In Laba v. CTA, 2016 WL 147656 (N.D.Ill. 2016), the Court considers the contours of the conversion tort in a dispute involving former Chicago Transit Authority (CTA) employees who lied about their hours worked.
The CTA claimed the employees converted or “stole” paycheck monies by falsifying employee time records in order to get paid by the agency.
The Court dismissed the CTA’s conversion claim based on the involuntary payment doctrine. Conversion applies where a plaintiff shows (1) a defendant exercised unauthorized control over the plaintiff’s personal property; (2) plaintiff’s right to immediate possession of the property; and (3) a demand for possession of the property.
A colorable conversion claim must involve specifically identifiable property. Money can be the subject of a conversion claim but it must be a specific source of funds. A general obligation (“John owes me money and so he basically stole from me,” e.g.) isn’t enough for actionable conversion.
A well-established conversion defense is the voluntary payment rule. This rule posits that where one party voluntarily transfers property to another, even if the transfer is mistaken, there is no conversion. In such a case, there is a debtor-creditor relationship: the debtor would be the person to whom the funds were paid and the creditor the paying party.
Here, since the CTA voluntarily paid money to the employees, in the form of regular paychecks, those monies could not be subject to a later conversion suit. The CTA did not pay the ex-workers under duress. The fact that the workers may not have earned their pay doesn’t change the analysis. At most, according to the court, the time sheet embellishments created a “general debt arising from fraudulent conduct.” The CTA has a remedy to recoup the funds; it’s just not one for conversion.
This case presents a creative use of the conversion tort in an unorthodox fact setting. The case lesson is clear: where an employer pays an employee of the employer’s own volition, the payment will be considered “voluntary” even where it turns out the employee didn’t deserve the payment (i.e. by not working). In such a case, the employer’s appropriate remedy is one for breach of contract or unjust enrichment. A civil conversion claim will not apply to voluntarily employer-employee payments.