Shaffer v. Heitner, 433 U.S. 186 (1977).
In Shaffer v. Heitner, the Supreme Court joins judicial and scholarly advocates in the destruction of the distinction between in personam and in rem jurisdiction. Traditionally, the presence of the person or the res formed the basis of the court\u27s power over the dispute. While in rem and quasi in rem actions have continued to be established in this manner, in personam jurisdiction incorporates additional considerations of due process in determining the extent of a court\u27s power. Shaffer adopts this standard for all other types of actions as well, thereby limiting a distressing trend in some courts to stretch in rem and quasi in rem jurisdiction to its constitutional limits.
Following Shaffer, jurisdiction in all types of actions, whether in personam, in rem, or quasi in rem, will be measured by considerations of  fair play and substantial justice,  a concept set out in the landmark case International Shoe v. Washington. For in rem and quasi in rem actions, it will no longer be sufficient merely to find property within a court\u27s jurisdiction. Instead, the court must determine whether it would be equitable for the non-resident owner of the property to be subject to the court\u27s power

Wilson, Victoria

English

University of Dayton

University of Dayton Law Review Volume 3 Number 2 Article 14 5-1-1978 The Expansion of the International Shoe Doctrine Victoria Wilson University of Dayton Follow this and additional works at: https://ecommons.udayton.edu/udlr  Part of the Law Commons Recommended Citation Wilson, Victoria (1978) "The Expansion of the International Shoe Doctrine," University of Dayton Law Review: Vol. 3: No. 2, Article 14. Available at: https://ecommons.udayton.edu/udlr/vol3/iss2/14 This Notes is brought to you for free and open access by the School of Law at eCommons. It has been accepted for inclusion in University of Dayton Law Review by an authorized editor of eCommons. For more information, please contact mschlangen1@udayton.edu, ecommons@udayton.edu. THE EXPANSION OF THE INTERNATIONAL SHOE DOC-TRINE-Shaffer v. Heitner, 433 U.S. 186 (1977).I. INTRODUCTIONIn Shaffer v. Heitner,' the Supreme Court joins judicial andscholarly advocates in the destruction of the distinction between inpersonam and in rem jurisdiction. Traditionally, the presence of theperson or the res formed the basis of the court's power over thedispute.2 While in rem and quasi in rem actions have continued tobe established in this manner, in personam jurisdiction incorporatesadditional considerations of due process in determining the extentof a court's power.3 Shaffer adopts this standard for all other typesof actions as well, thereby limiting a distressing trend in some courtsto stretch in rem and quasi in rem jurisdiction to its constitutionallimits.,Following Shaffer, jurisdiction in all types of actions, whetherin personam, in rem, or quasi in rem, will be measured by considera-tions of "fair play and substantial justice," a concept set out in thelandmark case International Shoe v. Washington.' For in rem andquasi in rem actions, it will no longer be sufficient merely to findproperty within a court's jurisdiction. Instead, the court must deter-mine whether it would be equitable for the non-resident owner of theproperty to be subject to the court's power.II. BACKGROUNDActions have traditionally been divided into three categories: inrem, quasi in rem, and in personam. Although the line of separationoften becomes blurred, courts have always relied on these distinc-tions in order to determine the extent of their power over litigants.In rem actions are those which directly affect the rights in aparticular piece of property, tangible or intangible, located withinthe court's territory. It is binding not only upon the litigants, butupon the entire world. Strict in rem actions are relatively rare, andcourts often use the term in rem for quasi in rem actions as well.Quasi in rem actions are also based upon the presence of prop-erty within the forum state's boundaries. However, that property is1. 433 U.S. 186, (1977).2. See Pennoyer v. Neff, 95 U.S. 714 (1877); Ownbey v. Morgan, 256 U.S. 94 (1921).3. See International Shoe Co. v. Washington, 326 U.S. 310 (1945); Gray v. AmericanRadiator & Standard Sanitary Corp., 22 11. 