, that the federal claim is inextricably intertwined with the state court judgment if the federal claim succeeds only to the extent that the state court wrongly decided the issues before it. Where federal relief can only be predicated upon a conviction that the state court was wrong, it is difficult to conceive the federal proceeding as, in substance, anything other than a prohibited appeal of the state court judgment.

The opinions of the District Court and the Court of Appeals in this case illustrate this problem. As the Court of Appeals noted,

[m]any of the judge’s conclusions [in the District Court] with respect to the merits of the Texas action, despite his lip-service disclaimer, constitute what amounts to an impermissible appellate review of issues that have already been adjudicated by the Texas trial court.

784 F.2d at 1143.

In determining whether Texaco had alleged the prospect of irreparable harm sufficient to support the issuance of an injunction, the Court of Appeals, in turn, found itself addressing the merits of Texaco’s appeal in the Texas state courts:

Only if Texaco’s appeal were patently frivolous would we be justified in holding that any threatened harm to it from effective denial of its right of appeal could be labelled inconsequential. The issue before us, therefore, is not whether Texaco should have prevailed on the merits in the Texas action, but whether its Texas appeal presents non-frivolous issues for resolution.

Id. at 1153. But the courts below, by asking whether Texaco was frivolous in asserting that the trial court erred or whether Texaco should have prevailed in the Texas trial court, undertook a review of the merits of judgments rendered by a state court. As the Court of Appeals recognized, the issuance of an injunction depended upon the finding that Texaco had significant claims to assert in its state court appeal. Because determination of Texaco’s claim for an injunction necessarily involved some review of the merits of its state appeal, Texaco’s constitutional claims were inextricably intertwined with the merits of the Texas judgment, and thus the District Court lacked jurisdiction over Texaco’s complaint in the first instance.

As Justice Holmes observed:

Great cases like hard cases make bad law. For great cases are called great, not by reason of their real importance in shaping the law of the future, but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment.

Northern Securities Co. v. United States, 193 U.S. 197, 400 (1904) (dissenting opinion). The history of this lawsuit demonstrates that great sums of money, like great cases, make bad law. Because a wealthy business corporation has been ordered to pay damages in an amount hitherto unprecedented, and finds its continued survival in doubt, we and the courts below have been presented with arguments of great sophistication and complexity, all concerned with a case which, under clearly applicable principles, should never have been in the federal courts at all. The Court’s opinion, which addresses in sweeping terms one of these questions, is the result of what Justice Holmes called

a kind of hydraulic pressure which makes what previously was clear seem doubtful, and before which even well settled principles of law will bend.

Id. at 401.

Had the sole proprietor of a small Texas grocery sued in the Southern District of New York to enjoin the enforcement of the Texas bonding provision in order to facilitate appeal in Texas from a state court judgment in the amount of $10,000, the result below would surely have been different, even if inability to meet the bonding requirement and to stay execution of judgment meant dissolution of the business and displacement of employees. The principles which would have governed with $10,000 at stake should also govern when thousands have become billions. That is the essence of equal justice under law. I concur in the judgment of the Court.

1. See Lugar v. Edmondson Oil Co., 457 U.S. 922 (1982), and cases cited at 932-933. In Lugar, the Court explained that

a private party’s joint participation with state officials in the seizure of disputed property is sufficient to characterize that party as a "state actor" for purposes of the Fourteenth Amendment.

Id. at 941. We reached this conclusion based on the rule that a person

may fairly be said to be a state actor . . . because he is a state official, because he acted together with or has obtained significant aid from state officials, or because his conduct is otherwise chargeable to the State.

Id. at 937. This reasoning allows no distinction between a litigant’s prejudgment and postjudgment involvement.

