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# United States Court of Appeals For the Seventh Circuit

No. 15-2130

L E L AND O. S T E V E N S and L E L AND O. S T E V E N S , I N C ORP OR

AT E D, Plaintiffs-Appellants ,

v.

I NT E R A C T I V E F I NAN C I AL A D VI S ORS , I N C ORP OR

AT E D and R E D TAI L T E C H N OL O GY

, I N C ORP OR

AT E D, Defen dants-Appellees.
Appe al f ro m the Uni ted S tates Distri ct Co urt fo r the Nor thern Distri ct o f Il l i noi s, Eastern Di v i sio n. No. 11 C 2 22 3 — Mat the w F. Ke nne lly, Judg e.

A RGU E D J UN E 1, 2016

— D E C I D E D J U LY 29, 2016

Before W O OD, Chief Judge, and B AU ER and F L AUM , Circ uit Judges. B AU E R , Cir cui t Judge. Plainti ff- appellant, Leland O. St ev ens (“Steven s”), i s a self- e m p l oye d f in a nci al advis or
. He clai ms that defendants- appellees, Ind e p endent Fin anci al Advis or s, Inc. (“IFA”) and Redtail T

echnologies, Inc. (“Redtail ”) (collecti v ely ,2 No. 15-2130
“the defendants”) , st o l e hi s cli ents’ nonpubli c personal information. B eli eving that he had a proper ty right to thi s priv ate information, St ev ens sued the d e fendants for conv er si on and other clai ms on behalf of hi mself and hi s eponymous corpor ation. The di stric t court gr anted sum mary judgment for the defendants on so me o f St ev ens’ clai ms, and a jury found for the defendants on the remain ing clai ms. S t e vens now
a p p eals the di stric t court’s gr ant of sum mary judgment, as w e l l
as a supp lemental jury instructi on that the di stric t court gav e duri ng tr i al. W

e affi rm both o f the di stric t court ’s acti ons. I. BACKGRO UND After tw enty y ears as an insu rance salesm an, St ev ens
w anted to sell inv estment products. Becaus e nei ther he nor hi s company w as reg i stered wi th the Securitie s and Exchange Commi ssi on, St ev ens needed to associ at e hi mself wi th a reg i stered inv estment advis or to sell secu riti es un d e r federal law

. See 15 U.S.C. § 80 b- 3 (a); 17 C.F .R. § 200.2(e). He di d so in 2003, when he associ ated wi th IFA, a loosely confederated inv estment advis or y fi rm. The tw o parties fi rst enter ed into an
o ral agr eement whereby St ev ens becam e an indi vid ua l advis or y repr esentativ e for IFA. The parties e ventually memoriali zed the agr ee me nt in a June 2009 wri tte n contract. As an independent advis or y repr esentativ e, St e ven s could prov i d e inv estment advic e and sell secu riti es under the umb rella of IFA; any one who purchas ed secu riti es from S tev ens w as consi dered a cli ent of both St ev ens and IFA. Though St ev ens alone procured the cli ents, he and IFA shared the fees.No. 15-2130 3
In exchange for sharing cli entele and fees wi th IFA, St ev ens ha d a ccess to IFA’s market resources and other propr i etar y information. Thi s inclu ded acces s to a centralized cloud-b ased data system, whi ch Redtail oper ated un d e r IFA’s di rection. S tev ens uploaded cli ent information into thi s databa se , inclu ding sens itiv e nonpubli c information li ke names, addresses, and soci al secu rity numb ers. Besi des uplo ading information from cli ents who purchas ed inv estment products from hi m, St ev ens also uploaded information from cli ents who purchas ed only ins urance products. Becau se these cli ents di d not purchas e secu riti es, they w ere not IFA cli ents. IFA di d not know that St ev ens had enter ed the non-IFA cli ent information into t he database. In October 2009, I FA learned that St ev ens had become inv olv ed in a P on zi sch eme. IFA sev ered i ts associ ation wi th St ev ens and or dered Redtail to block St ev ens from acces sing the database. It also tr ansferr ed St ev ens’ secu riti es-pu rchasing cli ents to other independent advis or y repr esentativ es. St ev ens clai med that by blocking acces s to the nonpubli c personal information of hi s cli ents, IFA effecti v ely stole hi s proper ty