2d 432, 176 N.E.2d 761 (1961); Buckeye BoilerCo. v. Superior Court of Los Angeles County, 71 Cal. 2d 893, 458 P.2d 57, 80 Cal. Rptr. 113(1969).4. See Seider v. Roth, 17 N.Y.2d 111, 216 N.E.2d 312, 269 N.Y.S.2d 99 (1966).5. 326 U.S. at 316, quoting from Milliken v. Meyer, 311 U.S. 457, at 463 (1940).Published by eCommons, 1978UNIVERSITY OF DAYTON LAW REVIEWnot the subject of the action, but is merely used by the plaintiff inorder to obtain a judgment against a non-resident owner to theextent of his interest in that property. Such judgment is only bind-ing upon a party to the suit. Pennoyer v. Neff' set the standardapplied for such actions. So long as there is attachment of the prop-erty prior to the proceeding, as well as service by publication, thereis sufficient basis to determine the interests of the owner in thatproperty.'The traditional basis for in personam jurisdiction has been thepresence of the person, as long as there has been proper service ofprocess In place of this requirement, which is difficult to satisfy,two interacting standards have gained acceptance following theleading case, International Shoe. In determining whether a non-resident corporation was subject to the court's power, the SupremeCourt measured "the quality and nature of the corporation's activ-ity in relation to the fair and orderly administration of the laws" ofthe forum state.9 The corporation's activities in the state must beof such breadth that it would reasonably expect to be subject to thestate's laws. In addition, there must be certain minimum "contacts,ties or relations."' 0 This is to ensure the fairness of subjecting thecorporation to the court's jurisdiction. Subsequent decisions havefound sufficient ties on the basis of the commission of a tortious actwithin the state," or a contract that had a "substantial connec-tion"' 2 with the state. It is this two-part standard which the ShafferCourt has extended to cover in rem and quasi in rem actions as well.III. SHAFFER v. HEITNERHeitner, a non-resident of Delaware, brought a derivative suitagainst Greyhound and Greyhound Lines, two Delaware corpora-tions, and their officers and directors.' 3 He charged the defendantswith mismanagement resulting in a judgment against the corpora-6. 95 U.S. 714 (1877).7. See, e.g., Minichello v. Rosenberg, 410 F.2d 106 (2d Cir. 1969), cert. denied, 396 U.S.844 (1969); Simpson v. Loehmann, 21 N.Y.2d 305, 234 N.E.2d 669, 287 N.Y.S.2d 633 (1967),reargument denied per curiam, 21 N.Y.2d 319, 290 N.Y.S.2d 1914 (1968); Seider v. Roth, 17N.Y.2d 111, 216 N.E.2d 312, 269 N.Y.S.2d 99 (1966).8. See Pennoyer v. Neff, 95 U.S. 714 (1877). However transiently the defendant mayhave been within the state, so long as the service of process is correct, the court may obtainproper jurisdiction.9. 326 U.S. at 319.10. Id. at 320.11. Gray v. American Radiator & Standard Sanitary Corp., 22 Il. 2d 432, 176 N.E.2d761 (1961).12. McGee v. International Life Insurance Co., 355 U.S. 220, 223 (1957).13. 433 U.S. at 189-90.[Vol. 3:2https://ecommons.udayton.edu/udlr/vol3/iss2/14NOTEtion in an antitrust suit, and a fine in a criminal contempt action.In order to obtain jurisdiction over the defendants, who were nonres-idents, Heitner obtained a sequestration order for about 82,000shares of Greyhound stock belonging to 19 of the defendants. He wasable to do this because of a unique Delaware statute4 which allowsquasi in rem jurisdiction over stock owned by non-resident partiesin any company incorporated under state laws. If the non-residentswish to protect their stock, they must make an appearance in thestate court, thus rendering them subject to the court's generalpower. 