Civil Procedure I, Pages 93–100

Shaffer v. Heitner

Supreme Court of the United States, 1977

Facts:

Plaintiff Heitner owns one share of stock in Greyhound, a company incorporated in Delaware that has its principle place of business in Arizona. He filed suit against twenty-eight of the company's former and current officers and directors for violating their duties to the company with actions that had made it liable to other legal action. These activities that opened the company to liabilities occurred in Oregon. At the same time, the defendant requested sequestration of of all company stock and credits of the defendants'. Delaware has a statute allowing a court of Delaware to take jurisdiction of a lawsuit by sequestering (taking) any of the defendant's property in Delaware. The sequestration was granted, seizing over 82,000 shares and options of stock. None of the stock certificates were physically in Delaware, but they were considered to be there as Delaware law makes Delaware the location of all stock in Delaware companies. All twenty-eight defendants were notified by certified mail to their last known addresses and by publication in the county newspaper. The twenty-one defendants who had property seized requested to move to void the sequestration order, arguing that it violated their due process.

Procedural History:

Delaware Supreme Court ruled for the plaintiff.

Issue:

Can a person be sued in a state merely because they own some property in that state?

Defendant's Argument:

The sequestration statute as applied violates Due process because it lets courts exercise jurisdiction without the defendant having sufficient contacts and because it deprives defendants of their property without proper safeguards.

Rule:

The suit's location must not offend fair play and substantial justice.

Reasoning:

While it simplifies plaintiffs getting a court and historically had been allowed, allowing in rem jurisdiction based solely on property in the state merely allows some cases that would otherwise be violations of due process. As owning property in the state unrelated to the case has nothing to do with the case (as shown by the suit being against seven others who don't own stock), it does not make it any more fair than it would be if they didn't own the property. Such claims must still be evaluated with the minimum contacts test to ensure due process exists then.

Holding:

No, a person must have more contacts than merely owning unrelated property in a state. Judgment of the Delaware Supreme Court was reversed.

Takeaway:

In rem suits are also subject to the "minimum contacts" test.

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