                  FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

BANK OF NEW YORK, a banking            
corporation organized under law
of New York,                                 No. 05-56653
                Plaintiff-Appellant,
                 v.                           D.C. No.
                                           CV-03-09238-CAS
FREMONT GENERAL CORPORATION, a                OPINION
California corporation,
               Defendant-Appellee.
                                       
       Appeal from the United States District Court
           for the Central District of California
       Christina A. Snyder, District Judge, Presiding

                    Argued July 9, 2007
                 Submitted August 16, 2007
                    Pasadena, California

                      Filed February 1, 2008

  Before: Alex Kozinski, Chief Judge, Andrew J. Kleinfeld
          and Richard C. Tallman, Circuit Judges.

                 Opinion by Judge Tallman




                              1545
           BANK OF NEW YORK v. FREMONT GENERAL        1549


                       COUNSEL

Robert L. Wallan (argued), Kimberly L. Buffington, Mariah
L. Brandt, Pillsbury Winthrop Shaw Pittman LLP, Los Ange-
les, California, for appellant Bank of New York.

Michael C. Lieb (argued), Leemore Kushner, Willenken, Wil-
son, Loh & Lieb, Los Angeles, California; Iain Nasatir,
Pachulski Stang Ziehl Young Jones & Weintraub LLP, Los
Angeles, California, for appellee Fremont General Corpora-
tion.

John F. Finston, Katherine J. Eddy, Sonnenschein Nath &
Rosenthal LLP, San Francisco, California, for amicus curiae
Superintendent of the State of New York as Ancillary
Receiver of Fremont Indemnity Company and the New York
Liquidation Bureau.


                        OPINION

TALLMAN, Circuit Judge:

  This case arises from a commercial bank deposit contract
1550         BANK OF NEW YORK v. FREMONT GENERAL
involving an account in which funds were held to secure the
payment of claims in the highly regulated world of workers’
compensation insurance. The Bank of New York (“BONY”)
appeals the district court’s entry of partial summary judgment
against it and ultimately judgment against it following a
bench trial. BONY brought suit against Fremont General Cor-
poration (“Fremont General”), the ultimate corporate parent
of Fremont Indemnity Company (“Fremont Indemnity”) and
Industrial Indemnity Company (“Industrial Indemnity”)—two
California insurance companies that provided workers’ com-
pensation policies to employers in several states, including
California and New York.1 BONY asserted claims for dam-
ages allegedly incurred as a result of Fremont General’s with-
drawal of $14 million from custodial accounts that Fremont
Indemnity maintained at BONY. Fremont General’s with-
drawals violated New York Insurance law and the “custodian
agreement” that Fremont Indemnity signed with BONY.
According to BONY, Fremont General intentionally inter-
fered with the custodian agreement between Fremont Indem-
nity and BONY, and converted the funds in the custodial
accounts. We review the district court’s judgment against
BONY on Claim One for Interference with Contract and
Claim Two for Conversion. We have jurisdiction under 28
U.S.C. § 1291, and we affirm in part, reverse in part, and
remand.

                                   I

                                  A

  Fremont Indemnity provided workers’ compensation insur-
  1
    Fremont General is the parent company of Fremont Compensation
Insurance Group (“FCIG”), which, in turn, is the parent company of Fre-
mont Indemnity and Industrial Indemnity. Fremont Indemnity and Indus-
trial Indemnity merged in August 2001, leaving Fremont Indemnity as the
surviving corporation. We collectively refer to Fremont Indemnity and
Industrial Indemnity as “Fremont Indemnity.”
             BANK OF NEW YORK v. FREMONT GENERAL                    1551
ance services to New York residents. New York insurance
law required Fremont Indemnity to maintain custodial
accounts at a New York bank in trust for the benefit of Fre-
mont Indemnity’s policyholders as a condition to Fremont
Indemnity writing workers’ compensation insurance in New
York. See N.Y. Ins. Law § 1314. By requiring insurance carri-
ers to maintain such custodial accounts, the New York Insur-
ance Department ensures that the carriers have adequate funds
to pay claims in the event that they become insolvent. New
York state law required Fremont Indemnity to enter into a
Workers’ Compensation Insurance Retaliatory Custodian
Agreement (“custodian agreement”) with BONY.2 Fremont
General managed Fremont Indemnity’s investments pursuant
to a written Services and Management Agreement.

