CIVIL PROCEDURE CLASS 35

1. CIVIL PROCEDURE CLASS 35 Professor Fischer Columbus School of Law The Catholic University of America November 14, 2003

2. Shaffer v. Heitner • Shareholder derivative suit brought by Heitner (shareholder) against 28 defendants who were present or former officers/directors of Greyhound Corp.

3. Shaffer v. Heitner • Greyhound (AZ, DE) • Heitner not resident in DE • Suit against present/former officers/directors of Greyhound for alleged mismanagement of corporation’s business in Oregon • How were Ds notified about the suit?

4. Shaffer: • What was the legal basis for the Delaware court’s assertion of jurisdiction over the D? (in personam? In rem? Quasi in rem (type I or type 2)?)

5. Shaffer: • What was the legal basis for the Delaware court’s assertion of jurisdiction over the D? (in personam? In rem? Quasi in rem?) • Quasi in rem, type 2, pursuant to 2 Delaware statutes • Exercise of attachment jurisdiction to seize intangible assets that could be used to satisfy the claim against the defendants which had nothing to do with the property attached

6. 2 Delaware Statutes • 1. SEQUESTRATION STATUTE Del. Code Ann., Tit. 10 § 366 (1950)- permitted seizure of property belonging to a non-resident D as the basis to compel the D’s appearance in litigation brought against that D • 2. SITUS OF OWNERSHIP STATUTE Del. Code Ann., Tit. 8 § 169 (1975) – Delaware is the situs of ownership for all stock in DE corporation regardless of where the certificates ae located.

7. Challenging DE jurisdiction • 21 Ds whose property was seized challenge jurisdiction on the basis that the ex parte sequestration procedure did not accord them due process and also did not have enough contacts with DE to satisfy International Shoe test. • DE courts (Court of Chancery, DE Supreme Court) uphold jurisdiction • U.S. Supreme Court only considers Int’l Shoe issue. Does the U.S. Supreme Court affirm or reverse the Delaware Supreme Court’s ruling on jurisdiction? Why

8. Justice Marshall – opinion of the Court • Int’l Shoe standard applies to quasi in rem jurisdiction.

9. Justice Marshall – opinion of the Court • “Traditional notions of fair play and substantial justice can be as readily offended by the perpetuation of ancient forms that are no longer justified as by the adoption of new procedures that are inconsistent with the basic values of our constitutional heritage…”

10. Justice Marshall – opinion of the Court • “The fiction that an assertion of jurisdiction over property is anything but an assertion of jurisdiction over the owner of property supports an ancient form without substantial modern justification. Its continued acceptance would serve only to allow state-court jurisdiction that is fundamentally unfair to the defendant. We therefore conclude that all assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny.” • How did this apply to the facts of Shaffer?

11. On the Facts • Heitner claims that DE has a strong interest in managing a DE corporation. • But Marshall says that the DE legislature has not endorsed this view: the sequestration statute bases jurisdiction only on the presence of property in the state. • Moreover, Heitner hasn’t shown DE is a fair forum for this dispute – only that DE law should govern obligations of officers to Greyhound and stockholders.

12. Justice Powell • Concern with overbreadth – agrees with Marshall’s assessment of sequestration statute in this case but reserves judgment about whether other kinds of property, especially real property, located in DE could provide necessary contacts to subject non-resident D to jurisdiction of DE courts.

13. Justice Brennan • Why does he dissent from Part IV of the Court’s opinion?

14. AFTER SHAFFER • Shaffer’s broad statement: “We . . . Conclude that all assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe,” raised questions remained about the validity of the traditional categorical rule that jurisdiction over a non-resident defendant was lawful if based solely on physical presence within the jurisdiction, however transitory the presence or how unrelated it was to the lawsuit against the defendant.

15. Legislative Response to Shaffer • DE enacts a statute (Del.St. Ti. 10 §3334) by accepting appointment as trustee, director, member of DE corporation, consent to jurisdiction in the DE state courts

16. Burnham v. Superior Court of California • According to Francie Burnham, her husband Dennis broke a promise to her that he had made in July, 1987. What was this promise?

17. Burnham v. Superior Court of California • In July 1987, Francie and Dennis agreed that Francie would file for divorce in CA on the grounds of irreconcilable differences. • But Dennis filed for divorce on the grounds of in NJ in Oct. 1987 – on the grounds of desertion. • Dennis did not serve process on Francie. What would you need to know to determine whether, if Dennis had served Francie with process, the NJ court would have had jurisdiction?

18. Meanwhile, in California…. • Francie sues Dennis for divorce in CA state court in Jan. 1988, presumably on “irreconcilable differences” ground • Where and how is Dennis served with process?

19. Paying a Price for Being a Good Dad? • Served at Francie’s house when returning child after a short weekend visit • Dennis contests the jurisdiction of the CA court. On what basis? Do the CA courts agree with Dennis?

20. Burnham: Issue for Decision By the U.S. Supreme Court • Court must decide whether the Due Process clause of the XIV Amendment prohibits the CA courts from exercising jurisdiction over a non-resident who was personally served with process while temporarily visiting CA (“tag jurisdiction”), in a lawsuit unrelated to his activities in CA. • How does the Court rule on this issue?

21. Burnham • All of the justices agree that the CA court could constitutionally assert jurisdiction over Burnham. • They greatly diverge in their reasoning, however.

22. Role-Playing – In a Supreme Court Conference Are: • Justice Scalia • Justice Brennan • Justice White • Justice Stevens • Please explain your reasoning in Burnham. • Next, defend your reasoning, showing why you think the approach of your brethren is wrong.

23. Justice Scalia: Textualist, Traditionalist Jurisprudence • In general, traditional theory of transient jurisdiction (based on presence in the forum state) does not violate due process. • Joined by Justice Kennedy, Rehnquist and White (joins in I, Iia, IIb and IIC)

24. Justice Scalia: Importance of Tradition • Jurisdiction over a person within a state’s borders is “one of the continuing traditions of our legal system” that defines due process standard of “traditional notions of fair play and substantial justice” and “its validation is its pedigree” • Transient jurisdiction need not be analyzed under the minimum contacts test of International Shoe because International Shoe developed as a substitute for personal service and it would thus make no logical sense to subject personal service to the International Shoe test. • “All” doesn’t mean”all” in Shaffer (p. 746)

25. What If Scalia Was On the Court forShaffer • Would Scalia’s approach have led to a different result in Shaffer?

26. Justice Brennan’s Concurrence: • Joined By Marshall, Blackmun, O’Connor

27. Justice Brennan: No Categorical Rules, Concern With Fairness • Although personal service in the forum state is generally sufficient as a valid basis for jurisdiction over a non-resident defendant, there is no categorical rule to this effect. • Transient jurisdiction must be subjected to the minimum contacts test of International Shoe. That is All means All. So you need to assess relevant state service rule. • Tradition is a relevant factor in determining whether the International Shoe test is met, but it is not dispositive.

28. Justice Brennan • How does Brennan weigh benefits and burdens on transient defendants?

29. Justice White’s Concurrence: • What is the basis for White’s concurrence?

30. Justice White’s Concurrence: Common Sense Should Prevail • Transient Jurisdiction rule has been “so widely accepted throughout this country that I could not possibly stike it down.” • No showing that rule so arbitrary and lacking in common sense that it would violate due process in every case. Unless that could be shown, should not allow challenges in individual cases – a least where presence in the forum is intentional.

31. Stevens’ Concurrence: An Easy Case • Why does Stevens think this is an easy case? • Why doesn’t he join in the opinions of Justice Scalia or Justice Brennan