International Shoe v. Washington
Encyclopedia
International Shoe Co. v. Washington, 326 U.S. 310
(1945), was a landmark decision
of the United States Supreme Court
in which the Court established 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, especially, personal jurisdiction.
, the State
of Washington, established a tax
on employers conducting business
therein with the stated legislative purpose of providing a fund to be used for financial assistance to newly unemployed workers in the state. The "tax" was in effect a mandatory contribution to the state's Unemployment Compensation Fund. The defendant
, International Shoe Co., was an American 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 the State of Washington, working on commission
. The salesmen were residents of that state and they met with prospective customers in motels and hotels, and occasionally rented space to put up displays. The company thus had no permanent "situs" of business in the State. Each year, the salesmen brought in about $31,000 in compensation. International Shoe's solicitation system allegedly was set up explicitly to avoid establishing the situs of the business in other states insofar as salesman did not have offices, did not negotiate prices, and sent all orders back to Missouri; shipments from the plant to customers were sent f.o.b.
.
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", however 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.
(and in which Justice Robert Jackson did not participate), held that 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. 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. 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. 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. 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. In reaching its decision the Court stated that throughout American
history, the jurisdiction of courts to render judgment in personam has been 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. 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.
As the doctrine of personal jurisdiction evolved with additional cases directed to related subject matter, the Supreme Court 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 the instant case, 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 legal responsibilities by "scampering" from the state of occurrence and not being available for service of process
. This 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
notions of justice
. The doctrine of International Shoe is broad, but the Court has recognized that it has limits, nevertheless.
Case citation
Case citation is the system used in many countries to identify the decisions in past court cases, either in special series of books called reporters or law reports, or in a 'neutral' form which will identify a decision wherever it was reported...
(1945), was a landmark decision
Landmark decision
Landmark court decisions establish new precedents that establish a significant new legal principle or concept, or otherwise substantially change the interpretation of existing law...
of the United States Supreme Court
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
in which the Court established 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, especially, personal jurisdiction.
Facts
The plaintiffPlaintiff
A plaintiff , also known as a claimant or complainant, is the term used in some jurisdictions for the party who initiates a lawsuit before a court...
, the State
U.S. state
A U.S. state is any one of the 50 federated states of the United States of America that share sovereignty with the federal government. Because of this shared sovereignty, an American is a citizen both of the federal entity and of his or her state of domicile. Four states use the official title of...
of Washington, established a tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
on employers conducting business
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
therein with the stated legislative purpose of providing a fund to be used for financial assistance to newly unemployed workers in the state. The "tax" was in effect a mandatory contribution to the state's Unemployment Compensation Fund. The defendant
Defendant
A defendant or defender is any party who is required to answer the complaint of a plaintiff or pursuer in a civil lawsuit before a court, or any party who has been formally charged or accused of violating a criminal statute...
, International Shoe Co., was an American company
Company
A company is a form of business organization. It is an association or collection of individual real persons and/or other companies, who each provide some form of capital. This group has a common purpose or focus and an aim of gaining profits. This collection, group or association of persons can be...
that was incorporated
Incorporation (business)
Incorporation is the forming of a new corporation . The corporation may be a business, a non-profit organisation, sports club, or a government of a new city or town...
in Delaware
Delaware
Delaware is a U.S. state located on the Atlantic Coast in the Mid-Atlantic region of the United States. It is bordered to the south and west by Maryland, and to the north by Pennsylvania...
with its principal place of business ("PPB") in Missouri
Missouri
Missouri is a US state located in the Midwestern United States, bordered by Iowa, Illinois, Kentucky, Tennessee, Arkansas, Oklahoma, Kansas and Nebraska. With a 2010 population of 5,988,927, Missouri is the 18th most populous state in the nation and the fifth most populous in the Midwest. It...
. The corporation had maintained for some time a staff of 11-13 salesmen in the State of Washington, working on commission
Commission (remuneration)
The payment of commission as remuneration for services rendered or products sold is a common way to reward sales people. Payments often will be calculated on the basis of a percentage of the goods sold...
