Shaffer v. Heitner

Facts

Greyhound Corp. was incorporated under Delaware law and had its principal place of business in Phoenix, Arizona. Heitner, who did not live in Delaware, owned one share of its stock. On May 22, 1974, he filed a shareholder's derivative suit (a suit in which a shareholder sues on a claim that belongs to the corporation) in the Delaware Court of Chancery. He sued Greyhound, its wholly owned subsidiary Greyhound Lines, Inc., and 28 present or former officers or directors of one or both companies. He alleged that the individual defendants had violated their duties to Greyhound by causing the companies to act in ways that led to substantial damages in a private antitrust suit and a large fine in a criminal contempt action. Those activities took place in Oregon. With his complaint, Heitner moved to sequester (seize) the individual defendants' Delaware property. Counsel's supporting affidavit stated that the individual defendants were nonresidents of Delaware. The court signed the order the same day. The sequestrator seized about 82,000 shares of Greyhound common stock belonging to 19 defendants, and options belonging to 2 others, by placing stop-transfer orders on Greyhound's books. So far as the record showed, none of the stock certificates was in Delaware. A Delaware statute made Delaware the situs, or legal location, of all stock in Delaware corporations. All 28 defendants were notified by certified mail and by publication in a New Castle County newspaper.

Issues

1. Must a State's assertion of jurisdiction based on a defendant's property in the State, in rem or quasi in rem, meet the minimum-contacts standard of International Shoe?
2. Did the defendants' Greyhound stock, which Delaware law located in Delaware, or their positions as officers and directors of a Delaware corporation give Delaware's courts jurisdiction over them in this derivative suit?

Holding

International Shoe governs all assertions of state-court jurisdiction. Delaware lacked jurisdiction over the appellants: the seized stock was neither the subject of the suit nor related to the claim, and their positions with a Delaware corporation did not supply the minimum contacts that due process requires.