## Facts

- Vectren Corporation employed Christopher Crowe as a network analyst.
- Crowe stole more than $900,000 in Vectren information-technology equipment over time.
- Crowe sold the stolen equipment via eBay to Nextday Network Hardware Corp., an IT equipment reseller, which purchased and resold the items in the ordinary course of its business.
- Law enforcement later informed Nextday that the equipment it had purchased from Crowe was stolen.
- After receiving that notice, Nextday allegedly continued to possess and sell the stolen equipment.
- Great American Insurance Company paid Vectren’s insurance claim for the loss and, as Vectren’s subrogee, sued Nextday and others, including for conversion.

## Issues

1. Whether Nextday could defeat the conversion claim at the pleading stage by invoking UCC § 2-403(2) (entrustment/buyer-in-ordinary-course) on the theory that Crowe could pass good title.
2. Whether the complaint plausibly alleged conversion, including based on Nextday’s continued control and resale of the equipment after being told it was stolen.

## Decision

- The court denied Nextday’s Rule 12(b)(6) motion to dismiss the conversion claim (and related claims resting on the same conduct).
- The court held the complaint plausibly alleged that Crowe lacked authority to sell Vectren’s property and that the UCC entrustment defense was not established on the pleadings.
- The court held allegations that Nextday continued to exercise dominion over and sell the goods after police notification were sufficient to state conversion under Maryland law.

## Legal Principles

- On a Rule 12(b)(6) motion, the court accepts well-pleaded factual allegations as true and draws reasonable inferences for the plaintiff; dismissal is improper when a defense depends on facts not established by the complaint.
- Under Maryland law, conversion is an intentional exercise of dominion or control over another’s property inconsistent with the owner’s rights; participation in the original theft is not required.
- UCC § 2-403(2) (entrustment) requires entrustment of goods to a merchant who deals in goods of that kind; theft by an employee alleged to lack authority does not, by itself, satisfy those conditions at the pleading stage.
- A downstream purchaser’s continued retention or sale of goods after actual notice they are stolen can constitute conversion.

## Conclusion

The court allowed the insurer-subrogee’s conversion claim to proceed because the complaint plausibly alleged that the goods were stolen rather than entrusted to a merchant, and that the reseller continued to control and sell the goods after being told they were stolen, defeating dismissal based on an asserted UCC entrustment defense.


Great Am. Ins. Co. v. Nextday Network Hardware Corp., 73 F. Supp. 3d 636 (D. Md. 2014)