Citation. 433 U.S. 186, 97 S. Ct. 2569, 53 L. Ed. 2d 683, 1977 U.S.
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Heitner (Appellee), a nonresident of Delaware, was the owner of one share of stock in the Greyhound Corp., a business incorporation under the laws of Delaware, with its principal place of business in Phoenix, Arizona. On May 22, 1974, Appellee filed a shareholder’s derivative suit in the Court of Chancery for New Castle County, Delaware, and named as defendants both Greyhound and twenty-eight present or former directors of either Greyhound Corp. or Greyhound Lines, Inc.(Greyhound), the subsidiary corporation.
Synopsis of Rule of Law.
Quasi in rem jurisdiction over a defendant cannot be exercised unless that defendant had such minimum contacts with the forum state that in personum jurisdiction could be exercised over him.
Facts.
Appellee alleged that the individual defendants had violated their duty to Greyhound by causing it and its subsidiary to engage in actions that resulted in the corporations being held liable for substantial damages in a private antitrust suit and for a large fine in a criminal contempt action. All of the activities in these suits took place in Oregon. Simultaneously with his complaint, Appellee filed a Motion for an Order of Sequestration of the Delaware property of the individual defendants, pursuant to Delaware state statute. The sequestration order was signed the day it was filed and, as a result, caused approximately 82,000 shares of Greyhound common stock to be seized. The court held that the stock was located in Delaware, so it was subject to seizure in Delaware. The twenty-one defendants affected by the seizure, filed a Motion to Quash Service of Process and to Vacate the Sequestration Order. They contended that the seizure was a violation of due process, there were not sufficient minimum contacts to sustain Delaware’s jurisdiction under International Shoe, and the stocks were not capable of being seized in Delaware. The Court of Chancery denied these motions. The Supreme Court of Delaware affirmed this judgment.
Issue.
Whether a statute that allows a court of that state to take jurisdiction of a lawsuit by sequestering any property of the defendants that happens to be located within that forum state is constitutional?
Held.
No. All assertions of state court jurisdiction must be evaluated according to the decision in International Shoe and its progeny. Appellants’ stocks were not the subject of this litigation, nor were they the subject of an underlying cause of action. Therefore, Appellants’ holdings in Greyhound do not provide sufficient contacts with Delaware to support the jurisdiction of that state’s courts over them. Appellants’ activities do not amount to “purposeful availment,” because the Court found that they had nothing to do with Delaware. In addition, they had no reason to believe that they could be sued in Delaware. Appellants were not required to obtain stock in Greyhound in order to maintain their positions in the company, therefore, their holdings do not negate the requirement of minimum contacts with the state, before they can be sued in that state. Concurrence. Several concurring opinions were offered in this case. Justice Powell wrote a concurring opinion and Justice Stevens wrote an opinion concurring in the judgment. J. Powell: The majority’s opinion should not be understood to invalidate quasi in rem jurisdiction where real estate is involved. J. Stevens: The majority opinion should not extend to invalidate the acquisition of jurisdiction over people who receive adequate notice both of the particular controversy and the fact that their local activities might subject them to lawsuit within the forum.
Dissent.
Justice Brennan wrote an opinion concurring in part and dissenting in part. J. Brennan: As a general rule, a state forum has jurisdiction to adjudicate a shareholder derivative action centering on the conduct and policies of the directors and officers of a corporation chartered in that state.
Discussion.
The court bases its findings on the argument that there is no necessary relationship between holding a position as a corporate fiduciary and owning stock or other interests in a corporation. The court states that if Delaware wanted to establish such a policy, it would have done so through the construction of a state statute to that effect.
