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Keywords

plaintiffdefendantjurisdictionlitigationcorporationdue processappellant

plaintiffdefendantjurisdictiondamagesliabilitytrustcorporationantitrustdue processappellantappelleeseizure

Related Cases

Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683

Facts

The plaintiff, a nonresident shareholder, initiated a derivative suit against Greyhound Corp. and its officers, claiming they caused the corporation to incur substantial liabilities due to their actions. Concurrently, the plaintiff filed for sequestration of the defendants' property located in Delaware, which included stock and options. The Delaware courts issued a sequestration order, prompting the defendants to challenge the jurisdiction and the due process of the sequestration procedure, arguing they had insufficient contacts with Delaware.

Appellee, a nonresident of Delaware, filed a shareholder's derivative suit in a Delaware Chancery Court, naming as defendants a corporation and its subsidiary, as well as 28 present or former officers or directors, alleging that the individual defendants had violated their duties to the corporation by causing it and its subsidiary to engage in actions (which occurred in Oregon) that resulted in corporate liability for substantial damages in a private antitrust suit and a large fine in a criminal contempt action.

Issue

Whether Delaware can assert jurisdiction over nonresident defendants based solely on the statutory presence of their property in the state, and whether this violates the Due Process Clause.

Whether or not a State can assert jurisdiction over a nonresident must be evaluated according to the minimum-contacts standard of International Shoe Co. v. Washington, supra.

Rule

Jurisdiction over nonresidents must be evaluated according to the minimum-contacts standard established in International Shoe Co. v. Washington, which requires sufficient contacts between the defendant, the forum, and the litigation.

Delaware's assertion of jurisdiction over appellants, based solely as it is on the statutory presence of appellants' property in Delaware, violates the Due Process Clause, which 'does not contemplate that a state may make binding a judgment . . . against an individual or corporate defendant with which the state has no contacts, ties, or relations.'

Analysis

The court analyzed the jurisdictional issue by referencing the minimum-contacts standard, concluding that the mere presence of property in Delaware, unrelated to the underlying cause of action, was insufficient to establish jurisdiction. The court emphasized that the defendants' property holdings did not provide the necessary contacts to justify Delaware's jurisdiction over them.

The court held that the limitation on the purpose and length of time for which sequestered property is held comported with due process and that the statutory situs of the stock (under a provision making Delaware the situs of ownership of the capital stock of all corporations existing under the laws of that State) provided a sufficient basis for the exercise of quasi in rem jurisdiction by a Delaware court.

Conclusion

The Delaware Supreme Court reversed the lower court's decision, ruling that the assertion of jurisdiction based solely on the presence of property in Delaware violated the Due Process Clause.

We hold that seizure of the Greyhound shares is not invalid because plaintiff has failed to meet the prior contacts tests of International Shoe.

Who won?

The appellants (defendants) prevailed because the court found that Delaware's jurisdiction over them was unconstitutional due to a lack of sufficient contacts with the state.

The Delaware Supreme Court affirmed the judgment of the Court of Chancery. Greyhound Corp. v. Heitner, 361 A.2d 225 (1976).

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