Shaffer v. Heitner
The Supreme Court ruled that Delaware could not use a state law treating corporate stock as located in Delaware to seize that stock and force out-of-state company officers to defend a lawsuit there, because the officers had no real connection to Delaware.
The decision extended the fairness-based 'minimum contacts' test, previously used only for lawsuits against a person directly, to cover cases where a state tries to get jurisdiction by grabbing a defendant's property instead — sharply limiting a long-used method of hauling nonresidents into court.
“We therefore conclude that all assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny.”
The Court's central holding extending the minimum-contacts test to all jurisdiction, including property-based jurisdiction.
How it got here: Delaware's Court of Chancery and then the Delaware Supreme Court upheld jurisdiction based on seized stock; the officers appealed to the U.S. Supreme Court.
The Case in Depth
What happened
A Greyhound shareholder sued the company's officers and directors in Delaware, claiming they mismanaged the company in ways that led to antitrust and criminal penalties stemming from conduct in Oregon. None of the officers lived in Delaware or had done anything there personally. The shareholder used a Delaware law that treats stock in Delaware corporations as legally located in Delaware to seize the officers' shares and force them to appear in court.
The question before the Court
Could Delaware courts hear a lawsuit against out-of-state corporate officers just because the officers happened to own stock legally considered located in Delaware?
The Court's answer
No — the Supreme Court ruled that Delaware could not base jurisdiction over the out-of-state corporate officers solely on a state law deeming their stock to be located in Delaware. The Court held that all assertions of state-court jurisdiction, whether framed as power over a person or over property, must satisfy the same fairness-based 'minimum contacts' test first set out in International Shoe Co. v. Washington.
Applying that test, the Court found the officers had no real connection to Delaware — they didn't live there, hadn't acted there, and the alleged wrongdoing occurred in Oregon. Owning stock that Delaware law artificially treated as located within the state was not enough of a genuine tie to justify requiring them to defend the lawsuit there, so Delaware's assertion of jurisdiction violated due process.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Businesses and individuals who hold property, including corporate stock, in a state can no longer be sued there solely because of that property if they otherwise have no real ties to the state. This narrows a tactic plaintiffs used to force distant defendants into a favorable forum, particularly affecting shareholder lawsuits against corporate officers and directors nationwide.
What changes now
The ruling reverses the Delaware Supreme Court's decision and ends this lawsuit's basis for proceeding in Delaware against these officers. More broadly, because this is a final merits decision, it changes the ground rules for jurisdiction based on property nationwide going forward. States can no longer rely on the mere legal presence of property, like stock, to hear cases unrelated to that property; plaintiffs seeking to sue distant defendants over unrelated claims must find another basis for jurisdiction, such as genuine contacts with the state.
What this does not decide
The Court did not decide whether owning property with a truly fixed physical location, like real estate, could by itself support jurisdiction; Justice Powell's concurrence and Justice Stevens's concurrence both flagged this as unresolved. The ruling also does not address the separate due process argument about inadequate procedural safeguards in the seizure process, since the Court decided the case on jurisdictional grounds alone.
Concurrences and dissents
Concurrence — Justice Powell
Justice Powell joined the Court's opinion but wrote separately to reserve judgment on whether owning property whose location is fixed and undisputed, especially real estate, might by itself justify jurisdiction up to the value of that property, without needing the full International Shoe analysis.
Concurrence — Justice Stevens
Justice Stevens agreed only with the result, reasoning the case should turn on lack of fair notice rather than a broad jurisdictional theory. He stressed that ordinary stock purchasers cannot be expected to know they might be sued far from home, and worried the majority's opinion decided far more than necessary, including possibly unsettling jurisdiction over real estate or other well-established methods.
Concurrence in part — Justice Brennan
Justice Brennan agreed that minimum contacts should replace the old property-based jurisdiction rules, but dissented from the Court's decision to actually apply that test here, arguing the issue was never raised or developed factually below and the ruling amounted to an unnecessary advisory opinion. He also argued that, on the merits, Delaware's strong interest in overseeing fiduciaries of its own corporations should have been enough to support jurisdiction.
How the Court got there
The legal reasoning, step by step
- The Court traced how jurisdiction based purely on a court's power over property in the state (in rem jurisdiction) developed from Pennoyer v. Neff, an 1878 case holding that courts could act on property within their borders even without power over the property owner personally.
- The Court noted that for lawsuits against a person directly, it had already replaced this territorial approach with the 'minimum contacts' test from International Shoe — a standard asking whether a defendant has enough real ties to a state that requiring them to defend a suit there is fair.
- The Court reasoned that an action against property is really an action against the interests of the person who owns that property, so there is no principled reason to apply a looser fairness standard just because a lawsuit is labeled as being against property rather than against a person.
- Applying this reasoning, the Court held that the fairness-based minimum contacts test must govern all assertions of state-court jurisdiction, whether framed as jurisdiction over a person or over property located in the state.
- Measured against that standard, the officers' only tie to Delaware was that their stock was deemed located there by statute, and that connection had nothing to do with the mismanagement claims against them, which involved conduct in Oregon.
- The Court concluded that owning stock deemed to be located in Delaware, without more, did not give the officers sufficient contacts with Delaware to justify requiring them to defend the lawsuit in Delaware's courts.
Doctrinal impact
Cases affected by this decision
Limits Pennoyer v. Neff (95 U.S. 714)
The Court said the territorial, property-based jurisdiction framework from this 1878 case no longer stands securely as the basis for state-court jurisdiction.
Limits Harris v. Balk (198 U.S. 215)
The Court said prior decisions relying on this case's property-based jurisdiction approach are overruled to the extent inconsistent with the new minimum-contacts standard.
Reaffirms International Shoe Co. v. Washington (326 U.S. 310)
The Court relied on and extended this case's fairness test to now cover property-based jurisdiction as well as personal jurisdiction.