United States Court of Appeals, Second Circuit

“ After further consideration of the issue, we now conclude that where a court lacks subject matter jurisdiction, it also lacks the power to dismiss with prejudice. It is true that such an order, if imposed as a procedural sanction, does not involve an assessment of the merits of the case. ”

“ Although we hold that federal courts lack the power to dismiss a case with prejudice where subject matter jurisdiction does not exist, we note that, in the interest of finality, collateral attacks on subject matter jurisdiction are not permitted. ”

“ Nevertheless, we believe that Article III's limits on federal jurisdiction are designed not only to prevent federal courts from assessing the merits of certain disputes, but also to prevent federal courts from interfering-through such assessments or otherwise-with the jurisdiction of state courts over certain cases, such as this one, that do not implicate federal interests. ”