Shaffer v. Heitner
Encyclopedia
Shaffer v. Heitner, 433 U.S. 186
(1977), was a case in which the Supreme Court of the United States
established that in order for an American
state to assert personal jurisdiction, due process
under the Fourteenth Amendment
requires minimum contacts
over and above the mere ownership of stocks
in a corporation
incorporated in that state.
of stock in Greyhound Corp.
) instituted a shareholder’s derivative suit
against Greyhound Corp., Greyhound subsidiary Greyhound Lines, Inc., and 28 members of Greyhound’s Board of directors
and officers. Heitner brought the suit in the Delaware Court of Chancery
of New Castle County
, Greyhound's state of incorporation. Heitner simultaneously filed a motion for an order to sequester (i.e. to 'seize' the stock by barring its sale) approximately 82,000 shares of Greyhound stock owned by 21 of the defendants. The defendant
s were notified by certified mail
and by publication in a New Castle County, Delaware
newspaper
.
The defendants responded by entering a special appearance in the Delaware court for the purpose of moving to quash service of process and to vacate the sequestration order and to contest personal jurisdiction, pointing out that none of them had ever set foot in Delaware or conducted any activities in that state. They contended that the ex parte sequestration procedure did not accord them due process of law as required by the Fourteenth Amendment
of the United States Constitution
and that the property seized was not capable of attachment in Delaware. In addition, appellants asserted that they did not have sufficient contacts with Delaware to sustain the jurisdiction of that State's courts.
. The defendants contended that the State
of Delaware
could not constitutionally seize the property in question.
, the Court determined that the minimum contacts rule of International Shoe applies to actions brought in rem and quasi in rem as well as individuals. Justice Marshall theorized that in rem actions would remain mostly unaffected by the ruling but "Type 2" quasi in rem actions (actions seizing property for the purpose of settling a dispute unrelated to that property) would be greatly affected because the mere ownership of property in a state is not a sufficient contact to subject the property owner to a lawsuit in that state, unless that property is the issue of the lawsuit. The state in which property is located will still generally have personal jurisdiction over disputes concerning the ownership of property within that state, because the owner will be receiving the benefits and protections of that state, while the state will have a strong interest in the peaceful resolution of disputes, and records and witnesses will probably be located therein.
Heitner argued that Delaware's interest in controlling the behavior of its corporations justified its assertion of personal jurisdiction over the defendants. The Court responded that this was a reason to use Delaware law, not a Delaware forum.
instead of stock. Powell would reserve judgment on whether ownership of real property
would constitute minimum contacts. Stevens saw no in rem jurisdiction for stocks because of the lack of notice to purchasers of securities that the purchase may subject them to such jurisdiction, but would not say the same for real estate.
wrote an opinion concurring in the method, but dissenting in the outcome. He agreed that an International Shoe-type minimum contacts analysis was appropriate, but asserted that in this case minimum contacts would have been found because the directors "voluntarily associated themselves with the State of Delaware...by entering into a long-term and fragile relationship with one of its domestic corporations."
Case citation
Case citation is the system used in many countries to identify the decisions in past court cases, either in special series of books called reporters or law reports, or in a 'neutral' form which will identify a decision wherever it was reported...
(1977), was a case in which the Supreme Court of the United States
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
established that in order for an American
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
state to assert personal jurisdiction, due process
Due process
Due process is the legal code that the state must venerate all of the legal rights that are owed to a person under the principle. Due process balances the power of the state law of the land and thus protects individual persons from it...
under the Fourteenth Amendment
Fourteenth Amendment to the United States Constitution
The Fourteenth Amendment to the United States Constitution was adopted on July 9, 1868, as one of the Reconstruction Amendments.Its Citizenship Clause provides a broad definition of citizenship that overruled the Dred Scott v...
requires minimum contacts
Minimum contacts
Minimum contacts is a term used in the United States law of civil procedure to determine when it is appropriate for a court in one state to assert personal jurisdiction over a defendant from another state...
over and above the mere ownership of stocks
Stocks
Stocks are devices used in the medieval and colonial American times as a form of physical punishment involving public humiliation. The stocks partially immobilized its victims and they were often exposed in a public place such as the site of a market to the scorn of those who passed by...
in a corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
incorporated in that state.
