460 F.3d 400 (2nd Cir. 2006), 05-4005, Thyroff v. Nationwide Mut. Ins. Co.

Docket Nº:05-4005-CV.
Citation:460 F.3d 400
Party Name:Louis E. THYROFF, Plaintiff-Appellant, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Nationwide Mutual Fire Insurance Company, Nationwide Life Ins., Nationwide General Insurance Company, Nationwide Property and Casualty Company, Nationwide Variable Life Insurance and Colonial Insurance Company of Wisconsin, Defendants-Appellees.
Case Date:August 21, 2006
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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Page 400

460 F.3d 400 (2nd Cir. 2006)

Louis E. THYROFF, Plaintiff-Appellant,

v.

NATIONWIDE MUTUAL INSURANCE COMPANY, Nationwide Mutual Fire Insurance Company, Nationwide Life Ins., Nationwide General Insurance Company, Nationwide Property and Casualty Company, Nationwide Variable Life Insurance and Colonial Insurance Company of Wisconsin, Defendants-Appellees.

No. 05-4005-CV.

United States Court of Appeals, Second Circuit.

Aug. 21, 2006

Argued: April 11, 2006.

Page 401

William P. Tedards, Jr., Washington, D.C. (Leo G. Finucane, Finucane & Hartzell, LLP, Pittsford, NY, on the brief), for Plaintiff-Appellant.

Ben M. Krowicki, Bingham McCutchen LLP, Hartford, CT, for Defendants-Appellees.

Before WINTER, CALABRESI, POOLER, Circuit Judges.

Page 402

POOLER, Circuit Judge.

Plaintiff-appellant Louis E. Thyroff appeals from an adverse disposition of his case in which the United States District Court for the Western District of New York (Telesca, J.) dismissed his claims for conversion and breach of contract. In an unpublished opinion, the district court dismissed the former upon defendants-appellees' motion to dismiss and the latter on its motion for summary judgment. Thyroff now challenges both of these decisions.

The correctness of the district court's dismissal of Thyroff' s conversion claim turns on an issue of New York law on which the New York Court of Appeals has not yet ruled. Specifically, Thyroff claims that defendants-appellees Nationwide Mutual Insurance Company et al. (collectively, "defendants") converted his electronic data, and he is therefore entitled to relief under New York law. It is unclear, however, whether electronic data may be the subject of a conversion claim under New York law. Compare Sporn v. MCA Records, Inc., 58 N.Y.2d 482, 489, 462 N.Y.S.2d 413, 448 N.E.2d 1324 (1983) (noting that "an action for conversion will not normally lie, when it involves intangible property") with Shmueli v. Corcoran Group, 9 Misc.3d 589, 594, 802 N.Y.S.2d 871 (N.Y.Sup.Ct.2005) (holding that plaintiff's computerized client list is property that may support a claim of conversion). Because this precise issue is unaddressed by the New York Court of Appeals and is controlling in the disposition of Thyroff' s conversion claim, we certify the question--whether electronic data may be the subject of a conversion claim--to the New York Court of Appeals.

As to Thyroff's breach-of-contract claim, however, we affirm the decision of the lower court because we agree that Thyroff has failed to satisfy the burden necessary to bring this claim to trial. We reject Thyroff' s position that the expiration of the contract's non-compete clause created an affirmative contractual obligation requiring that defendants provide Thyroff the materials necessary to compete.

We therefore affirm in part the decision of the district court regarding the dismissal of Thyroff' s breach-of-contract claim, and we certify the above-described question to the New York Court of Appeals. We retain jurisdiction over the case to decide the appeal on the conversion claim after we have learned the views of the New York Court of Appeals or that court declines certification.

BACKGROUND

Thyroff was associated with Nationwide Mutual Insurance Company ("Nationwide") as an insurance agent for twenty one years. Pursuant to this relationship, on October 13, 1988, Thyroff and Nationwide entered into an Agent's Agreement ("AA"), which governed the relationship between the parties. One section of the AA, 11(f), is relevant to the instant appeal.

Section 11(f) covers "[c]essation of [a]gency [s]ecurity [c]ompensation" and is, in part, a type of non-compete clause. According to 11(f)(1), if an agent is in any way connected "with the fire, casualty, health, or life insurance business, within one year following cancellation [of the agent relationship] within a 25 mile radius of [the agent's] business location," any obligation that Nationwide may have to provide "Agency Security Compensation" 1 terminates.

Page 403

In addition to requiring that Thyroff enter into the AA, Nationwide also required that Thyroff lease an agency office-automation system ("AOA"), including hardware and software, from Nationwide. Thyroff signed a lease agreement and paid monthly lease payments for the use of this system. Thyroff's office operations were very much dependent on the AOA. On a daily basis, Thyroff and his staff entered business data and information onto the hard drives of the AOA computers. Nationwide then uploaded that information on a nightly basis from Thyroff's computers onto Nationwide's computers. In the process, Nationwide also uploaded Thyroff' s personal information, which was unrelated to Nationwide business.

On September 18, 2000, Thyroff received a letter cancelling the AA. On September 19, 2000, without notice, Nationwide denied Thyroff access to the AOA as part of the cancellation of the AA, and it reclaimed its AOA. In the process, Nationwide took various software programs--including Microsoft Word, PowerPoint, Excel, etc.--and various files--including personal email, documents, and assorted data--that Thyroff stored on the system. Nationwide also seized data that Thyroff had compiled on Nationwide customers that Thyroff needed in order to retain his customers' business once his relationship with Nationwide ended.

According to Thyroff' s complaint, Nationwide was not entitled to take his personal or business information from the computers. Thyroff maintains that neither the AOA lease agreement nor the AA granted Nationwide this right. Nationwide's seizure of this electronic information--both Thyroff' s business records and personal information--forms the basis of Thyroff' s conversion claim.

The seizure of the business records alone is the basis for Thyroff' s breach-of-contract claim. According to Thyroff, section 11(f) dictates that an agent must not compete for one year following the termination of the AA, but after this year, the agent is free to compete. Thyroff maintains that this, along with the implied covenant of good faith and fair dealing, see 511 West 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 153, 746 N.Y.S.2d 131, 773 N.E.2d 496 (2002) (noting that all contracts under New York law include this implied covenant), created a contractual obligation for Nationwide not to deprive Thyroff access to business information necessary to compete once the year expired. Under this theory, when...

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