Commercial Litigation and Arbitration

Can a Telephone Number Be the Subject of a Conversion Claim?

From Staton Holdings, Inc. v. First Data Corp, 2010 U.S. Dist. LEXIS 48688 (N.D. Tex. May 11, 2010):

Plaintiff Staton Holdings, Inc. d/b/a Staton Wholesale ("Staton") is a business based in Dallas, Texas. Since the early 1990s, Staton has been the assignee and exclusive end-user subscriber of the toll-free telephone number (800) 888-8888. In April 1998, when the 888 prefix became available, Staton requested and was assigned the number (888) 888-8888. Staton had rights to use both numbers pursuant to an agreement with MCI Worldcom Communications, Inc. ("MCI"). ***

Plaintiffs contend that on or about October 31, 2000, Defendant called MCI representative, Denise Nilson, and misrepresented to her that (888) 888-8888 was not terminating to an active location and that a recording indicated that the number was not in use. Defendant asked Ms. Nilson to reserve the number for Defendant's own use. On January 2, 2001, Defendant again contacted MCI representative, Denise Nilson, about being assigned the rights to use the number. Thereafter, the number was transferred to Defendant. ***

Defendant *** argues that Plaintiffs never had a proprietary interest in the telephone number as a matter of law because only a telecommunications carrier has such an interest. *** In response, Plaintiffs cite to two bankruptcy cases that recognize right of use as the most important aspect of possession.***

At the core of Plaintiff's conversion claim is the supposition that a telephone number is an appropriate subject for a conversion claim. The issue of whether a telephone number can be the subject of a conversion claim is an issue of first impression in the state of Texas (and nearly everywhere else), yet neither side has offered any meaningful analysis on the issue. While conducting its own research on the issue, the Court has found that the question of whether an intangible property interest, such as a telephone number, is the proper subject for a conversion claim is an issue mired in confusion. ***

[C]onversion is the wrongful exercise of dominion over the personal property of another. *** Historically, the tort provided a remedy for the loss of any tangible object that could be lost and found. *** As society became more technologically advanced, the value of intangible property rights became apparent and consequently subject to theft. *** Thus, courts began to "relax" the rule to allow actions for conversion of intangible property rights in limited circumstances. ***

For example, the Texas Supreme Court has recognized a conversion claim involving intangible property merged into a document, such as a lease document. *** While some courts have held that the right to a conversion claim is limited only to those cases where intangible rights have been merged into a document and there has been a conversion of the document,

[Footnote 2] See Sefton v. Jew, 201 F. Supp. 2d 730, 751 (W.D. Tex. 2001) (service mark); CICCorp, Inc. v. AIMTech Corp., 32 F. Supp. 2d 425, 430 n.9 (S.D. Tex. 1998) (internet webpage address); W.G. Pettigrew v. Borden, Inc., 976 F. Supp. 1043, 1057 (S.D. Tex. 1996) (customers); Neles, 974 F. Supp. at 982; Pebble Beach, 942 F. Supp. at 1569 (golf course design); Express One Int'l Inc. v. Steinbeck, 53 S.W.3d 895, 901 (Tex. App. - Dallas 2001, no pet.) (trademark rights).

Texas has not expressly adopted the Restatement's "merged with" requirement. See annotations to Restatement (Second) Torts § 242 (1965).

A telephone number, although a form of property, is not tangible property. Rather, it is a series of numbers assigned by a telephone company to a telephone. Plaintiffs have pled in their Complaint that this particular telephone number was of immense value to Plaintiffs' business because it had the potential to be highly visible and recognizable to customers, thereby providing Plaintiffs with a competitive edge. *** In light of the undisputed fact that this particular phone number was of immense (potential) value to Plaintiffs and others, the Court hereby finds that a cause of action for conversion may lie. The Court does note, however, that it is not suggesting that all telephone numbers may be subject to a cause of action for conversion.

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