International Shoe Co. v. Washington
326 U.S. 310 (1945)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
The Due Process Clause of the Fourteenth Amendment permits a state to assert personal jurisdiction over a non-resident corporation and subject it to taxation if the corporation has certain minimum contacts with the forum state such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'
Facts:
- International Shoe Co. is a Delaware corporation with its principal place of business in St. Louis, Missouri, engaged in the manufacture and sale of footwear.
- From 1937 to 1940, International Shoe employed 11 to 13 salesmen who resided in Washington.
- These salesmen's principal activities were confined to Washington, and they were compensated by commissions based on sales, totaling over $31,000 annually.
- International Shoe supplied its Washington salesmen with product samples, which they displayed to prospective purchasers.
- On occasion, the salesmen rented permanent or temporary sample rooms in business buildings or hotels in Washington for exhibiting samples, and International Shoe reimbursed these rental costs.
- The salesmen's authority was limited to exhibiting samples and soliciting orders from prospective buyers at prices and terms fixed by International Shoe.
- Salesmen transmitted orders to International Shoe's St. Louis office for acceptance or rejection.
- Accepted orders were filled by shipping merchandise f.o.b. from points outside Washington directly to purchasers within the state, with invoicing and collections made from the place of shipment outside Washington.
Procedural Posture:
- The State of Washington issued a notice of assessment for unpaid contributions to the state unemployment compensation fund to International Shoe Company, a Delaware corporation.
- International Shoe appeared specially before the Washington Office of Unemployment and moved to set aside the assessment, arguing lack of jurisdiction.
- The Appeal Tribunal within the Office of Unemployment denied International Shoe's motion.
- The Commissioner of Unemployment affirmed the Appeal Tribunal's decision.
- International Shoe appealed to the Washington Superior Court, arguing that the statute as applied violated the Due Process Clause of the Fourteenth Amendment and the Commerce Clause.
- The Washington Superior Court affirmed the Commissioner's decision.
- International Shoe appealed to the Washington Supreme Court.
- The Washington Supreme Court affirmed the Superior Court's decision.
- International Shoe appealed to the United States Supreme Court.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the Due Process Clause of the Fourteenth Amendment permit the State of Washington to subject International Shoe Co. to suit in its courts for unpaid unemployment compensation contributions, when the company's activities within Washington consist of continuous and systematic solicitation of orders by resident salesmen, even though orders are accepted and filled outside the state?
Opinions:
Majority - Mr. Chief Justice Stone
Yes, the Due Process Clause permits the State of Washington to subject International Shoe Co. to suit and taxation for unemployment contributions, because its systematic and continuous activities within the state established sufficient minimum contacts, making it reasonable and fair to compel it to respond to the suit. The Court clarified that while historical jurisdiction required actual physical presence, due process now only requires that a defendant, if not physically present, have 'certain minimum contacts with it such that the maintenance of the suit does not offend “traditional notions of fair play and substantial justice.”' For a corporation, 'presence' is a legal fiction symbolizing its activities carried out by agents within the state. The test for jurisdiction is not merely mechanical or quantitative, but rather depends upon the quality and nature of the corporation's activity in relation to the fair and orderly administration of the laws. International Shoe's activities in Washington were neither irregular nor casual but systematic and continuous, resulting in a large volume of interstate business. Through these activities, the company received the benefits and protections of Washington's laws, including the right to use its courts. The obligation for unemployment contributions arose directly from these in-state activities. The Court found these operations established sufficient contacts to make it reasonable and just for Washington to enforce the obligations incurred there. Furthermore, Congress, through 26 U. S. C. § 1606 (a), explicitly allowed states to levy such unemployment taxes, addressing any Commerce Clause concerns. The power to tax and to sue to recover the tax are thus both constitutionally permissible when such activities establish the corporation's 'presence' for jurisdictional purposes.
Concurring - Mr. Justice Black
Yes, the State of Washington may subject International Shoe Co. to suit and taxation for unemployment contributions, but the majority's decision unnecessarily introduces vague constitutional criteria that risk unduly curtailing state powers. Justice Black agreed that the appeal lacked merit regarding both the Commerce Clause (due to Congressional consent) and due process. He believed the appeal was so 'patently frivolous' that it should have been dismissed without extended discussion. He criticized the majority for formulating 'vague Constitutional criteria' such as 'fair play and substantial justice' and 'estimate of the inconveniences.' He argued that these terms are subjective and allow judges to invalidate state laws based on their own 'notions of natural justice,' thereby granting the judiciary excessive power and altering the form of government established by the Constitution. Justice Black contended that the Federal Constitution, particularly the Tenth Amendment, leaves to each state the power to tax and open its courts to its citizens to sue corporations whose agents do business within those states, without such subjective conditions imposed by the Court.
Analysis:
This landmark decision fundamentally transformed the landscape of personal jurisdiction, departing from the rigid territorial rule established in Pennoyer v. Neff to introduce the more flexible 'minimum contacts' standard. It allowed states to assert jurisdiction over foreign corporations based on the quality and nature of their in-state activities, particularly when the cause of action arises from those activities. The 'minimum contacts' test and the 'fair play and substantial justice' rubric remain the bedrock of modern personal jurisdiction analysis, shaping how courts determine whether they can hear cases involving out-of-state defendants and providing a framework for the development of specific and general jurisdiction.
