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Hey everybody, in this episode, let's talk about an important case you're going to read in your civil procedure class in your first year of law school. International Shoe Company versus Washington. It's all about personal jurisdiction under the 14th Amendment. Let's get started.

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Welcome to Law School Decoded, the podcast that pulls back the curtain on what it's really like to succeed in law school. Let's get started.

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Because it's going to set the baseline important rules about personal jurisdiction that you will use on your civil procedure exam. It's a case from 1945 decided by the U.S. Supreme Court. And it's about whether a state could exercise personal jurisdiction over an out-of-state corporation. So we've got a corporation, they are in trouble in the state of Washington for some reason. They're a defendant in proceedings in the state of Washington. But that corporation says we aren't really doing business in Washington in such a way that it would be constitutional for us to be sued there. And so that's what this case is all about. And it's an important case because it really set the modern rules for personal jurisdiction that have continued to be honed in subsequent cases that you will read in your civil procedure class. Now, you probably also are going to be required to read Panoyer v. Neff. Panoyer v. Neff was really the foundational case that said under the 14th Amendment due process clause, there is some restriction on a state's constitutional ability to exercise jurisdiction over a foreign defendant. And so what Panoyer v. Neff was essentially establishing was hey, there's some constitutional limits on the state of Washington, Missouri, Wisconsin, on the ability of those states to subject defendants who aren't in that state to the authority of its court system. And so what Panoyer and International Shu very early on were recognizing was hey, it would be constitutionally unfair for a defendant from one state to be subjected to jurisdiction in another state. We think that would be constitutionally unfair under the Due Process Clause. And we're going to need to read a few cases to understand what the limits are of a state's ability to exercise jurisdiction over individuals and corporations in other states. So International Shoe Company versus Washington is important because it was one of those foundational cases that really introduces the modern concepts of personal jurisdiction under the 14th Amendment in a meaningful way that are going to be interpreted and honed in subsequent cases that you read. There are more recent cases that you are for sure going to read in your Civ Pro class, and you will use those more recent cases to get some really good rule statements that you will use for your exam. But International Shoe still has some rules that you are going to use. So let's get into it a little bit by starting with understanding what the facts were of International SHU. And it might be a little confusing to you because it involves Washington's unemployment compensation system. And if you don't know what that is, if you're reading about that for the first time in this case, it can be a little bit confusing. So I want to introduce what the unemployment compensation system is in the United States so that you have a better understanding of the case as a whole as you read it. So before 1945, as part of the Great Depression, coming out of the Great Depression in the United States, we set up in this country all these social safety nets. And states basically had various incentives to set up what are called unemployment, insurance, or compensation systems. What is that? Well, it's a system to help people when they lose their jobs, when they lose their steady income. And this is the way it works. Basically, states have set up these big accounts to pool money, and they get money for those accounts by levying taxes, imposing taxes on employers and employees. So in Washington, the state involved in this case, they had an unemployment compensation system, which they still have today. And under that system, both employers and employees, every pay period, are contributing a specified percentage of the employees' wages to Washington. So if the employee made $100 one week, some percentage of their wages, maybe $3, don't go to the employee. They go into this unemployment compensation system. And the state pools all that money in the unemployment system. And every time someone in Washington might lose their job, they can go to that pool of money, that unemployment compensation system run by the state, run by a state agency, and they can say, hey, Washington, I lost my job. I lost my income. I could really use your help. I could use some money from that unemployment compensation system that you've been pooling. It's a social security safety net, right? A social safety net to give me a bit of money when I need it most, when I lose my job unexpectedly under certain circumstances. And so people who lose their jobs can apply to Washington to receive some unemployment benefits from that fund. Now, according to Washington, there was this company called International Shoe. And Washington said, hey, International Shoe, we think you have employees here in Washington, and we think that you should be contributing to this unemployment tax fund because you have employees here. So the Washington Commissioner in charge of the unemployment tax fund prepared a notice of assessment, essentially a notice of taxes owed, and it described the taxes that International SHU owed. Washington sent that notice over to International SHUE, and it sent it over to them by giving it and sending it to a sales employee who happened to be in the state of Washington, who worked for International SHU. And it also mailed a copy to International Shoe's headquarters, which was in St. Louis, Missouri, not Washington, far away in the middle of the country. Washington's on the West Coast. So International Shoe was not based in Washington, but it apparently had at least one employee there. Washington felt International SHU owed it some unemployment taxes that International Shoe had not paid. So Washington sent a notice to International Shoe that said, hey, pay