   The custodian agreement named BONY as the custodian
and barred BONY from releasing funds without a written
request from Fremont Indemnity and written approval from
the Superintendent of Insurance of the State of New York
(“Superintendent”). The agreement provided in relevant part:

      Securities placed in the custodian account shall be
      held by the Custodian, its successors or assigns, in
      custody exclusively for the Superintendent of Insur-
      ance of the State of New York, as trustee, in trust for
      the security of the workers’ compensation insurance
      policyholders and claimants of the Company resident
      of New York State and free of any lien or other
      claim of the Custodian . . .
  2
    Industrial Indemnity entered into the custodian agreement with BONY
on August 15, 1995; Fremont Indemnity entered into the same agreement
on December 5, 1997. The agreements are “retaliatory” in that they are
required of companies domiciled elsewhere who seek to write insurance
in New York whose state of incorporation imposes a similar deposit con-
dition on New York insurers doing business in that foreign state. See N.Y.
Ins. Law §§ 1319, 1112; Levin v. Nat’l Colonial Ins. Co., 806 N.E.2d 473,
477 (N.Y. 2004).
1552         BANK OF NEW YORK v. FREMONT GENERAL
      Except as hereinafter provided, no securities in this
      account or any of the principal cash account held
      pursuant to this Agreement shall be released by the
      Custodian except upon receipt of a written request of
      the Company and written approval by or in the name
      of the Superintendent of Insurance . . .

      Custodian shall be accountable to the Superintendent
      of Insurance for the safekeeping of the securities and
      cash reserves held by it under this Agreement.

   New York Insurance Law sections 1314 and 1318 permit
insurance carriers to withdraw from custodial accounts inter-
est earned on the deposited principal, but not the principal
itself. Insurance carriers typically sweep the custodial
accounts to withdraw the interest as it is earned. Fremont
General, acting as Fremont Indemnity’s investment manager,
initially deposited in the custodial accounts interest-bearing
securities—California State Veterans bonds in the amount of
$10 million—that made no periodic partial principal repay-
ments. Fremont General, however, then sought and obtained
approval from the New York Insurance Department to substi-
tute Government National Mortgage Association (“GNMA”)
securities in place of the interest-bearing securities.3

   Because GNMA securities make periodic payments of prin-
cipal along with payments of interest, the New York Insur-
ance Department initially found them unacceptable trust
deposit securities for Fremont Indemnity’s custodial account.
Fremont General proposed alternatives to alleviate the regula-
tory concerns about Fremont Indemnity potentially receiving
principal payments as the GNMA securities paid principal
into the custodial account. The New York Insurance Depart-
ment ultimately approved substitution of GNMA securities
contingent on a commitment by Fremont Indemnity’s Board
  3
   GNMA securities are mortgage-backed securities that return principal
over time rather than in one lump sum on maturity.
              BANK OF NEW YORK v. FREMONT GENERAL                    1553
of Directors, who agreed by unanimous written consent to
“replace any GNMA or GNMA CMO security on deposit
before any return of principal is made.” Here lies the genesis
of the lawsuit.

   In October 2000, Fremont General replaced the existing
bonds in the custodial accounts with GNMA securities with
a principal value of approximately $14 million. Before May
2002, all returns on investment in the custodial accounts were
of interest only. The first periodic credit including partial
repayment of principal occurred in May 2002. In September
2000, Fremont General gave BONY a standing order to trans-
fer all cash in the custodial account to Fremont Indemnity’s
non-custodial account at J.P. Morgan Chase. Acting pursuant
to that order, BONY transferred the May 2002 principal pay-
ment out of the custodial account—and continued to do so
through September. Beginning in October 2002, BONY
required Fremont General to send monthly letters specifying
how much cash BONY should transfer. Following Fremont
General’s instructions, between May 2002 and April 2003,
BONY transferred approximately $14 million from the custo-
dial accounts to the J.P. Morgan Chase Account.4 New York’s
Superintendent of Insurance never authorized BONY to
release principal held in the custodial accounts. Evidence at
trial showed that some BONY employees knew about the
  4
    BONY initiated eleven separate wire transfers, totaling about $3.2 mil-
lion, between May 2002 and September 2002 under Fremont General’s
repetitive wire instructions provided to BONY two years earlier. In Octo-
ber 2002, BONY required specific letter requests for any further distribu-
tions. As a result, Fremont General issued monthly letters—the first two
on Fremont General letterhead and the remaining letters on Fremont
Indemnity letterhead—authorizing BONY to transfer all cash from the
custodial accounts to the J.P. Morgan Chase account. (We refer to all
transfers from the custodial accounts to Fremont Indemnity’s J.P. Morgan
Chase account collectively as “the transfer.”) BONY cites Fremont Gener-
al’s switching of letterhead as the best evidence of bad faith in this case
because BONY claims it shows that Fremont General knew the transfer
requests were wrongful under the terms of the custodian agreement.
1554       BANK OF NEW YORK v. FREMONT GENERAL
requirement for regulatory approval of reductions in principal
contained in the custodian agreement, but BONY nonetheless
honored the requests and transferred the money.

