SUPREME COURT OF ARIZONA
En Banc
STATE OF ARIZONA, ) Arizona Supreme Court
) No. CV-08-0241-PR
Plaintiff/Appellant, )
) Court of Appeals
v. ) Division One
) No. 1 CA-CV 07-0178
WESTERN UNION FINANCIAL SERVICES, )
INC., ) Maricopa County
) Superior Court
Defendant/Appellee. ) No. SW2006-002213
)
)
) O P I N I O N
__________________________________)
Appeal from the Superior Court in Maricopa County
The Honorable Kenneth L. Fields, Judge
The Honorable Brian K. Ishikawa, Judge
REMANDED
________________________________________________________________
Opinion of the Court of Appeals, Division One
219 Ariz. 337, 199 P.3d 592 (App. 2008)
VACATED
________________________________________________________________
TERRY GODDARD, ARIZONA ATTORNEY GENERAL Phoenix
By Cameron H. Holmes, Assistant Attorney General
Attorneys for State of Arizona
STEPTOE & JOHNSON LLP Phoenix
By Karl M. Tilleman
Douglas D. Janicik
Charles G. Cole Washington, DC
Shannen W. Coffin
And
SIDLEY AUSTIN LLP Washington, DC
By Carter G. Phillips
Attorneys for Western Union Financial Services, Inc.
________________________________________________________________
H U R W I T Z, Justice
¶1 The issue for decision is whether an Arizona court can
issue a warrant seizing Western Union money transfers sent from
other states to Mexico. We hold that an Arizona court lacks
jurisdiction under the Due Process Clause of the United States
Constitution to issue such a warrant.
I.
¶2 Western Union Financial Services, Inc. (“Western
Union”) is a Colorado corporation, whose principal place of
business is in that state. Western Union’s primary business,
conducted throughout the United States and in more than 195
foreign countries, is person-to-person wire money transfers. A
customer initiates a transfer by paying a Western Union agent
the amount to be transferred and a service fee. The agent
enters the information into Western Union’s computer system,
which assigns a control number to the transaction. The control
number is given to the customer to provide to the intended
recipient. The money is represented in Western Union’s computer
system as electronic credits. To receive the money, the
intended recipient presents the control number and personal
identification at a Western Union office. The sender may cancel
the transfer and receive a refund until the money is paid to a
recipient.
2
¶3 This case arises out of the Arizona Attorney General’s
commendable efforts to curtail human smuggling and narcotics
trafficking. Asserting that certain Western Union wire
transfers involved proceeds of these crimes, the State has
obtained a number of warrants authorizing seizure for forfeiture
of various transfers sent to or from Arizona. See A.R.S. § 13-
2314(G)(3) (2001) (providing that proceeds of racketeering are
subject to forfeiture); see also id. § 13-2314(C) (authorizing
pre-judgment seizure warrant in racketeering cases); id. § 13-
4310(A) (authorizing issuance of seizure warrant “prior or
subsequent to the filing of a notice of pending forfeiture,
complaint, indictment or information”).
¶4 On September 21, 2006, the State applied to the
superior court for the seizure warrant at issue here. An
affidavit supporting the warrant application asserted that human
smuggling operations based in Mexico most often smuggle
immigrants into the United States through Arizona. Once in
Arizona, immigrants often are detained by force in secured
locations until sponsors (family, friends, or prospective
employers) wire money to associates of the smugglers. After
payment, the immigrants are released and make their way to
destinations in Arizona or elsewhere. Similarly, the affidavit
asserted, drugs smuggled into the United States from Mexico
3
often come through Arizona, and Western Union transfers are used
to wire some of the proceeds of the ultimate sales.
¶5 The affidavit also alleged that, as a result of the
prior seizure of Western Union transfers to and from Arizona,
there had been a marked increase in transfers from twenty-eight
other states to certain Sonora, Mexico locations and a
corresponding decrease in transfers to and from Arizona. The
affidavit contended that many of these transfers from other
States represented the proceeds of racketeering activities in
Arizona. The affidavit did not identify any particular persons,
property, or transactions that were specifically related to
illegal activities in Arizona, nor did it identify any
particular transfer as representing the proceeds of Arizona-
based racketeering.
¶6 The superior court issued an ex parte seizure warrant
on September 21, 2006. In relevant part, the warrant authorized
the State to seize person-to-person wire transfers from twenty-
eight states other than Arizona to twenty-six locations in
Sonora. When payout of a transfer covered by the warrant was
sought at one of the identified Sonora locations, Western Union
was required to “(1) stop payment and transfer the funds to a
detention account, (2) notify the intended recipient of the
detention and provide that person with information to contact
the seizing agency, (3) retain the funds, except those released
4
by the seizing agency, in the detention account for twenty-one
days after the warrant expired, and (4) convey any remaining
detained funds to the clerk of the superior court in Maricopa
County upon the expiration of the twenty-one-day period.” State
v. Western Union Fin. Servs., 219 Ariz. 337, 343-44 ¶ 4, 199
P.3d 592, 598-99 (App. 2008).
¶7 On September 22, 2006, Western Union filed motions to
quash the seizure warrant and for a preliminary injunction to
prevent the State from seeking similar warrants.1 The superior
court stayed the warrant pending an evidentiary hearing. After
that hearing, the court granted Western Union’s motions, holding
that it lacked jurisdiction under the Due Process Clause of the
Fourteenth Amendment, U.S. Const. amend. XIV, § 1, to seize
transfers originating in other states and directed to recipients
in Sonora. The court also held that the State had not
established probable cause that any specific wire transfer
involved the proceeds of Arizona racketeering activity and that
the warrant violated the Commerce Clause of the United States
Constitution, U.S. Const. art. I, § 8, cl. 3.
¶8 The court of appeals vacated the superior court’s
order. Western Union, 219 Ariz. at 343 ¶ 2, 199 P.3d at 598.
The court concluded that “if a foreign corporation is subject to
1
Western Union did not challenge the September 21, 2006
warrant insofar as it involved transfers to or from Arizona.
5
general in personam jurisdiction in Arizona, its debts can be
considered within this state for purposes of in rem
jurisdiction.” Id. at 350 ¶ 28, 199 P.3d at 605 (citations
omitted). Because Western Union conceded that it was subject to
the general jurisdiction of Arizona courts, the court of appeals
held that the superior court could exercise in rem jurisdiction
over transfers to Sonora from other states involving the
proceeds of Arizona racketeering activities. Id. at 351 ¶ 33,
199 P.3d at 606. The court of appeals also held that the
seizure warrant did not violate the Fourth Amendment or the
Commerce Clause. Id. at 362, 366 ¶¶ 69, 84, 199 P.3d at 617,
621.
¶9 Western Union petitioned for review. We granted
review on the issues of whether the superior court could
constitutionally exercise in rem jurisdiction and whether the
warrant violated the Commerce Clause, questions of statewide
importance and first impression. See ARCAP 23(c). We have
jurisdiction pursuant to Article 6, Section 5 of the Arizona
Constitution, and A.R.S. § 12-120.24 (2003).
II.
¶10 We stress at the outset the narrow issue before us.