up. You owe us some taxes. You probably owe us some penalties for not paying these on time, maybe some interest. So Washington served that notice on International SHU. International SHU gets that notice and responds by saying, hey, Washington, we're not really doing business in that state. We don't actually have agents there. We shouldn't be subject to your unemployment taxes. We don't owe you anything. Washington, as you can imagine, wants money for its unemployment system. And it feels that International Shoe owes them taxes. So Washington continues to take the position that International Shoe owes Washington money. And what can a party do when they are owed money? They can take the issue to court. And so the state of Washington took International Shoe to court and said, hey, you owe us taxes. International Shoe objected to that in court. And here's what International Shoe said in court: it said, hey, subjecting us to taxes in Washington violates the due process clause of the 14th Amendment. Under the Due Process Clause, we think that Washington cannot exercise personal jurisdiction over us, International Shoe. Now, all the Washington courts that heard this issue rejected International Shoe's argument. They sided with their state tax commissioner and they affirmed that tax order against International Shoe that said, hey, pay us taxes. Now, let's talk a little bit more about what International Shoe is and what their kind of identity is and where they're at and what their presence was in Washington, because the case goes into that because it's going to be important as to whether International Shoe was subject to personal jurisdiction in Washington. International Shoe was incorporated in Delaware, and it had its principal place of business in St. Louis, Missouri. As the name suggests, what does International Shoe do? They make shoes and footwear. They operate in several states, but not directly in Washington. They didn't have an office in Washington. They said that they didn't really have contracts or store much merchandise there or make things there. But here's the thing. From 1937 to 1940, International Shoe employed between 11 and 13 salespeople there. Those salespeople were supervised by international shoe managers in St. Louis. They sold those international shoe products within Washington. And in fact, they earned $31,000 in sales commission each and every year. So International Shoe is sending this money, these kind of wages, these sales commission earnings to people in Washington. But International Shoe isn't paying the unemployment tax on those. And that's what the state of Washington is going after, or at least allegedly they're not paying it. That's what Washington says. So those salespeople in Washington were working for international shoe there. They would show people samples of shoes and they would try to secure sales to shoe stores. They rented display rooms to show off international shoes products. They all lived and worked in Washington, and they caused lots of international shoe merchandise to be shipped and sold within that state. So when the Washington Supreme Court got this case, an international shoe is saying to the Washington Supreme Court, hey, we don't have the kind of presence in Washington such that it would be fair under the Constitution to subjects to jurisdiction here. It would be unconstitutional. It would violate due process to subject us to jurisdiction here. Now, what does that mean exactly? It doesn't mean that if International Shue wins that argument, that they win the entire case. All it means is that they cannot be sued in Washington. Presumably, the Washington commissioner could maybe go to the federal court or a state court in St. Louis, Missouri, and sue International Shu there. And International Shu wouldn't have that personal jurisdiction argument. Remember, personal jurisdiction is just about whether a state can exercise legal authority over a defendant in that state, because we have this sense under the Due Process Clause that it is unfair and unconstitutional to exercise jurisdiction over certain out-of-state defendants in particular states. Federal courts are subject to that requirement, as are state courts. So International Shoe presented that argument all the way up to the Washington Supreme Court. And the Washington Supreme Court said, look, you've got these salespeople here. They are regularly and systematically soliciting orders in our state. You are continuously sending your products to the state. That is sufficient to be doing business in Washington, to be sued here under the 14th Amendment. Our courts can exercise jurisdiction over you, pay the taxes, okay? Or the case is going to go on and you can raise other defenses on the merits of the allegations that you owe taxes. But you can be sued here. You can defend a suit here. We don't feel bad about that. And it doesn't shouldn't surprise you that Washington, maybe here, wants to extend its jurisdiction a bit because it wants that tax money. So the tax commissioner is going to want that. Maybe those court justices are going to support their commissioner. So what can a party do if a state court rules on a constitutional issue? They can ask the U.S. Supreme Court to decide the issue and to review the case. And here, International Shoe did that. And the U.S. Supreme Court said, sure, we'll take a look at it. Let's decide a personal jurisdiction case. And we're going to, in fact, issue a really important U.S. Supreme Court case about personal jurisdiction and due process in this particular decision. So the question that the Supreme Court was presented with was this. It was the same one that the lower courts had decided. Could that Washington Unemployment Commissioner subject international shoe to process in Washington? Because Washington had personal jurisdiction over international shoe under the Fourteenth Amendment? Yes or no? So what are the rules that you get from this case and that you can drop into your exam outline? There are some really good ones in here, the foundational ones that you can use. Here's rule number one. Under the Fourteenth Amendment's due process clause, for a defendant to be subject to personal jurisdiction in a state, he must have certain minimum contacts with that state such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. And then the