SHAFFER v. HEITNER
Legal provision: Due Process
Argument of John R. Reese
Chief Justice Warren E. Burger: We will hear arguments next in 75-1812, Shaffer against Heitner.
Mr. Reese, you may proceed whenever you are ready.
Mr. John R. Reese: Mr. Chief Justice, and May it please the Court.
The issue before the court in this case today concerns the constitutionality of the Delaware's sequestration statute as it was applied to seize the property of some 21 nonresident defendants in an action having no substantial relationship to the state of Delaware.
This is an appeal, on the decision of the Delaware Supreme Court upholding that application of the statute.
This is a shareholder’s derivative suit brought by the holder of one share of stock of the Greyhound Corporation against some 28 individual defendants.
The action is alleged to be brought on behalf of Greyhound and its subsidiary Greyhound Lines, Inc., both of which have their principal places of business in Phoenix, Arizona.
The Greyhound Corporation is a Delaware Corporation. Greyhound Lines, Inc. is incorporated in California.
Now, the individual defendants are 28, present or former officers, directors or in some cases employees of either one or the other of those companies.
Justice Harry A. Blackmun: Do each one of the 28 fulfill what you have just stated either an officer or a Director or a key employee?
Mr. John R. Reese: No, Mr. Justice Blackmun.
Now, that is why I tried to put it in conjunctives.
Some are officers, some are directors, and some are both.
Justice Harry A. Blackmun: But all are one or the other?
Mr. John R. Reese: That is right.
Some of them hold no position with the Delaware Corporation.
It is worth noting that at this point.
Some of the individual defendants have only held positions with the California Corporation.
As I said, none of the defendants is a resident of the State of Delaware, neither is the plaintiff incidentally.
So as far as the record in this case shows no defendant has ever been in Delaware or done any act in that State.
The conduct charge against them in a complaint occurred far from Delaware.
The essence of those charges is that the individual defendants ought to be held liable for the reason that the companies were found have violated a court order and because the companies suffered an adverse verdict in antitrust case, that is still on appeal and not yet final.
But those charges are not before court.
Today the issue is whether the Delaware sequestration statute can constitutionally be applied to sequester the defendant’s stock as means for coercing their general appearance in the action.
Now, Delaware has no long arm statute applicable to individuals.
None of these defendants was personally seized with -- served with process.
Instead the plaintiff obtained an ex parte order from the Court of Chancery in Delaware, seizing any property that the defendants had in the state.
In this case the property seized consisted primarily of capital stock issued by a Delaware Corporation.
The seizure was affected by an order to the corporation directing it not to affect any transfers of those shares on its books.
The certificates themselves were not seized and they could not be seized because they are not in Delaware either.
Delaware accomplishes the seizure.
Justice Potter Stewart: They under the Uniform Commercial Code, am I incorrect in my memory that the situs of the certificate is the situs of the stock.
Mr. John R. Reese: Well, under the Uniform Commercial Code as applied in every state except Delaware, Mr. Justice Stewart, the certificate itself must be seized in order to affect an attachment.
Delaware alone adopts the contrary rule namely that the situs of the stock is deemed to be in the state of incorporation of the issuing corporation.
Unknown Speaker: That is always been in Delaware rule?
Mr. John R. Reese: As far as I know that has always been the Delaware rule.
Justice Harry A. Blackmun: And that is very much the minority rule you say, just as a matter of situs of property?
Mr. John R. Reese: At this point, Delaware is unique in holding that rule.
Every other jurisdiction has adopted those provisions of the Commercial Code that embody the stock and the certificate.
Justice John Paul Stevens: Mr. Reese you do not challenge the constitutional power of the State of Delaware to so locate the situs of the stock or do you?
Mr. John R. Reese: It depends on the purpose for which the State uses that legal fiction Mr. Justice Stevens.
We do challenge the power of the state to use that fiction for the purpose of the serene jurisdiction over non-resident defendants or to adjudicate their rights in that stock.
Justice Byron R. White: That could be even to the denial of the stock.
Mr. John R. Reese: It is not necessary to reach that question in this case…
Justice Byron R. White: You just reached to it.
Mr. John R. Reese: Our position is that a fictional situs for an intangible property is an insufficient basis for adjudication of personal rights.
Justice Byron R. White: Oh, even if Delaware could subject the property to a judgment, and your point is they cannot compel, use that property to compel personal jurisdiction?
Mr. John R. Reese: Correct.
Justice Byron R. White: That is all you need to decide in this case.
Mr. John R. Reese: That is all we need to decide in this case.
Justice Harry A. Blackmun: Well, may I ask you this which is the other side of the same coin.
If the certificates were in fact in the State of Delaware, would you not be making the same argument?
Mr. John R. Reese: Well, we might be making some of our same arguments Your Honor.
Justice Harry A. Blackmun: Well, why do you not be making the same basic argument that my brother White has just identified that you cannot use that in order to obtain personal jurisdiction?
Mr. John R. Reese: We would still be objecting to the course of purpose (Voice Overlap)
Justice Harry A. Blackmun: And (Voice Overlap) arguments that are same.
Mr. John R. Reese: Yes Your Honor.
Justice Harry A. Blackmun: Is there a fiction in any of that?
The certificate is only a certificate.
It is not a property.
It is just a certificate of ownership and anything more than the situs of the insuring corporation is the property, wherever you going to locate the situs, it is going to be something of fiction, is not it?
Mr. John R. Reese: That is correct Your Honor.
Justice Harry A. Blackmun: And even though Delaware follow the majority rule and say that the situs of the certificates is the situs of the personal property and if the certificates of the defendants in this case, all were happen to be locked up in the corporation’s safe deposit box in Delaware, you would still be making the same basic constitutional argument, would you not?
Mr. John R. Reese: Yes, Your Honor, we would.
I think that it is worth noting that connection that if those certificates were there, the odds are very much greater, that the defendants would have had some substantial relationship.
Justice Harry A. Blackmun: They might be in residence, but I am assuming they are not.
Mr. John R. Reese: Okay, that is fine.
Unknown Speaker: Mr. Reese, would you be making the same argument instead of stock certificates, one of the defendants had his brother-in-law drive his car to the state and the car was seized?
Mr. John R. Reese: Well, the same constitutional problems would exist to some extent in the case of tangible property.
In the case of tangible property that is in the jurisdiction through no fault, if you will, or without the knowledge or consent the defendant, I think the arguments would apply with the same force.
Justice Harry A. Blackmun: So, does it really turn on the situs of the stock?
Your position is basically the same.
It is unfair to seize the property without and use it for this purpose of gaining, of forcing someone in the general appearance.
Mr. John R. Reese: That is correct and our argument goes to the sufficiency of the relationship between a defendant and the jurisdiction, before that jurisdiction may assert its power over the defendant.
Now, we should note that State of Delaware could not use its sequestration procedure in this case to reach all of the defendants in the plaintiff suit, only those which had something that Delaware considered to be property in the State.
As a result, seven of the main defendants are not before the court, were not brought into the case and are not really parties to this appeal.