   Meanwhile, Fremont Indemnity ran into financial difficul-
ties which ultimately resulted in the company being placed in
conservatorship. In November 2000, the California Depart-
ment of Insurance, Fremont Indemnity, Fremont General, and
FCIG entered into a Letter Agreement of Regulatory Over-
sight in which the Department appointed a Special Deputy
Examiner to supervise FCIG and Fremont Indemnity. This
agreement prohibited Fremont Indemnity from making pay-
ment to, engaging in any transaction, or entering into any
agreement directly or indirectly with Fremont General, absent
the approval of the California Department of Insurance. Nor
could Fremont Indemnity make any dividend payment or
other distribution to Fremont General without the prior
approval of the California Department of Insurance.

   When FCIG’s financial health further deteriorated, Fremont
General, FCIG, Fremont Indemnity, and the California
Department of Insurance entered into a second letter agree-
ment in July 2002 called “Letter Agreement of Run-Off and
Regulatory Oversight of the Fremont Compensation Insurance
Group, Inc. Workers’ Compensation Insurance Companies.”
Fremont Indemnity was now completely prohibited from
engaging in transactions with its parent or affiliate. The dis-
trict court found as a matter of fact that Fremont General
never “engage[d] in any transactions that violated the
[November letter agreement],” and that it “substantially com-
plied” with the July letter agreement.

   The situation worsened. On June 4, 2003, the California
Department of Insurance obtained an order conserving Fre-
mont Indemnity; shortly thereafter, the Superior Court of the
State of California for the County of Los Angeles converted
the conservatorship into a liquidation proceeding. After the
California Department of Insurance commenced conservation
           BANK OF NEW YORK v. FREMONT GENERAL           1555
proceedings, the New York Insurance Department contacted
BONY asking for an accounting of the funds in the custodial
accounts. BONY reported that one of its employees—
unaware that the funds included both principal repayments
and interest—had wire-transferred the cash from those
accounts as Fremont General had requested. BONY con-
ducted an internal investigation of the transfers and deter-
mined that BONY was at least partially responsible for
mistakenly transferring principal from the custodial accounts.
On March 3, 2004, in response to the New York Insurance
Department’s repeated demands on BONY to replace the $14
million in principal, BONY entered into a Settlement Agree-
ment with the New York regulators to pay $13,939,999.90
principal and $580,833.31 in interest. The Superintendent
then assigned his claims against Fremont General to BONY
as part of this settlement. According to BONY, the agreed
upon amount paid to settle the threatened New York litigation
constitutes the measure of damages in this action.

   On November 30, 2004, the Insurance Commissioner for
the State of California, the Conservator of Fremont Indem-
nity, and the New York Insurance Department executed an
“Agreement for Early Access Distribution of Funds” with the
Fremont Indemnity estate. In this agreement, the New York
Department agreed to accept a pro rata distribution from the
Fremont Indemnity estate and to return to the Fremont Indem-
nity estate any excess distribution it had received from the
estate.

                              B

   On December 17, 2003, BONY filed a complaint against
Fremont General for intentional interference with contract,
conversion, money had and received, unjust enrichment, resti-
tution, unfair competition, and constructive trust. The opera-
tive First Amended Complaint alleges that Fremont General
knew of the restrictions and terms of the custodian agreement,
yet it nonetheless instructed BONY to wire transfer $14 mil-
1556        BANK OF NEW YORK v. FREMONT GENERAL
lion of principal from the custodial account to Fremont
Indemnity’s J.P. Morgan Chase account without the Superin-
tendent’s approval. Consequently, Fremont General caused
BONY to suffer damages in at least that amount.

   On June 17, 2005, the district court granted Fremont Gen-
eral’s motion for partial summary judgment on BONY’s
claims of intentional interference with contract and restitution.
Because the district court found that “no breach or damages
occurred as a result of [Fremont General’s] conduct,” it could
not hold Fremont General liable for intentional interference
with contractual relations between BONY and Fremont
Indemnity.