rules that International Shoe presents are known as the minimum contacts test. This is really important. Essentially what International Shoe tells us is that a corporation's presence in a state is manifested by the activities carried on on its behalf by those authorized to act for the corporation in the state. And the key question is, do the contacts of the corporation in a particular state make it reasonable under the Due Process Clause to require the corporation to defend a lawsuit right there in that state? An international shoe sets up two different ways that a corporation can be subject to personal jurisdiction. The general jurisdiction test and the specific jurisdiction test. And these are tests that you need to know for your exam. The general jurisdiction test says that a corporation is present in a state for due process purposes when its activities in a state are continuous and systematic. So if a corporation has those continuous and systematic activities in a state, they're subject to jurisdiction there. They can be sued there. And that makes sense, right? If a corporation is doing business all the time in Washington, for sure. Shouldn't they be able to be sued in Washington? Shouldn't they be able to take advantage of Washington courts? Might they do that? Of course they can be sued there. Here's the second rule, the minimum contacts test, the specific jurisdiction test. If a corporation's presence is not systematic and continuous, it could still be subject to personal jurisdiction. If the activities of the corporation give rise to the reason why the corporation is sued, then it can be subject to personal jurisdiction. But the casual presence of a corporation estate will not be enough for it to be sued for reasons unconnected with its activities in that state. Ultimately, whether due process is satisfied will depend on the quality and nature of the activity. If a corporation exercises the privilege of conducting activities in a state, it has the benefits and protections of laws in the state, and having those privileges means the corporation has obligations to respond to suits there. Okay, go read those rules in the case itself. Drop them into your exam outline under an issue statement that says one issue in this problem is whether defendant name can be subject to personal jurisdiction in state name in a lawsuit brought by plaintiff name. That's an actual issue statement then you can use. You can put all that under a header that says personal jurisdiction in state name over defendant name. Bold that header. There we go. We've started drafting our outline. Okay. So those are the rules from this case. You get this two-prong test. And what you know about the specific jurisdiction test, that second one, is that it's going to measure and balance the relatedness of the contacts to the suit. So let's say someone sued a salesman in Washington for misrepresentation. Well, the corporation, even though it's out of state, could probably be sued there for that, because the lawsuit is totally related to the salesman's conduct. But let's say the employer was sued for something totally different and totally unrelated. Then the specific jurisdiction test may not be satisfied. So this is a great debate that you can have in your exam answer when you spot that a corporation has minimal contacts. We'll talk about that more in a bit. So, but let's talk first. How did these rules we just went over apply to International SHUE? The U.S. Supreme Court essentially said, this is not a close case. International SHU had systematic and continuous contact with Washington during those years in question when Washington says they owed taxes. They did business there. They received the benefits and protections of being in the state. They sold a bunch of product in the state. And the liability of this state, these unemployment contributions, arose from their activities in the state, having employees. So this was not a close case. Washington was easily subject to jurisdiction in this case. So for your CivPro exam outline, you should create a section for personal jurisdiction. An issue on the exam could be whether a state has personal jurisdiction over a defendant. Look for facts where a potential plaintiff, someone who might bring a lawsuit, like the Washington Commissioner, might want to bring a case against a defendant who's out of state. That plaintiff may want to sue close to home. The Washington Commissioner doesn't want to travel to St. Louis for a lawsuit in 1945. No, you'd much rather sue in your home turf in Washington, right? But the defendant here isn't going to want to have to travel to Washington to defend a case and may argue, hey, that's unfair for me to be sued there. So unfair that it's unconstitutional. So look for that fact pattern. And when you see it, boom, flip to your section of your outline related to personal jurisdiction and start dropping in your header, your issue statement, and your rule. Your header is going to be something like what I just said: personal jurisdiction over the defendant name that you'll insert in the state name that you'll insert. And then you'll do a rule statement. And that rule statement might sound something like plaintiff name may want to sue defendant name in plaintiff's name's home state of insert the state name. But an issue is whether a court in that state would have personal jurisdiction over defendant name who is a resident or citizen of state name. Ooh, that's a great issue statement. You can write it beforehand. You can write it now. You don't have to do the analysis and brain work on the exam to write that out. Go ahead and write it out. Put it in your outline. You're done. All you gotta do is copy paste that in and put in the names of the defendants and of the plaintiffs and the states that they are involved in. And what's great is now you've weaved in the facts of the fact pattern that you're presented with on the exam into your issue statement. So it's gonna be really easy for your professor to read the story. And then you drop in the rules. You drop in the rules about specific and or personal jurisdiction, specific and or general jurisdiction, maybe both. And you drop in some of the foundational rules about what it means for a state to have personal jurisdiction over a defendant. You can write all those in advance. I recited them to