Appellant
International Shoe Company
Appellee
State of Washington
Appellant's Claim
As a Delaware-based corporation whose factory was located in Missouri, International Shoe was not liable to pay into the state unemployment compensation fund in the state of Washington.
Chief Lawyer for Appellant
Henry C. Lowenhaupt
Chief Lawyer for Appellee
George W. Wilkins, Assistant Attorney General of the State of Washington
Justices for the Court
Hugo Lafayette Black, William O. Douglas, Felix Frankfurter, Frank Murphy, Stanley Forman Reed, Owen Josephus Roberts, Wiley Blount Rutledge, Harlan FiskeStone (writing for the Court)
Justices Dissenting
None (Robert H. Jackson did not participate)
Place
Washington, D.C.
Date of Decision
3 December 1945
Decision
That International Shoe was liable to pay state unemployment tax in Washington State because it had had "minimum contacts" with that state.
Significance
The International Shoe decision has been used for the past 50 years tohelp establish the circumstances under which a person or corporation comes under the jurisdiction of a state that is not a state of primary residence.
If a person who lived in the state of Colorado was taking a road trip throughthe Midwest and was the cause of a minor traffic accident in Minnesota, theMinnesota resident involved in the accident could sue the Colorado driver under the laws of Minnesota. The out-of-state driver could not claim that, as aColorado resident, he was only bound by decisions made in Colorado state court. In legal terms, this kind of problem is known as one of personal jurisdiction. Because the Colorado driver committed an act within Minnesota that led to the suit, he is bound by Minnesota state law.
Now suppose that a large shoe company has several sales agents working in Washington state. The shoes that the company sells are all made in St. Louis, Missouri. The company's legal headquarters are in Delaware. The only thing thecompany does in Washington is to have its salespeople sell shoes there. The salespeople live and work in Washington, but the corporation is not located there. The question is raised as to whether the company is liable to pay unemployment tax--a percentage of the salespeople's salaries--to the state of Washington.
This was the problem faced by the Supreme Court in the case of International Shoe Co. v. State of Washington The decision made by the Court still carries enormous influence in settling problems of personal jurisdiction today.
Corporations, People, and Legal Fictions
Legally, a corporation is considered a person under U.S. law. That is why corporations are covered by laws that govern personal jurisdiction. As Chief Justice Stone recalled in his majority decision for International Shoe, ". . . the corporate personality is a fiction, although a fiction intended tobe acted upon as though it were a fact." Under our federal system, the Constitution treats each state as its own sovereignty. Therefore, when talking about International Shoe--a U.S. company--the Court nevertheless referred to itas "a foreign corporation," meaning "foreign" to the state of Washington.
Minimum Contacts and Personal Jurisdiction
The International Shoe case began when the state of Washington sent anotice by registered mail to the company's home office, calling on the company to pay its back taxes to the Washington unemployment compensation system. The state also personally delivered a notice to one of the company's salespeople in Washington. Unemployment tax was levied on companies as a percentage ofeach employee's earnings, and International Shoe had several sales agents based in Washington earning commissions totaling more than $31,000--a considerable sum in 1945. Washington State wanted the tax due on those earnings.
International Shoe argued that even though its salespeople solicited orders in Washington, it did not really have a "presence" in that state. And becauseit was not present, it did not come under the jurisdiction of the state. Therefore, Washington could not require it to pay unemployment tax.
In such a situation the idea of a corporation as a person becomes relevant. If a person is in Colorado, he cannot be expected to show up in a Minnesota court just because someone in Minnesota decides to sue him. If the person getsa Minnesota subpoena, he could argue that, in fact, he is not present in Minnesota, and that, therefore, Minnesota does not have any personal jurisdictionover him. Likewise, if the Colorado resident gets a bill for Minnesota stateincome tax, and he did not earn any of his income in Minnesota, he could claim that the state had no jurisdiction.
However, as in our previous example, suppose a person had a traffic accidentin Minnesota and then drove home to Colorado. It could be said that he had had certain "minimum contacts" with Minnesota--he had a traffic accident there.This contact would in fact make him liable to the jurisdiction of a Minnesota state court.
Likewise, if a person had lived and worked in Minnesota half the year and then moved to Colorado, that would constitute enough contact with the state to make him liable for Minnesota state income tax--even if he happened to be living in Colorado the day the tax bill became due. These are examples of times when a state has jurisdiction over a person even when the person is not physically present in the state.
An Important Precedent
By the same token, the Court reasoned that the International Shoe Company hadhad "certain minimum contacts" with the state of Washington. The Court heldthat if these "minimum contacts" were enough to satisfy "traditional notionsof fair play and substantial justice," the company was liable to Washington State's jurisdiction. Given that International Shoe did sell shoes and maintain a sales staff in Washington State, the Court ruled that it did have these minimum contacts and was therefore liable for the tax.
The Court's reasoning was based on two major points: (1) To the extent that acorporation enjoys the privilege of conducting business within a state, it should also expect to meet the obligations of doing business within that state; (2) To the extent that a corporation wants to employ labor, it may expect to be taxed.
International Shoe set a major precedent for laws about personal jurisdiction. Unfortunately, for future lawyers, plaintiffs, and defendants, the decision was not far-reaching enough to specify exactly what constituted "minimum contact."
Related Cases
International Shoe Company
Appellee
State of Washington
Appellant's Claim
As a Delaware-based corporation whose factory was located in Missouri, International Shoe was not liable to pay into the state unemployment compensation fund in the state of Washington.