5 In this way, the state gains personal jurisdiction over par-ties it could not have otherwise reached.The court of chancery, as well as the Delaware Supreme Court,ruled against the defendants' contentions that the Delaware statuteviolated due process, and that the standard of International Shoeshould be applicable to proceedings quasi in rem." The UnitedStates Supreme Court reversed, stating that, not only are quasi inrem actions subject to the International Shoe standard, but "allassertions of state court jurisdiction must be evaluated according tostandards set forth in International Shte and its progeny. ' 'The rationale of the decision was based on the premise that theold distinction between quasi in rem and personal actions is largelyillusory, 8 and that a party's rights are affected regardless of whetherthey are based on a piece of property or not. The Court found thatInternational Shoe has proven to be a very workable and much moreequitable standard than the traditional one and therefore shouldreplace it. Where there are insufficient contacts, the court must notextend its power over a party simply because he owns somethingwithin its boundaries. In this case the Court determined that thedefendants had no contacts at all with the state beyond the "situs"of the Greyhound stock. Therefore, Delaware could not assert juris-diction over them. 9IV. ANALYSISA. Dissolution of In Rem and In Personam DistinctionsThe Shaffer holding reverses a formidable line of cases that14. DEL. CODE, tit.VII,§ 169 (1975).15. DEL. CODE, tit.X,§ 366 (1975). Justice Powell points out that Delaware is the onlystate which has such a law, 97 S. Ct. at 2588 (concurring opinion). See Note, Attachment ofCorporate Stock: The Conflicting Approaches of Delaware and the Uniform Stock TransferAct, 73 HARV. L. REv. 1579 (1960).16. Greyhound Corp. v. Heitner, 361 A.2d 225 (1976).17. 433 U.S. at 212 (emphasis added).18. Id. at 207.19. Id. at 213-17.1978]Published by eCommons, 1978UNIVERSITY OF DAYTON LAW REVIEWfollowed the "time-honored method of procedure . . . [of] . . .adhering logically to the ancient distinction" 0 between personaland property actions. Ever since Pennoyer" clearly separated thetreatment that should be accorded to the two types of proceedings,most American courts have followed this distinction. The Delawarecourts consequently refused to discuss the problem beyond the con-clusion that since Shaffer is a quasi in rem proceeding andInternational Shoe was only applicable to personal actions, the twoshould not be analyzed in the same manner. Even before Shaffer,however, the Supreme Court had disregarded this historic distinc-tion in ruling on the notice requirements for beneficiaries of a judi-cial settlement of a trust. Once a court has obtained jurisdictionover the parties or property, its power to decide the controversy isstill incomplete until proper service of process has been achieved.In Mullane v. Central Bank & Trust Co.2 the Court said that, if atall possible, an effort must be made to notify the defendants of theproceedings. This brought in rem-quasi in rem proceedings awayfrom the Pennoyer principle that notice by publication is sufficient,and closer to the notice required in personal actions. The Mullanecourt explained its reasoning:It is not readily apparent how the courts of New York did or wouldclassify the present proceeding, which has some characteristics andis wanting in some features of proceedings both in rem and inpersonam. But in any event we think that the requirements of theFourteenth Amendment to the Federal Constitution do not dependupon a classification for which the standards are so elusive and con-fused generally and which, being primarily for state courts to define,may and do vary from state to state. . . .[W]e do not rest the powerof the State to resort to constructive service in this proceeding uponhow its courts or this Court may regard this historic antithesis. 3The value of the Shaffer holding is most clearly illustrated inthose actions, such as Mullane, where the court has trouble classify-ing the applicable type of jurisdiction. 4 Rather than attempting todetermine the nature of the action, the court can immediately getto the heart of the problem by weighing the relative' equities of20. Ownbey v. Morgan, 256 U.S. 94, 108 (1921).21. 95 U.S. 714 (1877).22. 339 U.S. 306 (1950).23. Id. at 312-13 (emphasis added). See also Walker v. City of Hutchinson, 352 U.S.112 (1965), and Schroeder v. City of New York, 371 U.S. 208 (1962), which held that merenotice by publication is insufficient for in rem proceedings where the defendants could havebeen personally notified.24. See, e.g., U.S. Industries v. Gregg, 540 F.2d 142 (3d Cir. 1976), cert. denied, 97 .Ct. 2972 (1977). This case involves the same Delaware statute as Shaffer.