International Shoe Co. v. Washington

326 U.S. 310 (1945)

What's Going On?

Appellant seeks review of a judgment affirming the denial of its motion to dismiss a notice of assessment of unpaid contributions to the unemployment compensation fund of Appellee, the State of Washington.

Who's Who?

Appellant  :

International Shoe Co. – (original defendant) a Delaware corporation with its principal place of business in Missouri.

Appellee   :

[State of] Washington – (original plaintiff) state government.

Facts:

Statutes enacted by Appellee, the State of Washington, establish an unemployment compensation fund. The fund is supported by mandatory contributions from each employer based on the annual wages payable for its employees' services within the state. Appellant is a Delaware corporation engaged in the manufacture and sale of shoes. Its principal place of business is in Missouri. Appellant maintains places of businesses in several states, but has no office in Washington and makes no contracts for the sale or purchase of merchandise, there. Appellant does not maintain goods within Washington or make deliveries of goods in Washington in intrastate commerce. During the three years in question, Appellant employed and directly supervised eleven to thirteen salesmen who resided in Washington, conducted their business in Washington, and were compensated by commissions based on the amount of their sales in Washington. The salesmen solicited orders from potential customers, but did not have the authority to enter into contracts or make collections. The salesmen occasionally rented rooms in which their shoe samples were displayed to potential customers, the cost of which was reimbursed by Appellant. The salesmen transmitted their orders to Appellant, who would accept or reject the orders from its office in Missouri. Defendant personally served a notice of assessment for unpaid contributions upon one of Appellant's salesmen within Washington, and mailed a copy of the notice to Appellant's office in Missouri. Appellant made a special appearance before the office of unemployment in Washington, arguing that the notice of assessment should be set aside because Appellant was not a corporation of the State of Washington, and that its due process rights had been violated because its activities within Washington were insufficient to justify Appellee's personal jurisdiction over Appellant. The courts below held that Appellee's jurisdiction over Appellant was proper. Appellant appealed.

Issue:

May a state, without violating the requirements of due process, exercise personal jurisdiction over a corporation that is not incorporated in that state, if the corporation has certain minimum contacts with that state?

Decision:

Yes. A state may have personal jurisdiction over a defendant that is not present within a state without violating the requirements of due process if the defendant has certain minimum contacts with the state such that the maintenance of the suit does not offend “traditional notions of fair play and substantial justice.” The demands of due process are met when a corporation's contacts with the forum state make it reasonable to require the corporation to defend the particular suit brought in that forum. “Presence” within a state generally exists when a corporation's activities in the state are continuous and systematic. “Presence” generally does not exist when the activities are casual, single, or isolated; although in some exceptional instances, a single or occasional act of a corporate agent within a state may be of a nature sufficient to subject the corporation to the jurisdiction of the state. Requiring a corporation to defend a suit in a forum where its activities have not been substantial would be unreasonably burdensome in a manner inconsistent with due process. The test of whether due process is satisfied depends on the nature and quality of the activity in relation to the fair and orderly administration of the laws which due process protects. A corporation enjoys the benefits and protections of the laws of a state in which it conducts its activities. The enjoyment of such benefits and protections may justifiably impose an obligation upon the corporation for which it may have to respond to suit within that forum. In this case, Appellant has taken the privilege of employing salesmen within the State of Washington, and Appellee is attempting to collect a tax which its laws have laid upon that privilege. Appellant's activities within Washington were systematic and continuous throughout the years in question, and the obligation for which Appellant is being sued upon arose out of its activities within Washington. The activities therefore establish Appellant's “presence” and justify Appellee's personal jurisdiction over Appellant for the purpose of recovering the tax. The maintenance of this suit therefore conforms to the traditional conception of fair play and substantial justice, and does not violate Appellant's due process rights.

Basic Rule:

A state may have personal jurisdiction over a defendant that is not present within a state, without violating the requirements of due process, if the defendant has certain minimum contacts with the state such that the maintenance of the suit does not offend “traditional notions of fair play and substantial justice.”

Concurrence:

The Court was correct in determining that Appellee may subject Appellant to a suit to recover Appellant's unpaid contributions; however, the Court should not have based its decision on the notion of “fair play” or substantial “justice.” The Federal Constitution leaves each state the power to tax and to allow its citizens to sue corporations whose agents conduct business within the state. The rule announced in the Court's decision, however, may result in those powers being struck down for not conforming to the Court's idea of “fair play.”

Terms:

Special Appearance :

An appearance by the defendant, before the court, to make a jurisdictional objection. Unlike a general appearance, a special appearance is not a consent to the court's jurisdiction over the defendant.

Note:

A corporation may be the subject of personal jurisdiction because a corporation is a legal person. This is often referred to as the “fiction of the corporate personality.”

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