Facts
Arnold Heitner (as custodian for Mark Andrew Heitner, owner of one shareShare (finance)
A joint stock company divides its capital into units of equal denomination. Each unit is called a share. These units are offered for sale to raise capital. This is termed as issuing shares. A person who buys share/shares of the company is called a shareholder, and by acquiring share or shares in...
of stock in Greyhound Corp.
Greyhound Lines
Greyhound Lines, Inc., based in Dallas, Texas, is an intercity common carrier of passengers by bus serving over 3,700 destinations in the United States, Canada and Mexico, operating under the well-known logo of a leaping greyhound. It was founded in Hibbing, Minnesota, USA, in 1914 and...
) instituted a shareholder’s derivative suit
Derivative suit
A shareholder derivative suit is a lawsuit brought by a shareholder on behalf of a corporation against a third party. Often, the third party is an insider of the corporation, such as an executive officer or director. Shareholder derivative suits are unique because under traditional corporate law,...
against Greyhound Corp., Greyhound subsidiary Greyhound Lines, Inc., and 28 members of Greyhound’s Board of directors
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
and officers. Heitner brought the suit in the Delaware Court of Chancery
Delaware Court of Chancery
The Delaware Court of Chancery is a court of equity in the American state of Delaware. It is one of Delaware's three constitutional courts, along with the Supreme Court and Superior Court.-Jurisdiction:...
of New Castle County
New Castle County, Delaware
New Castle County is the northernmost of the three counties of the U.S. state of Delaware. As of 2010 its population was 538,479, an increase of 7.6% over the previous decade. The county seat is Wilmington. The center of population of Delaware is located in New Castle County, in the town of...
, Greyhound's state of incorporation. Heitner simultaneously filed a motion for an order to sequester (i.e. to 'seize' the stock by barring its sale) approximately 82,000 shares of Greyhound stock owned by 21 of the defendants. The defendant
Defendant
A defendant or defender is any party who is required to answer the complaint of a plaintiff or pursuer in a civil lawsuit before a court, or any party who has been formally charged or accused of violating a criminal statute...
s were notified by certified mail
Certified Mail
Certified Mail is a type of Special Service mail offered by the United States Postal Service and other postal services that allows the sender proof of mailing, as well as proof of delivery. Certified Mail also provides the sender with a copy of the recipient's signature, which is obtained at the...
and by publication in a New Castle County, Delaware
Delaware
Delaware is a U.S. state located on the Atlantic Coast in the Mid-Atlantic region of the United States. It is bordered to the south and west by Maryland, and to the north by Pennsylvania...
newspaper
Newspaper
A newspaper is a scheduled publication containing news of current events, informative articles, diverse features and advertising. It usually is printed on relatively inexpensive, low-grade paper such as newsprint. By 2007, there were 6580 daily newspapers in the world selling 395 million copies a...
.
The defendants responded by entering a special appearance in the Delaware court for the purpose of moving to quash service of process and to vacate the sequestration order and to contest personal jurisdiction, pointing out that none of them had ever set foot in Delaware or conducted any activities in that state. They contended that the ex parte sequestration procedure did not accord them due process of law as required by the Fourteenth Amendment
Fourteenth Amendment to the United States Constitution
The Fourteenth Amendment to the United States Constitution was adopted on July 9, 1868, as one of the Reconstruction Amendments.Its Citizenship Clause provides a broad definition of citizenship that overruled the Dred Scott v...
of the United States Constitution
United States Constitution
The Constitution of the United States is the supreme law of the United States of America. It is the framework for the organization of the United States government and for the relationship of the federal government with the states, citizens, and all people within the United States.The first three...
and that the property seized was not capable of attachment in Delaware. In addition, appellants asserted that they did not have sufficient contacts with Delaware to sustain the jurisdiction of that State's courts.
