Can a state compel an out-of-state corporation to pay unemployment compensation contributions without violating the due process clause of the Fourteenth Amendment?

International Shoe Co., a Delaware corporation based in St. Louis, Missouri, manufactures and sells footwear. The company had no physical presence in Washington state - no office, contracts, or inventory. However, from 1937 to 1940, International Shoe employed 11-13 salesmen who resided in Washington. These salesmen's activities were limited to Washington state, where they displayed sample shoes, solicited orders, and transmitted these orders to the St. Louis office for acceptance. The salesmen were paid on commission and had no authority to enter into contracts or collect payments.

The company's business model involved shipping merchandise from outside Washington to purchasers within the state after orders were accepted at the St. Louis office. Despite having no formal establishment in Washington, International Shoe conducted business there through its salesmen who acted as intermediaries between the company and Washington-based customers.

International Shoe Co. was served a notice of assessment for unpaid unemployment contributions by the state of Washington through one of its salesmen in the state. The company received a mailed copy at its St. Louis address. International Shoe Co. appeared before the Office of Unemployment and moved to set aside the order, claiming improper service and lack of business presence in Washington. The appeal tribunal denied this motion, and the Commissioner affirmed the denial. The company then appealed to the Superior Court and subsequently to the Supreme Court of Washington, both of which affirmed the earlier decisions. Finally, International Shoe Co. appealed the case to the U.S. Supreme Court.

(Stone, J.)

Yes. A state can compel an out-of-state corporation to pay unemployment compensation contributions without violating the due process clause of the Fourteenth Amendment if the corporation has sufficient minimum contacts with the state. The determination of whether a foreign corporation can be subject to a state's jurisdiction hinges on the nature and quality of the corporation's activities within that state. When a corporation conducts systematic and continuous business activities within a state, resulting in a large volume of interstate business, it establishes sufficient contacts to make it reasonable and just for the state to exercise jurisdiction over it. This principle ensures that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. The concept of "minimum contacts" serves as the cornerstone for determining personal jurisdiction over foreign corporations. These contacts must be substantial enough that the corporation could reasonably anticipate being haled into court in that state. The systematic and continuous nature of the activities, rather than their mere casualness or occasional nature, is crucial in establishing this connection. Furthermore, when a corporation derives benefits from the protection of a state's laws, it is just and equitable that it should also bear the burden of obligations related to those benefits, such as contributing to unemployment compensation funds. The exercise of jurisdiction in such cases aligns with the principles of interstate federalism and state sovereignty, allowing states to regulate and tax businesses operating within their borders, even if those businesses are not physically present in the traditional sense. This approach balances the needs of states to enforce their laws and protect their citizens with the due process rights of foreign corporations, ensuring that jurisdiction is based on a meaningful connection to the forum state.

Concurrence (Black, J.) The Court should have dismissed the appeal as unsubstantial and declined to formulate broad rules about the meaning of due process. The criteria of 'fair play' and 'substantial justice' could lead to judicial overreach, potentially allowing the Court to strike down state or federal laws based on its own notions of natural justice rather than explicit constitutional prohibitions. This approach risks expanding the Court's power beyond its constitutional limits and introduces uncertainty into the application of due process standards.

No additional opinions found.