There is no real dispute about how the Delaware procedure works.
It has been interpreted and applied by the Delaware courts for many years and the procedure is well established.
First of all, it is an ex parte procedure.
The order seizing the property is issued without notice or prior opportunity for hearing.
Second, that order is issued automatically if only two facts are alleged.
The first fact is if the defendant is a non-resident and second fact is that he owns property in the State of the Delaware.
If only those two facts are alleged, the order must issue and there is no discretion to deny it.
Unknown Speaker: That is only a nominal bond of $1,000, isn't it?
Mr. John R. Reese: In this case Your Honor, a bond of the $1,000 was posted.
Unknown Speaker: Mr. Reese on that point, supposing Delaware amended its Statute to require that before the order issued, there would be a probable cause hearing, it would be ex party, and maybe served notice, but the defendant would not – may not come, would that cure the defect in the Statute?
Probable cause to show there is merit to the complaint.
Mr. John R. Reese: That would certainly alleviate the first problem of lack of prior notice and opportunity for hearing.
Unknown Speaker: Will it make the Statute any less unfair?
Mr. John R. Reese: It would make it less unfair.
I am not prepared to say that that would cure the other deficiencies that if existed in Statute.
Unknown Speaker: Well, if Delaware still insisted that you submit the ‘in personam’ jurisdiction, in order to defend the case, you would have the same argument in that respect.
Mr. John R. Reese: Yes, we would.
Chief Justice Warren E. Burger: You do not think the Statute eliminates the whole range of special appearance to part of the defendant to contest the jurisdiction of the court or for any other purpose?
Mr. John R. Reese: That is right, Mr. Chief Justice, it eliminates the ability of the defendant to enter a special appearance to contest the jurisdiction of the court or even to enter a limited appearance to defend to the extent of his property.
Justice John Paul Stevens: On the merits.
Mr. John R. Reese: On the merits, yes.
To get this order issued then, it does not matter who the plaintiff is or who are the plaintiffs are and it does not matter what the claim is about or where the claim arose or whether the claim is.
Mr. Justice Stevens, there is no determination whatever of whether that claim has any merit at all before that order issues.
Unknown Speaker: Nobody in this case was a resident of Delaware.
Mr. John R. Reese: That is correct.
Unknown Speaker: Nobody.
Mr. John R. Reese: Well, the only connection that Delaware has with any party or anything else in this case is that one of the two corporate defendants happens to have been incorporated in Delaware.
None of the individual defendants, nor the plaintiff who filed the lawsuit is a resident of Delaware.
Chief Justice Warren E. Burger: Statute is applicable to any and all kinds of lawsuits?
Mr. John R. Reese: Any claim brought by any plaintiff.
Chief Justice Warren E. Burger: It has to be in the Court of Chancery though, isn't it?
Mr. John R. Reese: Inequitable claim for the recovery of money is the way the Statute is described.
Chief Justice Warren E. Burger: It has to be inequitable claim, so it is not any claim.
It is any equitable claim, is that it?
Mr. John R. Reese: That is correct.
Chief Justice Warren E. Burger: It is not equitable, therefore to an ordinary tort suit, is that correct?
Mr. John R. Reese: This particular Statute is not Your Honor.
Delaware still has a Foreign Attachment Statute which has some of the same characteristics as the sequestration Statute.
Chief Justice Warren E. Burger: This one is only in the Court of Chancery and Delaware still has the division between Chancery and block, does it?
Justice Byron R. White: You suggest that before state may get jurisdiction by attaching property there must be a prior hearing?
You do not suggest that, do you?
Chief Justice Warren E. Burger: Well, Mr. Justice White I think that depends on whether Fuentes against Shevin really continues to be viable.
Justice Byron R. White: Well I know but getting jurisdictions puts a statement being able to get jurisdiction is a – puts a considerable different interest in the picture.
Mr. John R. Reese: Well I think the question in it as I see it would be whether the purpose to obtain jurisdiction is by itself such a significant State interest as to justify postponing notice and a prior opportunity for hearing.
Justice Byron R. White: Because the State may never give up the chance automatically, by giving notice, people move their property.
Mr. John R. Reese: That is correct, that is a possibility.
Justice Byron R. White: But in any of that you would say the state must give the four day opportunity for a timely hearing for a probable cause on the merits.
Mr. John R. Reese: Yes or at the very minimum, the State must provide some kind of procedural safe guard to protect the defendant?
Chief Justice Warren E. Burger: Against mistake of what?
Mr. John R. Reese: Against the cease of property on the basis of a frivolous or baseless claim or whatever.
If there is not prior notice or opportunity for hearing then there certainly must be some kind of protective mechanism.
Chief Justice Warren E. Burger: You think you have two independent grounds for winning here?
Mr. John R. Reese: At least two, Your Honor.
Chief Justice Warren E. Burger: Oh, at least two then.
Mr. John R. Reese: One is if there is no opportunity for a hearing at all at any time, the property must be released even if it was seized to get jurisdiction and the second is that, even if there was a hearing and even a probable cause was shown, the state may not – condition is right to defend, up to the value of the property on his submitting the ‘in personam’ jurisdiction.
Chief Justice Warren E. Burger: Yes.
The hearing be directed to -- to what will be the hearing directed?
Mr. John R. Reese: We are talking now about a pre-seizure hearing or a port-seizure hearing?
Unknown Speaker: Any hearing.
Mr. John R. Reese: It would be directed to whether the claimant had any basis or merit.
Unknown Speaker: Do you mean the underlying?
Mr. John R. Reese: The underlying…
Unknown Speaker: It would not be directed to the question of whether or not this is a property of the defendant?
Mr. John R. Reese: No.
Unknown Speaker: That was conceded under Delaware law it is, is it not?
Mr. John R. Reese: Under Delaware law this is conceded to be property of…
Unknown Speaker: Property of the defendants within the Jurisdiction of Delaware.
Mr. John R. Reese: Under Delaware law that is conceded…
Unknown Speaker: Under Delaware law that is – there's no, the hearing therefore, in other words, there is no dispute about that. So, the hearing would not be directed to that issue, is that correct?
Mr. John R. Reese: In this case, it would not.
Unknown Speaker: And so to what it would be directed?
Mr. John R. Reese: It will be directed to the question whether the underlying claim to the client had sufficient merit to justify the use of the State Seizure Powers.
Unknown Speaker: In preventing the losses, that is the basic loss.
Unknown Speaker: Which is the probable cause hearing, it is a Fentes hearing.
Mr. John R. Reese: Thank You, I would agree about a hearing to establish the validity or probable validity in the language used in Fuentes and North Georgia.
Justice Potter Stewart: But that as my brother Mike pointed out involves different state interests, different interests and other interests, in that case the question was who was entitled to the property?
Mr. John R. Reese: That interest is not entirely divorced from the Delaware Statute either Mr. Justice Stewart, because under Delaware law, the property maybe retained to satisfy an eventual judgment if the court determines that that should be so.
So, the Statute does serve a dual purpose.
