FMC Corp. v. Capital Cities/ABC, Inc.

• Decision Date: 04 October 1990
• Docket Number: No. 89-2599,89-2599
• Citation: 915 F.2d 300
• Parties: , 18 Media L. Rep. 1195 FMC CORPORATION, Plaintiff-Appellant, v. CAPITAL CITIES/ABC, INCORPORATED, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 300

915 F.2d 300

59 USLW 2240, 18 Media L. Rep. 1195

FMC CORPORATION, Plaintiff-Appellant, v. CAPITAL CITIES/ABC, INCORPORATED, Defendant-Appellee.

No. 89-2599.

United States Court of Appeals Seventh Circuit.

Argued Jan. 16, 1990.

Decided Oct. 4, 1990.

Joseph A. Cari, Jr., Michael T. Trucco, Peter J. Wifler, Brian L. Crowe, Coffield, Ungaretti, Harris & Slavin, Chicago, Ill., for plaintiff-appellant.

Dale M. Cohen, Samuel Fifer, Jeffrey P. Lennard, Richard Chessen, Duane C. Quaini, Sonnenschein, Nath & Rosenthal, Chicago, Ill., for defendant-appellee.

Before BAUER, Chief Judge, CUDAHY and FLAUM, Circuit Judges.

CUDAHY, Circuit Judge.

FMC Corporation brought suit against Capital Cities/ABC, Inc. for conversion and for misappropriation of its business information in connection with ABC's refusal to return copies of the FMC documents ABC had in its possession. The district court dismissed FMC's claims. We affirm in part and reverse in part.

I. FACTS

The facts of this case are, we hope, unique. On October 20, 1988, Capital Cities/ABC, Inc. ("ABC"), broadcast a story on its World News Tonight show that dealt with FMC's work on the Bradley Fighting Vehicle (the "BFV") for the United States Army. During this broadcast, ABC displayed what appeared to be several of FMC's documents relating to FMC's pricing policies and to FMC's contract with the U.S. Defense Department to provide spare parts for the BFV. The ABC news reporter covering the story reported, on the air, that the documents displayed in the newscast were, in fact, copies of FMC's documents. Four of these corporate documents are apparently missing from FMC's files. ¹ FMC does not have copies of the documents. It is apparently undisputed that ABC possesses copies of these documents. (In fact, it is quite possible that ABC has the originals of these documents.) It is also undisputed that ABC was not directly responsible for the loss of FMC's documents. ABC has refused, on various grounds and after repeated requests, to return the documents to FMC. Indeed, ABC has refused to even supply copies of the documents to FMC.

FMC brought suit in state court against ABC for conversion and for misappropriation. FMC sought to have the documents replevied and asked for damages to compensate it for the misappropriation of its confidential business information. ABC had the suit removed to federal court. Jurisdiction is premised on diversity of citizenship. The district court dismissed FMC's conversion claim on the grounds that copies of documents could not be converted and dismissed FMC's misappropriation claim on the grounds that confidential business information could be misappropriated only by a direct business competitor, something which ABC is not. We affirm the dismissal of FMC's misappropriation claim but reverse the dismissal of FMC's conversion claim.

II. LEGAL ANALYSIS

A. Choice of Law

The parties disagree over what law should apply. The district court applied Illinois law because it believed that neither party had addressed the choice of law issue. FMC, which has its headquarters in California, asserts that California law should apply because the documents were taken in California and because California is where, since the taking, FMC is being deprived of their use. ABC contends, on the other hand, that New York law should apply because New York is where it is maintaining control over the documents.

Illinois has adopted the "most significant contacts" test for determining choice of law in tort cases. Ingersoll v. Klein, 46 Ill.2d 42, 262 N.E.2d 593 (1970); Jackson v. Miller-Davis Co., 44 Ill.App.3d 611, 3 Ill.Dec. 161, 358 N.E.2d 328 (1976); see also Restatement (Second) of Conflict of Laws Sec. 145 (1971) [the "Restatement"]. We think that, under the circumstances, the law of California should be applied to FMC's claims. There are two fundamental elements of the tort of conversion. The first is that the plaintiff own or have a right to use the property in question at the time of the conversion. The second is the exercise of unlawful dominion over the plaintiff's property by the defendant in a manner that is inconsistent with the plaintiff's title or rights. See, e.g., Moore v. Regents of Univ. of Cal., 215 Cal.App.3d 709, 249 Cal.Rptr. 494, 503 (1988).