   The court then proceeded to conduct a bench trial in August
2005 on the remaining claims. The district court issued find-
ings of facts and conclusions of law and entered final judg-
ment in favor of Fremont General. The district court
concluded that BONY could not prevail on its conversion
claim for several reasons, including the fact that neither
BONY nor the New York Insurance Department suffered
damages from BONY’s release of the funds. BONY appeals.

                               II

   We review de novo the district court’s order granting Fre-
mont General partial summary judgment. Scheuring v. Tray-
lor Bros., Inc., 476 F.3d 781, 784 (9th Cir. 2007). Federal
Rule of Civil Procedure 56(c) governs our review of summary
judgment motions, and we must view the evidence on sum-
mary judgment in the light most favorable to the non-moving
party and draw all reasonable inferences in favor of that party.
Id. We review the district court’s findings of fact following
the bench trial for clear error and its conclusions of law de
novo. Jarvis v. K2 Inc., 486 F.3d 526, 529 (9th Cir. 2007).
            BANK OF NEW YORK v. FREMONT GENERAL             1557
                               III

                               A

   To prevail on its intentional interference with contract
claim, BONY had to show (1) the existence of a valid contract
between BONY and a third party, (2) Fremont General’s
knowledge of the contract, (3) intentional acts designed to
induce a breach or to disrupt a contractual relationship, (4)
actual breach or disruption of the contractual relationship, and
(5) resulting damage. See Reeves v. Hanlon, 95 P.3d 513, 517
(Cal. 2004) (citing Pac. Gas & Elec. Co. v. Bear Stearns &
Co., 791 P.2d 587, 590 (Cal. 1990)). The third element
required BONY to show that Fremont General knew the inter-
ference was certain or substantially certain to occur as a result
of its action, see id., and no liability can arise unless Fremont
General’s alleged wrongful or unjustified conduct caused the
breach, see Weiss v. Marcus, 124 Cal. Rptr. 297, 303 (Ct.
App. 1975); Augustine v. Trucco, 268 P.2d 780, 791 (Cal.
Dist. Ct. App. 1954) (citing Hill v. Progress Co., 180 P.2d
956, 961 (Cal. Dist. Ct. App. 1947)).

                               1

   The district court concluded that, whatever Fremont Gener-
al’s intention in requesting the transfer, those requests did not
actually cause the transfer. Rather, the transfer occurred as a
result of BONY’s breach of its independent duty to secure
written permission from the Superintendent before transfer. In
reaching this conclusion, the district court appears to have
applied the wrong legal standard for causation.

   [1] California employs the “substantial factor” test for
determining causation in intentional torts cases. See Franklin
v. Dynamic Details, Inc., 10 Cal. Rptr. 3d 429, 441 (Ct. App.
2004) (applying the substantial factor test in an intentional
interference with contractual relations action and noting that
“a cause of . . . damage . . . is something that is a substantial
1558        BANK OF NEW YORK v. FREMONT GENERAL
factor in bringing about . . . damage”). “The substantial factor
standard generally produces the same results as does the ‘but
for’ rule of causation which states that a defendant’s conduct
is a cause of the injury if the injury would not have occurred
‘but for’ that conduct.” Rutherford v. Owens-Illinois, Inc., 941
P.2d 1203, 1214 (Cal. 1997) (citing Mitchell v. Gonzales, 819
P.2d 872, 879 (Cal. 1991)). California law defines “substan-
tial” expansively, and at least one court has cautioned against
placing “undue emphasis” on the ordinary meaning of that
word. Rutherford, 941 P.2d at 1214. Although “a force which
plays only an ‘infinitesimal’ or ‘theoretical’ part in bringing
about injury, damage, or loss is not a substantial factor,” the
substantial factor test is a “broader rule of causality than the
‘but for’ test.” Id. (citing People v. Caldwell, 681 P.2d 274,
280 (Cal. 1984); Prosser & Keeton on Torts (5th ed. 1988
supp.) § 41, pp. 43-44); see also U.S. Fid. & Guar. Co. v. Am.
Employer’s Ins. Co., 205 Cal. Rptr. 460, 465 (Ct. App. 1984)
(“The critical question as to causation in intentional torts is
whether the actor’s conduct is a substantial factor in bringing
about the type of harm which he intended from his original
act. [N]o consideration is given to the fact that after the event
it appears highly extraordinary that it should have brought
about such harm or that the actor’s conduct has created a situ-
ation harmless unless acted upon by other forces for which the
actor is not responsible.”) (quoting Tate v. Canonica, 5 Cal.
Rptr. 28, 35 (Dist. Ct. App. 1960)) (internal citations and
some punctuation omitted).

