Shaffer
v. Heitner
433
U.S. 186 (1977)
Yeazell,
p. 104-113
Facts:
Heitner was
a shareholder in Greyhound who sued a number of officers of the company. He moved to “sequester” their property in
Delaware. This property included the
defendants’ stock in Greyhound and other financial instruments. The motion was granted.
Procedural
Posture:
The suit and the sequestration motion were originally filed in the Delaware
Court of Chancery. Service of process
was made by certified mail and publication.
The defendants made a special appearance to argue that under Shoe,
the Delaware courts did not have personal jurisdiction over them because the
defendants had insufficient contacts with the state. The
Issue: Does the Delaware court have
jurisdiction over the defendants or their property or both?
Rule: NEW RULE! The Shoe model should be applied to
jurisdiction in rem as well as in personam.
Analysis: I think the Court is on very
shaky ground, but maybe it only appears that way because the decision is so
heavily edited. They basically seem to
say “Pennoyer is old, and we think something different now, so we’re
going to change the rules. So there.”
The
Court asserts that the true test of jurisdiction is the “relationship among the
defendant, the forum, and the litigation”.
This had been the test for in personam jurisdiction since Shoe,
and the Court says it should be extended to quasi in rem actions.
The
Court argues that no in rem action is, strictly speaking,
“thing-related”. There is always a
person behind the thing they own who will be affected. The Court suggests that apply minimum
contacts standards to in rem actions won’t change anything, because the
simple fact that you own land or other big-time property in a state can be seen
as sufficient proof that you have more than minimal contacts there.
The
Court says that quasi in rem jurisdiction is going to have to
change. The difference with quasi in
rem is that the property in question isn’t really related to the subject of
the plaintiff’s lawsuit. The Court will
no longer allow the states to assert jurisdiction merely because
somebody owns some property in that state.
The
Court argues against Heitner’s assertion that the state of Delaware has an
interest in controlling corporations that are formed within its borders. The Court says that the Delaware legislature
didn’t seem to have this intent when it made the sequestration statute.
Heitner
also suggests that the officers and directors of the company received benefits
from the state of Delaware, and thus they should be subject to Delaware’s
jurisdiction. The Court rejects this by
saying the defendants had no relationship with the state whatsoever.
Powell
concurs, but says that he favors preserving the traditional notion of quasi
in rem jurisdiction for real property for efficiency purposes.
Stevens
concurs, saying that buying stock should not be seen as consent to
jurisdiction. He also states his fear
that the decision goes further than is necessary.
Brennan
concurs on three points and dissents on the last, saying the state has a
compelling interest in maintaining a convenient forum for corporate disputes
like the one in the present case. He
favors using the standard that anyone who is under the protection of a state’s
laws ought to be under the jurisdiction of that state.
Conclusion:
The Court
rules that Delaware does not have jurisdiction over the defendants, and
therefore, it reverses the ruling of the Delaware Supreme Court.
Notes
and Problems
1. This particular
suit had nothing to do with Greyhound as a company. It was one guy against 21 other guys
(probably all guys at that time).
2.
a. No, because
the Court concedes that there are some situations where the property is closely
related to the cause of action, and thus the state has jurisdiction.
b. No, but the
Court suggests that each piece of property in question must be evaluated based
on whether or not it constitutes a “contact” between the defendant, the forum,
and the litigation.
c. No; the Court
says that if a state wants to have jurisdiction over corporate directors, they
can, but they must pass a statute to that effect first.
d. Yes, it seems
the Court does say that in the absence of a statute, acceptance of a position
on the board of directors does not constitute consent to be under the
jurisdiction of the state. This isn’t
the driving force behind the ruling, though.
e. Not in
general. The Court seems to suggest that
in cases where the property is intimately tied up with the issue in the
lawsuit, the state certainly can seize the property.
3. Good
question! What the heck were they
thinking???
a. In this case,
I think the Pennoyer Court would say that Oregon has jurisdiction. On the other hand, the Shaffer Court
would say that Neff has insufficient contacts with Oregon and his property has
an insufficient connection with the subject of the lawsuit. Therefore, the Court would rule in the latter
case that Oregon does not have jurisdiction.
b. Here, I think
the two courts would be in agreement.
Because the land is closely related to the subject of the lawsuit, the Shaffer
Court would grant Oregon jurisdiction.
4. If there’s a
statute that says a corporation must give consent to be served in order to do
business in a state, then I don’t think that’s implied consent. If there’s a law on the books, I ought to
know, explicitly, that I’m in for service of process if I go and do
business there. As a policy matter,
Delaware might not want to pass such a statute for fear of driving away
businesses that otherwise would have incorporated there and paid taxes.
5. Brennan
doesn’t want too much power taken away from states in regulating their internal
affairs.
6. It would seem
there would be few cases where there was no other possible forum for the
plaintiff. I can’t think of any besides
when the defendant is from another country.
As a policy matter, the courts won’t want to make it too easy to attach
the property of foreign defendants because it may discourage foreign
investment.
[Supplement: Yeazell, FEDERAL RULES OF CIVIL PROCEDURE at 379 (2003).] 15 U.S.C. §
1125(d)(2) deals with in rem and in personam on the Internet. The statute uses the domain name registration
system to help establish jurisdiction.
If you can’t find obtain in personam jurisdiction over someone, you can serve
process by e-mail and postal mail to the domain name registrant or just publish
service of process.
a. Based on the
present case, the standard of Shoe ought to be applied to in rem as well
as in personam actions. Therefore, López
may argue that it is not fair to hale him into
b. According to the
statute, it seems that the domain name registrar is required to sort of “freeze”
the domain name and deliver documents to the court that will give the court
control over the domain name. This seems
constitutional, because this is almost a pure in rem action. The property in dispute is exactly what gets
seized.
c. We haven’t
done much with interpleader yet, but I would think the domain name registrar
has little interest in coming into court with a lot of disputes. It seems cheaper for the domain name
registrar to selfishly let the parties go at it and just send the appropriate
documents to the courts when necessary.
7. The court in
this case seems to argue that you can’t seize property just to get the
defendant to come in and face the music, but you can seize the property if it’s
needed to make sure you can get your money from a lawsuit where the forum
already has jurisdiction.
8. The Court is
so broad in this decision that it seems attractive for a defendant who is
served “gotcha” process to argue that this violates “fair play” and
“substantial justice”, and that they need to be in a state for a certain amount
of time conducting certain activities before they may be served process.
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