It is both to obtain jurisdiction and to secure a judgment.
So, it has that aspect that is common to the creditor cases.
Justice Potter Stewart: But it also has in your submission an additional vice in this system?
Mr. John R. Reese: Well, it has the cohesive vice.
Justice Potter Stewart: That even if there is a hearing, it has the cohesive advice.
Mr. John R. Reese: If a defendant in Delaware who has been subjected to the procedure declines to submit to that coercion and just stays away and forfeits a property…
He forfeits the property without any adversary hearing whatever.
It is just gone.
Now, that is a Statute that has a potentially enormous impact together because the appellee has pointed out over one half of the most important companies in United States have chosen Delaware as the place to incorporate and all of their share holders are vulnerable to the use of this procedure on any claim that any plaintiff might choose to assert against them.
Justice Potter Stewart: Any equitable claim.
Mr. John R. Reese: Any equitable claim that any plaintiff might choose to assert against them.
Justice Potter Stewart: Equitable claim for money?
Mr. John R. Reese: Equitable claim for money.
Now, we submit that that procedure is not only unfair, but that is unnecessary and it is obsolete.
It has a whole catalog of defects.
I think most of them we have touched on already.
There is no prior notice or opportunity for hearing.
There is no consideration of the merit, either before or after the seizure takes place.
The defendant is not permitted any right to defend unless he submits himself unlimited personal jurisdiction in the state.
There is no adequate provision for indemnifying the defendant against a wrong procedure.
The purpose of the state is to assert personal jurisdiction over the defendant, but in this case, none of the defendants and who know the controversy has a substantial relationship with the state of Delaware and even the property that Delaware has purported to use as a basis for the proceeding is located there by reason of illegal fiction that no other state continues to accept.
Justice Potter Stewart: But I thought that after that last point you did not question the power of Delaware to say in this state they read the personal property, when it comes to, we are talking about shares of stock shall be decided for the issuing corporation.
And if the issuing corporation is in Pennsylvania, even though the certificates are in Delaware, I gather that the under Delaware law, the property is in Pennsylvania.
Is that correct?
Mr. John R. Reese: As my understanding, that is correct.
Justice Potter Stewart: Did I misunderstand you when you, when I thought that you just say that you were not questioning the power of Delaware to identify the situs of the personal property as depending upon the situs of the issuing corporation?
Mr. John R. Reese: I think in the answer to Mr. Justice Stevens question on that point earlier, I indicated that it depends on what state then does with its legal fiction and I think the case does raise a serious question as to whether the state does not exercise in jurisdiction over property that is not truly within its borders.
Justice Potter Stewart: But your argument I think you said and tell me if I misunderstood you because it is of some importance; wouldn’t your argument is be the same if this was a single defendant, who has lived in Arizona, but whose automobile is in Delaware?
Mr. John R. Reese: Our argument would be weaker.
It would basically follow the same constitutional lines.
Justice Potter Stewart: In constitutional matter why would it?
Mr. John R. Reese: I think that the court has previously recognized limits on the ability of State through the use of fictions, to deem property to be within its borders for the purpose of asserting jurisdiction.
The case of an intangible fiction is surely a more questionable one than the case of a tangible.
Justice Potter Stewart: What if the claim had nothing to do with the car?
Mr. John R. Reese: This claim?
Justice Potter Stewart: This claim.
Mr. John R. Reese: It had nothing to do with the car, the car had no -- because of action in Arizona, the car being there or being own there.
Well, we would certainly be here making the same argument.
Justice Potter Stewart: Yeah, this is the point.
Mr. John R. Reese: State of Delaware considers the defendant’s contacts, for the relationship of the controversy to the State to be irreverent.
Justice Potter Stewart: There is nothing new about that.
In fact, what is new is International Shoe if you are as old as I am -- because in my Law School days there was no such thing as the International Shoe Doctrine and it was a quite a usual thing for every State to provide that the if a laws suit involved real property then the jurisdiction of the court existed wherever the real property was situated.
If it involved any other kind of a lawsuit, if there was personal property within the jurisdiction, you could acquire personal jurisdiction to the extent of the value the property by quasi in rem jurisdiction.
There is nothing new about this basic system, is there?Mr.
Mr. John R. Reese: No, the development of intangible property is however causing a serious question whether you ought to follow that same analysis for jurisdictional purpose?
Justice Potter Stewart: I am not sure, one of your plans was that now, that we are in the regime of International Shoe that we should forget all that, all those previous devices to acquire personal jurisdiction.
Mr. John R. Reese: Well that certainly is our position.
Justice Potter Stewart: I thought.
Mr. Reese even in the times to which my brother Steward refers was it permissible to get jurisdiction by quasi in rem method and obtain a judgment for more than the value of the property?
Mr. John R. Reese: I am not aware of the case.
It could not -- you have to show up in Court
Unknown Speaker: But, could he not come in and enter an appearance and be permitted to defend without risking a judgment in excess of value the property?
Mr. John R. Reese: Certainly in many jurisdictions.
Unknown Speaker: Well, there were any, where that was not the case other than Delaware?
Mr. John R. Reese: I am not able to answer this question.
Chief Justice Warren E. Burger: That was the function of the special appearance was is not, to guard against to that possibility?
Mr. John R. Reese: Yes, Mr. Chief Justice.
Justice Byron R. White: The position is not (Inaudible) that a state may not insist that the defendant submit himself generally to the jurisdiction of the court as a price for defending his property in the State?
Mr. John R. Reese: In the absence, of a relationship between the defendant and the State.
Unknown Speaker: Other than just having property?
Mr. John R. Reese: That is right.
The Court below sought to defend this procedure largely on the basis of two cases.
One was the district court opinion in U.S. Industries against Gregg; the second was this Court’s decision in 1921 in Ownbey against Morgan.
Since, that time the Third Circuit reversed the District Court’s decision in that case so, rather than being support for the decision below that case is now another reason for reversal.
We submit that case of Ownbey against Morgan does not support the decision below either and it is for several reasons.
First, Ownbey really did not address question that is presented to this court.
The validity of the attachment of the defendant’s property was not really in issue in Ownbey to the extent the Court there assumed that that attachment was valid.
The appellants submit that the assumption is out of touch with the procedure of due process concept that this court has developed and articulated in approximately 60 years since Ownbey was decided.
At the time Ownbey was decided, it may well have been that an attachment to secure jurisdiction over a nonresident defendant was the only way you could get jurisdiction over him, but as Mr. Justice Stewart pointed out, since International Shoe was decided about 30 years ago, there has no longer been a valid assumption and to put it simply we think that Ownbey reflects a time and the stage of analysis of the constitution that has been superseded.
I would like to reserve the rest of my time for rebuttal.
Justice Potter Stewart: Do you International Shoe did not provide an alternative criterion of due process constitutionality, but provided a new one that implicitly overruled the old one?
Mr. John R. Reese: Yes, Mr. Justice Stewart.
Chief Justice Warren E. Burger: Mr. Maschio, did I pronounce your name correctly.
