Following the Great Depression, national and
state governments enacted the New Deal and other economic recovery measures. The State
of Washington passed a comprehensive unemployment scheme, which was to be partially funded by
contributions from employers doing business in the state, paying a percentage of the wages
employees earned there. In International Shoe Co. v. Washington, defendant
International Shoe sold goods in Washington through salespeople located there, but did
not pay into the unemployment fund. The commissioner of the state unemployment office notified
International Shoe that it owed assessed amounts from 1937 to 1940 and ordered payment. Notice
was served on an International Shoe salesperson and by registered letter to company headquarters
in Missouri. International Shoe refused to pay and made
a special appearance to dispute the state’s in personam jurisdiction. After a hearing
before the appeals examiner, the unemployment office’s appeal tribunal agreed that International
Shoe had to pay. The commissioner and the county superior court affirmed. The Washington
Supreme Court also found for the state, holding that “regular and systematic solicitation
of orders…resulting in a continuous flow of [International Shoe’s] products into
the state,” constituted “doing business” sufficient to satisfy due process.
International Shoe appealed to the U.S. Supreme Court. The Court’s decision would determine
whether Washington could require payments to the unemployment fund and hail companies
into court without running afoul of due process. International Shoe argued that, as an entity
incorporated in Delaware and headquartered in Missouri, it was not doing business in
Washington. The company had roughly a dozen salespeople in Washington, but did not maintain
offices or warehouses there. Salespeople met with customers in hotels and public spaces,
and put up temporary displays. Orders were sent to Missouri and filled from facilities
outside Washington. The company did not have a registered agent in the state. International
Shoe claimed it didn’t meet the definition of an “employer” under state law and didn’t
have to contribute to the unemployment fund. In Pennoyer v. Neff, the Supreme Court found
that a defendant had to have some presence in a state for jurisdiction to be proper.
The question in International Shoe was whether a new standard ought to be defined.
Writing for the majority, Chief Justice Stone held that minimum contacts between the defendant
and the forum must exist in order for the exercise of in personam jurisdiction to be
proper. Minimum contacts will be found if the defendant’s contact with the state is
systematic and continuous, even if unrelated to the subject of the lawsuit. Alternately,
single or occasional acts in a state might be enough, depending on the nature and circumstances.
The assessment of contacts is qualitative; there’s no checklist. A corporation cannot
reap the benefits and protections of conducting business in a state without also being subject
to suit there. The Court found that the presence of International Shoe’s salespeople in Washington
and the sale of goods to Washington residents sufficient to establish systematic and continuous
contacts. Thus, allowing the suit did not “offend traditional notions of fair play
and substantial justice.” Justice Black dissented, arguing that the
test put forth by the majority judicially deprived states of their constitutional rights.
Black asserted that states have an unfettered right to tax businesses and allow their citizens
to seek relief against any company whose agents do business in the state. Tying jurisdiction
to establishment of minimum contacts, Black believed, limited states’ ability to afford
judicial protections to their citizens. If you found this video helpful, you can explore
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