The court of appeals held that the State had not established in
personam jurisdiction over any owner or interest holder of any
seized transfer. Western Union, 219 Ariz. at 346 ¶ 14, 199 P.3d
6
at 601.2 The State does not challenge that holding. Nor does it
challenge the court of appeals’ conclusion that, because the
issue is whether the warrant could constitutionally authorize
seizure of the money transfers, the case before us involves only
the exercise of in rem jurisdiction. See id. 346, 348 ¶¶ 14,
21, 199 P.3d at 601, 603.
¶11 The question today is therefore not whether the State
can exercise in personam jurisdiction over Western Union.
Because Western Union does not dispute that its activities in
this state allow the exercise of general jurisdiction, id. at
346 ¶ 15, 199 P.3d at 601, the Due Process Clause permits the
corporation to be sued in personam in Arizona for any reason.
See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S.
408, 414 (1984). Thus, the Fourteenth Amendment poses no bar to
an Arizona court, after an appropriate showing, issuing in
personam orders to Western Union governing the disposition of
wire transfers involving the proceeds of racketeering conducted
in this state. See also A.R.S. § 13-2314(C) (authorizing
2
Under A.R.S. § 13-4301(5), an “owner” is defined as “a
person who is not a secured party . . . and who has an interest
in property, whether legal or equitable. A person who holds
property for the benefit of or as an agent or nominee for
another is not an owner.” An “interest holder” is “a person in
whose favor there is a security interest or who is the
beneficiary of a perfected encumbrance pertaining to an interest
in property.” Id. § 13-4301(4). Western Union does not satisfy
either statutory definition.
7
various orders before determination of liability in forfeiture
actions).3
¶12 The issue before us is instead whether the superior
court can properly exercise in rem jurisdiction over Western
Union money transfers originating in other states and directed
to Sonora, Mexico. It is to that issue that we therefore turn.
A.
¶13 The Supreme Court has long recognized that “principles
of interstate federalism” dictate limits on the exercise of
state court jurisdiction. World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286, 293 (1980); see also id. (“The
sovereignty of each State . . . implied a limitation on the
sovereignty of all of its sister States – a limitation express
or implicit in both the original scheme of the Constitution and
the Fourteenth Amendment.”). The traditional framework for
determining the constitutionality of the exercise of
jurisdiction over persons and things was set forth in Pennoyer
v. Neff, 95 U.S. 714 (1877). Pennoyer held that state courts
are constrained in exercising jurisdiction by the Due Process
Clause of the Fourteenth Amendment and adopted a distinctly
territorial approach to establish the constitutional limits.
3
We also do not today address the power of the Attorney
General, upon an appropriate showing, to obtain information from
Western Union concerning wire transfers allegedly arising from
racketeering activities. See State ex rel. Goddard v. W. Union
Fin. Servs., Inc., 216 Ariz. 361, 166 P.3d 916 (App. 2007).
8
The central inquiry under Pennoyer effectively was “Is it
there?” In other words, the Court asked whether the defendant
or property over which jurisdiction was sought was within the
territorial boundaries of the state. Id. at 722 (“[N]o State
can exercise direct jurisdiction and authority over persons or
property without its territory.”). Pennoyer also sanctioned the
exercise of “quasi in rem” jurisdiction, under which the in-
state property of a defendant could be seized to establish
jurisdiction, allowing a plaintiff thereafter to pursue his
claim against the defendant to the extent of the value of the
property. Id. at 723.
¶14 In International Shoe Co. v. Washington, 326 U.S. 310
(1945), the Court expanded the inquiry, and the reach of state
jurisdiction, to a broader question: “Is it fair?”
International Shoe held that the Due Process Clause is not
offended by the exercise of personal jurisdiction over a
corporate defendant that, although not domiciled in the forum
state, has “sufficient contacts” with that state “to make it
reasonable and just according to our traditional conception of
fair play and substantial justice to permit the state to enforce
the obligations which [defendant] has incurred there.” Id. at
320. International Shoe’s now familiar “minimum contacts” test
thus allows a state to exercise so-called specific jurisdiction
over a defendant not present in the forum for causes of action
9
arising from its contacts with the forum. Id. at 317.4
International Shoe also contemplated that a state could exercise
general jurisdiction over a corporate defendant whose
“continuous corporate operations within a state [are] so
substantial and of such a nature as to justify suit against it
on causes of action arising from dealings entirely distinct from
those activities.” Id. at 318; see Helicopteros Nacionales, 466
U.S. at 414 (“Even when the cause of action does not arise out
of or relate to the foreign corporation’s activities in the
forum State, due process is not offended by a State’s subjecting
the corporation to its in personam jurisdiction when there are
sufficient contacts between the State and the foreign
corporation.”).
¶15 International Shoe and the cases immediately following
it addressed only in personam jurisdiction. Thus, the sole
constitutional issue when a state sought to exercise either in
rem or quasi in rem jurisdiction continued to be the one posed
by Pennoyer: Was the relevant property within the jurisdiction
of the state? See, e.g., Hanson v. Denckla, 357 U.S. 235, 246
(1958) (holding that “[t]he basis of [in rem] jurisdiction is
the presence of the subject property within the territorial
4
International Shoe involved a corporate defendant. It has
long been clear, however, that the minimum contacts analysis for
specific jurisdiction also applies to individual defendants.
See Shaffer v. Heitner, 433 U.S. 186, 204 n.19 (1977); McGee v.
Int’l Life Ins. Co., 355 U.S. 220, 222 (1957).
10
jurisdiction of the forum State”). The hoary doctrine of Harris
v. Balk, 198 U.S. 215 (1905), was thus left intact. Harris
arose out of a debt from Harris to Balk; Balk in turn owed money
to Epstein. Harris lived in North Carolina, Epstein in
Maryland. When Harris travelled to Maryland, Epstein served him
with process, and a Maryland court entered a judgment requiring
Harris to pay Epstein the money Harris owed to Balk. The
Supreme Court upheld the judgment against a due process attack,
relying on the fiction that the debt followed the debtor, and
therefore concluded that Harris’s debt to Balk could be found in
Maryland because Harris was served there. Id. at 222-23.
¶16 Thus, for some thirty years after International Shoe,
quasi in rem jurisdiction could still be predicated entirely on
the fictional “presence” in the forum state of intangible
property. Shaffer v. Heitner abandoned that notion. 433 U.S.
186, 212 (1977). Recognizing that an assertion of jurisdiction
over a thing is really “jurisdiction over the interests of
persons in a thing,” id. at 207 & n.22, Shaffer held that
although the location of property could be evaluated as a
contact for International Shoe purposes, the end question was
whether there was jurisdiction over the party against whom the
plaintiff ultimately asserted liability, id. at 212. See also
Burnham v. Superior Court, 495 U.S. 604, 621-22 (1990)
(plurality opinion) (stating that Shaffer held that quasi in rem
11
jurisdiction and in personam jurisdiction “are really one and
the same”).