Comment i to section 147 of the Restatement states that the issue of whether the plaintiff is entitled to use the converted property is actually a property question. On the other hand, whether the defendant asserted wrongful dominion over or wrongfully detained the property at issue is a conversion issue sounding in tort. We believe that, in this case, the law of California should control the resolution of both questions. Section 247 of the Restatement states that "[i]nterests in a chattel are not affected by the mere removal of the chattel to another state." Hence, we will apply California law to decide whether FMC is entitled to the possession or use of the documents retained by ABC. With respect to the conversion issue, we recognize that ABC apparently took and maintains control over copies of FMC's documents in New York. But the fact that FMC is located in California and is feeling the loss of its documents there means that the "most significant contacts" for purposes of FMC's conversion and misappropriation claims are to be found in California. ² We believe that California has the greatest interest here. That state has an important interest in insuring that the property of its citizens is returned.

We will, however, apply Illinois law to determine whether ABC has a First Amendment-related defense to FMC's conversion and misappropriation claims. ABC's World News Tonight show was televised throughout the world. Hence, for the purpose of the First Amendment and the dissemination of news, no one state actually has more "significant contacts" with this dispute than any other. We will therefore apply the law of the forum as well as federal law to ABC's First Amendment-related defenses.

B. Conversion

In California, as in most states, the tort of conversion consists of " 'a distinct act of dominion wrongfully exerted over another's personal property in denial of or inconsistent with his title or rights therein, ... without the owner's consent and without lawful justification.' " Moore v. Regents of Univ. of Cal., 215 Cal.App.3d 709, 249 Cal.Rptr. 494, 503 (1988) (citing 18 Am.Jur.2d, Conversion, 1, at 145-46 (footnotes omitted)). Superseded on other grounds by Moore v. Reports of Univ. of Cal., 51 Cal. 120, 793 P.2d 479, 271 Cal.Rptr. 146 (1990). It is " 'an act of wilful interference with a chattel, done without lawful justification, by which any person entitled thereto is deprived of use and possession.' " De Vries v. Brumback, 53 Cal.2d 643, 2 Cal.Rptr. 764, 767, 349 P.2d 532, 535 (1960) (quoting W. Prosser, Prosser on Torts 66 (2d ed. 1955)). We believe that, under any of the scenarios we shall outline, ABC is chargeable with conversion under California law and hence must return to FMC either the originals, if it has them, or a copy of any of FMC's documents listed in Exhibit A of Appellant's Appendix, of which FMC no longer has a copy.

FMC contends that ABC has several of its documents or that ABC has copies of these documents. Paragraph 14 of FMC's Second Amended Complaint alleges, for example, that "ABC has received the stolen documents, or copies thereof." See also Appellant's Appendix at 1. ABC contends that it does not have the originals and that FMC has not, and cannot, allege that it does. We read the plain language of FMC's complaint differently, however. If ABC has the originals, they must be returned to FMC for it is axiomatic that property known to belong to another must be returned. See In re Greg F., 159 Cal.App.3d 466, 205 Cal.Rptr. 614, 615 n.2 (1984) (quoting section 485 of California's Penal Code) ("One who finds lost property under circumstances which give him knowledge of or means of inquiry as to the true owner, ..., without first making reasonable and just efforts to find the owner and restore the property to him, is guilty of theft.") ABC can, however, keep copies of the documents so that its First Amendment investigative activities will not be chilled or discouraged. ABC refuses to show the documents in question to anyone, claiming that the First Amendment and the reporter's privilege exempts it from so doing. Because neither FMC, the district court nor this court had or has any way of knowing exactly what documents ABC possesses, we believe the burden should be on ABC, and not FMC, to come forward with evidence that it does not have the originals of the documents pilfered from FMC's files (if this is the case). We are mindful of the First Amendment issues attending such a demonstration; hence we leave it to the district court, and to the parties, to decide what form ABC's proof may take. The district court is welcome, for example, to undertake an in camera inspection of the documents. If, on the other hand, FMC is willing to accept copies of the documents, ABC should not have to submit to such a procedure. We leave the precise resolution of this matter to the district court. ABC is not, however, to be allowed to flout well-accepted property and tort law in the name of the First Amendment--especially since procedures are available that should adequately protect ABC's investigative activities. We now move on to address the issue whether ABC must return copies of FMC's own documents to FMC if the only documents ABC possesses are merely duplicates of the documents removed from FMC's files.

As the district court correctly noted, "the receipt of copies of documents, rather than the documents themselves, should not ordinarily give rise to a claim for conversion." March 8, 1989 Memorandum Opinion and Order at 2. See Harper & Row Publishers, Inc. v. Nation Enters., 723 F.2d 195, 201 (2d Cir.1983), rev'd on other grounds, 471 U.S. 539, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985...