In this electronic age, claims for conversion – the intentional and unauthorized exercise of control over another’s property that interferes with the owner’s right of possession – have become more complex. Decades ago, if someone broke into your safe and stole stock certificates representing your shares in a company, a conversion claim was straightforward: the thief, without authority, deliberately stole your stock certificates and you lost your right of possession. The analogous act today would be a thief improperly accessing your online brokerage account and transferring ownership of your shares to another account. The result is still the same – someone stole your property and you can no longer use it. Until 2007, however, New York law was unsettled as to whether a claim for conversion could even apply to electronic records and data.
In a 2007 advisory opinion, the New York Court of Appeals, in Thyroff v. Nationwide Mut. Ins. Co., 8 N.Y.3d 283, 832 N.Y.S.2d 873 (2007), held for the first time that intangible property, such as electronic data, is capable of being converted. In Thyroff, pursuant to an agent agreement, an insurance company provided an insurance agent with a computer, on which the agent saved personal data. The insurance company later terminated the agreement and repossessed the computer, depriving the agent of access to his electronically stored personal information. In the landmark opinion, the Court of Appeals held that even though the insurance company had the right to repossess the computer, it did not have the right to take the agent’s electronic data and the agent could have a claim against the insurer for conversion.
Recently, the Commercial Division of the New York County Supreme Court had to decide an “arguably unsettled question of law” – whether a claim for conversion exists where the owner still has electronic access to the stolen information. In MLB Advanced Media, L.P. v. Big League Analysis, 2017 NY Slip Op 32617(U), Major League Baseball entered into an agreement with Big League Analysis to develop a suite of online youth-oriented baseball services. The parties’ relationship deteriorated and, among other claims, Big League Analysis alleged MLB committed conversion by keeping copies of Big League Analysis’ information without authority. While Big League Analysis admittedly still had access to the subject information, it argued it could still maintain a conversion claim. Relying on Thyroff, the court disagreed and dismissed Big League Analysis’ conversion claim, holding Big League Analysis was not deprived of its use of the information. The court held that no claim for conversion lies where a party “wrongfully possesses a copy of documents when the originals are in [the owner’s] possession.” While the court held that Big League Analysis did not have a conversion claim because it still could access the stolen information, Big League Analysis still has other claims beyond the scope of this post that can protect its business information, data and documents.
If you have questions about conversion and misuse of business information, please do not hesitate to contact us.