On April 5, 2024, Justice Reed of the New York County Commercial Division issued a decision in dMY Sponsor, LLC v. Glatt, 2024 NY Slip Op. 50364(U), upholding a claim for conversion of stock even where there was no physical stock certificate, explaining:
Counterclaimants also seek to add a new claim for conversion as against You and de Masi, asserting that You and de Masi caused 251,250 Class Y units of dMY Sponsor owned by Glatt, through Captains Neck, to be sold, transferred or otherwise disposed of.
A conversion takes place when someone, intentionally and without authority, assumes or exercises control over personal property belonging to someone else, interfering with that person’s right of possession. To state a conversion claim, a claimant must allege (1) a possessory right or interest in the property and (2) defendant’s dominion over the property or interference with it, in derogation of plaintiff’s rights. Under New York law, conversion claims may be brought as to both tangible and intangible property, including stocks that exist exclusively in electronic format. Courts recognize that shares of stock can be transferred by mere computer entries and that conversion occurs when a person improperly transfers shares from one financial account to another.
Counterclaim defendants argue that, whether physical or electronic, claimants must allege that the stocks were issued to Glatt or that he had some other kind of possession. Indeed, in the proposed amended answer, counterclaimants allege just that. Conversion lies where the tortfeasor exercises unauthorized dominion over property belonging to another, even if the possession was at one time lawful. While counterclaimants do not allege that the stocks were issued to them, or that there was any electronic record or registration, in this court’s view, such allegations are not required to sustain the claim. It is sufficient for claimant to allege that they owned or purchased the stocks and that counterclaim defendants sold, transferred, or otherwise disposed of them improperly.
(Internal quotations and citations omitted).