Argument of Michael F. Maschio
Mr. Michael F. Maschio: Yes, you did.
Mr. Chief Justice, may it please the court.
The issue before this court is whether the present use of the Delaware sequestration statute in the case at Bar has deprived these appellants of their Fourteenth Amendment rights under the United States constitution.
The appellee Arnold Heitner is attempting secure access to a forum so that this case may proceed on the merits.
Jurisdiction is the appellee’s sole concern and that is all that this case is about.
In this respect the seizure in the case at Bar is quite different from the seizures involved in recent attachment cases decided by this court.
I am of course, referring to Sniadach and Fuentes and the cases which have followed those very important decisions.
In those cases, ‘in personam’ jurisdiction over the defendant already existed. Here the Delaware statute can only be used if the defendants are nonresidents of the State of Delaware.
In addition, in those attachment cases, the purpose of the attachment was to secure or to obtain property, security for the underlying judgment.
In the case at bar, the appellee has no interest in the property.
As soon as the appellants appear, their property will be released. Now, throughout the appellant’s argument, they have maintained that the procedures used in this case are fundamentally unfair and the traditional notions of fair play and substantial justice have been violated.
Chief Justice Warren E. Burger: Can I ask you this before you proceed?
What if contrary of the facts in this case?
What if they were a bona fide issue as to whether or not this was property of the defendants?
Mr. Michael F. Maschio: I am not sure I understand you question.
The issue as to who has owned the stock?
Chief Justice Warren E. Burger: As whose property was it, contrary to the facts in this case in Delaware and under Delaware law, if there is a serious question or if a question is raised or the potential of being raised, as to whose property it really is?
Is there any provision in Delaware law for the defendant to come in and make a special appearance and say sorry this is not my property?
Mr. Michael F. Maschio: I can answer that question by just saying that there are procedures in Delaware, builds in equity exist in Delaware, that can only had take place in the hypothetical situation which is not before this court where there has been at transfer of the stock.
Chief Justice Warren E. Burger: Well let us say it is not even stock, let us say it is an automobile.
Mr. Michael F. Maschio: I know the answer with respect to stock.
I am not sure with respect to an automobile.
As far as stock is concerned, it seems to me that Delaware Courts have recognized that a suit in equity is the appropriate procedure whereby all of the claimants who claim that they have interest in the stock can be brought before the court in one particular proceeding, so that the ownership interest of all the parties can be resolved.
In addition, it should be pointed out that where stock is involved the transferor is really transferring stock in violation of a court order and just cannot warrnat title for that stock to the transferee.
The Federal Courts have recognized the billing interpleader which also serves the function of bringing all parties before the court.
This is an equitable proceeding and I think that it gives sufficient safeguards to the possible danger that may exist if there is a dual situs to the stock certificate as exists in the case that…
Chief Justice Warren E. Burger: What if in this case, one of the defendants had in fact validly transferred his shares of stock to his nephew, who is not a defendant and had validly done so before this attachment or sequestration whatever you call.
Mr. Michael F. Maschio: Before the attachment?
Chief Justice Warren E. Burger: Yes.
Mr. Michael F. Maschio: Well, then at that point there would be no stock.
Chief Justice Warren E. Burger: No, but on the books of the transferrations it still showed that the defendant was the owner.
Would he be given any opportunity under Delaware law to come in and say you cannot bring me in this lawsuit because this is not my stock?
Mr. Michael F. Maschio: I think he could, I think he can bring an equitable suit in doubt.
Chief Justice Warren E. Burger: As one reads the Statute there is no opportunity for a hearing on that sort of an issue.
Mr. Michael F. Maschio: No, there is not, but referring to case law in the state of Delaware which does provide for equitable proceedings to basically, resolve the question of ownership.
Unknown Speaker: (Inaudible)
Mr. Michael F. Maschio: Pardon.
Unknown Speaker: He would have to come to Delaware?
Mr. Michael F. Maschio: Yes, he would.
Unknown Speaker: Which is just what you want and what he does not want?
Mr. Michael F. Maschio: Well, it…
Unknown Speaker: And he would not have to…
Unknown Speaker: Is there any way that he could protect his interest without coming to Delaware?
Mr. Michael F. Maschio: In this hypothetical situation, I cannot think of any way.
Unknown Speaker: So, he is still would have to come to Delaware.
Mr. Michael F. Maschio: He would have to come to Delaware.
Now, I would like to return back to the fairness argument because I think that that is very important in this case.
It should be pointed out, and I will point it out that this is a derivative action and is brought against offices and directives of a Delaware Corporation.
The number of shares that the plaintiff owns is meaningless because he is bringing this suit in a representative capacity.
The appellants in this case have willfully violated an order of the District Court and have been found to be in contempt of court.
Civil and criminal sanctions have been imposed upon the Corporation and the Corporation has been required to pay a fine of $600,000 as the result of the activities of certain of these appellants.
It is alleged that these appellants have engaged in a continuous course of legal conduct.
There has been violation of orders of the Interstate Commerce Commission, the District Court and I have indicated the fines and sanctions that have been imposed upon them.
Certainly, these losses should be recovered by the Delaware Corporation.
The corporation shareholders and the public at large have a right to rely upon the performance of fiduciary duties by offices and directors of a corporation.
In this sense, this is not a private suit.
It is a public suit.
It is a derivative action.
There is a policing function involved.
Unknown Speaker: Mr. Maschio, as I understand the facts there are 28 individual defendants who are responsible for all this and this wrongdoing took place was in the Northern District of Illinois or…
Mr. Michael F. Maschio: No, the wrongdoing took place probably, most probably out on the coast.
It had to do with discriminatory bus lines.
Unknown Speaker: And could they not, could not jurisdiction have been obtained over the entire group of 28 instead of just 21 if the action had been brought where the wrongdoing took place?
Mr. Michael F. Maschio: That could have been the possibility, yes.
Unknown Speaker: And that could have been a better procedure?
Mr. Michael F. Maschio: I am not sure if it is a better procedure.
First of all, as you know, a hearing on a minimal context is a very difficult situation.
I mean you have to take the ties and connections with the (Inaudible) procedures in the Court and I think that for all practical purposes, jurisdiction would have been much, much more difficult to obtain under that type of a situation.
Moreover, there is nothing inherently wrong with the fact that under our system of Federalism, the two jurisdictions could have sufficient contacts with the proceedings so that the case could go forward in both the jurisdictions.
Unknown Speaker: And Delaware can not go forward as to seven of the defendants at all.
Mr. Michael F. Maschio: At this point, but I think that we have gotten most of the defendants before the court who are involved in this situation.
Chief Justice Warren E. Burger: But there is the situation in this case, have you?
Mr. Michael F. Maschio: Yes, we believe that we have.
Chief Justice Warren E. Burger: Well, if the Statute is valid you have, but if it is not, you have not?
Mr. Michael F. Maschio: Of course, I understand.
That is why we are here.
Unknown Speaker: You have been addressing the merits of this case, how many shares of stock does your client own?
