International Shoe Co. v. Washington (1945) established the "minimum contacts" rule for personal jurisdiction. Specifically, the United States Supreme Court held that state courts may exercise their jurisdiction over a corporation if the business has enough contact with state residents that being sued in that state would not offend "traditional notions of fair play and substantial justice."
For good reason, first-year law students often study International Shoe in civil procedure. This landmark decision shaped later court decisions on personal jurisdiction, due process, interstate commerce, and the service of process.
Question: Does the due process clause of the Fourteenth Amendment allow a Delaware corporation to be sued by the state of Washington when the company's primary place of business is in another state?
Holding: Personal jurisdiction is constitutional where a defendant corporation has "minimum contacts" with the state in which the lawsuit is brought, such that notions of fair play and substantial justice would not be offended.
Facts of International Shoe v. Washington
Following the Great Depression, the state of Washington passed the Washington Unemployment Compensation act, a tax on in-state employers that would set up a state unemployment compensation fund. International Shoe Company was incorporated in Delaware and primarily conducted business in Missouri. However, the company employed around a dozen sales clerks who were Washington residents and worked for International Shoe on commission. Their direct supervisors worked out of the company's main office in St. Louis.
The company did not have a brick-and-mortar establishment or offices in Washington. Instead, International Shoe would rent out space for displays in hotels or other businesses.
The state of Washington filed suit against International Shoe when the company failed to pay the unemployment fund tax. Per the statute's requirements, the state government delivered a notice of assessment to one of the local salesmen and sent a letter to International Shoe's headquarters in Missouri.
International Shoe argued that the courts should set the notice and order to pay the tax aside for several reasons:
- Washington state courts lacked jurisdiction over the company because its principal place of business was in Missouri.
- Delivering the notice to one of the Washington sales associates was not a proper service of process, and the company had no agent within the state who could be properly served.
- The company was incorporated elsewhere and was not "doing business" in Washington.
- International Shoe was not an employer within the meaning of the statute.
The trial court was unconvinced and held that Washington courts did have personal jurisdiction. The appeal tribunal agreed, as did the Superior Court and the Supreme Court of Washington. So, International Shoe appealed to the U.S. Supreme Court.
Analysis by the Supreme Court
Chief Justice Harlan Fiske Stone wrote the opinion for the majority. He points out that in older cases such as Pennoyer v. Neff, personal jurisdiction (also called "in personam" jurisdiction) was grounded on a court's "power over the defendant's person." However, the Pennoyer decision was from 1877, where a local newspaper ad did not give an out-of-state party sufficient notice of a lawsuit.
But this is 1945, Chief Justice Stone argues, and personal service of process is the norm. Therefore, 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."
So how do we establish minimum contacts?
"Whether due process is satisfied must depend upon the quality and nature of the activity," Justice Stone writes. International Shoe's business activities in Washinton state were "systemic and continuous," and resulted in a "large volume of interstate business," the Court held. After all, the sales team in Washington was generating roughly $31,000 a year in commissions in the late 1930s (that's more than half a million today!)
Further, the Court held that International Shoe had established sufficient contacts within the state of Washington that it would have sufficient notice of a lawsuit filed against it. Plus, the state had further ensured the company was on notice by mailing a tax assessment notice to the main office in Missouri.
Justice Black's Concurrence
In a separate opinion, Justice Hugo Black wrote that while he agreed with the outcome of International Shoe, he believed the rule set out by the majority was too reliant on subjective terms like "fair play" and "justice."
"[The Court] has thus introduced uncertain elements confusing the simple pattern and tending to curtail the exercise of State powers to an extent not justified by the Constitution," he wrote.
Justice Black argued that the Court shouldn't have taken up the case in the first place, pointing to the fact that Congress had passed legislation giving states the power to levy the types of unemployment taxes at issue in International Shoe.
"We have twice decided that this Congressional consent is an adequate answer to a claim that imposition of the tax violates the Commerce Clause [citation omitted]. Two determinations by this Court of an issue so palpably without merit are sufficient."
He was also unimpressed with the company's argument that it lacked sufficient contacts in Washington to face a lawsuit:
"And the due process clause is not brought in issue any more by appellant's further conceptualistic contention that Washington could not levy a tax or bring suit against the corporation because it did not honor that State with its mystical' presence.'"
Personal Jurisdiction Today
Despite Justice Black's protests, the rule established in International Shoe remains a fundamental doctrine in constitutional law. It provided the basis for states to create "long-arm" statutes, state laws that allow courts to assert personal jurisdiction over nonresidents who have a connection to the state.
Read the full opinion from International Shoe Co. v. Washington on FindLaw's Cases & Codes.