Shaffer v. Heitner
433 U.S. 186 (1977)
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Rule of Law:
All assertions of state-court jurisdiction, including in rem and quasi in rem actions, must be evaluated according to the "minimum contacts" standard of fair play and substantial justice established in International Shoe. The mere presence of a defendant's property within a state is insufficient, by itself, to confer jurisdiction over a cause of action that is unrelated to the property.
Facts:
- Greyhound Corp. is a corporation incorporated under the laws of Delaware, with its principal place of business in Arizona.
- Arnold Heitner, a nonresident of Delaware, was a shareholder of Greyhound.
- Heitner alleged that 28 of Greyhound's non-resident officers and directors (appellants) had violated their fiduciary duties to the corporation.
- The alleged misconduct by the officers and directors, which led to significant corporate liability, occurred in Oregon.
- Under Delaware law, the legal situs of stock in any Delaware corporation is considered to be within the state of Delaware.
- The individual defendant officers and directors owned shares of Greyhound stock and stock options, which were statutorily deemed to be property in Delaware, though the stock certificates were not physically present there.
Procedural Posture:
- Heitner filed a shareholder's derivative suit in the Delaware Court of Chancery against Greyhound Corp. and 28 of its officers and directors.
- Concurrently, Heitner moved for an order of sequestration of the defendants' Delaware property (their Greyhound stock).
- The Court of Chancery entered a sequestration order, and the sequestrator 'seized' the stock of 21 defendants by placing stop-transfer orders on the corporate books.
- The 21 defendants (appellants) entered a special appearance to move to quash service and vacate the sequestration order, arguing the court lacked personal jurisdiction under the International Shoe standard.
- The Delaware Court of Chancery denied the motion, ruling that the statutory presence of the defendants' property in Delaware was a sufficient basis for quasi in rem jurisdiction.
- On appeal, the Delaware Supreme Court affirmed the judgment of the Court of Chancery.
- The defendants (appellants) appealed to the Supreme Court of the United States.
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Issue:
Does a state statute that permits a court to exercise jurisdiction over a nonresident defendant by seizing their property located within the state violate the Due Process Clause of the Fourteenth Amendment when the defendant's only contact with the state is the ownership of that property, and the cause of action is unrelated to the property?
Opinions:
Majority - Justice Marshall
Yes. A state's exercise of jurisdiction over a nonresident defendant based solely on the statutory presence of the defendant's property within the state violates due process when the cause of action is unrelated to that property and the defendant otherwise lacks minimum contacts with the forum. The Court held that an assertion of jurisdiction over property is fundamentally an assertion of jurisdiction over the owner's interest in that property. Therefore, all assertions of state-court jurisdiction must satisfy the minimum contacts standard set forth in International Shoe, which requires an analysis of the relationship between the defendant, the forum, and the litigation to determine if exercising jurisdiction offends 'traditional notions of fair play and substantial justice.' Here, the appellants' only connection to Delaware was their ownership of stock in a Delaware-chartered corporation, which was unrelated to the subject matter of the lawsuit. The Court rejected the argument that accepting a directorship in a Delaware corporation constituted sufficient contact, noting that Delaware had not enacted a statute treating such an act as consent to jurisdiction. The historical precedent of Pennoyer v. Neff, which allowed for quasi in rem jurisdiction based solely on the presence of property, is overruled to the extent it is inconsistent with this standard.
Concurring - Justice Powell
Agrees with the Court's opinion but writes separately to reserve judgment on whether the ownership of other forms of property, particularly real property, might by itself provide sufficient minimum contacts for jurisdiction. He suggests that for real property, which has an indisputable and permanent situs within a state, preserving the traditional quasi in rem concept might be consistent with 'fair play and substantial justice' without creating the uncertainty of the general International Shoe standard.
Concurring - Justice Stevens
Concurs in the judgment, agreeing that the Delaware statute is unconstitutional. His reasoning focuses on the lack of fair warning; a person purchasing securities on a national market should not reasonably expect to be subject to suit in the corporation's state of incorporation, a forum with which they have no other connection. He finds the Delaware procedure particularly unfair because it coerces defendants into either forfeiting their property or submitting to full personal jurisdiction. Like Justice Powell, he would not read the opinion to invalidate quasi in rem jurisdiction in cases involving real estate.
Concurring-in-part-and-dissenting-in-part - Justice Brennan
Concurs with the majority's conclusion that the minimum contacts standard of International Shoe should govern all assertions of state-court jurisdiction. However, he dissents from the Court's application of this standard to the facts, arguing it is an inappropriate advisory opinion because the issue of minimum contacts was never addressed by the Delaware courts and the factual record is undeveloped. Justice Brennan further argues that a state has a significant interest in overseeing the conduct of fiduciaries of its corporations, and by accepting directorships, the appellants voluntarily associated themselves with Delaware, invoking the benefits and protections of its laws. In his view, these contacts are likely sufficient to support jurisdiction in a shareholder derivative suit.
Analysis:
This landmark decision fundamentally altered personal jurisdiction doctrine by effectively collapsing the distinction between in personam, in rem, and quasi in rem jurisdiction into a single, unified standard. Shaffer requires that all assertions of state jurisdiction meet the 'minimum contacts' test of International Shoe, ending the long-standing practice of 'attachment jurisdiction' where property was the sole basis for litigating an unrelated claim. The ruling significantly increased due process protections for nonresident defendants, forcing plaintiffs to file suit in forums where defendants have a meaningful connection to the state or the litigation. It marked the definitive shift from a territorial power-based theory of jurisdiction to one centered on fairness and the defendant's relationship with the forum.