Chief Lawyer for Appellant
Henry C. Lowenhaupt
Chief Lawyer for Appellee
George W. Wilkins, Assistant Attorney General of the State of Washington
Justices for the Court
Hugo Lafayette Black, William O. Douglas, Felix Frankfurter, Frank Murphy, Stanley Forman Reed, Owen Josephus Roberts, Wiley Blount Rutledge, Harlan FiskeStone (writing for the Court)
Justices Dissenting
None (Robert H. Jackson did not participate)
Place
Washington, D.C.
Date of Decision
3 December 1945
Decision
That International Shoe was liable to pay state unemployment tax in Washington State because it had had "minimum contacts" with that state.
Significance
The International Shoe decision has been used for the past 50 years tohelp establish the circumstances under which a person or corporation comes under the jurisdiction of a state that is not a state of primary residence.
If a person who lived in the state of Colorado was taking a road trip throughthe Midwest and was the cause of a minor traffic accident in Minnesota, theMinnesota resident involved in the accident could sue the Colorado driver under the laws of Minnesota. The out-of-state driver could not claim that, as aColorado resident, he was only bound by decisions made in Colorado state court. In legal terms, this kind of problem is known as one of personal jurisdiction. Because the Colorado driver committed an act within Minnesota that led to the suit, he is bound by Minnesota state law.
Now suppose that a large shoe company has several sales agents working in Washington state. The shoes that the company sells are all made in St. Louis, Missouri. The company's legal headquarters are in Delaware. The only thing thecompany does in Washington is to have its salespeople sell shoes there. The salespeople live and work in Washington, but the corporation is not located there. The question is raised as to whether the company is liable to pay unemployment tax--a percentage of the salespeople's salaries--to the state of Washington.
This was the problem faced by the Supreme Court in the case of International Shoe Co. v. State of Washington The decision made by the Court still carries enormous influence in settling problems of personal jurisdiction today.
Corporations, People, and Legal Fictions
Legally, a corporation is considered a person under U.S. law. That is why corporations are covered by laws that govern personal jurisdiction. As Chief Justice Stone recalled in his majority decision for International Shoe, ". . . the corporate personality is a fiction, although a fiction intended tobe acted upon as though it were a fact." Under our federal system, the Constitution treats each state as its own sovereignty. Therefore, when talking about International Shoe--a U.S. company--the Court nevertheless referred to itas "a foreign corporation," meaning "foreign" to the state of Washington.
Minimum Contacts and Personal Jurisdiction
The International Shoe case began when the state of Washington sent anotice by registered mail to the company's home office, calling on the company to pay its back taxes to the Washington unemployment compensation system. The state also personally delivered a notice to one of the company's salespeople in Washington. Unemployment tax was levied on companies as a percentage ofeach employee's earnings, and International Shoe had several sales agents based in Washington earning commissions totaling more than $31,000--a considerable sum in 1945. Washington State wanted the tax due on those earnings.
International Shoe argued that even though its salespeople solicited orders in Washington, it did not really have a "presence" in that state. And becauseit was not present, it did not come under the jurisdiction of the state. Therefore, Washington could not require it to pay unemployment tax.
In such a situation the idea of a corporation as a person becomes relevant. If a person is in Colorado, he cannot be expected to show up in a Minnesota court just because someone in Minnesota decides to sue him. If the person getsa Minnesota subpoena, he could argue that, in fact, he is not present in Minnesota, and that, therefore, Minnesota does not have any personal jurisdictionover him. Likewise, if the Colorado resident gets a bill for Minnesota stateincome tax, and he did not earn any of his income in Minnesota, he could claim that the state had no jurisdiction.
However, as in our previous example, suppose a person had a traffic accidentin Minnesota and then drove home to Colorado. It could be said that he had had certain "minimum contacts" with Minnesota--he had a traffic accident there.This contact would in fact make him liable to the jurisdiction of a Minnesota state court.
Likewise, if a person had lived and worked in Minnesota half the year and then moved to Colorado, that would constitute enough contact with the state to make him liable for Minnesota state income tax--even if he happened to be living in Colorado the day the tax bill became due. These are examples of times when a state has jurisdiction over a person even when the person is not physically present in the state.
An Important Precedent
By the same token, the Court reasoned that the International Shoe Company hadhad "certain minimum contacts" with the state of Washington. The Court heldthat if these "minimum contacts" were enough to satisfy "traditional notionsof fair play and substantial justice," the company was liable to Washington State's jurisdiction. Given that International Shoe did sell shoes and maintain a sales staff in Washington State, the Court ruled that it did have these minimum contacts and was therefore liable for the tax.
The Court's reasoning was based on two major points: (1) To the extent that acorporation enjoys the privilege of conducting business within a state, it should also expect to meet the obligations of doing business within that state; (2) To the extent that a corporation wants to employ labor, it may expect to be taxed.
International Shoe set a major precedent for laws about personal jurisdiction. Unfortunately, for future lawyers, plaintiffs, and defendants, the decision was not far-reaching enough to specify exactly what constituted "minimum contact."
Related Cases
- International Harvester Co. v. Kentucky, 234 U.S. 579 (1914).
- People's Tobacco Co. v. American Tobacco Co., 246 U.S. 79 (1918).
- Southern Pacific Co. v. Arizona, 325 U.S. 761 (1945).
- Burger King Corp, v. Rudzewicz, 471 U.S. 462 (1985).
- Asahi Metal Industry Co. v. Superior Court of California, 480 U.S.102 (1987).
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