Shaffer v. Heitner

Minimum Contacts must be established in rem jurisdiction as well as in personam jurisdiction. Parties: Appellants (def in Delaware) - Shaffer et al. Appellee (Plaintiff in Delaware Court) - Heitner

Procedural History: Heitner brought suit against Shaffer. Supreme Court of Delaware found for plaintiff. Defendants now appealing to U.S. supreme court based on jurisdiction. Facts: Heitner sued Shaffer, and Delaware state took the jurisdiction of the lawsuit by sequestering the defendant's property located in the state. The property sequestered were shares of Greyhound stock; where Greyhound is incorporated in Delaware. However, the defendants that owned the stock were not residents of Delaware, nor had they ever conducted any business there. Furthermore, the physical stock certificates were not in Delaware, but since the company is incorporated there, Delaware State statute holds that it is property of the state, and that based on in rem jurisdiction, Delaware state is able to seize the property to gain jurisdiction. Delaware state contended that establishment of minimum contacts was not necessary to obtain jurisdiction, since they had in rem jurisdiction because of the property. Issue: Is a Delaware state statute unconstitutional by violating the due process clause of the 14th amendment, by permitting Delaware courts to take jurisdiction of a lawsuit by sequestering defendant's property located in that state, despite the absence of sufficient contacts with that state? Judgment/Holding: Delaware's state statute , permitting courts of that state to take jurisdiction of a lawsuit by sequestering defendant's property located in Delaware violated the due process clause of the 14th amendment. Delaware judgment reversed by the U.S. supreme court. Reasoning: The court held that minimum contacts should have been established in in rem jurisdiction as well as in personam jurisdiction. The seized property did not have sufficient contacts with the state to support Delaware's jurisdiction over the appellants. That is because the property in question were shares of a stock, of a company with business nationwide, that is only incorporated in Delaware. The appellants had never intended to conduct any business in Delaware, and therefore to gain privileges and protections of conducting business in that state, nor had any reason to be brought before the Delaware Court. Notes Derivative suit brought by Heitner to defendants. This means he is bringing a lawsuit in the name of the corporation, so if verdict for plaintiff, compensation goes to corporation and shareholders. Heitner brought suit in a court of equity of Delaware. Directors had nothing to do with Delaware. Delaware passed a statute that says that the stock of a corporation incorporated in Delaware is located in Delaware. (unique statute in the country). Compel the directors to come to Delaware by seizing the stocks, and will remain unsellable until they appear in Delaware court, thus consenting to jurisdiction. Directors made a special appearance and argued that the seizure was no good because of due process rights. 2nd issue - no good as basis of jurisdiction.

Delaware supreme court said this is fine because it is quasi in rem jurisdiction and is within the state's statute. According to Pennoyer v Neff, if he has attached the property before giving notice, state could have assumed jurisdiction. The property was attached before serving the notice, so why not constitutional? ****Harris v. Balk They decided to kill the idea of quasi in rem, in order to have minimum contacts to satisfy jurisdiction. Directors have no contacts with Delaware No relationship with ownership of stock and Delaware Absurd for Heitner to sue each director in each's home state. In response to this ruling, Delaware writes a statute that all person's who are director's of Delaware corporation, are subject to jurisdiction in Delaware for breach of duty as a director of the corporation. By becoming officers of a corporation, they consent to being held under Delaware jurisdiction. This is constitutional. Milton v. Meyer : You can always sue a person on any cause of action in their domicile, as you can where they are present. Hypo: Mrs. X driving and gets into accident in Louisiana. Her domicile is Tennessee. So, she can be sued in either Tennessee or Louisiana. HOWEVER, more recently, said that just because she is a domicile of Tennessee, the action has nothing to do with Tennessee and should be tried in Louisiana. The suit should be related to the action that occurred in that state for it to have jurisdiction. Personal jurisdiction in place to protect due process rights of the defendant.