HGT Law Wins Ninth Circuit Appeal, Confirming That Under California Law, Conversion Is A Strict Liability Tort Entitled To Equitable Indemnity

On July 29, 2026, HGT Law secured a victory in an appeal before the U.S. Court of Appeals for the Ninth Circuit in Serenity Investments, LLC, et al. v. Sun Hung Kai Strategic Capital, Ltd., No. 24-6686. Arguing on behalf of Sun Hung Kai Strategic Capital, Ltd. (“SHK”), HGT Law persuaded the Ninth Circuit to reverse a grant of summary judgment and to hold, in a published opinion, that conversion is a strict liability tort for which a defendant may seek equitable indemnity from concurrent negligent tortfeasors.

The dispute arose out of a 2017 stock transfer in which SHK's counterparties, Serenity Investments and the Daniel V. Tierney 2011 Trust, alleged that SHK had converted their shares of Social Finance, Inc. (“SoFi”) stock. SHK, in turn, filed a third-party complaint seeking equitable indemnity from Orrick, Herrington & Sutcliffe LLP (“Orrick”) and Scenic Advisement, Inc. (“Scenic”) - the plaintiffs' own administrative agent and broker - based on their alleged negligence in handling the transaction. The District Court granted summary judgment to Orrick and Scenic, holding that conversion is an intentional tort for which equitable indemnity is not available.

The Court ruled in favor of Legend LP on all five causes of action: breach of contract; breach of fiduciary duty; aiding and abetting breach of fiduciary duty; unjust enrichment; and receipt of stolen property under California Penal Code section 496. The Court entered judgment against the General Partners and the individual principals, jointly and severally, for compensatory damages in the amount of $10,326,636. Restitution was also ordered against each defendant based on the amount by which each defendant was unjustly enriched, totaling $9,970,136. Treble damages under California Penal Code section 496 were also awarded against Defendant Zhang in the amount of $936,000.

The Ninth Circuit disagreed and reversed. Under California's equitable indemnity doctrine, a right of partial indemnity exists among defendants in actions based on negligence and strict liability, but intentional tortfeasors may not seek indemnity based on the negligence of others. The question, therefore, was whether conversion is properly characterized as an intentional tort or a strict liability tort for purposes of equitable indemnity.

Guided by the California Supreme Court's recent decisions in Voris v. Lampert, 446 P.3d 284 (Cal. 2019), and B.B. v. County of Los Angeles, 471 P.3d 329 (Cal. 2020), the Ninth Circuit held that conversion is a strict liability offense that does not depend on the wrongful knowledge or intent of the defendant. As the Court explained, conversion "does not require bad faith, knowledge, or even negligence" — only that the defendant intentionally performed the act depriving the plaintiff of possession. In this respect, the Court reasoned, conversion "is more akin to strict product liability than to battery or fraud," and does not carry the "social condemnation" that would foreclose equitable indemnity. Accordingly, the Court held that a conversion defendant may seek partial equitable indemnity from concurrent negligent tortfeasors, and reversed the District Court’s order granting summary judgment.

A copy of the Ninth Circuit's decision can be found here.

For more information about the HGT Law's commercial litigation practice, please contact us at (646) 453-7288 or via email at info@hgtlaw.com.