Can a state court assert jurisdiction over nonresident defendants based solely on the presence of their property within the state without violating due process?

Heitner, a nonresident of Delaware, initiated a shareholder's derivative suit in Delaware against Greyhound Corporation, its subsidiary Greyhound Lines, Inc., and 28 current or former officers and directors. The lawsuit alleged that the individual defendants breached their duties to Greyhound, leading to antitrust damages and criminal contempt fines. Heitner sought an order of sequestration for the Delaware property of the individual defendants, primarily consisting of Greyhound stock.

The sequestration was executed by placing 'stop transfer' orders on Greyhound Corp.'s books. Although the stock certificates were not physically present in Delaware, state law designated Delaware as the situs of ownership for all stock in Delaware corporations. The defendants were notified via certified mail and publication. Twenty-one defendants whose property was seized entered a special appearance to challenge the service and sequestration order, arguing they lacked sufficient contacts with Delaware under the International Shoe Co. v. Washington standard.

The Court of Chancery initially ruled against the defendants, rejecting their arguments and emphasizing sequestration's role in compelling nonresident defendants to appear. The defendants appealed this decision to the Delaware Supreme Court, which affirmed the lower court's ruling. The Delaware Supreme Court held that the statutory Delaware situs of the stock provided sufficient basis for quasi in rem jurisdiction. Following this affirmation, the case was brought before the U.S. Supreme Court, which noted probable jurisdiction, indicating its willingness to hear the case.

(Marshall, J.)

No. A state court cannot assert jurisdiction over nonresident defendants based solely on the presence of their property within the state without violating due process. The minimum contacts standard established in International Shoe applies to all assertions of state court jurisdiction, including in rem proceedings. The mere presence of property within a state's territory is insufficient to establish the necessary contacts between the defendant and the forum state. Due process requires a meaningful connection between the defendant, the controversy, and the forum state. The traditional notion that property presence alone confers jurisdiction is incompatible with modern due process standards. Jurisdiction over property is fundamentally a proceeding against the property owner's interests, necessitating an evaluation of the owner's contacts with the forum state. This approach ensures fairness and prevents states from exercising jurisdiction beyond constitutional limits. The rejection of pure in rem jurisdiction aligns with the evolving understanding of due process in an increasingly interconnected world. State interests, such as regulating corporations formed under their laws, do not override these constitutional protections. Absent specific statutory provisions and sufficient minimum contacts, a state cannot exercise jurisdiction over nonresident defendants merely because they own property within the state. This principle applies equally to tangible and intangible property, including corporate stock. The decision reinforces the paramount importance of fairness and substantial justice in jurisdictional determinations, emphasizing that all exercises of state court jurisdiction must satisfy the same constitutional standard of minimum contacts.

Concurrence (Powell, J.) The principles of International Shoe should extend to in rem jurisdiction. However, judgment must be reserved on whether ownership of certain forms of property, particularly real property, might alone provide sufficient contacts for jurisdiction. This distinction is crucial for future cases involving property-based jurisdiction claims.

Concurrence (Stevens, J.) The Delaware statute creates an unacceptable risk of judgment without notice. Stock purchasers lack fair notice that they might be subject to suit in Delaware. This opinion highlights the importance of due process and fair notice in jurisdictional matters, even in cases involving corporate stock ownership.

Concurrence/Dissent (Brennan, J.) The Court should not have reached the minimum contacts question, as it was not properly before us. However, there were sufficient minimum contacts to justify Delaware's jurisdiction in this case. The state has legitimate interests in providing restitution for its corporations and regulating corporate fiduciaries. This approach balances state interests with due process concerns in cases involving corporate governance and shareholder disputes.