¶17 Shaffer involved the type of quasi in rem action in
which the plaintiff seeks to apply property to satisfy a claim
unrelated to the property itself. See Shaffer, 433 U.S. at 199
n.17 (defining “in rem” jurisdiction and two types of “quasi in
rem” jurisdiction). Although stating that the International
Shoe minimum contacts test would also apply to a true in rem
action (a suit involving claims related to the property itself),
the Court recognized that “it would be unusual for the State
where the property is located not to have jurisdiction,” as the
location of the property itself would provide the required
contacts. Id. at 207-08 & n.24.
B.
¶18 The court of appeals correctly concluded that the
warrant at issue today, which authorizes the seizure of specific
property, must be analyzed under principles governing in rem
jurisdiction. Western Union, 219 Ariz. at 346, 348 ¶¶ 14, 21,
199 P.3d at 601, 603; see also State v. Kaufman, 201 N.W.2d 722,
723 (Iowa 1972) (“Search warrant proceedings are in rem,
directed primarily against the property, not the owner.”). The
State does not disagree. The court of appeals also held that
courts of this state cannot exercise in rem jurisdiction unless
the wire transfers are deemed present within Arizona. See
12
Western Union, 219 Ariz. at 349-50 ¶¶ 27-29, 199 P.3d at 604-05.
Again, the State does not disagree. Indeed, the Supreme Court’s
post-International Shoe jurisprudence makes plain that a
necessary prerequisite to in rem jurisdiction is the location of
the subject property within the forum state. The Court has
emphasized that “[t]he basis of the jurisdiction is the presence
of the subject property within the territorial jurisdiction of
the forum State.” Hanson, 357 U.S. at 246 (citations omitted).
The Court concluded in Hanson that there could be no in rem
jurisdiction when the property – the assets of a trust — was not
present in the forum state. Id. at 249. It thus reaffirmed a
core Pennoyer principle: An in rem judgment cannot extend to
“property outside the forum state.” Id. at 250.
¶19 Although limiting the broad application of Pennoyer to
quasi in rem jurisdiction, Shaffer itself did not question the
basic requirement that in rem jurisdiction rest on the presence
of property in the forum state. Rather, the Court indicated
that even if International Shoe “minimum contacts” are found, in
rem jurisdiction is premised on the presence of the property in
the forum. See Shaffer, 433 U.S. at 199 (“If jurisdiction is
based on the court’s power over property within its territory,
the action is called ‘in rem’ or ‘quasi in rem.’” (emphasis
added)). Later Arizona cases are in accord. See In re Approx.
$50,000.00 in U.S. Currency, 196 Ariz. 626, 629 ¶ 7, 2 P.3d
13
1271, 1274 (App. 2000) (noting that “the superior court
typically has in rem jurisdiction over the property or res at
issue so long as the property is located in the state”); see
also State ex rel. Napolitano v. Gravano, 204 Ariz. 106, 117
¶ 45, 60 P.3d 246, 257 (App. 2002) (“[A]n Arizona trial court
typically has in rem jurisdiction over property that is located
in Arizona.”); cf. 4A Charles Alan Wright & Arthur R. Miller,
Federal Practice and Procedure § 1071 (3d ed. 2008) (“[P]roperty
can be used as a jurisdictional basis only if it is physically
within the territory of the state in which the federal court is
sitting.”).
III.
¶20 We therefore turn to the primary question posed by
this case: Is a money transfer sent from a state other than
Arizona to a recipient in Sonora, Mexico located within this
state for purposes of in rem jurisdiction?
¶21 As the Supreme Court has noted, although determining
the location of “[t]angible property poses no problem . . . the
situs of intangibles is often a matter of controversy.” Hanson,
357 U.S. at 246-47 (citing Fletcher R. Andrews, Situs of
Intangibles in Suits against Non-Resident Claimants, 49 Yale
L.J. 241 (1939)). When, as here, the intangible property is not
embodied in a document, determining its situs in many senses
14
involves a fiction.5 “The situs of intangible property is about
as intangible a concept as is known to the law.” Tabacalera
Severiano Jorge, S.A. v. Standard Cigar Co., 392 F.2d 706, 714
(5th Cir. 1968).
¶22 The State contends that the properties seized here are
the electronic credits in the Western Union computers, which it
characterizes as a debt from Western Union to the Sonora
recipients. This “debt,” the State contends, is located
wherever Western Union is subject to jurisdiction. Because
Arizona can exercise general jurisdiction over Western Union,
the State concludes that the electronic credits are located
here. This argument, as the State recognizes, rests squarely on
the Harris fiction – that a debt follows the debtor and is
located wherever the debtor can be found.
A.
¶23 As a preliminary matter, we question whether the
Harris analogy is apt. In that case, Harris had borrowed money
and had the contractual obligation to repay this “ordinary debt”
to Balk. Harris, 198 U.S. at 221, 223. Here, Western Union’s
direct contractual obligation is to the sender; it has promised
5
Hanson involved trust property. 357 U.S. at 247 n.16. The
Court noted that the “stocks, bonds, and notes that make up the
corpus of the trust . . . [p]roperly speaking . . . are
intangibles that have no ‘physical’ location. But their
embodiment in documents treated for most purposes as the assets
themselves makes them partake of the nature of tangibles.” Id.
(citation omitted).
15
the sender that it will deliver money to the recipient on proper
demand. Moreover, unlike the Harris debtor, whose obligation to
the creditor was fixed, Western Union’s obligation to deliver
funds to the Sonoran recipient may be cancelled by the sender at
any time before the money is paid out. See Western Union, 219
Ariz. at 347 ¶ 16, 199 P.3d at 602.
¶24 As an analytical matter, Western Union’s role in the
wire transfers is more akin to that of a courier, such as United
Parcel Service or Federal Express, who has agreed to deliver a
package containing cash sent from Colorado to Mexico. In that
circumstance, Arizona courts could not exercise in rem
jurisdiction over the package in either Colorado or Mexico, even
if the funds in the package represented proceeds of racketeering
committed in Arizona and the courier was subject to general
Arizona jurisdiction. Cf. State v. Everett, 110 Ariz. 429, 431,
520 P.2d 301, 303 (1974) (noting “the general rule of law . . .
that a warrant of arrest issued in one state can not be executed
outside the boundary of the issuing state”). Similarly, we
cannot conclude that the property seized here, although in
electronic form, is itself located in Arizona simply because
Western Union can be sued here. The technical complexities of
16
the electronic age should not blind courts to the substance of
transactions in conducting jurisdictional analyses.6
B.
¶25 Factual distinctions aside, the State concedes that
its argument depends on the continued vitality of the Harris
fiction that an intangible obligation is located for
jurisdictional purposes wherever the obligor can be found. The
logical result of the State’s contention is that Western Union’s
“debt” to the Sonoran recipient is simultaneously located in
every state in which Western Union can be sued.
¶26 The Supreme Court has stated, however, that Shaffer
“interred the mechanical rule that a creditor’s amenability to a
quasi in rem action travels with his debtor.” World-Wide
Volkswagen, 444 U.S. at 296; see also id. (stating that Shaffer
“abandoned the outworn rule of Harris v. Balk, that the interest
of a creditor in a debt could be extinguished or otherwise
affected by any State having transitory jurisdiction over the
debtor”). The court of appeals necessarily construed Shaffer
narrowly, holding that the Harris fiction remained viable to
determine the situs of intangible property for purposes of
6
In United States v. Daccarett, a federal appeals court
upheld the exercise of in rem jurisdiction in New York by a
district court over wire transfers moved from an originating
bank to an intermediary bank in New York as a step toward
eventual transfer to Colombia. 6 F.3d 37, 54-55 (2d Cir. 1993).
