A capital fund can try to make the agents it blames for a botched stock transfer help pay the bill.
That is the takeaway from a Ninth Circuit decision, filed July 29, 2026, that changes how blame gets divided when several parties feed into one loss.
It began with a 2017 deal. Serenity Investments and a related trust agreed to sell 101,640 shares of Social Finance, Inc. (SoFi) Series E preferred stock to Sun Hung Kai Strategic Capital (SHK) for $1,641,486. The sellers used Orrick, Herrington & Sutcliffe (Orrick) as their agent to handle the transfer and Scenic Advisement (Scenic) as their broker.
Then the deal stalled. Before paying, SHK told Scenic it was putting the transaction "on hold" over bad news about SoFi's chief executive. Scenic told Orrick. Orrick transferred the certificates anyway. When SHK pointed out it "had not yet agreed to the purchase," Orrick said it could "unwind the transfer easily" and told SoFi to "roll back this transfer." Scenic called it "a mistake on [its] end" that "[s]hould not be a problem to rectify." SoFi never reversed it.
The unpaid-for shares stayed in SHK's account for years. As SoFi headed for a public listing, SHK signed an "affidavit of lost stock certificate," swearing under penalty of perjury that it owned them. The shares converted into 177,138 SPAC shares. By late 2021, when the sellers demanded them back, they were worth $4,185,771 - but SHK offered only the original $1,641,486. The shares finally went back on January 14, 2022, by then worth $2,359,478.
The sellers sued SHK for conversion, and the two sides later settled. SHK, meanwhile, pulled in Orrick and Scenic, arguing their negligence caused the mess and they should share any payout - a claim called equitable indemnity, which splits a loss by comparative fault. The trial court granted summary judgment against that claim, holding conversion is an intentional tort for which indemnity is not available.
The Ninth Circuit reversed. Reading recent California Supreme Court rulings, the panel predicted the state's high court would treat conversion as a strict liability tort - one that "does not require bad faith, knowledge, or even negligence." On that reading, a conversion defendant can seek partial indemnity from co-defendants it accuses of negligence.
For E&O carriers and claims teams, that is what matters: a defendant facing a conversion claim can now try to bring an allegedly negligent professional in to share the cost. The panel also distinguished older insurance-coverage cases that had called conversion intentional, explaining those turned narrowly on whether the insured intended the act, not on the tort's nature. SHK won only the right to press its claim; the panel left the merits, and how fault gets divided, for the district court on remand.