. The salesmen were residents of that state and they met with prospective customers in motels and hotels, and occasionally rented space to put up displays. The company thus had no permanent "situs" of business in the State. Each year, the salesmen brought in about $31,000 in compensation. International Shoe's solicitation system allegedly was set up explicitly to avoid establishing the situs of the business in other states insofar as salesman did not have offices, did not negotiate prices, and sent all orders back to Missouri; shipments from the plant to customers were sent f.o.b.
FOB (shipping)
FOB is an initialism which pertains to the shipping of goods. Depending on specific usage, it may stand for Free On Board or Freight On Board. FOB specifies which party pays for which shipment and loading costs, and/or where responsibility for the goods is transferred...
.
Procedural history
International Shoe did not pay the tax at issue in this case, so the state effected service of processService of process
Service of process is the procedure employed to give legal notice to a person of a court or administrative body's exercise of its jurisdiction over that person so as to enable that person to respond to the proceeding before the court, body or other tribunal...
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
Special appearance
A special appearance is a term used in the American law of civil procedure to describe a civil defendant's appearance in the court of another state solely to dispute the personal jurisdiction of the court over that defendant...
before the office of unemployment to dispute the state's jurisdiction over it as a corporate
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
"person", however 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.
Ruling
The issue involved a determination of the level of connection that must exist between a non-resident corporation and a state in order for that corporation to be sued within that state. The Supreme Court, in an opinion by Chief Justice Harlan Fiske StoneHarlan Fiske Stone
Harlan Fiske Stone was an American lawyer and jurist. A native of New Hampshire, he served as the dean of Columbia Law School, his alma mater, in the early 20th century. As a member of the Republican Party, he was appointed as the 52nd Attorney General of the United States before becoming an...
(and in which Justice Robert Jackson did not participate), held that in view of 26 U.S.C. § 1606(a), providing that no person shall be relieved from compliance with a state
U.S. state
A U.S. state is any one of the 50 federated states of the United States of America that share sovereignty with the federal government. Because of this shared sovereignty, an American is a citizen both of the federal entity and of his or her state of domicile. Four states use the official title of...
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. 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. 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. 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. 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. In reaching its decision the Court stated that throughout American
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
history, the jurisdiction of courts to render judgment in personam has been 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. Justice Hugo Black
Hugo Black
Hugo Lafayette Black was an American politician and jurist. A member of the Democratic Party, Black represented Alabama in the United States Senate from 1927 to 1937, and served as an Associate Justice of the Supreme Court of the United States from 1937 to 1971. Black was nominated to the Supreme...
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.As the doctrine of personal jurisdiction evolved with additional cases directed to related subject matter, the Supreme Court 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 the instant case, 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 legal responsibilities by "scampering" from the state of occurrence and not being available for service of process
Service of process
Service of process is the procedure employed to give legal notice to a person of a court or administrative body's exercise of its jurisdiction over that person so as to enable that person to respond to the proceeding before the court, body or other tribunal...
. This case changed that to some extent, though the "traditional notions of fair play and substantial justice" are drawn from the Due Process
Due process
Due process is the legal code that the state must venerate all of the legal rights that are owed to a person under the principle. Due process balances the power of the state law of the land and thus protects individual persons from it...
Clause of the Fourteenth Amendment
Fourteenth Amendment to the United States Constitution
The Fourteenth Amendment to the United States Constitution was adopted on July 9, 1868, as one of the Reconstruction Amendments.Its Citizenship Clause provides a broad definition of citizenship that overruled the Dred Scott v...
and Aristotle's
Aristotle
Aristotle was a Greek philosopher and polymath, a student of Plato and teacher of Alexander the Great. His writings cover many subjects, including physics, metaphysics, poetry, theater, music, logic, rhetoric, linguistics, politics, government, ethics, biology, and zoology...
notions of justice
Justice
Justice is a concept of moral rightness based on ethics, rationality, law, natural law, religion, or equity, along with the punishment of the breach of said ethics; justice is the act of being just and/or fair.-Concept of justice:...
. The doctrine of International Shoe is broad, but the Court has recognized that it has limits, nevertheless.