   Relatedly, “the notion of independent intervening cause has
no place in the law of intentional torts, so long as there is a
factual chain of causation.” United States Fid. & Guar. Co.,
205 Cal. Rptr. at 465 (quoting Tate, 5 Cal. Rptr. At 35).
“[T]he fact that the actor’s conduct becomes effective in harm
only through the intervention of new and independent forces
for which the actor is not responsible is of no importance.”
Tate, 5 Cal. Rptr. at 35.
              BANK OF NEW YORK v. FREMONT GENERAL                      1559
   [2] Thus, we must decide in this case whether Fremont
General’s conduct was a substantial factor in causing the
transfer. See Judicial Council of Cal. Civil Jury Instructions
No. 2201 (listing as an element of intentional interference
with contractual relations, “[Defendant’s] conduct was a sub-
stantial factor in causing [Plaintiff’s] harm”). We believe that
the district court’s findings of fact compel the legal conclu-
sion that Fremont General’s conduct meets this standard. Irre-
spective of BONY’s conduct, Fremont General made multiple
requests that funds from the custodial accounts be transferred
to Fremont Indemnity’s separate account, and those funds
were indeed transferred. But for Fremont General’s conduct,
the funds never would have been transferred.5

   [3] In essence, Fremont General contends that BONY’s
breach of its independent duty to secure written permission
from the Superintendent before transferring the funds was an
intervening force that acts as a barrier to liability for Fremont
General. Fremont General is mistaken. The causation analysis
turns on whether “there is a factual chain of causation,” not
whether there has been an intervening act. U.S. Fid. & Guar.
Co., 205 Cal. Rptr. at 465 (quoting Tate, 5 Cal. Rptr. at 35)
(emphasis omitted). Such a chain exists here. Though
BONY’s violation of its independent duty undoubtedly played
a role in the transfer, that role does not break the “factual
chain of causation.” We therefore conclude that, as a matter
of law, BONY has met the causation element of its intentional
interference with contract claim.

                                     2

   We turn to the remaining elements of BONY’s intentional
  5
    The district court’s finding that Fremont General “took no action” in
causing the transfer of the first $3.2 million is clearly erroneous, and
indeed, that finding conflicts with the district court’s earlier finding that
those funds were transferred “pursuant to recurring wire transfer instruc-
tions provided by Fremont General on behalf of [Fremont Indemnity].”
1560        BANK OF NEW YORK v. FREMONT GENERAL
interference with contract claim. We must determine whether
there are still issues of fact with respect to those elements. If
issues of fact exist, we must remand to the district court to
conduct, as necessary, further evidentiary proceedings to
resolve those issues.

   [4] There is no dispute as to the first element: there is a
valid contract between BONY and Fremont Indemnity. As for
the second element, no issues of fact remain. Fremont General
was aware of the contract. Fremont General was responsible
for managing the funds deposited into the custodial account,
and indeed, Fremont General obtained special permission
from the New York Insurance Department to deposit GNMA
securities into the custodial account. Fremont General could
not have negotiated with the New York Insurance Department
to allow the deposit of those securities if Fremont General
was unaware of the custodian agreement between Fremont
Indemnity and BONY. There can also be no real dispute as to
the fourth element. The transfer of funds out of the custodial
account constituted a breach of the custodian agreement.

                               3

   [5] Next, we turn to the issue of Fremont General’s inten-
tion in causing the transfer. The basic requirement is that Fre-
mont General intended to cause a breach or disruption of the
custodian agreement between Fremont Indemnity and BONY.
However, BONY is not required to present direct evidence of
Fremont General’s intention. “ ‘Intent, of course, may be
established by inference as well as by direct proof.’ Thus, the
jury may ‘infer culpable intent from conduct “substantially
certain” to interfere with the contract.’ ” Savage v. Pac. Gas
& Elec. Co., 26 Cal. Rptr. 2d 305, 314 (Ct. App. 1993) (quot-
ing Seaman’s Direct Buying Serv., Inc. v. Standard Oil Co.,
686 P.2d 1158, 1165 (Cal. 1984)). Since there is no direct evi-
dence of Fremont General’s intention, we must determine
whether there is evidence from which a finder of fact could
reasonably infer its intention, or evidence that Fremont Gen-
            BANK OF NEW YORK v. FREMONT GENERAL             1561
eral conducted itself in a manner substantially certain to inter-
fere with the contract.