Mr. Michael F. Maschio: Again, my client owns one share of stock, but I did point out the fact that this is a derivative action and is brought on behalf of not only himself but all other shareholders in a similar situation.
Unknown Speaker: I understand that.
Mr. Michael F. Maschio: So, it may well be that there are shareholders …
Unknown Speaker: How long has your client owned that one share of stock?
Mr. Michael F. Maschio: It is for several years, Your Honor.
Unknown Speaker: How many other stockholders of this corporation have asserted the same claims that you have said in your complaint?
Mr. Michael F. Maschio: I think this is the only suit of this nature.
Unknown Speaker: How many stockholders does a Greyhound Corporation have?
Mr. Michael F. Maschio: They have many shareholders, I do not know, thousands of shareholders.
Unknown Speaker: Hundreds of thousands?
Mr. Michael F. Maschio: Hundreds of thousand.
Unknown Speaker: The merits really are totally irrelevant to what you are arguing anyway there, aren’t they?
Mr. Michael F. Maschio: I do not think so.
I think the merits are very important.
Unknown Speaker: But we have a constitutional issue here.
Mr. Michael F. Maschio: Well, I am arguing the merits to demonstrate to the court that this is a public lawsuit.
It is not a private lawsuit.
You can talk about the fact that Mr. Heitner has one share of stock from now until doomsday, it is not going to change the fact it is a derivative action and it is brought on behalf of all shareholders similarly situated.
Now, even the court believes in the theory of a public suit of this nature, it does not, but the point is that this is a derivative action and that there is a public function involved here.
There is a policing function involved here and I think that that is an important distinction.
Unknown Speaker: Does the record shed any light on whether this one share of stock was acquired as a prejuder to this litigation?
Mr. Michael F. Maschio: It was not Your Honor, that I know, but the record does not shed any light on it.
I would like to continue on the fairness argument and I like would to point out that the Appellant’s authorities, the Appellant’s authorities in this case as regulated of course by Delaware law, it is certainly appropriate for Delaware to construe its own corporate laws.
I feel that this is an important public function which we must concern ourselves with.
In addition, several states, in particular states of South Carolina and Connecticut have enacted special statute subjecting non-resident directives to suit within the state of incorporation as a result of activities which they have engaged in, in the course of their performance of their duties as directives of a corporation.
Unknown Speaker: Can I ask you a question?
Suppose in Delaware there is an action on a contract in a…
Mr. Michael F. Maschio: I did not hear you, can you repeat the question, and I did not hear, I am sorry, Your Honor.
Unknown Speaker: Suppose in the state of Delaware there is an action on a contract and the plaintiff attaches property pursuant to the Delaware attachment statute and do you think Delaware has to afford that defendant an early hearing, a probable cause hearing to avoid a mistake?
Mr. Michael F. Maschio: I really do not think it is required in that type of a situation.
Unknown Speaker: You do not think the cases in this court indicate that there are some procedures of due process protections available to a defendant whose property is attached?
Mr. Michael F. Maschio: Oh! I did not say that, I certainly do…
Unknown Speaker: When I asked you a question whether -- must Delaware law afford a defendant an early hearing as to whether the plaintiff has a probable cause basis for his claim.
Mr. Michael F. Maschio: I do not think so under these circumstances.
Unknown Speaker: I did not say these circumstances.
Mr. Michael F. Maschio: In that circumstance no.
I feel that the purpose of the Delaware statute is to acquire jurisdiction.
It is not to hold the property.
It is not attempting to reverse the…
Unknown Speaker: Let me put it to you again.
Let suppose that both plaintiff and defendant are residents of Delaware in my example.
Mr. Michael F. Maschio: Alright.
Unknown Speaker: Now, must there be a hearing or no?
Mr. Michael F. Maschio: When I belive if a defendant is a resident of the State of Delaware the statute does not apply because the statue can…
Unknown Speaker: I know this statute does not, but the attachment statute does, some attachment statue does.
Mr. Michael F. Maschio: Well, it is very hard to speculate on facts that are not before -- the nature of the claim…
Unknown Speaker: Well, (Inaudible) your claim is that, as long as Delaware is purporting to get jurisdiction, you can just put aside all procedures of due process protection.
Mr. Michael F. Maschio: Oh! No, we are not saying that at all.
We feel that there is a provision for a hearing in this case.
In point of fact the trial is a hearing of this case, the trial is hearing of this case…
Unknown Speaker: You do not have to give a hearing prior to trial.
Mr. Michael F. Maschio: No, well yes may be in some circumstances we do.
It is not a hearing in the sense that there are live people before the court and witnesses are being -- the testimony is being taken.
First of all the Appellants can come into this court, into the Delaware Courts and challenge the procedures involved in connection with the seizure of property.
They can say that too much property was seized, and therefore, a review would have to be made of the allegations of the complaint to see whether based on the merits of the complaint, a sufficient amount of property had been seized in ordered for the sequestration statute to be solemnly used.
Unknown Speaker: Mr. Maschio, what interest is the State of Delaware has in this statute?
Mr. Michael F. Maschio: Well, Delaware has a…
Unknown Speaker: I think I should preface it.
You are from New York, the other side is from San Francisco and nobody is here from Delaware.
Now how do we know what interest does State of Delaware has in this statute?
Mr. Michael F. Maschio: Well, we know what interest the State of Delaware has because the Delaware Supreme Court has felt that it did have an interest in this proceeding and so stated in its opinion.
Unknown Speaker: There is no brief from the State of Delaware.
Mr. Michael F. Maschio: No, there is not.
Unknown Speaker: So what is Delaware -- you tell me what Delaware’s interest is, since Delaware is not interested?
Mr. Michael F. Maschio: Well, one of the interests that Delaware has that it is in a unique position to decide issues concerning its own corporate law.
I feel that it is perfectly appropriate for Delaware to construe on corporate law, particularly where allegations of wrongdoings of offices and Directors of a Corporation, incorporated within Delaware are being called to task for their activities, that is one interest which Delaware has in this proceeding.
In addition, I think that…
Unknown Speaker: That would be true if there were not a single stock holder in Delaware?
Mr. Michael F. Maschio: Pardon.
Unknown Speaker: That would be true if there were not a single stock holder living in Delaware.
Mr. Michael F. Maschio: That is true.
Unknown Speaker: That would be, Delaware still would have an interest.
Mr. Michael F. Maschio: Yes, the fact is that well yes that would be….
Unknown Speaker: It is just like the interest they say that the stock belongs to them in Delaware, it seems to me.
It is one fiction on top of another.
Mr. Michael F. Maschio: It is no more fictional than some of the other statutes or some of other decisions which indulge in the fiction of implied consent or have implied presence within a jurisdiction for the purposes of jurisdiction.
I do not think it is any less fair for the court to assume jurisdiction based on the fact that there is property within the jurisdiction.
Delaware has other ties with…
Unknown Speaker: I think that goes back, as long as you had the common law.
Mr. Michael F. Maschio: Right.
