Does the Due Process Clause of the Fourteenth Amendment permit a state to subject an out-of-state corporation to suit in its courts and to the assessment of unemployment compensation contributions where the corporation, though lacking physical presence there, has systematic and continuous activities in the state through salesmen that give rise to the obligation sued upon?

International Shoe Co. (appellant) was a Delaware corporation with its principal place of business in St. Louis, Missouri, engaged in manufacturing and selling shoes. It maintained no office in Washington, made no contracts of sale or purchase there, kept no stock of merchandise there, and made no intrastate deliveries. From 1937 to 1940, it employed eleven to thirteen salesmen who resided in Washington and worked under the supervision of sales managers in St. Louis. The salesmen were compensated by commissions exceeding $31,000 per year. They displayed samples to prospective buyers, sometimes renting permanent or temporary sample rooms in business buildings or hotels, with costs reimbursed by the company. Their authority was limited to exhibiting samples and soliciting orders at prices and terms fixed by the company. They sent orders to St. Louis for acceptance, and accepted orders were shipped f.o.b. from outside Washington to purchasers in the state. Salesmen had no authority to enter contracts or make collections. The State of Washington sought to collect unpaid contributions to the state unemployment compensation fund, measured by a percentage of wages paid to employees in the state. Notice of assessment was personally served on one of the salesmen in Washington and mailed by registered mail to the company's St. Louis address.

The Washington Commissioner of the Office of Unemployment issued an order and notice of assessment of delinquent contributions. International Shoe appeared specially before the office of unemployment and moved to set aside the assessment, arguing that service on its salesman was improper, that it was not a Washington corporation and was not doing business in the state, that it had no agent in the state for service, and that it was not an employer under the statute. An appeal tribunal heard the motion on evidence and a stipulation of facts and denied it, ruling that the Commissioner was entitled to recover the contributions. The Commissioner affirmed, and the Washington Superior Court and the Washington Supreme Court both affirmed. International Shoe challenged the statute as applied under the Due Process Clause of the Fourteenth Amendment and the Commerce Clause. The case reached the United States Supreme Court on appeal under § 237(a) of the Judicial Code.

(Stone, J.)

Yes. Due process permits a state to subject an out-of-state corporation to suit in its courts where the corporation has established sufficient contacts with the state. The Commerce Clause challenge fails because 26 U.S.C. § 1606(a) expressly provides that no person required to pay into a state unemployment fund is relieved of compliance on the ground that he is engaged in interstate commerce. Congress may authorize states to regulate or burden interstate commerce in specified ways.

Historically, in personam jurisdiction rested on the defendant's physical presence within the forum. Pennoyer v. Neff, 95 U.S. 714 (1878). Now that personal service of summons or other notice has replaced the capias ad respondendum, due process requires only that a defendant not present within the territory of the forum have certain minimum contacts with it such that maintaining the suit does not offend traditional notions of fair play and substantial justice. Milliken v. Meyer, 311 U.S. 457 (1940).

A corporation is a fiction, so its presence can be manifested only through the activities of those authorized to act for it. The terms "present" or "presence" merely symbolize those activities of the corporation's agents within the state that courts deem sufficient to satisfy due process. The test is not mechanical or quantitative. It depends on the quality and nature of the activity in relation to the fair and orderly administration of the laws. Continuous and systematic activities that give rise to the liability sued upon support jurisdiction. Casual presence or isolated acts do not support suit on causes of action unconnected with those activities.

A corporation that exercises the privilege of conducting activities within a state enjoys the benefits and protection of its laws, and obligations arising out of those activities may be enforced in the state's courts. International Shoe's activities in Washington were systematic and continuous over the years in question, produced a large volume of interstate business, and gave rise to the very obligation sued upon. Service on the salesman and registered mail to the home office were reasonably calculated to give actual notice. The Washington statute imposes a tax on the privilege of employing salesmen in the state, a permissible subject of state taxation, and the same activities that establish presence subject the company to taxation and to suit to collect the tax. The judgment is affirmed.

Dissent (Black, J.) The appeal should be dismissed as unsubstantial. Congressional consent already answers the Commerce Clause claim, and the due process claim lacks merit because service by registered mail and on the company's salesmen satisfied procedural due process. A state has the power to tax and sue those who do business within its borders through agents, and nothing in the Constitution requires the corporation's mystical "presence." The majority's criteria of "fair play," "substantial justice," and "reasonableness," including weighing the inconvenience to the corporation, are vague standards the Court announces unnecessarily. They substitute the Court's notions of natural justice for constitutional text and curtail state power, contrary to the Tenth Amendment. Such elastic standards make judges the supreme arbiters of the country's laws and could be used to invalidate legislation, endangering democratic safeguards, and they alter the constitutional form of government.