Shaffer v. Heitner, U.S. Supreme Court (1977)
Author: Bram

Cause of action: The following is a cause of action for reversal of an order for sequestration of property belonging to appellants, as the result of DE's long arm statute which allows a court of that State to take jurisdiction of a lawsuit by sequestrating any property of DF that happens to be located in DE.

Procedural History: Court of Chancery rejected DF's arguments.   DE Supreme Court affirmed.  The Court reversed.

Facts: Heitner, nonresident of DE, has one share in Greyhound, a DE corporation with its principal place of business in Phoenix, AZ.  Heitner filed a shareholder's derivative suit (claim brought by shareholder on the corporation's behalf that the corporation failed to assert) in County Court for the Chancery for New Castle, DE which it named Greyhound and 28 other officers as DF's.  The activities involved for which this suit took place was Oregon.

At the same time, Heitner filed a motion for an order of sequestration of DE property of the individual DF's pursuant to DE long arm statute.  Motion accompanied by supporting affidavit of counsel which stated that the individual DF's were nonresidents of DE.  Affidavit identified the property to be sequestered as "common stock of DF Greyhound."

Sequestration order signed same day it was filed.  82K shares seized belonging to 19 DF's and options belonging to 2 other DF's.  Stocks seized were not in DE, but since the company was in DE, court ruled seizure OK.

Issue(s): Whether the standard of fairness and substantial justice  set for in Int'l. Shoe should be held to govern actions in rem as well as in personam?

Court's Rationale/Reasoning: Rule of International Shoe: The term "presence" is used to determine a business/person's activities, in addition to potentially their residence and/or activity within the jurisdiction in question.  This means the seizure notice must have something to do with the actions of DF's.  Here, they didn't.  The seizure was a result of a long arm statute.  The original suit was a result of non-DE residents being involved in what the PL's in the original suit thought was a non-performance of their executory position which resulted in an antitrust suit and additional fines from criminal action.

The court found the property could be seized if it was to get appellants back into jurisdiction, but here, one action had nothing to do with the other, thus the sequestration is denied.

Rule: All assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny (re: minimum contacts).

Holding: Yes.  There is a standard of reasonableness where the forum must assert the state interest it finds so compelling.  If DF's acts do not have anything to do with the reason the property is being seized, then there is no cause for the in rem jurisdiction.

Concurrence/Dissenting:  The issue of minimum contacts was never pleaded by appellee, made the subject of discovery or ruled upon by DE courts.  But if it was, the issue would come into play in order to right some of the wrongs committed by the appellants, namely wrongdoings by fiduciaries, even if they were done outside the state.  It would also apply as states have traditionally expanded the crimes features citizens of their state.  And, DE, since it made the statute, should provide a forum for the issues to be tried.

If the appellants tried to bring themselves under the rules of the state, they should be bound by them in a judicial proceeding.