   [6] “Generally, the knowledge of a corporate officer within
the scope of his employment is the knowledge of the corpora-
tion.” Meyer v. Glenmoor Homes, Inc., 54 Cal. Rptr. 786,
800-01 (Ct. App. 1966) (citation omitted). David Brody, Fre-
mont General’s Assistant General Counsel, knew no later than
November 2002 that Fremont General was causing the trans-
fer of principal from the custodial account. There is evidence
from which the finder of fact could reasonably deduce that he
knew the transfer of principal violated the terms of the custo-
dian agreement. Although Brody did not personally cause the
transfers, a jury could find that he knew about them and effec-
tively sanctioned them by failing to stop them from occurring.
Brody’s knowledge and conduct must be imputed to Fremont
General. Id. From this evidence, a reasonable finder of fact
could conclude that Fremont General through Brody caused
the transfer of principle with the intention of disrupting the
contract at issue.

   The change in letterhead discussed in footnote four also
serves as evidence of Fremont General’s intention. One possi-
ble explanation for the change is that it was part of a wider
corporate policy, unrelated to the transfer. Another reasonable
explanation is that Brody knew that his corporation was inten-
tionally causing the breach of Fremont Indemnity’s contract
with BONY and did not want his own company’s name to
appear on any of the relevant documents. The finder of fact
must resolve that question.

   [7] Because contested issues of material fact remain with
respect to Fremont General’s intention in causing the transfer
of funds out of the BONY custodial account, we remand the
case to the district court to conduct further proceedings as
necessary to resolve the dispute.
1562         BANK OF NEW YORK v. FREMONT GENERAL
                                    4

   [8] The final element of BONY’s intentional interference
claim is damages. Following the bench trial, the district court
entered findings of fact and conclusions of law with respect
to the damages element of BONY’s conversion claim.
Because the damages analysis for both claims is effectively
the same — BONY must prove that it, or the New York
Insurance Department, was negatively impacted by the trans-
fer to Fremont Indemnity’s separate J.P. Morgan Chase
account — we apply those findings of fact and conclusions of
law to BONY’s intentional interference claim.6 We now
review those findings of fact for clear error and the conclu-
sions of law de novo.

   [9] BONY’s alleged damages are derivative of the New
York Insurance Department’s. According to BONY, the New
York Insurance Department was damaged because if the
transfer had not occurred, the Department would have been
entitled to retain control over the full $14 million and use it
exclusively to pay the claims of Fremont Indemnity’s New
York policyholders. But the transfer did occur, and as a result,
the New York Insurance Department wound up with only a
pro rata share of Fremont Indemnity’s liquidated assets,
which amounted to about $3.8 million.

   [10] In response, Fremont General relies on New York
Insurance Law § 1314(a)(2), which states that, “All such
securities shall be held by the superintendent, in trust, without
preference or priority to any beneficiary entitled to share
therein, for the security of the depositing insurer’s policyhold-
  6
    The alternative — remanding the case to allow the district court to
enter findings of fact and conclusions of law with respect to BONY’s
intentional interference claim — would be pointless, because the district
court, under the law of the case doctrine, would be effectively precluded
from reconsidering the issue of damages, since it has already decided that
issue in the context of BONY’s conversion claim. See Milgard Tempering,
Inc. v. Selas Corp. of Am., 902 F.2d 703, 715 (9th Cir. 1990).
               BANK OF NEW YORK v. FREMONT GENERAL                        1563
ers within the United States.” According to Fremont General,
§ 1314(a)(2) establishes that even if the transfer had not
occurred, the New York Insurance Department would not
have been entitled to use the full $14 million to pay the claims
of Fremont Indemnity’s New York insureds, but instead
would have been entitled only to a pro rata share of Fremont
Indemnity’s estate. In other words, regardless of whether the
transfer had occurred, the New York Insurance Department
would have been in the same position. The district court
agreed with Fremont General’s position.

   [11] We do not. Although the district court’s interpretation
of § 1314(a)(2) is correct, that provision does not apply to the
instant case because Fremont Indemnity was domiciled out-
side of New York. Under New York’s “reciprocity statute,”
New York treats the deposits of an insurer domiciled out-of-
state in the same manner as that insurer’s state of domicile
treats the deposits of New York insurers. N.Y. Ins. Law § 1112.7
Fremont Indemnity is domiciled in California, so we must
look to how California treats the special deposits of New
York insurers doing business in California.