. He sued the defen d ants for conv ersi on, violati on of the Illi noi s T rade Secret s Act, tor tious interfer ence wi th bus iness expectancy , and injuncti v e relief. Becaus e there i s complete di v ersi ty and be ca use the amount in contro v ersy exceeds $75,000, S tev ens proper ly brought these state law clai ms in federal court. See 28 U.S.C. §§ 1332(a)( 1), 1332(c) (1). He fi led sui t in the W estern Di stric t of Vi rg ini a, and the case w as later tr ansferr ed to the Nort hern Di str ict of Illi noi s. All parties agr ee that Illi noi s’ sub sta nt i v e law governs. See McCoy v
. Iberdrola Rene wab les, Inc. , 760 F .3d 674, 680 (7th Ci r . 2014).4 No. 15-2130
In tim e, the defendants mov ed for sum mary judgment. The di stric t court gr anted the defendants’ motion on the clai ms relat ing t o t he information of cli ents who had purchas ed
secu riti es from S t e vens. The di stric t court noted that federal
secu riti es law prev ented a financi al insti tution li ke IFA from di scl osing the nonpubli c inf o r ma tion of i ts cli ents to a nonaffi li ated thi rd party li ke St ev ens. See 1 5 U

. S

. C

. § 6801; 17 C.F .R. § 248.10. Thi s prev ented St ev ens from havin g an absolu te, unc ondi tional right to i mmedi ate possess i on of the proper ty , as required to sus tain a conv e r sio n clai m under Illi noi s law

. See In re Karavidas , 9 9 9 N

. E .2d 296, 310 (Ill. 2013) (quotation mar ks and citati ons o mit t ed). U nable t o fulfi ll t hi s element of a conv ersi on clai m, the di strict co urt held that the entire clai m fai led as a matter o f law

. The di stric t court di d not gr ant sum mary judgment for the
conv ersi on clai m r e lated to the information of the non-IFA cli ents (those who purchas ed only insu rance from St ev ens). The same restr i cti ons governing the sale o f secu riti es do not govern the sale of insu rance, and relev ant state law does not proscrib e I FA from sharing that information wi th St ev ens. Those clai ms instead w ent to tr i al. During i ts deliberations, the jury sent the di stric t court a q ue st i on in wri tin g, “Can w e consi der [f iling ] the laws ui t a demand for proper ty?” The dist r ict court stated that fi ling a laws ui t does not consti tute a demand for the purposes of a conv ersi on clai m under Illi noi s l a w
. The jury then ret urned a v erdic t in fav or of the d e fe ndants. St ev ens appealed.No. 15-2130 5
II. DISCUSSION St ev ens’ arg uments on appeal only relat e to hi s conv ersi on clai ms. T o prove conv ersi on under Illi noi s law , a plainti ff mus t show that: (1) he has a right to the proper ty at i ssu e; (2) he has an abs olute and uncondi tional ri ght t o the i mmedi ate possessi on of the proper ty; (3) he made a demand for possess i on; and (4) the defendant wrongfully and wi thout authorizat i on
assu med contro l, domini on, or ownershi p ov er the proper ty

. In re Karavidas , 999 N.E.2d at 310 (q uo t a t i on marks and ci tations omi tte d). St ev ens presents tw o arg uments on appeal. First, he arg ues that the di stric t court err ed by holding that he could not prove t ha t he had an absolute and unc ondi tional right to the i mmedi ate possess i on of the n onpubli c information of the IFA cli ents. Thus, gr anti ng summa r y judgment on the
conv ersi on clai m relat ing to IFA cli ents w as e rroneous. Second, he arg ues that fi ling a laws ui t sati sfi es the demand element of the conv ersi on clai m, and that the di stric t court err ed by instructing the j ury differently

. W e di sagree wi th both of St ev ens’ ar g um e nts. First, the di stric t court proper ly underst ood relev ant federal secu riti es law and corr ectly appli ed thi s law to St ev ens’ conv ersi on clai m reg ardin g the IFA cli ent s. S econd, St ev ens forfeited hi s arg ument reg ardin g the di stric t court’s answer to the jury questi on becau se he di d not object t o t he di stric t court’s response at tr i al. Regar dless, the di stric t court commi tte d no
er r o r; i t proper ly described what consti tutes—or , more preci sely , what does not consti tute—a demand un d er Illi noi s
conv ersi on law

