Shaffer v. Heitner

Brief Fact Summary.

Plaintiff brought a shareholder derivative suit against Defendants and filed an order of sequestration against nonresident Defendants’ stocks. Defendants moved to quash the sequestration and argued the forum state lacked personal jurisdiction.

Synopsis of Rule of Law.

For in rem and quasi in rem proceedings, the forum state lacks personal jurisdiction over the defendant unless the minimum contacts test of International Shoe is satisfied.

Facts.

Heitner (Plaintiff), a nonresident of Delaware, brought a shareholder derivative suit in Delaware against 28 present or former officers and directors (Defendants) of Greyhound Corporation, a Delaware corporation. Plaintiff argued Defendants had violated their duties to Greyhound Corporation through mismanagement in Oregon. To establish personal jurisdiction through a quasi in rem proceeding, Plaintiff sought an order of sequestration against the 21 nonresident Defendants’ stocks in Delaware. Those Defendants moved to quash the sequestration, arguing that it violated Due Process and that the lawsuit could not be brought in Delaware because they did not meet the minimum contacts requirement for personal jurisdiction.

Issue.

To be subject to personal jurisdiction in a quasi in rem proceeding, must a nonresident have minimum contacts with the forum state, consistent with traditional notions of fair play and substantial justice?

Held.

Yes, the Defendant must satisfy the minimum contacts test of International Shoe to be subject to personal jurisdiction. The decision of the lower court is reversed.

Dissent.

Justice Brennan

Justice Brennan concurred in part, agreeing that the test from International Shoe should be applied to all analyses of personal jurisdiction. He disagreed that the Defendants in this case did not satisfy the test, because they had voluntarily associated themselves with the forum state.

Concurrence.

Justice Powell

Justice Powell agreed that the test from International Shoe should be applied to all analyses of personal jurisdiction. He added that real property located within a forum state and of sufficient value should satisfy this test for purposes of quasi in rem proceedings.

Justice Stevens

Justice Stevens agreed with the Court’s conclusion that stocks located in Delaware were not sufficient to establish personal jurisdiction. He worried about the reach of the opinion in other contexts, such as when real property exists in the forum state, as mentioned by Justice Powell.

Discussion.

The Court concluded that the nonresident Defendant’s property in Delaware was not a sufficient contact with the state to render them present for purposes of exercising personal jurisdiction. The Defendants, as corporate shareholders, had no direct relation to Delaware; the property was not the subject of the litigation; and Defendants could not have expected buying stock in a corporation meant they would be subject to litigation in the place of incorporation.