   In California,

      In order to provide protection to the workers of this
      state in the event that the insurers issuing workers’
      compensation insurance to employers fail to pay
      compensable workers’ compensation claims . . .
      every insurer desiring admission to transact workers’
      compensation insurance . . . shall, as a prerequisite
      to admission . . . deposit [approved funds] . . . with
  7
     New York Insurance Law section 1112(a)(1) provides: “If, by the laws
. . . of any other state, any insurer organized or domiciled in this state . . .
shall be, required to deposit securities in such other state to protect policy-
holders . . . then all similar insurers organized or domiciled in such other
state . . . shall make like deposits for like purposes with the superintendent
. . . .” (emphasis added).
1564        BANK OF NEW YORK v. FREMONT GENERAL
    a qualified depository. . . . The deposit shall be for
    the purpose of paying compensable workers’ com-
    pensation claims under policies issued by the insurer
    . . . in the event the insurer . . . fails to pay those
    claims when they come due.

Cal. Ins. Code § 11691(a). “The proceeds of the deposit
required pursuant to Section 11691 shall be used solely to pay
compensable workers’ compensation claims under the insured
. . . policies . . . .” Cal. Ins. Code § 11698.02. California
defines a “compensable workers’ compensation claim” as “a
claim where the claimant is entitled to benefits under the
workers’ compensation law of the state [of California].” Cal.
Ins. Code § 11690(a).

    [12] Read together, these provisions authorized the Super-
intendent to use Fremont Indemnity’s funds on deposit in
BONY for the sole benefit of Fremont Indemnity’s New York
policyholders. The terms of the custodian agreement support
this conclusion. Under the terms of that agreement,
“[s]ecurities placed in the custodian account shall be held by
Custodian . . . in custody exclusively for the Superintendent
. . . , as trustee, in trust for the security of the workers’ com-
pensation insurance policyholders and claimants of the Com-
pany resident of New York State . . . .” (emphasis added).

   [13] Fremont General contends that the New York Insur-
ance Department’s decision to enter into the Early Access
Agreement, in which the New York Insurance Department
agreed to accept a pro rata distribution of the Fremont Indem-
nity estate, demonstrates that the New York Insurance Depart-
ment was not entitled to the full $14 million, because
otherwise it never would have agreed to accept far less than
that. However, the New York Insurance Department’s inten-
tion in entering into the Early Access Agreement is irrelevant.
The essential fact is that under New York’s reciprocity stat-
ute, the Superintendent was entitled to use the $14 million as
security solely for the benefit of New York policyholders.
            BANK OF NEW YORK v. FREMONT GENERAL              1565
That it later agreed to accept $3.8 million as its pro rata share
of the California conservatorship is irrelevant to BONY’s
damages in this action.

   The New York Insurance Department, as the holder of a
security, was damaged when Fremont General caused a
reduction in that security’s value. See Baldwin v. Marina City
Props., 145 Cal. Rptr. 406, 411 (Ct. App. 1978) (citing U.S.
Fin. v. Sullivan, 112 Cal. Rptr. 18, 23-25 (Ct. App. 1974)). In
Baldwin, the plaintiffs sold their share in a limited partnership
to the defendants, who paid cash and executed promissory
notes payable to the plaintiffs. 145 Cal. Rptr. at 409. As
security on the promissory note indebtedness, the plaintiffs
retained a security interest in the partnership. Id. Ultimately,
the defendants defaulted on the promissory notes, and also
took actions that caused a reduction in the value of the secur-
ity interest. Id. at 410. The court noted that the plaintiffs were
permitted to maintain an action for the impairment of the
value of their security, and such an action “may be brought
whether or not the debtor is in default.” Id. at 411 (citing U.S.
Financial, 112 Cal. Rptr. at 23-25).

   [14] The principles discussed in Baldwin apply here. At the
moment the funds were transferred from the custodial
account, BONY was liable for the full amount to the New
York Insurance Department, which, as trustee of those funds,
stood in the shoes of Fremont Indemnity’s New York policy-
holders. As Baldwin makes clear, the New York Insurance
Department was not required to wait to sue BONY until Fre-
mont Indemnity defaulted on any of the claims of its insureds.