.6 No. 15-2130
A. S u m m a ry J u d gm e nt For Claims Relat ed to IFA Clien ts Once IFA ter minated i ts relat i onshi p wi th Stev ens in 2009, i t could not prov i de hi m wi th the nonpubli c information of the IFA cli ents under federal law

. As a result, St ev ens di d not hav e
an absolute and i mmedi ate right to i mmedi ate pos se ssi on of the information. See Horbach v
. Kaczmar ek , 288 F .3d 969, 978 (7th Ci r
. 2002) (ci tations omi tte d) (und er Illi noi s law , “[t]he essenc e of conv ersi on i s the wrongful depriv ation of o ne wh o has a right to i mmedi ate possess i on of an object unlaw fully held” (quotation marks omi tte d)). He could not sus tain a conv ersi on clai m as a matte r o f law , so sum mary judgment for the defendants w as appropriate. W e rev i ew the gr ant of sum mary judgment de novo , construing the facts in the li ght most fav or able to the no nmoving party —here, St ev ens. E.g. , R ob erts v
. Columbia Coll. Chicago , 821 F .3d 855, 861 (7th Ci r
. 2016) (ci tation omi tte d). Summary j ud g ment i s appropr i ate and the moving party i s entitled to judgment as a matter of law where “the r e is no genuine di spute as to any material fact.” Fed. R. Civ

. P

. 56(a); accord. Humm el v
. St. Joseph Cty

. Bd. of C omm’rs , 817 F .3d 1010, 1 0 15–16 (7th Ci r
. 2016). Here, sum mary judgment for t he defendants on the clai ms relat ed to the IFA cli ents w as appropriate becau se St ev ens poin ts to no evidenc e or law that allows a ci rcumv ention of federal securi ties law

. The Gramm-Leach-Bli ley Act famous l y repealed the Dep r essi on-era Glass -Steag all Act’s “ban on affi li ations betw ee n co mmerci al and inv estment banks.” W att ers v
. W achovia Bank, N.A. , 550 U.S. 1, 29 (2007) (call ing GrammLeach- Bli ley a “seminal pi ece of banking legis lation” for thi sNo. 15-2130 7 reason) ; see Pub

. L. No. 106-102, § 101, 113 St at. 1338 (1999). Gramm-Leach-Bli ley also enacted mu ltip le safeguards to prot ect the priv acy of cus tome r s of financi al insti tutions. Regar ding nonpubli c personal information speci fi cally , the st a t ut e notes: “It i s the poli cy of the Congr ess that each financi al insti tution has an affi rmativ e and conti nuing obli gation

... to prot ect the secu rity and confi denti ali ty of i ts cus tomers’ nonpubli c personal information.” 15 U.S.C. § 6801(a). The Act also v ested relev ant agenci es wi th the abi li ty to “establi sh appropr i ate standards for the financi al insti tutions” in or der to further thi s poli cy of prot ecting consu mer inform a t ion. 15 U.S.C. § 6801(b)

. Speci fi cally , the Securiti es and Exchan ge Commi ssi on has the authority to reg ulate inv estment advis or s li ke IFA. See 15 U.S.C. § 6805(a)(5); see also 15 U.S.C. § 80b-4a. Pursu ant to i ts statuto ry a ut ho r i ty , the SEC promulgat ed Regulation S-P

, which forbid s inv estment advis or s from “di rectly or t hr o ugh any affi li ate, di scl os[ing] any nonpubli c personal information about a consu mer to a nonaffi li ated thi rd party .” 17 C.F

. R. § 248.10(a). The reg ulati on states that “[a]n indi vidu al i s [the advis or ’s] consum er i f he or she prov i des nonpubli c personal information to [the advis or ] in connecti on wi th obtaining or seeki ng to obtain brok erag e ser v ices or inv estment advis or y services .” 17 C.F .R. 248.3(g)(2)( i ) (emphasi s added). It defines a “non a ff iliat ed thi rd party ” as “any person” except an inv est ment advis or ’s affi li ate or a jo int employ ee of both the inv estment advis or and a company that i s not the inv estment advis or ’s affi li ate. 15 C.F .R. § 248.3(s) (1). F ina l l y , an “affi li ate” i s “any company that contro ls, i s contr olled by

