South-Western Legal Studies in Business

Theft of Electronic Files Is Common Law Conversion
Description

New York high court held that the doctrine of conversion applies to intangible goods such as electronic files on computers. The taking of such property will be treated the same at law as the taking of physical property.

Topic Cyberlaw
Key Words

Tort; Conversion; Files

C A S E   S U M M A R Y
Facts

Thyroff worked as an agent for Nationwide Mutual Insurance. Their agreement specified that Nationwide leased Thyroff’s office computer hardware and software to facilitate sharing of customer information and other business data. He used it for the Nationwide business as well as for other personal and business correspondence. After several years, Nationwide terminated the agreement, as it had the right to do. The next day, Nationwide seized Thyroff’s computer equipment and denied him access to all his records. He sued Nationwide in federal district court for conversion for taking his personal and business files not related to Nationwide. That court dismissed the suit for failure to state a cause of action. Thyroff appealed to the federal appeals court which held that New York law had not been resolved on that issue, so it asked the New York high court: is a claim for the conversion of electronic data cognizable under New York law?

Decision

Question answered. The common law cause of action of conversion applied to intangible electronic records that are stored on a computer and are indistinguishable from printed documents. Conversion is the unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner’s rights. This applies to tangible and intangible goods. [Thyroff may now proceed against Nationwide in federal district court.]

Citation

Thyroff v. Nationwide Mutual Insurance Co., 8 N.Y.3d 283, Ct. App., N.Y. (2007)

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