Shaffer v. Heitner Case Brief

Why is the case important?

Plaintiff stockholder brought a shareholder’s derivative action in Delaware state court against Defendants, corporations incorporated in Delaware with their principal place of business in Arizona, and corporate officers of the corporations (Defendants). Plaintiff moved to sequester Defendants’ property, which was stock in the company, located in Delaware as defined by the Delaware statute. Defendants moved to quash the summons and to vacate the sequestration order, arguing that both exercising personal jurisdiction and seizing Defendants’ property violated due process.

Facts of the case

Question

In order for the forum state to exercise in rem jurisdiction on a nonresident, must the nonresident have minimum contacts with the forum state such that the defendant has purposefully availed itself of the benefits of that state’s laws? If so, must the cause of action be sufficiently related to the contacts the nonresident has with the forum state?

Answer

Yes to both. Judgment reversed. In rem is not a proceeding against the property, it is a proceeding against a person’s interest in the property. You need to give an owner of property reasonable and appropriate notice of an in rem proceeding so that he or she recognizes that such a proceeding directly affects his or her interests. Having property in a state does not give the state jurisdiction over causes of action unrelated to the property unless the person also passes the minimum contacts test articulated in the International Shoe decision. If it is unconstitutional to exercise jurisdiction over the person directly then it should be unconstitutional to assert jurisdiction indirectly. Plaintiff’s argument that Delaware has an interest in asserting jurisdiction over corporate fiduciaries is not established by Delaware law.

Conclusion

The Court held that (1) all assertions of state jurisdiction, including in rem and quasi in rem actions, must be evaluated according to the minimum contacts standard, and (2) neither the presence of the nonresident defendants’ stock in Delaware nor the fact that the nonresident defendants were officers of a Delaware chartered corporation, provided the requisite contacts to establish the jurisdiction of Delaware courts.

  • Case Brief: 1977
  • Appellant: Shaffer
  • Appellee: Heitner
  • Decided by: Burger Court

Citation: 433 US 186 (1977)
Argued: Feb 22, 1977
Decided: Jun 24, 1977