The Delaware state court found that it had quasi in rem jurisdiction, based on a Delaware statute that declared stock owned in a Delaware corporation to be legally located 'in' Delaware.
The primary purpose of 'sequestration' is not to secure possession of property pending a trial between resident debtors and creditors on the issue of who has the right to retain it. On the contrary, as here employed, 'sequestration' is a process used to compel the personal appearance of a nonresident defendant to answer and defend a suit brought against him in a court of equity. It is accomplished by the appointment of a sequestrator by this Court to seize and hold property of the nonresident located in this State subject to further Court order. If the defendant enters a general appearance, the sequestered property is routinely released, unless the plaintiff makes special application to continue its seizure, in which event the plaintiff has the burden of proof and persuasion. [Citations removed]
Procedural history
The defendants ultimately appealed to the U.S. Supreme Court and the Supreme Court granted certiorariCertiorari
Certiorari is a type of writ seeking judicial review, recognized in U.S., Roman, English, Philippine, and other law. Certiorari is the present passive infinitive of the Latin certiorare...
. The defendants contended that the State
U.S. state
A U.S. state is any one of the 50 federated states of the United States of America that share sovereignty with the federal government. Because of this shared sovereignty, an American is a citizen both of the federal entity and of his or her state of domicile. Four states use the official title of...
of Delaware
Delaware
Delaware is a U.S. state located on the Atlantic Coast in the Mid-Atlantic region of the United States. It is bordered to the south and west by Maryland, and to the north by Pennsylvania...
could not constitutionally seize the property in question.
Result
In an opinion written by Justice MarshallThurgood Marshall
Thurgood Marshall was an Associate Justice of the United States Supreme Court, serving from October 1967 until October 1991...
, the Court determined that the minimum contacts rule of International Shoe applies to actions brought in rem and quasi in rem as well as individuals. Justice Marshall theorized that in rem actions would remain mostly unaffected by the ruling but "Type 2" quasi in rem actions (actions seizing property for the purpose of settling a dispute unrelated to that property) would be greatly affected because the mere ownership of property in a state is not a sufficient contact to subject the property owner to a lawsuit in that state, unless that property is the issue of the lawsuit. The state in which property is located will still generally have personal jurisdiction over disputes concerning the ownership of property within that state, because the owner will be receiving the benefits and protections of that state, while the state will have a strong interest in the peaceful resolution of disputes, and records and witnesses will probably be located therein.
Heitner argued that Delaware's interest in controlling the behavior of its corporations justified its assertion of personal jurisdiction over the defendants. The Court responded that this was a reason to use Delaware law, not a Delaware forum.
Concurrences
Concurring opinions were written by Justice Powell and by Justice Stevens. Both agreed with the outcome in this case, but differed on the question of whether the analysis would be the same if the property in question was real estateReal estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
instead of stock. Powell would reserve judgment on whether ownership of real property
Real property
In English Common Law, real property, real estate, realty, or immovable property is any subset of land that has been legally defined and the improvements to it made by human efforts: any buildings, machinery, wells, dams, ponds, mines, canals, roads, various property rights, and so forth...
would constitute minimum contacts. Stevens saw no in rem jurisdiction for stocks because of the lack of notice to purchasers of securities that the purchase may subject them to such jurisdiction, but would not say the same for real estate.
Dissent
Justice BrennanWilliam J. Brennan, Jr.
William Joseph Brennan, Jr. was an American jurist who served as an Associate Justice of the United States Supreme Court from 1956 to 1990...
wrote an opinion concurring in the method, but dissenting in the outcome. He agreed that an International Shoe-type minimum contacts analysis was appropriate, but asserted that in this case minimum contacts would have been found because the directors "voluntarily associated themselves with the State of Delaware...by entering into a long-term and fragile relationship with one of its domestic corporations."
See also
- List of United States Supreme Court cases, volume 433
- List of United States Supreme Court cases
- Lists of United States Supreme Court cases by volume
- List of United States Supreme Court cases by the Burger Court
External links
- [ Official Website of the Supreme Court of the United States]