Shaffer v. Heitner

From wikilawschool.org. Wiki Law School does not provide legal advice. For educational purposes only.
Shaffer v. Heitner
Court Supreme Court of the United States
Citation 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683
Date decided June 24, 1977
Appealed from Delaware Supreme Court
Overturned Pennoyer v. Neff

Facts

  • Greyhound Lines, Inc. = "Greyhound" is the largest bus service that runs lines nationally in the United States = a business incorporated in Delaware but with principal place of business in Phoenix, AZ (as of 1977 albeit in 2024 the company's headquarters are in Texas)
  • Greyhound company stocks were in Delaware
  • Heitner = the owner of one share of stock in Greyhound
  • The relevant events that Heitner was complaining against had occurred in the state of Oregon.
  • None of the defendants that Heitner had named resided in Delaware.
  • Shaffer = the main representative of Greyhound in this case

Procedural History

  • Heitner filed a shareholder's derivative suit (filed by a shareholders on behalf of the corporation) in Delaware & named as defendants, Greyhound's wholly-owned subsidiary Greyhound lines, Inc., and 28 present or former officers and directors of one or both of the corporations.
  • In order to compel the named individual representing Greyhound to appear in the Delaware court, the Delaware trial court attached a lien to the Greyhound stocks (as explained below)
  • At the same time as the suit, Heitner filed a motion for an order of sequestration of the Delaware property of the defendants. The sequestrator seized about 82,000 shares of greyhound common stock and options.
  • Defendants entered special appearances to move to quash service of process and vacate sequestration order, and asserted that the courts didn't have jurisdiction.
  • Deleware courts rejected defendant's claim of lack of jurisdiction based on quasi in rem jurisdiction.
  • Heitner won in the Delaware trial court.
  • The Delaware Supreme Court affirm Heitner's win.

Issues

Are minimum contacts required for a state court to exercise quasi in-rem jurisdiction over a non-consenting out-of-state defendant?

-----

  1. Whether the standard of fairness and substantial justice set forth in International Shoe should be held to govern actions in rem as well as in personam.
  2. Whether in rem jurisdiction can be upheld using the standard from International Shoe, that is, the standard of fairness and substantial justice.

Arguments

Heitner argued that Greyhound had breached its fiduciary duty to the shareholders.

The officers & directors of Greyhound named in the suit moved to dismiss the case for lack of personal jurisdiction for failure of minimum contacts.

Holding

Thurgood Marshall: Yes. Minimum contacts are the minimum constitutional threshold that due process require for any type of personal juridiction.

Yes, the standards should now also be applied to in rem jurisdiction. Jurisdiction is not upheld.

Judgment

Reversed. SCOTUS decides in favor of Shaffer & other Greyhound corporate officers

Reasons

  • If a direct assertion of jurisdiction over the defendant would violate the Constitution, it would seem that an indirect assertion of that jurisdiction should be equally impermissible.
  • Jurisdiction is not upheld because the controversy did not arise from the defendants' ownership of the property in the forum state that was used to qualify for in rem jurisdiction.
  • Forum state doesn't have enough interest in the litigation of the case. Delaware wasn't proven to be a fair location for the defendant.

--

Thurgood Marshall: Shaffer and other Greyhound defendants weren't being sued as stockholders but as officers of Greyhound. Under Delaware state law, the officers of a Delaware corporation hadn't consent to being sued by merely holding office in a Delaware corporation.

Rule

Quasi in rem jurisdiction = the state court seizes the forum-state property of the defendant to secure a personal claim against the defendant

Resources