In the case before us there is no contention that the wire
transfers moved through an Arizona intermediary.
17
evaluating in rem jurisdiction. See Western Union, 219 Ariz. at
350 ¶ 28, 199 P.3d at 605.
¶27 In so concluding, the court of appeals relied on Rush
v. Savchuck, 444 U.S. 320 (1980). That case involved an
automobile accident in Indiana; the plaintiff, an Indiana
native, was a passenger in a car driven by another Indiana
citizen. The plaintiff brought suit in Minnesota after
garnishing the obligation of the driver’s insurer, State Farm,
which conducted business in every state.
¶28 The Supreme Court held that Shaffer barred the
assertion of quasi in rem jurisdiction, as the driver had no
Minnesota contacts. Id. at 328-29. The court rejected the
constitutional significance of State Farm’s obligation to the
insured, stating:
In fact, the fictitious presence of the insurer’s
obligation in Minnesota does not, without more,
provide a basis for concluding that there is any
contact in the International Shoe sense between
Minnesota and the insured. To say that “a debt
follows the debtor” is simply to say that intangible
property has no actual situs, and a debt may be sued
on wherever there is jurisdiction over the debtor.
State Farm is “found,” in the sense of doing business,
in all 50 States and the District of Columbia. Under
appellee’s theory, the “debt” owed to Rush would be
“present” in each of those jurisdictions
simultaneously. It is apparent that such a “contact”
can have no jurisdictional significance.
Id. at 329-30.
18
¶29 The court of appeals read this language as recognizing
the “ongoing viability” of the Harris fiction and standing for
the proposition that “if a foreign corporation is subject to
general in personam jurisdiction in Arizona, its debts can be
considered within this state for purposes of in rem
jurisdiction.” Western Union, 219 Ariz. at 350 ¶ 28, 199 P.3d
at 605. To the contrary, Rush simply recognized the complete
constitutional irrelevance of the Harris fiction to state
assertions of quasi in rem jurisdiction. Because the only issue
in such a case is whether the party against whom the plaintiff
seeks to impose ultimate liability is subject to the in personam
jurisdiction of the forum, the situs of intangible property
unrelated to a plaintiff’s claim has no application whatsoever
after Shaffer to the constitutional analysis. Rush thus simply
ignored the Harris fiction; it did not approve its use in
analyzing in rem jurisdiction.
¶30 The court of appeals also cited Weitzel v. Weitzel, 27
Ariz. 117, 230 P. 1106 (1924), for the proposition that a debt
owed by a non-Arizona corporation was located here because the
corporation was subject to Arizona service. But Weitzel was
decided half a century before Shaffer, and expressly relied on
the Harris fiction. Id. at 121, 230 P. at 1107. Moreover,
Weitzel involved a post-judgment garnishment. In such
circumstances, the defendant’s liability has already been
19
established. The relevant jurisdictional analysis in such cases
properly focuses on whether the garnishee is subject to the
specific or general jurisdiction of the forum state, not whether
the intangible res is located there under the Harris fiction.
See State ex rel. Dep’t of Rev. v. Control Data Corp., 713 P.2d
30, 32 (Or. 1986) (holding, without resort to the Harris
fiction, that a post-judgment garnishment could reach wages owed
to the judgment debtor “in the hands of Control Data, a third
party that unquestionably is present in Oregon”); see also
Shaffer, 433 U.S. at 210 n.36 (stating that “there would seem to
be no unfairness” in a state exercising post-judgment
jurisdiction to collect a debt even if it would have had no
original jurisdiction to determine the debt).7
C.
¶31 It is therefore clear at the very least that the
Supreme Court has not mandated the continued use of the Harris
fiction for the purposes of establishing in rem jurisdiction.
But, even assuming that the Court has not completely abandoned
the fiction, it surely has not foreclosed us from evaluating the
continuing utility of the Harris doctrine.
7
The court of appeals also cited Levi Strauss & Co. v.
Crockett Motor Sales, Inc., 739 S.W.2d 157 (Ark. 1987). Western
Union, 219 Ariz. at 350 ¶ 28, 199 P.3d at 605. But that case
also involved a post-judgment garnishment, not a pre-judgment
seizure of property to establish in rem jurisdiction. See Levi
Strauss, 739 S.W.2d at 157.
20
¶32 We start from the premise that, before Shaffer, the
Harris fiction served a useful purpose, as International Shoe
left alive the doctrine of quasi in rem jurisdiction. But since
Shaffer, the Harris fiction no longer has any relevance in quasi
in rem actions; the focus is now on the defendant’s contacts
with the forum state. Nor is the fiction necessary, as noted
above, to support the exercise of post-judgment garnishment of
intangible assets. See ¶ 30, supra.
¶33 The fiction is also unnecessary after International
Shoe to allow courts to reach intangible property in the hands
of out-of-state defendants. If those with interests in the
property are subject to in personam jurisdiction in the forum
state, a court in that state undoubtedly has jurisdiction
consistent with the Due Process Clause to enter orders relating
to the property. See ¶ 11, supra. Any reason for continued
adherence to the Harris fiction as a basis for the exercise of
in rem jurisdiction has disappeared.
¶34 Rather, when the plaintiff proceeds in rem, “the
solution must be sought in the general principles governing
jurisdiction over persons and property rather than in an attempt
to assign a fictional situs to intangibles.” Atkinson v.
Superior Court, 316 P.2d 960, 964 (Cal. 1957) (Traynor, J.).
Courts must focus on reality, not fiction. Under such an
analysis, an intangible not embodied in a document is
21
undoubtedly subject to the jurisdiction of the court where its
owner is domiciled. Gravano, 204 Ariz. at 117 ¶ 45, 60 P.3d at
257 (holding that Gravano’s rights under a book contract, “which
are intangible property,” could be seized in Arizona “because
Gravano was a resident here”) (citing Kelly v. Bastedo, 70 Ariz.
371, 377, 220 P.2d 1069, 1073 (1950)). That principle, however,
is of no aid to the State today, as it makes no contention that
either the sender or the recipient of the wire transfer is
domiciled in Arizona.
¶35 The Supreme Court has expressly pretermitted whether
in rem jurisdiction over intangibles not embodied in documents
can be exercised in more than one state. See Hanson, 357 U.S.
at 247. We therefore need not decide today whether the wire
transfers are present for constitutional purposes in more than
one locale. It might well be reasonable under the circumstances
of this case to consider the seized funds as present in the
state from which they were sent until they are collected. It
might also be reasonable to view the funds as located in
Colorado, Western Union’s state of incorporation. Cf. Delaware
v. New York, 507 U.S. 490, 494 (1993) (holding that when owner
of unclaimed securities distributions cannot be found, state of
domicile of debtor has priority in escheat proceedings);
Pennsylvania v. New York, 407 U.S. 206, 212, 215-16 (1972)
22
(allowing escheat of money orders where the payee’s address is
unknown in the state of telegraph company’s domicile).