Unknown Speaker: Yeah, but it does not.
Mr. Michael F. Maschio: Well this goes back quite away…
Unknown Speaker: Not that far.
Mr. Michael F. Maschio: Not that far, no.
I think it is important to point out that under our system of federalism; the state of Delaware has enacted corporate laws which contain numerous advantages for incorporating within that jurisdiction.
These advantages include the generous indemnification and insurance provisions which have been enacted by the state of Delaware to induce capable and responsible businessmen to assume the duties and hardships of corporate directorship of a Delaware Corporation.
Also consistent with our system of federalism, Delaware has sought to counter balance these liberal corporate revisions, and its corporate law by enacting a sequestration statute which asserts the function of many cases calling corporate offices to account for their activities in connection with the operation of their performance, their duties of a Delaware corporation.
These defendants keenly as they are aware of the benefits of incorporating within Delaware must be deemed to have knowledge of the existence of sequestration statute, and in effect I am suggesting that they have not probably waived any objection to the operation of the statute in the case so far.
I think that the Court must concern itself with the facts which are before this Court.
The appellants have constantly made reference to where, in other situations, the operation of the statute may possibly prove a hardship.
Those facts and those circumstances are not before the court.
Here we review the question of fairness in the context which these appellants have with state of Delaware.
I do not feel the traditional notions of fair play and substantial justice have been violated.
It may be other situations, where the application of the statute is monotonous, but these appellants lack standing to raise issues and constitutionality of the stature based upon facts which are not before this court.
I would like to –
Unknown Speaker: Mr. Maschio, you before you get on another subject, do you have any precedence other than from the Delaware State Courts or, quasi in rem jurisdiction, where the defendants must subject themselves to liability above the value of the property which has been attached in any other state?
Mr. Michael F. Maschio: I know, I have that in my brief.
I would like to point out a response to that.
It is my understanding and I may be mistaken here and that only the state of New York has a provision and certain federal court decisions where a special appearance is permitted.
I know for a fact that the state of New York has a provision for special appearance.
I have not made a survey of the laws of the jurisdictions.
Unknown Speaker: Well, I am not so much interested in statutory provisions.
Has there been any decision by this court or any other court that you are aware of that has sustained quasi in rem jurisdiction for an amount in excess of the value of the property?
Mr. Michael F. Maschio: Not that I know, but that doesn’t mean it doesn’t exist.
I would like to.
Unknown Speaker: The defendant can limit their liability to the value of the property simply by not appearing, is that not correct?
Mr. Michael F. Maschio: Yes that’s right.
Unknown Speaker: You can't both that and defend the action.
That used to be the standard procedure.
Mr. Michael F. Maschio: That’s the standard procedure in quasi in rem proceedings.
It doesn’t change the…
Unknown Speaker: I know you are against that
Mr. Michael F. Maschio: That is right.
Unknown Speaker: No but have in any of those cases by defending the action as he been required to take the risk to the judgment in excess of the value of the property might be entered against them.
Mr. Michael F. Maschio: I believe there are cases, but I do not have those – right now.
Unknown Speaker: You enter a special appearance to contest the procedures under which the quasi in rem attachment had taken place or they can test his ownership of the property or so on and if you are ruled against in that, then his option was to go back to his home state and forfeit the property or to remain there and enter a general appearance and defend the lawsuit.
Mr. Michael F. Maschio: And that is the procedure is Delaware.
Unknown Speaker: That was standard operating procedure, back as I said in the old days
Mr. Michael F. Maschio: Right and that is the procedure…
Unknown Speaker: But you cannot cite any case sustaining that procedure.
Mr. Michael F. Maschio: I have a good counsel.
Unknown Speaker: You need good counsel.
Mr. Michael F. Maschio: With respect to the issue of special appearance, I just like to point one thing out that there are some benefits in the procedure which has been enacted by Delaware.
By requiring a general appearance in order to defend, you do eliminate the possibility of multiple lawsuits and I think that is something to be considered.
Also Delaware has enacted in the statute and it is case law, safeguards in the sense that if there is a general appearance, the claims which can be asserted against the appellant, cannot go beyond the four corners of the complaint.
In other words, no new causes of action can be interjected into the action by the virtue of the fact of the general appearance.
So these are two facts which I think the court should be aware of with respect to this particular type of procedure.
I would like to turn briefly to the recent Supreme Court cases dealing with requirements of the hearing.
I think we touched upon some of this in earlier discussions.
We have maintained in this case that the procedures involved are consistent with the one of these criteria and a postponing notice in a hearing is justified.
We based that position basically on the case of Ownbey v. Morgan and the citation of those cases in Fuentes, Sniadach and Calero-Toledo cases before this Court in which those cases were cited for the proposition that attachment for the purposes of obtaining jurisdiction in state court has always been a basic and important public interest justifying seizure without prior notice and hearing, that is also another interest which the state of Delaware has in this proceeding.
We feel that the Delaware statute serves us very important function.
The public interest is also served because of the –
Unknown Speaker: Mr. Maschio what do you understand the holding of the Ownbey case to be?
Mr. Michael F. Maschio: I understand that the basic thrust of the Ownbey case is as I have just quoted it that it, that attachment for the purposes of obtaining jurisdiction in the state court has always been a basic and important public interest, justifying seizure without the benefit of prior notice and a hearing.
That is all that I limit holding in the Ownbey case.
I do not condone the requirements of special bond…
Unknown Speaker: The issue in the Ownbey case was whether the defendant had to post a special bond in order to enter a general appearance (Voice Overlap) security.
Mr. Michael F. Maschio: That would be (Voice Overlap) and I do not think that that issue would be decided the same way today.
However, the Ownbey case has been cited by this Court.
Now, I do not know what this court had in mind when it was deciding the Ownbey case and Fuentes, Sniadach and Calero-Toledo…
Unknown Speaker: Did I understand you?
Did I hear you correctly to say you do not think we would decide the Ownbey case the same way today?
Mr. Michael F. Maschio: On that narrow issue of the special bond requirement.
Unknown Speaker: Which is what the issue was in the Ownbey case?
Mr. Michael F. Maschio: Which was the issue in that case, however…
Unknown Speaker: But yet you rely on Ownbey.
Mr. Michael F. Maschio: No I never rely upon the pronouncement in the Ownbey case that attachment is for the purpose of obtaining jurisdiction.
In state court it has been recognized as the basic important public interest justifying seizure without prior notice and hearing.
Now, I am not really relying on Ownbey.
I am really relying upon the reaffirmation of that principle in Fuentes, in Sniadach case in the Calero-Toledo case.
Unknown Speaker: All victim.
Mr. Michael F. Maschio: Your Honor, I think we all need guidance on this point.
I really think that we only guide this on this point and I can't tell this court what it meant when it cited those cases in its decision, but it has been interpreted as being a reaffirmation of the Ownbey case.
Unknown Speaker: None of those deals with the judgment in excess of the value of the property seized either.
Mr. Michael F. Maschio: No I don’t believe so...