, or i s under common contro l wi th the

... inv estment advis [o]r .” 15 C.F .R. § 248.3(a). The SEC has been vigoro us in8 No. 15-2130
i ts enforcement of Regulation S-P , puni shing advis or s who hav e di scl osed cli ent information to nonaffi li ated thi rd parties. See, e.g. , Santos , S.E.C. Release No. 4346, 2016 WL 786444 at *2 (F eb. 29, 2016); Gisclair, S.E.C. Release No. 3703, 2013 W L 5740459 at *6–8 (Oct. 23, 2013). Here, IFA could not hav e p ro vided St ev ens wi th the nonpubli c personal information o f the IFA cli ents that he procured. First, the cli ents in thi s case are consu mers under the reg ulati on; the heart of the contro v ersy i s the nonpubli c personal inf o r mati on that they prov i ded when seeking financi al advic e. See 17 C.F .R. 248.3( g)(2)(i ). Second, and more i mport antly

, St ev ens ceased being an affi li ate of IFA when the relat i onshi p betw een the tw o parties ended. Wi th the relat i onshi p ter minated, St ev ens w as no longer contro lled by or under
common contro l wi th IFA, the inv estment advis or
. Nor w as he

a jo int employ ee of IFA and a nonaffi li ated thi rd party

. He w as instead an unaffi li ated thi rd party for the purposes of Regulation S-P , and IFA could not di scl ose to hi m any nonpubli c personal information of the cli ents on the database. Nor could Redtail, an affi li ate of IFA contro lled by IFA, giv e St ev ens thi s information. S t e vens arg ues that becau se he procured the cli ents and uploaded the information at i ssu e, he has an ownershi p clai m to the information superseding IFA’s clai m to the information and the mandate of Regulation S-P

. But ownershi p i s not relev ant to analysi s under Regulation S-P

. See In re S.W

. Bach & Co. , 435 B.R. 866, 891 (Bankr . S.D.N.Y . 2010) (c i tin g NEXT Fin. Grp., Inc. , S.E.C. Release No. 349, 2008 WL 2444775 at *26 (ALJ June 18, 2008)) ( n otin g th a t Re gu l a ti on S- P appli es “[r]egar dlessNo. 15-2130 9
of who ‘owns’ the cus tomer information”). The statuto ry duty to prot ect a cus tomer ’s nonpubli c informa t io n under both G ra m m - L e a ch -Bli ley and Regulation S-P falls squarely “ ‘o n the
cover e d financi al insti tution, not the indi vidu al repr esentativ e.’” Id. (quoti ng NEXT , 2008 WL 2444775 at *26); see 1 5 U.S.C. § 6801(a); 17 C.F .R. § 248.10(a). An inv estment advis or ’s duty under the reg ulati on quash es any ownershi p clai m; i t w as incu mbent on IFA to not di scl ose i ts cli ents’ infor mati on to nonaffi li ated thi rd p a rt i es, even i f the unaffi li ated thi rd party ini tiall y ge nerate d the cli ents. Regulation S-P carv es out a single exception to the duty of non-di scl osure to a nonaffi li ated thir d party : an inv estment advis or li ke IFA could foll ow a s p e c i fi c a lly enumerated opt-out procedure. See 15 U.S.C. §§ 6802(b) ; 17 C.F .R. § 248.10(a)( 1). But t his exception does not apply here, becau se IFA explic i tl y esch ews this opt-out procedure. In i ts compli ance poli cy manual, IFA st ates that i t “does not need to prov i de the right for i ts cli ents to opt o ut o f sharing wi th nonaffi li ated thi rd parties.” Its non-di scl osure duty w as clear and unav oidab le:

1 i t could not rev eal the nonpubli c information to St ev ens when he w as no longer affi li ated wi th the fi rm.