¶36 In the end, however, we cannot conclude that a wire
transfer originated in another state by someone who has not been
shown to be an Arizona resident and directed to a recipient in a
foreign country who also has not been shown to be an Arizona
resident is “located” in Arizona simply because Western Union, a
foreign corporation, is amenable to suit here. Nor can we
conclude that the seized funds are somehow “located” here
because they allegedly are in payment for illegal conduct that
occurred in this state. Just as cash paid in another state to a
criminal who violated the law in Arizona is not located here for
constitutional purposes, other forms of payment that never
travel through this state are similarly beyond the reach of a
seizure warrant. We decline to resuscitate the moribund Harris
fiction as a substitute for reasoned analysis of the situs of
the particular intangible at issue, and as the State concedes,
that fiction is the essential underpinning of its in rem
jurisdictional claim.
D.
¶37 Our dissenting colleague suggests that we have “built
a straw man” on Harris v. Balk. Infra ¶ 44. The contention is
passing strange. Both in this Court and in the court of
appeals, Harris was the linchpin of the State’s jurisdictional
23
argument; indeed, the State admitted at oral argument that its
position rested entirely on the Harris fiction. The fiction
unquestionably was the centerpiece of the conclusion below that
the seized funds were located in Arizona for jurisdictional
purposes. See Western Union, 219 Ariz. at 350 ¶ 28, 199 P.3d at
605 (“[I]f a foreign corporation is subject to general in
personam jurisdiction in Arizona, its debts can be considered
within this state for purposes of in rem jurisdiction.”); see
also id. at 348 ¶ 22, 199 P.3d at 603 (noting that the State
“relied on” Harris).
¶38 Moreover, although ostensibly eschewing reliance on
Harris, the dissent in reality relies in full force on its
outdated fiction. Our dissenting colleague agrees with us that
“presence” of the res in Arizona is a “necessary component” of
in rem jurisdiction. Infra ¶ 48. The dissent then finds that
“electronic credits necessarily exist simultaneously in every
place they can be instantly received.” Infra ¶ 52. Because the
dissent concludes that the electronic credits at issue here can
be received in any place where Western Union maintains an
office, it necessarily stands for the proposition that the
credits are “present” for in rem purposes wherever Western Union
can be found. It would be difficult to think of a better
restatement of the Harris fiction.
24
¶39 The dissent argues that because “an intended recipient
can go to any Western Union station and instantly receive the
money, the funds must be at that location, both conceptually and
physically.” Infra ¶ 49. But, even assuming the factual
accuracy of the quoted statement,8 it does not lessen the
dissent’s reliance on the Harris fiction. Western Union does
not contest the ability of the State to seize funds demanded by
a recipient at an Arizona location. The dissent’s argument
therefore must be that even if the recipient does not do so, the
res is nonetheless found here because he theoretically might
have sought payment in Arizona. This is precisely the Harris
fiction – an intangible debt is present wherever the creditor
can find the obligor and demand payment.
¶40 The dissent also speculates that if Arizona cannot
exercise in rem jurisdiction over the electronic credits, no
state can. Infra ¶ 54. But ironically, this assertion does
precisely what the dissent accuses the majority of doing – it
“essentially conflates presence, a necessary component of [in
8
The factual premise of this argument is at least subject to
question. Western Union vigorously asserted at oral argument
and in its briefing, Western Union Financial Services, Inc.’s
Supplemental Brief on the Merits at 4, that Sonora-bound
transfers are not payable in the United States. The opinion
below stated that a recipient of a wire transfer may collect
funds “at any WU payout location,” Western Union, 219 Ariz. at
347 ¶ 16, 199 P.2d at 602, but it is not clear whether this is
simply a description of Western Union’s general practices and
the superior court appears to have made no factual findings on
this point.
25
rem] jurisdiction, and jurisdiction itself.” Infra ¶ 48. The
dissent worries that even if the wire transfers are present for
in rem purposes in one or more other states (as we assume, see
¶ 35, supra), those states may be unable, as Shaffer requires,
433 U.S. at 212, to establish that those with interests in the
funds have minimum contacts with the forum. But if, as the
dissent concedes, presence is a “necessary component” of in rem
jurisdiction, that component cannot be ignored simply because
another necessary component, the minimum contacts of those with
interests in the res, can be established by the forum.
¶41 More importantly, the dissent’s suggestion that law
enforcement will be unable to address the problems of human
smuggling in the absence of the in rem order at issue in this
case finds no support in our opinion or the case law. Because
Western Union is subject to the general jurisdiction of Arizona
courts, the Due Process Clause is not offended by in personam
orders regarding the disposition of the wire transfers shown to
constitute proceeds of racketeering conducted in this state.
See ¶ 11, supra. Such orders can assure – as does the order at
issue today – that the funds will not be transferred pending the
institution of forfeiture proceedings. And, in those subsequent
proceedings, whether formally denominated in rem or in personam,
the core requirements of the Due Process Clause remain identical
– there must be minimum contacts between those with interests in
26
the subject funds and the State of Arizona. Shaffer, 433 U.S.
at 212; see also A.R.S. § 13-4302 (authorizing forfeiture
proceedings “if the property for which forfeiture is sought is
within this state at the time of the filing of the action or if
the courts of this state have in personam jurisdiction of an
owner or interest holder in the property”).
¶42 In short, despite our dissenting colleague’s
reservations, our opinion establishes only that Western Union
wire transfers initiated in another state and directed to
recipients in Mexico are not “present” in Arizona for in rem
jurisdictional purposes. However noble the State’s purposes, in
rem jurisdiction requires presence of the subject property in
this State, and we hold today only that we can no longer accept
the Harris fiction as the basis for finding that presence.
IV.
¶43 For the reasons above, we hold that the superior court
could not exercise in rem jurisdiction over Western Union money
transfers from senders in states other than Arizona to
recipients in Mexico.9 We therefore vacate the opinion of the
court of appeals and remand to the superior court for further
proceedings consistent with this opinion.
9
We thus need not consider whether it would be reasonable to
exercise jurisdiction over those with alleged interests in the
seized transfers. We also therefore decline to consider Western
Union’s Commerce Clause arguments.
27
_______________________________
Andrew D. Hurwitz, Justice
CONCURRING:
_______________________________
Ruth V. McGregor, Chief Justice
_______________________________
Michael D. Ryan, Justice
_______________________________
W. Scott Bales, Justice
E S P I N O S A, Judge, dissenting
¶44 I respectfully dissent because, in my view, the
majority has painstakingly built a straw man on the bleached
bones of Harris v. Balk, and then knocked it down, without
addressing what I believe is the true issue at hand. In doing
so, the court avoids grappling with the key feature of the
jurisdictional question presented: the implication of a
relatively new species of intangible property that has no
singular location. Contrary to the majority’s characterization,
this type of property has virtually nothing in common with “a
package” that a “courier, such as United Parcel Service or
Federal Express,” has agreed to deliver; thus, traditional, in-
28
rem-jurisdiction analysis does not readily apply. The very term
“electronic credit” illustrates the problem because it aptly
describes the abstraction that is at the heart of the
transactions and wire transfers involved here. If a Western
Union wire transfer, which consists of electronic credits
created by the payment of money at a sending location, cannot be
found, in both a conceptual and practical sense, wherever
Western Union does business and routinely pays out on such
transfers, then it is nowhere to be found, because, in Western
Union’s global, computerized accounting system, these electronic
credits have no more “location” than does an e-mail message once
the “send” button is clicked. The majority, however, sidesteps
this modern reality, saying, “The technical complexities of the
electronic age should not blind courts to the substance of
transactions in conducting jurisdictional analyses.”
