SHAFFER V HEITNER ****Harris v.

Balk
JUN 24 1997 | MARSHALL, J
FACTS
Heitner sued Shaffer, and Delaware state took the jurisdiction of the lawsuit by sequestering the
defendant's property located in the state. The property sequestered were shares of Greyhound
stock; where Greyhound is incorporated in Delaware. However, the defendants that owned the
stock were not residents of Delaware, nor had they ever conducted any business there.
Furthermore, the physical stock certificates were not in Delaware, but since the company is
incorporated there, Delaware State statute holds that it is property of the state, and that based on
in rem jurisdiction, Delaware state is able to seize the property to gain jurisdiction. Delaware state
contended that establishment of minimum contacts was not necessary to obtain jurisdiction, since
they had in rem jurisdiction because of the property.
ISSUE: WON DELWARE State statute is unconstitutional by violating the due process clause of
the 14th amendment, by permitting DELAWARE courts to take jurisdiction of a lawsuit by
sequestering SHAFFER’s property located in that state, despite the absence of sufficient contracts
with that state? YES
Arguments for D
 They did not have minimum contacts with the state
o Also, sequestration would allow possibility of decision without hearing
o Property is unrelated to P’s cause of action
They decided to kill the idea of quasi in rem, in order to have minimum contactsto satisfy
jurisdiction.
Directors have no contacts with Delaware
No relationship with ownership of stock and Delaware
Absurd for Heitner to sue each director in each's home state. In response to this ruling, Delaware
writes a statute that all person's who are director's of Delaware corporation, are subject to
jurisdiction in Delaware for breach of duty as adirector of the corporation. By becoming officers
of a corporation, they consentto being held under Delaware jurisdiction. This is constitutional.
Milton v. Meyer : You can always sue a person on any cause of action in their domicile, as you
can where they are present.
Hypo: Mrs. X driving and gets into accident in Louisiana. Her domicile is Tennessee. So, she can
be sued in either Tennessee or Louisiana.
HOWEVER, more recently, said that just because she is a domicile of Tennessee, the action
has nothing to do with Tennessee and should be tried in Louisiana. The suit should be related to
the action that occurred in that state for it to have jurisdiction.
Personal jurisdiction in place to protect due process rights of the defendant.
WHEREFORE, JUDGMENT REVERSED

Arguments for P
 International Shoe does not apply because state is invoking in rem not in personam
jurisdiction

Judgment/Holding: Delaware's state statute , permitting courts of that state to take jurisdiction of
a lawsuit by sequestering defendant's property located in Delaware violated the due process
clause of the 14th amendment. Delaware judgment reversed by the U.S. supreme court.

Reasoning: The court held that minimum contacts should have been established in in rem
jurisdiction as well as in personam jurisdiction. The seized property did not have sufficient contacts
with the state to support Delaware's jurisdiction over the appellants. That is because the property
in question were shares of a stock, of a company with business nationwide, that is only
incorporated in Delaware. The appellants had never intended to conduct any business
in Delaware, and therefore to gain privileges and protections of conducting business in that state,
nor had any reason to be brought before the Delaware Court.

Notes
Derivative suit brought by Heitner to defendants. This means he is bringing a law suit in the name
of the corporation, so if verdict for plaintiff, compensation goes to corporation and shareholders.
Heitner brought suit in a court of equity of Delaware.
Directors had nothing to do with Delaware. Delaware passed a statute that says that the stock of
a corporation incorporated in Delaware is located in Delaware (unique statute in the country).

Compel the directors to come to Delaware by seizing the stocks, and will remain unsellable
until they appear in Delaware court, thus consenting to jurisdiction.
Directors made a special appearance and argued that the seizure was no good because of due
process rights. 2nd issue - no good as basis of jurisdiction.

Delaware supreme court said this is fine because it is quasi in rem jurisdictionand is within the
state's statute.

According to Pennoyer v Neff, if he has attached the property before givingnotice, state could
have assumed jurisdiction. The property was attached beforeserving the notice, so why not
constitutional?