IFA exempts certai n third partie s fro m this rul e: service pro v i ders, such 1

as “attorneys, audito rs, consul tan ts, b ro kers , custodi ans, and other consul tan ts”; those partie s who help pro cess and service trans actio ns; and t ho se partie s who are requir ed or all owed to rece i v e the i nfor mati on b y l aw, su c h as partie s connected to an audit or sub poe na. Stevens, a termi

nat ed fo rmer i nv estment adv i sory repre sentati v e, fall s i nto none of these three exempted c ategori es.10 No. 15-2130
As the di stric t court noted, St ev ens may indeed hav e “some right” to the cli ent information. But any su ch right does not
ov err i de the requirements of R e g ulati on S-P

. The reg ulati on prev ents hi m from taking i mmedi ate possess i o n of the cli ent information. As a result, St ev ens cannot prove an element of hi s conv ersi on clai m as a matter of law

. Summary judgment for the defendants on the conv ersi on clai m relating to IFA c li ents
w as proper
. B. Jury Instruc tion in T ria l F o r Claims Relat ed to NonIFA Client s St ev ens also arg ues that the di stric t court mi sstated Illi noi s law when i t told the jury that fi ling a conv ersi on l awsu i t does not consti tute a demand for p r o p ert y
. W e reg ard a court’s response to a questi on from the jury reg ardin g the law as a supp lemental jury instructi on, and ge ne rally rev i ew such instructi ons for abu se of di screti on. See United States v
. Carani, 492 F .3d 867, 874 (7 t h Ci r
. 2007) (ci tations omi tte d). But w e hav e no evidenc e that St ev ens objecte d to the court’s response,
or that any exc e p t io nal ci rcums tances prev ented hi m from objecting. Th us , hi s arg ument i s forfeited. See Fed. R. Ci v
. P

. 51(d); Perry v
. City of Chi c ago , 733 F .3d 248, 253 (7th Ci r
. 2013) (ci tations omi tte d) (abs ent showing of exceptional ci rcumstances, an effect on a party ’s sub stanti al rights, and a resulti ng mi scarri age of justic e, appellate rev i ew not av ai lable in civil
cases i f party does not o bject at t rial)

. Ev en i f St ev ens had objecte d, the di st r ict court di d not abus e i ts di screti on in i ts instructi on to the jury

. When rev i ewing a court’s response to a jury questi on, w e d e t e r mine whether the response: (1) fai rly and adequately addressed theNo. 15-2130 11
i ssu es; (2) corr ectly stated the law; and (3) answered the jury ’s questi on speci fic a l l y

. Mor gan v
. City of Chicago , 822 F .3d 317, 342 (7th Ci r
. 2016) (quotation marks and ci tation omi tte d). Here, the di stric t court more than adequately a d d r e ssed the
narro w i ssu e and di rectly answered the jury ’s single questi on. The sali ent questi on on appea l i s whether i t corr ectly stated relev ant Illin ois law

. W e hold that it di d. The Illi noi s Supreme Court has nev er explic i tly establi shed the rule that fi ling a laws ui t does notconsti tute a demand, so

a federal court si tting in di v ersi ty jurisdi cti on mus t “use [i ts]
own best judgment to esti mate how the Illi noi s Supreme Court

w ould rule as to i ts law .” Zahn v
. N. Am. Power & Gas, LLC, 815 F .3d 1082, 1087 (7th Ci r
. 2016) (brackets, quotat i on marks, and ci tatio n o mit ted). In maki ng thi s esti mati on, federal courts should “giv e gr eat w ei ght to the holdings of t he st ate’s intermediate appe l l a te courts[,] and ought to deviate from those holdings only when there are persuasi v e indi cati ons that the hi ghest court of the state w ould deci de the case di ffer

ently .” Id. at 1087–88 (quoti ng Allstate Ins. Co. v

. Menards, Inc. , 285 F .3d 630, 637 (7th Ci r
. 2002)); see also Fid. Union T rust Co. v
. Fiel d, 311 U.S. 169, 177–78 (1940) (“An intermediate state court in declaring and applyi ng the state law i s acting as an or gan of the [s] tate [,] and it s d eter minati on, in the absenc e of more convin cing evidence o f what the state law i s, should be follow ed by a federal courtin deci ding a state question.”). Here, there i s no persuasi v e indi cati on that the I l linoi s Supreme Court w ould rule that filing a lawsu i t w as suffi ci ent to meet the demand element of a conv ersi on clai m. St ev ens has not ide nti fi ed any Illinoi s appellate case holding as much. In fact, Illinoi s appellate courts hav e held to the contrar y—that a12 No. 15-2130 pre-lawsu i t d e mand i s necess ary to sus tain a conv ersi on clai m—and the Illi noi s Supreme Court has not ov err uled these deci si ons. See R

ybak v
. Dressler, 532 N.E.2d 1375, 1387 (Ill. App. Ct. 1988), reh’g denied, 541 N.E.2d 1115 (Ill. 1989); A.T