Unfortunately, in my opinion, the majority has turned a blind
eye to the true nature of the issue here.
¶45 As the majority acknowledges, intangible property does
not have a clearly defined or easily ascertainable situs. See
Hanson, 357 U.S. at 246-47; Tabacalera Severiano Jorge, 392 F.2d
at 714. In addressing this problem, the majority cogently
summarizes portions of the evolution of jurisdiction
jurisprudence and then focuses on Harris, stating that the issue
here “rests squarely on the Harris fiction” and questioning
29
whether it is analogous to this case. I agree that Harris is
not applicable here, but for different reasons than those
provided by the majority.
¶46 Initially distinguishing Harris as involving an
“ordinary debt,” the majority points out that Western Union’s
obligation is to the sender, who can cancel the obligation up
until the time the money is paid to the recipient. But this is
a distinction without a difference in terms of the location of
Western Union’s electronic credits. Although a transaction may
be subject to cancellation by the sender, absent such a
presumably rare occurrence, Western Union has a contractual
obligation to pay out the money being transferred. More
importantly, Harris is not “apt” here because it held that quasi
in rem jurisdiction could be premised on nothing more than the
transitory presence of a debtor and his debt to an unrelated
third party. That is the “mechanical rule” soundly rejected by
the Supreme Court in World-Wide Volkswagen and Shaffer. 444
U.S. at 296; 433 U.S. at 208-09. But, contrary to the
implications of the majority opinion, the Court has never
overruled or disavowed the underpinning of Harris – the common
law doctrine that the legal situs of an intangible obligation is
the situs of the obligor.10 Rather, the Court has simply pointed
10
Case law from past to present acknowledges the proposition
that a debt is located with the debtor. See, e.g., Chicago,
30
out the due process problems with attempting to ground
jurisdiction over individuals on nothing more than the
theoretical location of a debt. See Shaffer, 433 U.S. at 209
(“In such cases, if a direct assertion of personal jurisdiction
over the defendant would violate the Constitution, it would seem
that an indirect assertion of that jurisdiction should be
equally impermissible.”); see also Rush, 444 U.S. at 328 (in rem
jurisdiction may only be exercised when contacts “satisfy the
fairness standard of International Shoe”). It is clear the only
thing the Court “interred” in World-Wide Volkswagen was “the
mechanical rule that a creditor’s amenability to quasi in rem
___________________________
R.I. & P. Ry. Co. v. Sturm, 174 U.S. 710, 716-17 (1899) (debts
accompany creditor everywhere and are payable everywhere); Af-
Cap Inc. v. Republic of Congo, 383 F.3d 361, 371 (5th Cir. 2004)
(courts consistently hold situs of debt obligation is situs of
obligor); Libra Bank Ltd. v. Banco Nacional de Costa Rica, S.A.,
570 F. Supp. 870, 879 n.9 (S.D.N.Y. 1983) (“While ‘Shaffer
clearly overruled Harris on its facts,’ ‘[t]he [Supreme] Court
did not indicate total disapproval of Harris v. Balk, for it
noted that attachment of a debt is proper wherever the debtor is
found.’”) (internal citations omitted, alterations in Libra);
Long v. Baldt, 464 F. Supp. 269, 273 n.3 (D.S.C. 1979) (“[T]he
Shaffer decision does not disturb the common law notion that the
situs of the debt lies with the debtor.”); Barker v. Smith, 290
F. Supp. 709, 711-12 (S.D.N.Y. 1968) (corporate debt located
where corporation does business); In re World of English, N.V.,
16 B.R. 817, 819 (Bankr. N.D. Ga. 1982) (situs of account
receivable is location of account debtor); Perez v. Chase
Manhattan Bank, N.A., 463 N.E.2d 5, 8 n.1 (N.Y. 1984) (“Although
another aspect of Harris v. Balk has been overruled, the debt-
situs holding remains unimpaired.”) (internal citations
omitted); Beck v. Mfrs. Hanover Trust Co., 481 N.Y.S.2d 211, 216
(N.Y. Sup. Ct. 1984) (debt follows debtor); Poston v. Poston,
657 A.2d 1076, 1078 (Vt. 1993) (debt has situs in any state
corporate debtor may be sued).
31
action travels with his debtor.” 444 U.S. at 296. Stated
differently, what has been laid to rest is the use of the debt-
follows-the-debtor doctrine as a substitute for due process and
minimum contacts analysis when invoking in rem or quasi in rem
jurisdiction.
¶47 In Shaffer, the Court noted:
“The Fourteenth Amendment did not, in guaranteeing due
process of law, abridge the jurisdiction which a State
possessed over property within its borders, regardless
of the residence or presence of the owner. That
jurisdiction extends alike to tangible and to
intangible property. Indebtedness due from a resident
to a non-resident of which bank deposits are an
example is property within the State. Chicago, Rock
Island & Pacific Ry. Co. v. Sturm, 174 U.S. 710, 19 S.
Ct. 797, 43 L. Ed. 1144. It is, indeed, the species
of property which courts of the several States have
most frequently applied in satisfaction of the
obligations of absent debtors. Harris v. Balk, 198
U.S. 215, 25 S. Ct. 625, 49 L. Ed. 1023. . . .
[G]arnishment or foreign attachment is a proceeding
quasi in rem. Freeman v. Alderson, 119 U.S. 185, 187,
7 S. Ct. 165, 30 L. Ed. 372, 373. The thing belonging
to the absent defendant is seized and applied to the
satisfaction of his obligation. The Federal
Constitution presents no obstacle to the full exercise
of this power.”
433 U.S. at 211 n.38, quoting Pennington v. Fourth Nat’l Bank,
243 U.S. 269, 271 (1917); see also Burnham, 495 U.S. at 620
(Shaffer stands for “nothing more than the proposition that when
the ‘minimum contact’ that is a substitute for physical presence
consists of property ownership it must, like other minimum
contacts, be related to the litigation”).
32
¶48 I believe the majority’s failure to make this
distinction essentially conflates presence, a necessary
component of jurisdiction, and jurisdiction itself. That
approach is useful in linking the property seizure at hand to
the precipitous fall of Harris, but this only distracts from a
realistic view of the nature and situs of the res at issue. See
Dickstein v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 685
A.2d 943, 948 & n.5 (N.J. Super. Ct. App. Div. 1996) (question
of state’s power to assert jurisdiction over trust account
irrelevant to identifying account’s situs). Western Union
contracts with senders to transmit – in actuality, to make
available – specified funds to remote receivers. The resulting
electronic credits are thus conceptually and pragmatically debts
or obligations while on the books of Western Union before they
are paid out. Cf. Universal Mktg. & Entm’t, Inc. v. Bank One of
Ariz., N.A., 203 Ariz. 266, & 7, 53 P.3d 191, 193 (App. 2002)
(money deposited in account creates debt bank owes customer).