2. As the Court of Appeals explained: "The state interests at stake in this proceeding differ in both kind and degree" from the cases in which the Court has held Younger abstention appropriate. 784 F.2d 1133, 1149 (CA2 1986). As JUSTICE BRENNAN’s analysis points out, ante at 19-21, the issue whether "proceedings implicate important state interests" is quite distinct from the question whether there is an ongoing proceeding. See Middlesex County Ethics Comm. v. Garden State Bar Assn., 457 U.S. 423, 432 (1982). Although we have often wrestled with deciding whether a particular exercise of state enforcement power implicates an "important state interest," see Younger v. Harris, 401 U.S. 37 (1971) (criminal statute); Huffman v. Pursue, Ltd., 420 U.S. 592 (1975) (obscenity regulation); Juidice v. Vail, 430 U.S. 327 (1977) (contempt proceedings); Trainor v. Hernandez, 431 U.S. 434 (1977) (welfare fraud action); Moore v. Sims, 442 U.S. 415 (1979) (child abuse regulation); Middlesex County Ethics Comm., supra, (bar disciplinary proceedings); Ohio Civil Rights Comm. v. Dayton Christian Schools, Inc., 477 U.S. 619 (1986) (antidiscrimination laws), we have invariably required that the State have a substantive interest in the ongoing proceeding, an interest that goes beyond its interest as adjudicator of wholly private disputes. By abandoning this critical limitation, the Court cuts the Younger doctrine adrift from its original doctrinal moorings which dealt with the States’ interest in enforcing their criminal laws, and the federal courts’ longstanding reluctance to interfere with such proceedings. See Huffman, supra, at 604.

3. For the reasons stated by JUSTICE BRENNAN, ante at 21, and JUSTICE SCALIA, ante at 18, I do not believe that the doctrine described in District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983), and Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), bars the federal courts from considering Texaco’s claims. See generally Feldman, supra, at 490 (STEVENS, J., dissenting).

4. In Marine Cooks and Stewards v. Arnold, 348 U.S. 37, 42-43 (1964), the Court stated:

Here the petitioner has had its day in court. The dismissal has cut off only a statutory right of review after a full trial by judge and jury.

* * * *

While a statutory review is important, and must be exercised without discrimination, such a review is not a requirement of due process. District of Columbia v. Clawans, 300 U.S. 617, 627; Ohio v. Akron Park District, 281 U.S. 74, 80; Reetz v. Michigan, 188 U.S. 505, 508; McKane v. Durston, 153 U.S. 684, 687-688.

Similarly, the Court has explained:

An appeal from a judgment of conviction is not a matter of absolute right, independently of constitutional or statutory provisions allowing such appeal. A review by an appellate court of the final judgment in a criminal case, however grave the offense of which the accused is convicted, was not at common law, and is not now, a necessary element of due process of law. It is wholly within the discretion of the State to allow or not to allow such a review. A citation of authorities upon the point is unnecessary.

McKane v. Durston, 153 U.S. 684, 687 (1894). See also Ortwein v. Schwab, 410 U.S. 656, 660 (1973) (per curiam).

5. The Court of Appeals stated that Texaco has "a liquidation value of $22 billion and a net worth of about $23 billion." 784 F.2d at 1152; see also id. at 1155; Brief for Appellee 6. As the Court points out, the judgment against Texaco, including prejudgment interest, totaled approximately $11 billion. Ante at 4.

6. Of course, if Texaco were forced to file for bankruptcy under Chapter 11, the claims of judgment creditors would be automatically stayed. See 11 U.S.C. § 362. If Texaco were then to prevail on its appeal from the Texas judgment, the bankruptcy court could dismiss the reorganization proceeding. 11 U.S.C. § 1112.

7. See R. Lynn, Appellate Litigation 385 (1985) (collecting provisions on requirements to obtain stay of execution pending appeal). A judgment creditor’s interest in the judgment can be adversely affected during the appellate process in a variety of ways. For example, the debtor may purposely dissipate its assets, or subsequent secured creditors may attach the debtor’s property.

8.

In the area of economics and social welfare, a State does not violate the Equal Protection Clause merely because the classifications made by its laws are imperfect. If the classification has some "reasonable basis." it does not offend the Constitution simply because the classification "is not made with mathematical nicety, or because, in practice, it results in some inequality." Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 78 [(1911)].

Dandridge v. Williams, 397 U.S. 471, 485 (1970). Cf. Johnson v. Louisiana, 406 U.S. 356, 364 (1972) (State acted rationally in attempting to "`facilitate, expedite, and reduce expense in the administration of criminal justice’" (citation omitted)).