According to New York law, 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 includes a denial or violation of the plaintiff's dominion, rights, or possession over her property. It also requires that the defendant exclude the owner from exercising her rights over the goods.
The agent and the insurers participated in an agreement, which provided that the agent must not compete for one year following the termination of the agreement. The insurers also required the agent to lease from them an office-automation system, including hardware and software. When the insurers cancelled the agent's agreement, they denied him access to the office-automation system, various software, and files. The agent alleged that this amounted to conversion, and that the seizure of the business data, which could have helped the agent compete in the future, formed the basis of a breach of contract action. The district court dismissed his claims for conversion of electronic data merged into a computer program and breach of contract. The case was appealed to the United States Court of Appeals for the Second Circuit.
Was the breach claim properly dismissed?
The court held that the breach of contract claim was properly dismissed. The agent did not point to any provision of the agreement that, when read in conjunction with the implied covenant of good faith, imposed an affirmative obligation on the insurers to provide the agent with the means to compete, and which obligation they breached. However, because New York law was unsettled on the issue, the court certified to the New York Court of Appeals the question of whether electronic data, computer programs, or electronic data saved in computer programs supported a conversion claim.