. Kearney , Inc. v
. INCA Int’l, Inc. , 477 N.E.2d 1326, 1334 (Ill. App. Ct. 1985); Hoffman v
. Allstate Ins. Co. , 407 N.E.2d 156, 158 (Ill. App. Ct. 1980). W e too hav e held that makin g a demand pr i or to fi ling
a laws ui t i s necess ary to sus tain a conv ersi on clai m under Illi noi s law

. Se e R unn emede Owners, Inc. v
. Crest Mort g. Corp. , 861 F .2d 1053, 1060 (7th Ci r
. 1988)

. W e noted in Run nemede that the “prim ary purpose” of the requiremen t is t o faci li tate the ret urn of the desi red proper ty to the plainti ff “be fo r e being required to submi t to unnec essary li tigati on.” Id. In supp or t of hi s posi tion, St ev ens only cit e s a single unrepor ted federal di stric t court opin i on, whi ch in turn ci tes a single Sev enth Ci rcui t case. S e e MacNeil Auto. Prod., Ltd. v
. Cannon Auto. Ltd. , 2010 WL 4823592, at *1 (N. D. Ill. Nov

. 19, 2010), citing LaParr v
. City of Rockford, 100 F .2d 564, 565–66 (7th Ci r
. 1938). MacNeil ’s relianc e on LaParr w as mi splac ed: LaParr ’s di scu ssi on of a “d e ma nd” relat es to a contro v ersy reg ardin g the appropr i ate refer ence poin t for intere st accrual, not reg ardin g what satisfi es t he demand element of a conve r sio n clai m. See LaParr

, 100 F .2d at 568–69. LaParr refer ences no Illi noi s case that di scu sses the appropr i ate tim in g for a demand for proper ty in a conv ersi o n clai m, and certainly does not stand for the pro p o siti on that fi ling a laws ui t fulfi lls the demand e l e me nt of a conv ersi on clai m under Illi noi s law

. A single tangent i al Sev enth Ci rcui t case ci ted in an unpubli shed federal d i stric t c ourt opin i on i s hardly “c onvinc ing evi dence”
o f wh a t Illi noi s law w ould be r egar ding the demand elementNo. 15-2130 13
of a co nve r si on clai m. See Fiel d, 311 U.S. at 178. The di stric t court’s answer to the jury ’s questi on w as co r r e ct , and not an abus e of di screti on. 2
A final i ssu e: St ev ens arg ues on appeal that he w as excused from maki ng a demand. Under Illi noi s law , a demand fo r proper ty i s not necess ary where the demand w ould be futi le or i f the defendant has sold, di sposed o f, or fund amentally changed proper ty at i ssu e. See, e.g. , Stathis v. Geldermann , Inc. , 630 N.E.2d 926, 931 (Ill. App. Ct. 1994); A.T

. Kearney , Inc. , 477 N.E.2d at 1334 (ci tation om it t e d ). St ev ens clai ms that the di stric t c ourt di d not addr ess thi s i ssu e of law . But the di stric t court di d address the i ssu e, inclu ding thi s language in i ts jury instructi ons. It did n ot mis state t he law asSt ev ens argues.

III. CONCLUSION W e AFF IRM the actions of the di stric t courtand the jury ’s

v erdic t.

Lo gic b uttresses our deter minatio n. If fi l i ng a l awsu i t c o nsti tuted a 2 demand fo r pro perty, then a demand fo r pro perty woul d b e an unnecessa ry el ement of a conversio n cl aim. F i l i ng a suit woul d always satisfy this el ement; there woul d be no nee d f or a di screte demand el ement.