Unknown Speaker: This case, you are not interested in property at all, you are interested in getting them in the court.
Mr. Michael F. Maschio: That’s all we are interested in Your Honor, and that’s the reason why….
Unknown Speaker: Doesn’t it differentiate your case than any other?
Mr. Michael F. Maschio: Yes it does.
It is a completely different situation.
Unknown Speaker: Good or bad.
Mr. Michael F. Maschio: I think it is good, I think it is good because it goes to the issue of – it goes to many of the issues.
Unknown Speaker: You mean a man can be brought in and get a judgment against for a $100,000 is better than if it is limited to $1,000, we have done for the plaintiff.
Mr. Michael F. Maschio: The plaintiff can get a judgment in this case only in two methods.
One if it revels on the merits of the case and that would imply a general appearance.
Two, there is a default.
There the judgment would be limited to the amount of the property sequestered, but it is not an absolute default of judgment.
We have to go through the procedures of an inquest.
We have to prove that our case has a prima facie merit and we have to show that there has been damage which is not unusual in our system of jurisprudence.
Unknown Speaker: And settlement too.
Unknown Speaker: I think you have said two or three times that once a general appearance is made, the stock that has been sequestered is released.
Mr. Michael F. Maschio: That is correct.
Unknown Speaker: Does that follow automatically without regard to the…
Mr. Michael F. Maschio: Well, it is automatically unless the party who has seized the stock can show a special need for the withholding of the stock until the judgment has been rendered, and automatically the stock would be released, unless a special application is brought by the party who has sequestered the stock, asking for it to be withheld during the continuation of the lawsuit.
Unknown Speaker: Would that imply upon or whether or not the party who has made a general appearance may be judgment proof, if the stock is released.
Mr. Michael F. Maschio: I would rather suspect that that would be one of the considerations of the court –
Unknown Speaker: So more and more automatic release really depends on whether or not you can satisfy…
Mr. Michael F. Maschio: No it is an automatic release unless a special application is brought.
A new proceeding has to be the brought by the party who has sequestered the stock and a sufficient showing has to be made that there is a reason for withholding the stock further, but the basic thrust of the statute is for jurisdictional purposes.
It has been construed that way it has been utilized that way, in the state of Delaware, and I really think that that is the basic thrust of the statute.
Now, we talked briefly about the question of a hearing.
I think that again it is important to distinguish this case from the recent attachment cases.
Of course, and again Mr. Heitner, the appellee has no claim to the sequestered property.
There is no danger that this property will be depreciated or wasted.
There is no wages or consumer goods at issue.
There are no vendor’s liens on the property, all of which could involve in the attachment cases.
I think that this goes to the question of what type of the hearing is required and what is the purpose of an immediate post-seizure hearing, or a hearing?
What will be determined at that hearing?
The only point that has to be established under the terms of the Delaware statute is the fact that the appellants are non residents of the state of Delaware and that they have property within the state of Delaware.
Now, the hearing on the merits is not illuminated.
The hearing on the merits, we have touched upon that.
How the merits can be discussed by the court in the event that the Delaware sequestration procedure itself was contested on the grounds that too much property had been withheld and also there is the trial of the action which is a hearing.
I think that under the circumstances, you have to look at what the property interest is and what the function of the hearing would be and under these circumstances I think that the sufficient safeguards exist within the Delaware statute to cover this point.
Unknown Speaker: Well, going over to the personal jurisdiction side of the case, suppose there was no property in Delaware, but nevertheless the suit was brought there and suppose that Delaware could not get personal jurisdiction over these non resident defendants under International Shoe, or cases following International Shoe, they just warrant minimum context, that Delaware just would exceed it is authority to serve these people and get personal jurisdiction on them.
Suppose that were the case, then your position is I take it that if you had one single fact in addition, namely that one of those defendants does have property in the state, you may get personal jurisdiction over him.
Mr. Michael F. Maschio: You are asking me to, well…
Unknown Speaker: Well, the argument in the case is that except for this property, Delaware could not get jurisdiction.
Mr. Michael F. Maschio: I don’t believe it, that is, well yes, that’s true, (Voice Overlap) on statute but…
Unknown Speaker: Well, the argument is that without the property Delaware could not exercise jurisdiction over these defendants.
Mr. Michael F. Maschio: That is the argument.
Unknown Speaker: But with the property your position is, you may not only exercise jurisdiction over the property, but personal jurisdiction over them.
Mr. Michael F. Maschio: Our argument is that there is property within the jurisdiction and that is a valid basis for the exercise of quasi in rem jurisdiction.
Our further argument is that if the doctrine of International Shoe and Hanson and Denckla is said to apply in this case, we meet those qualifications.
Unknown Speaker: Just by the fact of owning property.
Mr. Michael F. Maschio: Oh no, not by the fact of owning property, by the fact of owning property and by the fact that Delaware has a substantial interest in this controversy, by the fact that this is a derivative action, by the fact that the appellants have ties with the jurisdiction and that’s why…
Unknown Speaker: Yeah, but the only tie you have got with the jurisdiction is through the corporation.
Mr. Michael F. Maschio: Yes it has ties through the corporation.
Unknown Speaker: That’s all, is it not?
Mr. Michael F. Maschio: It is a very important tie.
Unknown Speaker: However important it is, you say yes that is all.
Mr. Michael F. Maschio: Yes that and the property.
Unknown Speaker: And that is the property.
Mr. Michael F. Maschio: No, the corporation exists in the state of Delaware and has a (Voice Overlap) that is a tie.
Unknown Speaker: They are also Directors and officers and employees.
Mr. Michael F. Maschio: Yes, all of those things we are trying to marshal to show that the exercise of jurisdiction whether or not you say the International Shoe Doctrine applies or not, or whether or not you say that this is strictly a quasi in rem proceeding, we meet the qualifications.
This is not the case…
Unknown Speaker: That’s a valid argument you have jurisdiction over the seven non stock holder defendants as well, and Delaware doesn’t sustain that jurisdiction.
That argument applies equally to the non stock holder defendants unless you rely on the stock holders.
Mr. Michael F. Maschio: Well, Delaware does not have a long arm statute and so that makes…
Unknown Speaker: You don’t have a statutory basis for this other kind of jurisdiction?
Mr. Michael F. Maschio: That is correct we do not have a statutory basis for the ‘in personam’ jurisdiction argument based on a minimum context.
Unknown Speaker: But your argument, your submission to my brother White was if Delaware did have a long arm statute, it is application to the all the defendants in this case would be constitutionally permissible because of their relationship with the Delaware corporation, quite apart from their stock ownership.
Mr. Michael F. Maschio: Yes probably if the breathe of the statute was as broad as the…
Unknown Speaker: It was based on major attachment statute than to sustain the jurisdiction, are you saying that or not?
Mr. Michael F. Maschio: No I am not sure, no I am saying that.
Unknown Speaker: So you need the attachment Statute.
Mr. Michael F. Maschio: Well I do not know what the breathe…
Unknown Speaker: Since Delaware does not have a long arm statute.