To say they are not only exalts form over substance. Whether
specific obligations, in the form of electronic credits, are
subject to Arizona forfeiture jurisdiction is a related but
different issue that does not depend on the antiquated holding
of Harris.
¶49 The majority’s assertion that my analysis “in reality
relies in full force on [Harris’s] outdated fiction” only
33
compounds what I see as its needless fixation on that case,
notwithstanding the State’s arguably making Harris the fulcrum
of its jurisdiction arguments. No “fiction” at all is needed to
see that, if an intended receiver of funds can go to any Western
Union station and instantly receive the money, the funds must be
at that location, both conceptually and physically. That the
electronic credits are therefore present “in any place where
Western Union maintains an office,” if that is congruent with
any location where the funds can be disbursed, is simply a fact
of this modern business practice that has nothing to do with
Harris or the minimum contacts doctrine that overwrote its
jurisdictional holding. The majority’s insistence to the
contrary simply underlines its narrow view of the unique res at
issue, and appears to overlook that the flaw in Harris is not
its debt-follows-the-debtor underpinning but the exercise of
jurisdiction on that basis alone “without more.” Rush, 444 U.S.
at 329. That is not the situation here.
¶50 At this point it is useful to revisit some of the
underlying facts of this case, particularly those surrounding
the deplorable business of human smuggling. After depositing
human cargo at a “stash house” in Arizona, a “coyote” demands
payment from the hostage’s relatives or sponsor in another
state. The coyote directs those persons to send the required
payment by Western Union wire transfer to a specified accomplice
34
outside Arizona – in this case, at one of several northern
Mexico border towns. The payment is made to a Western Union
office either in person, by telephone, or over the Internet, and
that office makes the specified sum of money available at the
desired remote location. That location can be any one of
thousands of similar locations throughout the nation,
hemisphere, and, indeed, nearly the entire world. Although
Western Union claimed otherwise before this court, in its own
affidavit provided to both the trial court and the court of
appeals, it stated:
Unlike many other money transmitters, Western Union’s
money transfer service is provided on a “will call”
basis, which means that the sender can identify the
receiver of a transaction without having to specify
the exact agent location at which the recipient will
pick up the transferred funds. Instead, the receiver
goes to any convenient Western Union agent location of
his or her choosing. The agent uses a control number
and other verifying information to identify the
transmitted funds and then pays the receiver.11
¶51 No cash, currency, check, note, or bank draft of any
sort is sent, transported, or routed through any geographic
channels between the sender and receiver. Instead, an entry is
keyed into the Western Union computer system, identifying the
11
No facts in the record demonstrate that this is not true
for money transfers involving Mexico. And neither Western
Union’s “Dinero in Minutos” program information submitted below
nor its sample consumer “SEND” form, which includes a full page
of fine-print “Terms and Conditions” in both English and
Spanish, advises senders the money can only be picked up in
Mexico.
35
transaction and communicating to any and all other Western Union
locations and remote agents authorization to pay to a designated
receiver a specified amount of money under certain
circumstances. Although typically a location is specified, one
is not necessarily required. The payout readily can be made
anywhere in the nation or world where Western Union maintains
its branches or agents, and thousands of such transactions
routinely occur daily. As noted above, the transmitted funds
within Western Union’s system are referred to as “electronic
credits,”12 which, at bottom, are simply internal communications
that Western Union relies on to make this unique type of
business transaction possible and advantageous in a modern,
Internet-era, global financial system. See Joseph H. Sommer,
Where is a Bank Account? 57 MD. L. REV. 1, 7 (1998) (modern
financial transactions nothing more than communications).
¶52 The relevance of this real-world situation to the
present legal issue is that, simply stated, electronic credits
have no actual physical location once they are created in
Western Union’s computer system. Instead, just like e-mail
12
This term is not unique to the business of money transfers
and is commonly used in the banking industry as well. See,
e.g., In re Ocean Petroleum, Inc., 252 B.R. 25, 29 (Bankr.
E.D.N.Y. 2000) (automated clearinghouses distribute and settle
“electronic credits and debits among financial institutions”);
Banque Worms v. BankAmerica Int’l, 570 N.E.2d 189, 194 (N.Y.
1991) (wire transfers process funds through wire payment
systems).
36
communications whose receipt is not limited to any particular
location or computer, such electronic credits necessarily exist
simultaneously in every place they can be instantly received.
See Reno v. Am. Civil Liberties Union, 521 U.S. 844, 851 (1997)
(“cyberspace,” in which e-mail exists, is “a unique medium . . .
located in no particular geographical location but available to
anyone, anywhere in the world”); Ashcroft v. Am. Civil Liberties
Union, 535 U.S. 564, 590-91 (2002) (Breyer, J., concurring)
(describing impossibility of confining Internet to particular
geographical areas); see also Campbell Pet Co. v. Miale, 542
F.3d 879, 884 (Fed. Cir. 2008) (Web site information available
everywhere, not confined to discrete jurisdiction or exclusively
located in any one place).
¶53 The majority points out that the logical implication
of locating a debt anywhere the debtor can be found is that the
electronic credits are “simultaneously located in every state in
which Western Union can be sued.”13 It then reasons, “The
Supreme Court has squarely stated, however, that Shaffer
13
Although the majority quotes a passage from Rush in which
the Supreme Court stated that the multijurisdictional situs of
an intangible obligation “can have no jurisdictional
significance,” the implication of this language is not that
multijurisdictional situs is impossible or improper. See Rush,
444 U.S. at 329-30. Rather, the Court was emphasizing that mere
presence is not a factor establishing minimum contacts when the
res exists in every state. See Shaffer, 433 U.S. at 209 (“the
presence of the defendant’s property in a State might suggest
the existence of other ties”).
37
‘interred the mechanical rule that a creditor’s amenability to a
quasi in rem action travels with his debtor,’” citing World-Wide
Volkswagen, 444 U.S. at 296. But acknowledging that in rem
jurisdiction cannot be premised solely on the situs of a debt
does not explain why multijurisdictional situs is factually or
legally untenable. See Tabacalera Severiano Jorge, 392 F.2d at
714-15 (acknowledging intangible property may have legal situs
in multiple places). The notion that intangible electronic
credits are present anywhere they can be redeemed is neither
outlandish nor troublesome, as the majority suggests. It
relates only to the situs of the credits and does not, in the
case of a company with multistate presence, automatically or
“mechanically,” create jurisdiction in every state in which the
credits can be said to exist. Cf. Rush, 444 U.S. at 329 (mere
presence of State Farm’s obligation to insured, which can be
said to exist in every state where State Farm does business,
insufficient basis for in rem jurisdiction absent meaningful
contacts with the forum state; insurance policy “not the subject
matter of the case . . . nor . . . related to the operative
facts of the . . . action”).