[Vol. 3:2https://ecommons.udayton.edu/udlr/vol3/iss2/14NOTEadjudicating the case in the particular forum.Several lower court decisions have foreshadowed the Shafferrationale, placing little value in exercising jurisdiction merely be-cause of the existence of property in their territories. A notableexample is Atkinson v. Superior Court25 in which Justice Traynorupheld quasi in rem jurisdiction over a New York trustee, notthrough establishing some theoretical situs of an obligation withinCalifornia, but by examining the activities of the trustee in orderto find some sort of justification through minimum contacts.In a subsequent law review article, Justice Traynor followed upthe Atkinson case with a proposal for a test based on minimumcontacts.26 He heartily endorsed the movement to abolish "statestatutes that prattle of 'in rem' or impose outdated tests.B. Recent Quasi In Rem TrendsThe Shaffer case, although consistent with the trend in per-sonal actions, flies in the face of quasi in rem development." In thisarea courts have often gone to great lengths to obtain jurisdictionby disregarding due process and practical considerations and con-juring up the theoretical "presence" of an intangible concept. Forexample, the famous textbook case of Harris v. Balk 9 establishedcourt jurisdiction by attaching a debt personified in the non-resident defendant's debtor, who had just happened to pass throughthe plaintiff's state.3°New York courts have been especially eager to take advantageof this way of extending their powers. Their method originated withSeider v. Roth, 31 a case that involved a New Yorker who was injuredoutside the state by a Canadian. In a four-to-three decision, thecourt held it could attach as a "debt" a New York insurance com-pany's duty to defend the Canadian policyholder. As the dissenterspointed out, the obligation to defend furnished the jurisdiction fora suit brought in order to determine that very issue. 2 The ultimate25. 49 Ca l.2d 338, 316 P.2d 960 (1955), appeal dismissed and cert. denied sub nom.Columbia Broadcasting Systems v. Atkinson, 357 U.S. 569 (1958).26. Traynor, Is This Conflict Really Necessary? 37 TEx. L. REv. 657 (1969). For otherlegal writers advocating the elimination of the in rem-in personam difference, see, e.g., VonMehren & Trautman, Jurisdiction to Adjudicate: A Suggested Analysis, 79 HARV. L. REV.1121 (1966); Hazard, A General Theory of State Court Jurisdiction, 1965 Sup. CT. REV. 241(1965), Ehrenzweig, The Transient Rule of Personal Jurisdiction: The Power Myth andForum Conveniens, 65 YALE L.J. 289 (1956).27. Traynor, supra note 26, at 662.28. See note 7 supra.29. 198 U.S. 215 (1905).30. Id. at 224-26.31. 17 N.Y.2d 111, 216 N.E.2d 312, 269 N.Y.S.2d 99 (1966).32. Id.19781Published by eCommons, 1978UNIVERSITY OF DAYTON LA W REVIEWeffect of this type of reasoning is the establishment of personal juris-diction over the insurer on a quasi in rem basis. Although this ap-pears to present constitutional due process problems, the Seiderdecision was upheld by the Second Circuit Court of Appeals."Shaffer implicitly overrules the Seider line of reasoning bymaking the situs merely a factor to be considered in the search forthe proper forum. Due process prohibits the courts from using quasiin rem jurisdiction as a tool to further their own power withoutconsidering possible unfairness to the out-of-state defendant.Therefore where, as in Seider, the insurance company has no otherties with the forum state,34 under the Shaffer standard, the courtmay not exercise power on the company's obligation to defend.C. The Scope of ShafferThe Supreme Court does not limit its holding to fact situationssimilar to that in Shaffer. In every case, whether in rem, quasi inrem, or in personam, courts must use the International Shoe stan-dard. However, the Court immediately mentions two possible ex-ceptions.35 The first situation is where "a State in which property islocated should have jurisdiction to attach that property by use ofproper procedures, as security for a judgment being sought