Shaffer v. Heitner

by:

Following is the case brief for Shaffer v. Heitner, Supreme Court of the United States, (1977)

Case Summary for Shaffer v. Heitner:

  • Heitner brought a derivative suit against Greyhound Corp. in Delaware, over an alleged violation which took place in Oregon.
  • A Delaware statute defined the property(stock) as being located in Delaware.
  • Defendants filed a motion to quash the sequestration order, claiming that exercising personal jurisdiction and seizing Defendants’ property violated due process. The trial court found for Heitner and Shaffer, as Greyhound Corp. representative, appealed.
  • The Court held that although the stock was located in the forum state, it did not meet the minimum contacts requirement set out in International Shoe Co. In addition, the defendant’s were absent from the forum and as a result, exercising personal jurisdiction would violate the 14th Amendment’s Due Process Clause.

Case Brief for Shaffer v. Heitner

Statement of the facts:

Heitner brought a claim against Greyhound Corp. in Chancery court on behalf of other shareholders claiming a violation took place in Oregon. Greyhound Corp. was represented by Shaffer and incorporated in Delaware. Heitner filed an order to sequester his shares of Greyhound stock owned by the defendants named in his complaint. In response, defendants moved to vacate the sequestration order alleging that the ex parte sequestration violated due process and that the stock (property) seized could not be attached in Delaware.

Procedural History:

The lower court rejected this challenge claiming it was brought as a quasi in rem proceeding. Delaware’s Supreme Court affirmed the lower court’s decision and the United States Supreme Court granted certiorari.

Rule of Law or Legal Principle Applied:

A party in a civil action may only assert quasi in rem jurisdiction when the interest of the person in the property seized has sufficient minimum contacts or relations to the state.

Issue and Holding:

Is it necessary to have sufficient contacts between the states and interest in the defendant’s property prior to a court exercising quasi in rem jurisdiction? Yes.

Judgment:

The Court reversed the lower court’s judgment.

Reasoning:

The Court held that in order to use Quasi in rem jurisdiction for personal jurisdiction,  the person’s property who Quasi in rem jurisdiction is being used over must meet the minimum contacts standard established in International Shoe Co. v. Washington, 326 U.S. 310 (1945).

In international Shoe Co., the Court established a standard  for exercising jurisdiction consistent with 14th Amendment’s Due Process Clause. The Court pointed out that if there were no minimum contacts required by International Shoe Co., then the Delaware stature which deprived Shaffer of his property was unconstitutional.

Although property seized from Shaffer in this case was located in Delaware, it had no relation to the subject matter of the present litigation. Here, the defendants did no have anything to do with Delaware other than the fact that the company they accepted positions for incorporated in Delaware. The Court held that acceptance of a position is not enough to assert personal jurisdiction over each defendant.

Concurring or Dissenting opinion:

Concurring (Stevens):

Purchasing stocks on the open market does not equate to sufficient contact with the state to establish jurisdiction. This is because the purchaser of stock may not know which state the corporation is incorporated.

Concurring (Powell):

The standard set out in international shoe does not necessarily need to apply to other forms of property, like real property statutorily situated in a specific state.

Dissenting and Concurring in part (Brennan):

The International Shoe Co. standard should apply here and the contacts with the state were sufficient to meet the minimum standard test. Through accepting director positions with the corporation located in Delaware, the defendants chose to take on powers and responsibilities which resulted from Delaware’s regulations.

Significance:

This case helped illustrate how difficult it is to establish sufficient personal jurisdiction for a person who is not located in the forum state, but has property located there. Minimum contacts must be established even when the property is part of the litigation.

Student Resources:

https://supreme.justia.com/cases/federal/us/433/186/case.html
http://caselaw.findlaw.com/us-supreme-court/433/186.html