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.
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