International Shoe Co. v. Washington
| International Shoe Co. v. Washington | |
|---|---|
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| Argued November 14, 1945 Decided December 3, 1945 | |
| Full case name | International Shoe Company v. State of Washington, Office of Unemployment Compensation & Placement, et al. |
| Citations | 326 U.S. 310 (more) 66 S. Ct. 154; 90 L. Ed. 95; 1945 U.S. LEXIS 1447; 161 A.L.R. 1057 |
| Case history | |
| Prior | Special appearance by appellant in Washington state court as defendant in lower court; appellant moved to set aside order on grounds of lack of personal jurisdiction; tribunal denied motion; state Superior Court affirmed; state Supreme Court affirmed |
| Holding | |
| Suit cannot be brought against an individual unless they have minimum contacts with the forum state, and such lawsuit does not offend traditional notions of fair play and substantial justice. | |
| Court membership | |
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| Case opinions | |
| Majority | Stone, joined by Reed, Frankfurter, Douglas, Murphy, Rutledge, Burton |
| Concurrence | Black |
| Jackson took no part in the consideration or decision of the case. | |
| Laws applied | |
| U.S. Const. Amendment XIV | |
International Shoe Co. v. Washington, 326 U.S. 310 (1945)[1], was a landmark decision of the United States Supreme Court in which the Court stated important rules impacting a number of areas of the law including the participation of corporations involved in interstate commerce in state unemployment compensation funds, the confines imposed upon the power of the States by the Due Process Clause of the Fourteenth Amendment, the sufficiency of service of process, and personal jurisdiction.
Facts
The plaintiff, responsible for filing this suit in the State of Washington, established a tax on employers doing business therein. The "tax" was a mandatory contribution to the state's Unemployment Compensation Fund. The defendant, International Shoe Co., was a company that was incorporated in Delaware with its principal place of business ("PPB") in Missouri. The corporation had maintained for some time a staff of 11-13 salesmen in Washington, working on commission, who were residents of that state, and who occasionally rented space to put up displays, as well as met with prospective customers in motels and hotels, thus having no permanent "situs" of business in the State. Each year they brought in about $31,000 in compensation.
International Shoe's solicitation system was allegedly set up to explicitly avoid establishing the situs of the business in other states. Salesman did not have offices, did not negotiate prices, sent all orders back to Missouri and shipments from the plant were sent f.o.b..
Procedural history
International Shoe did not pay the tax at issue in this case, so the state effected service of process on one of their salesmen with a notice of assessment. Washington also sent a letter by registered mail to their place of business in Missouri. International Shoe made a special appearance before the office of unemployment to dispute the state's jurisdiction over it as a corporate "person."
The trial court ruled that it had personal jurisdiction over defendant corporation and this ruling was upheld in the appeal tribunal and by the Superior Court and the Supreme Court of Washington, so International Shoe Co. appealed to the U.S. Supreme Court.
Issue
What level of connection must exist between a non-resident corporation and a state in order for that corporation to be sued within that state?
Result
The Supreme Court, in an opinion by Chief Justice Harlan Fiske Stone (and in which Justice Robert Jackson did not participate), held that: 1) in view of 26 U.S.C. § 1606(a), providing that no person shall be relieved from compliance with a state law requiring payments to an unemployment fund on the ground that he is engaged in interstate commerce, the fact that the corporation is engaged in interstate commerce does not relieve it from liability for payments to the state unemployment compensation fund; 2) the activities in behalf of the corporation render it amenable to suit in courts of the State to recover payments due to the state unemployment compensation fund; 3) the activities in question established between the State and the corporation sufficient contacts or ties to make it reasonable and just, and in conformity to the due process requirements of the Fourteenth Amendment, for the State to enforce against the corporation an obligation arising out of such activities; 4) in such a suit to recover payments due to the unemployment compensation fund, service of process upon one of the corporation's salesmen within the State, and notice sent by registered mail to the corporation at its home office, satisfies the requirements of due process; and 5) the tax imposed by the state unemployment compensation statute -- construed by the state court, in its application to the corporation, as a tax on the privilege of employing salesmen within the State -- does not violate the due process clause of the Fourteenth Amendment.
The Court provided the following reasoning for its decision:
Historically, the jurisdiction of courts to render judgment in personam is grounded on their de facto power over the defendant's person. Hence, his presence within the territorial jurisdiction of a court was prerequisite to its rendition of a judgment personally binding him. But now that the capias ad respondendum has given way to personal service of summons or other form of notice, due process requires only that, in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.
Concurrence
Justice Hugo Black wrote a separate opinion, agreeing with the outcome in this case, but contending that the Court has excessively restricted the power of states to find jurisdiction over companies doing business therein.
Analysis
A growing body of Supreme Court precedent and incremental statutory and common law doctrines related to personal jurisdiction had been evolving over a period of several decades from the late 19th century through the early 20th century and the Supreme Court therefore could have upheld jurisdiction over defendant corporation. Initially the courts followed a strict interpretation of territorial jurisdiction, where states only had power over property or defendants who were actually present in the state (excepting corporations or residents). Defendants wishing to avoid claims could abscond to other jurisdictions without fear of suit. By the time of Hess v. Pawloski, the court had expanded jurisdiction to anyone who tacitly "consented" to jurisdiction (in that case, a defendant consented to jurisdiction by merely driving on a Massachusetts state highway).
These doctrines were built upon the expanding legal fiction of "presence" within the forum state or the defendant's commission of an act or failure to act within the forum state. (A "forum state" means the state in whose courts a case is being litigated.) In International Shoe, the Court's majority chose to create a new doctrine, while still adhering to a "presence" rationale. The basic formulation is: A state may exercise personal jurisdiction over an out-of-state defendant, so long as that defendant has "sufficient minimum contacts" with the forum state, from which the complaint arises, such that the exercise of jurisdiction "will not offend traditional notions of fair play and substantial justice . . ." See 326 U.S. 310 (1945).
The court broke down the types of contact that a defendant can have with a state into "casual" contact and "systematic and continuous" contact. In cases with only casual contact, the claim must be related to the contact in order for the state to have jurisdiction. Casual contact is not a basis for bringing unrelated claims. Systematic and continuous contact allows for both claims related to the contact and unrelated claims.
It was and remains a broad doctrine. It eventually allowed states to create "long arm" statutes and responded to the actualities of the national market of the United States. Defendants had often avoided their legal responsibilities by "scampering" from the state of occurrence and not being available for service of process. The case changed that to some extent, though the "traditional notions of fair play and substantial justice" are drawn from the Due Process Clause of the Fourteenth Amendment and Aristotle's[citation needed] notions of justice. The doctrine of International Shoe is broad, but the Court has recognized that it has limits, nonetheless.