Recent Developments in Business Torts Litigation 2021


Jason Twinning

Attorney in Washington, DC and Maryland

§ 1.1 Introduction

“The hand of history lies heavy upon the tort of conversion.”  Prosser, The Nature of Conversion, 42 Cornell LQ 168, 169 (1957).  With roots dating back to the Norman Conquest of England in 1066, the cause of action had its original underpinnings as an alternative to deciding rightful ownership of disputed property by “wager of battle”—a physical altercation or duel between alleged victim and thief.  Ames, The History of Trover, 11 Harv. L. Rev. 277, 278 (1897).

While life-and-death duels aren’t required anymore to ascertain ownership, the stakes of modern litigation over disputed property interests often carry existential consequences for the parties’ business interests.  Despite being an ancient cause of action, conversion claims continue to impact present-day business disputes.  Dozens of purported class action lawsuits pending in multiple jurisdictions seek to use the tort of conversion as a mechanism for adjudicating the proper ownership of billions of dollars the federal government paid for Paycheck Protection Program (PPP) loans pursuant to the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  Some courts have begun to assess how conversion claims may apply to disputes over blockchain cryptocurrencies.  Still other recent decisions assess the cause of action’s applicability to everything from membership interests in limited liability companies, to theft of a manuscript that played a key role in exposing movie producer Harvey Weinstein’s history of committing sexual assault and rape.

§ 1.2 The Development of the Cause of Action

§ 1.2.1 Brief History of Conversion, and Its Gradual Expansion to Include Some Forms of Intangible Property.

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.”  Restatement (Second) of Torts § 222A[1] (1965).  Originally, this meant interferences with or misappropriation of only tangible “goods”—personal property capable of being lost or stolen.  See W. Page Keeton et al., Prosser & Keeton on the Law of Torts § 15, at 90 (5th ed. 1984).  Because intangible rights could not be “lost or found” in the eyes of the common law, the general rule was that “an action for conversion [would] not normally lie, when it involves intangible property” because there was no physical item that could be misappropriated.  See Sporn v. MCA Records, 58 N.Y.2d 482, 489, 462 N.Y.S.2d 413, 448 N.E.2d 1324 (1983).

Despite this long-standing reluctance to expand conversion beyond the realm of tangible property, most courts have determined there was “no good reason for keeping up a distinction that arose wholly from that original peculiarity of the action” and allowed conversion claims to reach “things represented by valuable papers, such as certificates of stock, promissory notes, and other papers of value.”  See Ayres v. French, 41 Conn. 142, 150, 151 (1874) (emphasis added).  This, in turn, led to recognition of conversion when an intangible property right can be united—or “merged”—with a tangible object.  New York’s highest court explained:

[F]or practical purposes [the shares] are merged in stock certificates which are instrumentalities of trade and commerce…. Such certificates ‘are treated by business men as property for all practical purposes.’ … Indeed, this court has held that the shares of stock are so completely merged in the certificate that conversion of the certificate may be treated as a conversion of the shares of stock represented by the certificate.

See Agar v. Orda, 264 N.Y. 248, 251, 190 N.E. 479 (1934); see also Sporn, 58 N.Y.2d at 489, 462 N.Y.S.2d 413, 448 N.E.2d 1324 (plaintiff could maintain conversion claim where defendant infringed plaintiff’s “intangible property right to a musical performance by misappropriating a master recording—a tangible item of property capable of being physically taken”).

To some courts, the “lack of a compelling reason to prohibit conversion for redress of a misappropriation of intangible property underscores the need for reevaluating the …

This is premium content for:

ABA Business Law Section Members.

Please log in or join the Business Law Section to read this full article.

For more information about joining the Section, click here.


Connect with a global network of over 30,000 business law professionals


Login or Registration Required

You need to be logged in to complete that action.