¶54 After Shaffer and its progeny, not every state –
indeed, perhaps no other state but Arizona – could exercise in
rem jurisdiction over the property involved in this case. See
Shaffer, 433 U.S. at 208-09 (absent showing of additional ties
38
supporting jurisdiction beyond mere presence of property in
state, jurisdiction unconstitutional). Only Arizona can
arguably satisfy the minimum contacts requirements of
International Shoe and Shaffer because the wire-transferred
payments are at the very heart of the litigation here. Although
refraining from assigning a location to this res, the majority
surmises it might be located either in the states in which the
money transfers originated or in Colorado, Western Union’s state
of incorporation. But to find that jurisdiction exists in those
states would require application of the “mechanical rule”
proscribed by Shaffer. If one accepts that Western Union’s
ubiquitous electronic credits are somehow more authentically
“present” in those states than in Arizona, the exercise of in
rem jurisdiction in those forums would be problematic, if not
flatly unconstitutional, because the intangible property would
lack any meaningful contact with those jurisdictions. See id.
at 208-09 (where property within forum unrelated to cause of
action, insufficient basis for jurisdiction).
¶55 Smugglers cross the border into Arizona, deposit their
cargo in Arizona, demand or arrange for payment for their
services while in Arizona, and hold the smuggled immigrants or
drugs in Arizona until payment is received. The only facet of
these particular enterprises occurring elsewhere is the
initiation of payment from another state. This limited
39
participation in the remote forum, involving relatively
attenuated and sometimes innocuous conduct, would likely be
insufficient to establish the requisite contacts to assert or
sustain jurisdiction over the res in those states. See
Helicopteros Nacionales, 466 U.S. at 418 (“mere purchases”
insufficient to satisfy minimum contacts standard of
International Shoe). And, in the wake of Shaffer, Colorado’s
exercise of jurisdiction over the res necessarily would be
unconstitutional because it would rest solely on the presence of
the intangible property in Western Union’s state of
incorporation. See Shaffer, 433 U.S. at 208-09. Accordingly,
the majority’s decision could effectively render the electronic
credits generated by criminal conduct in our state legally
untouchable; if Arizona may not assert jurisdiction over them,
it is likely no state could.14
14
The majority deflects this concern, citing A.R.S. §§ 13-
4302 and 13-2314(C) and suggesting Arizona could exert general
in personam jurisdiction to prevent Western Union from
distributing funds identified as proceeds of racketeering. But
that precise theory was not raised or briefed by the parties and
may not be a viable option. On its face, § 13-4302 authorizes
in rem jurisdiction over “property . . . within th[e] state” and
expressly limits in personam jurisdiction to an “owner of or
interest holder in the property.” Section 13-2314(C) allows
pre-liability orders only over property “subject to forfeiture”
which presumably means as governed by § 13-4302. It would appear
the state could never meet this burden with regard to Western
Union’s electronic credits because the majority denies both that
they exist in Arizona and that Western Union is either an owner
or an interest-holder of this property. See supra n.2; see also
Gravano, 204 Ariz. 106, ¶¶ 42-45, 60 P.3d at 257 (state could
40
¶56 Although exercising jurisdiction over an intangible
res violates due process when “the property which now serves as
the basis for state-court jurisdiction is completely unrelated
to the . . . cause of action,” Shaffer, 433 U.S. at 209,
“when . . . the property itself [is] the source of the
underlying controversy . . . , it would be unusual for the State
where the property is located not to have jurisdiction.” Id. at
207. See also Cameco Indus., Inc. v. Mayatrac, S.A., 789 F.
Supp. 200, 203-04 (D. Md. 1992) (subjecting bank account to
quasi in rem jurisdiction when property directly related to in-
state activities); State of Oregon ex rel. Dep’t of Rev. v.
Control Data Corp., 713 P.2d 30, 31-32 (Or. 1986) (Shaffer not
violated when state seeks to attach property of out-of-state
party in care of in-state third party). In this vein, an
eminent jurist long ago observed:
The situs of intangibles is in truth a legal fiction,
but there are times when justice or convenience
requires that a legal situs be ascribed to them. The
locality selected is for some purposes, the domicile
of the creditor; for others, the domicile or place of
business of the debtor, the place, that is to say,
where the obligation was created or was meant to be
discharged; for others, any place where the debtor can
be found. At the root of the selection is generally a
___________________________
institute pre-liability forfeiture orders over book royalties
when it had in personam jurisdiction over owner); State v.
Henderson, 149 Ariz. 254, 256, 717 P.2d 933, 935 (App. 1986)
(denying jurisdictional challenge where plea agreement included
forfeiture of out-of-state real property defendants owned at
time of judgment).
41
common sense appraisal of the requirements of justice
and convenience in particular conditions.
Severnoe Sec. Corp. v. London & Lancashire Ins. Co., 255 N.Y.
120, 123-24, 174 N.E. 299 (N.Y. 1931) (Cardozo, J.) (citations
omitted). The unique intangible property here, while under the
exclusive control of Western Union, is necessarily located at
every Western Union office where it can be collected at will,
including Western Union’s offices in Arizona – the forum
directly connected to the litigation. The money underlying
these electronic credits is payment for drugs or ransom for
hostages being held and often abused in clandestine locations in
Arizona. The state’s overriding interest in this money is the
prevention of drug and human smuggling and the attendant
violence, degradation, suffering, and economic harm such
activities visit on Arizona’s communities. Interfering with the
powerful financial incentives for committing these crimes is one
of the most effective tools there can be. Thus, the property at
issue is at the heart of the state’s mission in this action.
And, if fairness is the touchstone of contemporary
jurisdictional jurisprudence, see Rush, 444 U.S. at 328;
Shaffer, 433 U.S. at 205, it is without question fair and
concordant with traditional notions of due process to anticipate
that the transferred money – and, by extension, its owners –
should be subject to the authority of this state’s courts, see
42
Shaffer, 433 U.S. at 207 (exercise of in rem jurisdiction is
jurisdiction over property’s owner).
¶57 As the majority notes, “Courts must focus on reality,
not fiction.” But the majority today avoids the real-world
situation presented in this case by applying traditional
jurisdictional analysis and sidestepping the novel issues
created by evolving technology and ever-adapting criminal
methodologies. In so doing, this court misses a compelling
opportunity to appropriately advance the law in accord with
changing societal needs. See id. at 202 (social and
technological change drives evolution of jurisdictional
analysis); see also Burnham, 495 U.S. at 617 (advances in
technology, communications, and mobility have broadened scope of
state court jurisdiction). Accordingly, I would uphold the
jurisdictional ruling of the court of appeals and go on to
address the Commerce Clause issue, which I believe was correctly
decided as well.
_______________________________
Philip G. Espinosa, Judge∗
∗
Vice
Chief Justice Berch has recused herself from this
case. Pursuant to Article 6, Section 3 of the Arizona
Constitution, the Honorable Philip G. Espinosa, Judge of the
Arizona Court of Appeals, Division Two, was designated to sit in
this matter.
43