you. They're in the actual case that you'll read. You don't need to change the language that much. It's already written for you. Put it in your rule statement. And then when you see those rules implicated, use them. Now, if it's really obvious that a party is subject to jurisdiction in a state, like it's headquartered there, like both the plaintiff and defendant are both from Illinois, you probably don't have a jurisdiction issue. So you don't need to go to this section of the outline. Don't discuss issues that aren't there. But when you have parties in different states, this is probably an issue that your professor is going to play around with if they want to have a personal jurisdiction discussion on the exam. This is not a technical issue, by the way, to talk about real practice. This actually comes up. I litigated for about 10 years, I litigated personal jurisdiction in multiple cases. And it was a battle to talk about whether the defendant had the adequate minimum contacts in a state to be sued there. This is a real issue that really does come up. So you need to be ready to talk about it on your exam and to potentially raise it for clients in practice. And so look for the facts. As we'll talk about in subsequent cases that suggest whether or not a defendant is subject to general jurisdiction and specific jurisdiction in a state. You may have to talk about both. It should probably be pretty obvious whether a defendant is subject to general jurisdiction. Like they're going to have pretty systematic and continuous contacts in a state, just like international shoe did. Maybe they have 10 salespeople there all the time. But it will be more of a battle and discussion in your exam answer if the defendant has fewer contacts and a plaintiff is going to need to rely on the specific jurisdiction test to sue them in a particular state. In that instance, you are going to be discussing the facts in the problem presented and dropped in there by your professor, suggesting whether or not that defendant has contacts in the state and whether those contacts are related to the lawsuit. What would the plaintiff argue to say, hey, this defendant has a ton of contacts here? They have salespeople here. They send people here for conferences. They send merchandise here. They use the internet to contact people in this state. They call people in this state on the phone. They pick up the phone and dial. Those kinds of details. What are the contacts? What are the ways the defendant is reaching into the state? It might be subtle, so read the problem carefully. Look at every act of the defendant and ask yourself, are they reaching into that state? On the other hand, what are the facts that suggest the defendant is not reaching into that state? Those are facts the defendant will use and that you should use on their behalf in your exam answer to say this defendant is not subject to personal jurisdiction here. They cannot be sued in this state. And then you want to discuss how related would the plaintiff's lawsuit be to those contacts? An international shoe was obvious, right? The lawsuit was related to those employees in that state. It was related to unemployment taxes. So it was really obvious for the court to say, yeah, even if we needed to rely on the specific jurisdiction test here, this lawsuit over unemployment taxes is super related to what International Shoe was doing here. But what if International Shoe got sued for something totally different, some kind of tort or property case, something completely separate from what it was doing in the state? In that instance, maybe International Shoe would have some arguments that, hey, we aren't subject to specific jurisdiction here. But again, if they're subject to general jurisdiction, they're out of luck. They can be sued for just about anything in that state and not have a personal jurisdiction argument. So on your exam, look for those fact patterns with a defendant who might be sued in a state where they only have limited contacts. That may mean that there is a personal jurisdiction issue. You go to that section of your outline, you drop in the bold header, you drop in the issue statement, you drop in your pre-written rule statements. You're going to develop those in other cases that we read, and you're going to get more bullet points essentially that will be your rule statements. And when you see that the facts and the problem implicate those particular rule statements, you can drop them in. Some of them can come from Air National Shoe, though. This is the modern personal jurisdiction case that's giving you the basic rules for your outline and your exam answer. Those subsequent cases are going to give you additional and more specific rules that you can use when the facts of the exam call them into action. So I hope this podcast helped you understand what to expect when you see a personal jurisdiction issue come up on your exam, what the International Shoe case was all about, and how you might use International Shoe and the rules you learned from International Shoe on your exam. In subsequent episodes we do, we'll talk about other cases you might be reading in your personal jurisdiction section and in your Civ Pro class that you might drop into that section of your exam answer, which I know will be impeccably written. By the way, come to a conclusion at the end of that answer. Come to a conclusion about whether the state would have personal jurisdiction over that non-resident defendant, who seems to have the better argument and why you can do it. Use common sense based on what the professor is presenting you with. So I hope you enjoyed this episode about a really important case and a really important section of your class because this is one that professors love to test on the exam. And it's seriously a real issue that lawyers are battling in briefs that they file every single day in state and federal courts around the country. So I hope this podcast episode helped you understand the case a little bit more. Look forward to talking to you more about this topic in future podcast episodes. We will see you next time.

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That's it for today's episode of Law School Decoded. Visit us online at lawschooldecoded.com and make sure to subscribe. Until next time, keep decoding the law one step at a time.