Mr. Michael F. Maschio: Delaware does not have a long arm statute and I think that this statute is more conducive to securing access to a forum and as long as that situation is not unfair and I think that no due process violation has occurred.
Now, it may well be that the imposing of a minimum context theory in a quasi in rem proceeding will be more restrictive than that which exists in the present time and I don’t know if the court wants to go that far.
Unknown Speaker: You haven’t raised any question here about the jurisdiction of this court, over the appeal brought by your colleague.
This is a final order, this is a lawsuit, a derivative lawsuit brought by you and this is just a interlocutory order in the course of that lawsuit is new to the state case.
Mr. Michael F. Maschio: Maybe I don’t think it through all the way, may be the case does not long here, but I thought because of the constitutional arguments it was appropriate that this case…
Unknown Speaker: I know, but if we do not have any jurisdiction, we do not have any jurisdiction no matter how important or interesting the constitutional question they seem, it is prematurely here, we don’t have jurisdiction to consider it, wasn’t this is just an interlocutory order in an ongoing state lawsuit or a state action, bill on equity?
Mr. Michael F. Maschio: Quite frankly I am not sure any answer to that.
Unknown Speaker: So, was not that correct?
Mr. Michael F. Maschio: Probably
Unknown Speaker: Not a fact.
Unknown Speaker: Well, accept counsel, if you loose here, there are lawsuits all over, is it not?
Mr. Michael F. Maschio: That is correct.
Unknown Speaker: Yes but, you still might loose.
You still might loose.
You might have got a judgment on the merits.
I have never got to make a premature constitutional decision.
And we have in our jurisdiction, you couldn’t loose, I think as respondent.
Mr. Michael F. Maschio: That is very interesting.
Unknown Speaker: Yeah.
Mr. Michael F. Maschio: Yes, I would appreciate that.
I think I have covered all the points I wanted to cover and I thank you for your time.
Justice Potter Stewart: Mr. Reese, How about this finality does,Mr. Reese, before any…
Rebuttal of John R. Reese
Mr. John R. Reese: Mr. Justice Stewart we know that an order has been entered by the highest court instead of Delaware.
Justice Potter Stewart: Interlocutory order.
I mean this is an ongoing lawsuit particularly because of the way we have decided the case on the merits.
If nothing can happen, this case would go back for trial in the state court, would it not, and the plaintiff might loose and that would be the end of it and might not that indicate that this is not a final judgment.
Mr. John R. Reese: Presumably, defaults would be taken and the property of the defendants sold, which -- a point we could start back up.
Justice Potter Stewart: Well, it is one presumption.
Another presumption is you go and defend the lawsuit unless thought that you were, the plaintiff had a great deal of force in his claim.
And under that presumption if you defended the lawsuit and did so successful this case would be over, wouldn’t it, if we decide in your favor on the merits.
Mr. John R. Reese: If we successfully defended on the merits the lawsuit would be over.
Justice Potter Stewart: And therefore why is this a final order, and if it is not as you know we do not have any jurisdiction over it?
Mr. John R. Reese: It is a question that I have not considered previously Mr. Justice Stewart.
Justice Potter Stewart: Well, it just occurred to me.
Unknown Speaker: Do you need counsel?
Mr. John R. Reese: Pardon.
Unknown Speaker: Do you need counsel?
Mr. John R. Reese: Yeah, I will take it if I can get it.
I want to correct…
Chief Justice Warren E. Burger: Is it your position that you are entitled to have this issues resolved at the outset, that it is a due process, that you have directed to due process to have this issue resolved?
Mr. John R. Reese: Mr. Chief Justice, the property of these defendants has been tied up for two-and-a-half years.
No responsible official of the state of Delaware has ever during that period considered whether there is a baseless or a sound or any other kind of claim against them to justify that deprivation of their property.
We think that it is more than long enough for that condition to be allowed to continue and that it is time for it to be ended.
Unknown Speaker: And you suggest there is no mandamus remedy available to you, if you bring that to a head?
Unknown Speaker: Then there will be no more claim.
Mr. John R. Reese: We have pursued the matter through the state court system to the end point.
Delaware Supreme Court has rendered its final judgment on the matter.
Unknown Speaker: Though on this basically interlocutory matter.
Mr. John R. Reese: To the extent a two-and-a-half-year deprivation is interlocutory.
Unknown Speaker: Under the Delaware judgment, all that needs, all it has decided is that you are properly in the lawsuit, a lawsuit now can go on, on the merits, that’s all the Delaware has been told.
Justice Thurgood Marshall: Doesn’t the judgment hold that your property has been seized and if you don’t submit to that jurisdiction, your property is gone?
Unknown Speaker: Certainly, Mr. Justice Marshal.
That is what that they tend to --
Justice Thurgood Marshall: Was that interlocutory?
Mr. John R. Reese: I am sorry.
I missed your question Mr. Justice Marshall.
Justice Thurgood Marshall: If you do not submit to that jurisdiction, which you say they do not have, then you lose your property, that’s been decided.
Mr. John R. Reese: That’s clear.
Justice Thurgood Marshall: That’s good.
Mr. John R. Reese: The only step remaining is to conduct the final hearing and the sale of the property.
Justice Potter Stewart: Well, only that is if you are going to default in the lawsuit?
Mr. John R. Reese: Yes.
Justice Potter Stewart: Now, let us say this were a case in Delaware in which there was a personal service upon a resident defendant of Delaware and his claim was there was something defective about that service and that as a constitutional matter there was something defective of the personal service of him and Delaware.
He brought that up all the way up to the Delaware Supreme Court and Delaware Supreme Court said no as a constitutional matter that is end as well as statutory, this is a perfectly valid service.
Then this court would not have jurisdiction that way, not the interlocutory.
All I would have decided was that you and Mr. Defendant have to go and defend the lawsuit.
Mr. John R. Reese: In this case Delaware Supreme Court has issue a final judgment as to the validity of the taking of the defendant’s property.
The defense now has only the choice that you pointed out.
Justice Potter Stewart: Defaulting in lawsuit or defending it?
Mr. John R. Reese: Or to enter a general appearance and giving up at that point, their rights under the Fourteenth Amendment, having a trial in a proper form.
Justice Potter Stewart: No, but because you might win on the merits, and if you loose on the merits you would not have given up your Fourteenth Amendment plan, because it then would be a final judgment that you could bring to this court.
Chief Justice Warren E. Burger: I understood your position the way that you loose your constitutional right to have the case tried in a proper forum, and the Delaware is not the proper forum, is that your position?
Mr. John R. Reese: That is our position Mr. Chief Justice.
Chief Justice Warren E. Burger: And you are saying that this Thompson's (ph) choice is one that the provisions of due process should guarantee that you should not have to make.
Mr. John R. Reese: Yes, the defendants stand a loose a lot by just being forced to the trial on the merits at this point, part of the point of it.
Justice Potter Stewart: And that’s one of the prices of not allowing the interlocutory appeals too.
Chief Justice Warren E. Burger: Thank you gentlemen the case is submitted.