in aforum where the litigation can be maintained consistently withInternational Shoe." 3 The sequestration process could still be usedif there is danger the defendant would remove his assets from thereach of the successful plaintiff. This exception would becomeapplicable where there is a possibility the defendant will remove hisassets completely out of the country.After Shaffer, California Power & Light Co. v. Uranex3' upheldattachment of a foreign company's only assets in the United States,in a state other than that of the suit's location, because of thisdanger. In cases such as this, Shaffer allows attachment of propertywithout regard to minimum contacts where the court would be pow-erless to enforce its judgment in any other manner.The second possible exception the Court discussed is a realproperty strict in rem actionY.3 In these cases the state has a verystrong interest in providing a judicial resolution of property disputeswithin its boundaries.3" Minimum contacts would include records33. Minichello v. Rosenberg, 410 F.2d 106 (1969).34. Seider v. Roth, 117 N.Y.2d 111, 216 N.E.2d 312, 269 N.Y.S.2d 99 (1966).35. 433 U.S. at 207-08.36. Id. at 210 (footnote omitted).37. 46 U.S.L.W. 2194 (N.D. Cal., Sept. 26, 1977).38. 433 U.S. at 207.39. Id.[Vol. 3:2https://ecommons.udayton.edu/udlr/vol3/iss2/14NOTEand witnesses, which are usually located in the state in which theproperty is found. '0 The Shaffer Court concludes that these factorswill ordinarily make it fair and equitable for the state to exercisejurisdiction over the property in any case, thus satisfying theInternational Shoe test. This analysis demonstrates that it is un-clear whether traditional in rem actions are to be considered as anexception to the general rule, or whether they would have beenaffected even if the rule is applied.V. CONCLUSIONThere are underlying problems with the Shaffer doctrine whichsoon become apparent. Courts are so accustomed to using the his-toric labels of in rem and in personam as conclusions, and notmerely factual considerations, in determining the proper forum,that there is bound to be confusion in the analytic process. TheShaffer Court itself, although it attempts to dissolve the differencesbetween in rem and personal actions, emphasizes the dichotomy inpointing out that real property in rem actions may not be coveredby its rule.Confusion in application as well as analysis may also resultbecause the Court created a general rule out of a case that involvesonly one type of fact situation among hundreds of possibilities. Theconcurring opinions demonstrated immediate differences as to theextent of the majority holding." The fact that the first case to followShaffer falls under the exception to the rule adds to the complex-ity.42The safest prediction of the impact of the Shaffer decision isthat the cases will follow the pattern set by in personam suits. Eachsituation will be determined separately, for in different cases theelements will take on varying significances. Although the analysismay be time consuming, it is also more equitable.Shaffer is the first major step towards a dramatic change in themethod of determining a court's jurisdiction. It establishes a univer-sal standard that incorporates new due process considerations intothe traditional concern for physical presence. In adopting theInternational Shoe standard, it effectively halted a trend in quasiin rem actions to extend a court's power despite great injustices. Italso set out a standard which can be applied consistently and with40. Id.41. Id. at 217-19 (Stevens, J.).42. California Power & Light Co. v. Uranex, 46 U.S.L.W. 2194 (N.D. Cal., Sept. 26,1977).19781Published by eCommons, 1978508 UNIVERSITY OF DAYTON LAW REVIEW [Vol. 3:2relative ease in all types of actions. The threshold question will nolonger be: Where is the defendant's property located?; but rather:Is it fair and just to adjudicate the defendant's interests in theforum?Victoria Wilsonhttps://ecommons.udayton.edu/udlr/vol3/iss2/14

The Expansion of the International Shoe Doctrine

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The Expansion of the International Shoe Doctrine

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