Shaffer v. Heitner
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| Shaffer v. Heitner | |||||||||
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 Supreme Court of the United States |
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| Argued February 22, 1977 |
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| All assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe v. Washington and its progeny. | |||||||||
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Shaffer v. Heitner, 433 U.S. 186 (1977), was a case in which the United States Supreme Court established that in order for a state to assert personal jurisdiction, due process requires minimum contacts over and above the mere ownership of stocks in a corporation incorporated in that state.
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[edit] Facts
The plaintiff, Greyhound shareholder Heitner instituted a shareholder’s derivative suit against Greyhound and 28 members of Greyhound’s Board of Directors and officers. Heitner brought the suit in the Court of Chancery of New Castle County, Delaware, where Greyhound was incorporated, and simultaneously filed a motion for an order to sequester their stock (i.e. to 'seize' the stock by barring its sale). The defendants were notified by certified mail and by publication in a Delaware newspaper.
The defendants made a special appearance in the Delaware court for the purpose of moving to quash service of process and to vacate the sequestration order, and to contest personal jurisdiction, pointing out that none of them had ever set foot in Delaware or conducted any activities in that state. The state court found that it had quasi in rem jurisdiction, based on a Delaware statute that declared stock owned in a Delaware corporation to be legally located 'in' Delaware.
The defendants ultimately appealed to the U.S. Supreme Court, asserting that under the Court's decision in International Shoe v. Washington, 326 U.S. 310 (1945), Delaware could not constitutionally seize the property in question.
[edit] Issue
Does the minimum contacts standard established in International Shoe apply to quasi in rem lawsuits, where jurisdiction is premised on the presence of property within a state?
[edit] Result
In an opinion written by Justice Marshall, the Court determined that the minimum contacts rule of International Shoe applies to actions brought in rem and quasi in rem as well as individuals. Justice Marshall theorized that in rem actions would remain mostly unaffected by the ruling but "Type 2" quasi in rem actions (actions seizing property for the purpose of settling a dispute unrelated to that property) would be greatly affected because the mere ownership of property in a state is not a sufficient contact to subject the property owner to a lawsuit in that state, unless that property is the issue of the lawsuit. The state in which property is located will still generally have personal jurisdiction over disputes concerning the ownership of property within that state, because the owner will be receiving the benefits and protections of that state, while the state will have a strong interest in the peaceful resolution of disputes, and records and witnesses will probably be located therein.
Heitner argued that Delaware's interest in controlling the behavior of its corporations justified its assertion of personal jurisdiction over the defendants. The Court responded that this was a reason to use Delaware law, not a Delaware forum.
[edit] Concurrences
Concurring opinions were written by Justice Powell and by Justice Stevens. Both agreed with the outcome in this case, but differed on the question of whether the analysis would be the same if the property in question was real estate instead of stock. Powell would reserve judgment on whether ownership of real property would constitute minimum contacts. Stevens saw no in rem jurisdiction for stocks because of the lack of notice to purchasers of securities that the purchase may subject them to such jurisdiction, but would not say the same for real estate.
[edit] Dissent
Justice Brennan wrote an opinion concurring in the method, but dissenting in the outcome. He agreed that an International Shoe-type minimum contacts analysis was appropriate, but would have found minimum contacts because the directors "voluntarily associated themselves with the State of Delaware...by entering into a long-term and fragile relationship with one of its domestic corporations."
