"It is the strength of the common law to respond, albeit cautiously and intelligently, to the demands of commonsense justice in an evolving society."
The Court of Appeals recently reiterated that sentiment in Thyroff v. Nationwide Mutual Insurance Company , wherein it extended the right to use a conversion claim to recover the value of electronic data and records.
"Conversion" is an intentional act of "dominion or control over a chattel which so seriously interferes with the right of another to control it that the actor may justly be required to pay the other the full value of the chattel."* In other words, if someone wrongfully takes your property, you can sue that person for its value. In effect, it is like a "forced sale."
Interestingly, this doctrine has had a slow and tortuous evolution. Back in the Middle Ages, (when our senior partner Danny Finkelstein was a mere youngster), a victim could assert a private claim against the thief. In some instances, when stolen goods were found in the accused's possession, he was summarily executed, without a hearing. When trials were held, they were often conducted by "wager of battle" -- basically, a duel -- and to the victor went the spoils.** (And you thought being a litigator today was a tough way to make a living.)
It was not until the end of the 12th Century that the English Crown began conducting criminal prosecutions for theft. Victims were not thrilled with that development, since any recovered property was given to the Crown, rather than returned to the victim.
Since the 1200's, the common law has evolved to make it easier for people to recover the value of property taken illegally by another. However, these claims had been restricted to tangible personal property, which is property "capable of being identified and taken into actual possession." That made sense in the 1200's, since intangible property was not vital economically. But, as our world has become more complex, this exclusion became problematic.
In 1934, in Agar v. Orda,*** New York recognized that the value of "intangible property" could be recovered by way of a conversion claim, but only if the intangible property "merged" with tangible property. For instance, the value of the stock certificate lies not in the paper (which is relatively worthless), but in the rights the document conveys or transfers. The intangible ownership of a company "merges" into the tangible stock certificate, and that "morphing" is what allows a party to sue for the value of the stock should the certificate be stolen.
Louis Thyroff was an insurance agent for Nationwide Mutual Insurance. While he was an agent, he leased Nationwide's computer hardware and software, including their Agency Office Automation (AOA) system, which allowed for the quick collection and dissemination of business information
Thyroff also used the AOA software for personal use and other data regarding his customers. When he was terminated as an agent, Nationwide recovered their computers and denied Thyroff access to the AOA system. He later sued to recover damages for the value of his property -- electronic data -- which existed in that system.
Thyroff filed his claim in U.S. District Court the Western District of New York, which eventually dismissed his case. On appeal, the U.S. Court of Appeals for the Second Circuit was unsure whether New York recognized a conversion claim for intangible property and certified that question to the New York State Court of Appeals.
Noting that the tort "must keep pace with the contemporary realities of widespread computer use," our state's high court decided that a conversion claim can apply to the Thyroff's property. Since "society's reliance on computers is substantial, if not essential," there was no reason in "law or logic" to exclude electronic data from a conversion claim. As a result, since they "were indistinguishable from printed documents," Thyroff may eventually recover damages for the value of his electronic records.
(Better late, than never.)
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*See Restatement [Second] of Torts.
**Amazingly, wager of battle was not officially abolished in England until 1818.
***264 NY 248 (1934).