Civil Procedure Class Notes 9/2/03


On Thursday, we wound up Shoe.  Shoe introduced our modern concept of personal jurisdiction, which involves “minimum contacts” and “traditional notions of substantive justice and fair play”.


Now we’ll look at cases that develop and interpret the Shoe model.


To review, what were International Shoe’s contacts?


-         “large volume of interstate business”

-         “systematic and continuous” contacts

-         “the right to resort to the courts”

-         relatedness – “the obligation arose out of activities” – e.g. the automobile accident, where the contact is 100% related to the claim stemming from that accident


One thing we didn’t point out about Shoe last week: Justice Black dissented, and said that in the area of taxation, states should be able to tax businesses coming into their territory.  Black wasn’t as concerned about the jurisdiction implication on the facts of this case.  Black was concerned about the language that the court used: “substantive justice” and “fair play” are not in the Constitution or the Fifth or Fourteenth Amendments, yet these are going to be the tests the Court will use going forward.


The cases so far, in brief


-         Pennoyer asks: Is it there?

-         Shoe asks: Is it fair?


Shaffer v. Heitner


This opinion came down in 1977.  Shoe was in 1945.  We’re jumped forward in time.  That’s important because we’ll go back and pick up cases that came up in the interim, but Stevie Y. will organize the cases thematically rather than strictly chronologically.


We’ve talked a lot about general jurisdiction: everybody, including corporations, can be sued somewhere.  For example, if the company was incorporated in Delaware, they can be sued there under general jurisdiction principles.


Greyhound was incorporated in Delaware and had their headquarters in Arizona.  We could sue them in Delaware or Arizona without much trouble.


Why was there any question about suing Greyhound in Delaware?  Well, we weren’t suing Greyhound here.  The plaintiff was suing these dudes, these individual directors and officers, in a:


Shareholder Derivative Action


A shareholder sues on behalf of the corporation.  He sues the officers and directors for breach of their fiduciary duty.  You must also have the corporation as one of the defendants.


So it’s:


Shareholder (Heitner)


Officers & Directors of the Corporation (including Shaffer),

plus the Corporation itself (Greyhound)


It turns out that Heitner owned just one share.


Greyhound is just a nominal defendant, but the real dispute is against the officers and directors.


Why would Heitner be willing to be the plaintiff in this lawsuit?  I mean, he only has one share!  There must be some incentive for him to be the plaintiff here.


Lots of these things settle, and the settlements often have a little something in them for the named plaintiff.


Where are all these people from?  Greyhound is headquartered in Arizona.  The “bad acts” happened in Oregon.  The plaintiff is a non-resident of Delaware; it doesn’t make any difference where he’s from.  The 28 officers and directors are from all over the place, but definitely not Delaware.


So the lawsuit is filed in the Delaware Court of Chancery.  The question is not whether Delaware has jurisdiction over Greyhound, it’s whether they have jurisdiction over the 28 dudes.


Why doesn’t Shoe answer this question?  To what does the holding of Shoe apply?  Shoe seems to deal with in personam jurisdiction rather than in rem jurisdiction.


The present case is about in rem jurisdiction, therefore, on its face, Shoe doesn’t seem to apply to Shaffer.


So the Delaware court seized the 28 dudes’ stock.  Where’d the stock go?  I don’t know.


Delaware has a state law that says that stock in Delaware corporations is considered to be present in the state.  How come?  They’re doing this to establish jurisdiction over stockholders in Delaware corporations.


What allows Delaware to create this rule?  It looks like this comes out of Pennoyer.


In Pennoyer, stuff that’s in the state is under the jurisdiction of the state.


What about the note cases after Pennoyer?  How about Harris v. Balk?  We find that a debt is going to be located for in rem purposes wherever the debtor travels!  This is what gives us the law for the present case.  The question is, “Where is intangible property located?”  The Delaware statute answers this question.


Pennoyer + Harris = if we attach the property at the start of the lawsuit, and the property is located within the jurisdiction of the forum, then the forum has in rem jurisdiction.


The state issues stop orders so the stock can’t be sold.  So in the old way, the state is all set to have jurisdiction in rem against the 28 dudes.


Shoe Rules Everything Around Me”


Now, the Court says that Shoe rules everything.  What happens to Harris v. Balk?  It’s explicitly overruled!  However, the basic principles of Pennoyer are not overruled.


What’s the rationale?  Jurisdiction “over a thing” is sort of a euphemism for jurisdiction “over the interests of a person in a thing”.  Everything is owned by somebody, so whatever or wherever the property is, we’re really trying to get power over the person through their stuff.


Is the location of the stuff relevant anymore?  The test of Shoe is “minimum contacts” such that the suit does not offend the notions of “fair play” and “substantial justice”.  So the location of the stuff is relevant in so far as it is a contact.  In rem gave property a special status; Shoe says that property is just another contact, nothing special.  We’ll just add it into the mix.


A hypothetical


Say a relative in Texas dies and leaves you a house there.  You offer to sell it to someone in Texas.  After agreeing to sell it, you change your mind.  Let’s say the person in Texas sues you for specific performance of the contract, i.e. you must sell the house as agreed.


Under Pennoyer, would the Texas dude have jurisdiction over you?  Sure, if they attach the land first.


Under Shoe and Shaffer, we consider the volume and connectedness of our contacts with Texas.  Our contact is that we have land there plus contacts related to the process of selling the house.  What is the relatedness of the claim to the contact?  It’s very highly related.  So, Texas would have jurisdiction.


The Court says that it would be unusual for a state not to have jurisdiction in a controversy over some land in a state, because that land is what it’s all about and would constitute sufficient contacts.


After Shaffer, we will still see courts talking about in rem and quasi in rem.  The law says that all assertions of jurisdiction must be made according to Shoe.  Shoe, in turn, encompasses in personam, in rem, and quasi in rem.


Under Shoe, you don’t need to attach property to satisfy Constitutional jurisdictional principles.  State law might establish other requirements when you file a lawsuit over some property.  In practice, you really should attach the property.


Change the factual pattern: let’s say you get into a car accident in Ohio, and the victim wants to sue you over the house in Texas.  The contact is the same.  You still have the house in Texas.  However, in this factual pattern, the contact is totally unrelated to the claim.  Therefore, there would be no jurisdiction in Texas.  Where should the victim sue?  She should have sued in Ohio.


More on Shaffer next time


For tomorrow, read McGee and Hanson.


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