   [15] At the time BONY settled with the New York Insur-
ance Department, the Department had not yet received a
penny from Fremont Indemnity’s bankrupt estate. Though the
estate later paid the Department $3.8 million, none of that
money was returned to BONY. BONY’s damages are there-
fore the $14 million that the bank was legally obligated to pay
to the New York Insurance Department out of its own pocket.
1566        BANK OF NEW YORK v. FREMONT GENERAL
  [16] We reverse the grant of partial summary judgment in
favor of Fremont General. We remand to allow the district
court to conduct such further evidentiary proceedings as nec-
essary to resolve the issue of Fremont General’s intention in
causing the transfer.

                                B

   [17] BONY argues that the district court erred by not find-
ing Fremont General liable for conversion where Fremont
General, according to BONY, prevented BONY from freely
exercising control or ownership over its property. A conver-
sion occurs where the defendant wrongfully exercises domin-
ion over the property of another. Greka Integrated, Inc. v.
Lowrey, 35 Cal. Rptr. 3d 684, 691 (Ct. App. 2005) (citing
Farmers Ins. Exch. v. Zerin, 61 Cal. Rptr. 2d 707, 709 (Ct.
App. 1997)). To establish conversion, a plaintiff must show
(1) his ownership of or right to possess the property at the
time of the conversion, (2) that the defendant disposed of the
plaintiff’s property rights or converted the property by a
wrongful act, and (3) damages. Messerall v. Fulwilder, 245
Cal. Rptr. 548, 550 (Cal. Ct. App. 1988) (citing Baldwin, 145
Cal. Rptr. at 416).

   [18] A plaintiff in a conversion action must also prove that
it did not consent to the defendant’s exercise of dominion. See
Farrington v. A. Teichert & Son, Inc., 139 P.2d 80, 83 (Cal.
Dist. Ct. App. 1943) (holding that no conversion action exists
where the plaintiff consented to the removal of his personal
property); see also, e.g., Judicial Council of Cal. Civil Jury
Instructions No. 2100 (listing plaintiff’s lack of consent as an
element of conversion); Tavernier v. Maes, 51 Cal. Rptr. 575,
587-88 (Dist. Ct. App. 1966) (“As to intentional invasions of
the plaintiff’s interests, his consent negatives the wrongful
element of the defendant’s act, and prevents the existence of
a tort. ‘The absence of lawful consent,’ said Mr. Justice
Holmes, ‘is part of the definition of an assault.’ The same is
true of . . . conversion . . . .”) (citations omitted). In Farring-
             BANK OF NEW YORK v. FREMONT GENERAL                    1567
ton, the appeals court affirmed a judgment against the plaintiff
on his conversion claim arising out of the removal of sand,
rock and gravel from his land. 139 P.2d at 81. The court rea-
soned that the plaintiff had consented to the removal because
he had simply watched as the defendant made multiple trips
to the plaintiff’s land, removing truckloads of sand, rock and
gravel each time. Id. at 82. The court noted that, “[T]he law
is well settled that there can be no conversion where an owner
either expressly or impliedly assents to or ratifies the taking,
use or disposition of his property.” Id. at 83.

   [19] In the present case, the district court found that BONY
knew that the money it was transferring to Fremont Indemni-
ty’s separate account was principal. “Beginning in May 2002,
the GNMAs began making unscheduled principal reduction
payments. Various documents regarding the transfer of princi-
pal approved by various [BONY] account supervisors . . .
indicate that [BONY] was aware that the GNMAs were gen-
erating principal reduction payments, but [BONY] nonethe-
less transferred those funds to the J.P. Morgan Chase account
. . . .” This factual finding establishes that BONY consented
to the transfer, despite knowing the transfer required written
approval from the Superintendent. Under Farrington, this
consent forecloses BONY’s conversion claim, unless BONY
can demonstrate that the district court’s finding is clearly
erroneous. BONY has not carried this heavy burden.8

                                   IV

   We affirm the district court’s judgment in favor of Fremont
General on the conversion claim. We reverse the district
court’s grant of partial summary judgment in Fremont Gener-
al’s favor on the intentional interference with contract claim,
  8
   Although the district court did not rely on its finding of consent as a
basis for its ruling in Fremont General’s favor, “[w]e may affirm on any
basis supported by the record, whether or not relied upon by the district
court.” Hall v. N. Am. Van Lines, Inc., 476 F.3d 683, 686 (9th Cir. 2007).
1568       BANK OF NEW YORK v. FREMONT GENERAL
and remand to allow the district court to conduct such pro-
ceedings as necessary to resolve the outstanding issues as dis-
cussed in this opinion. Each party shall bear its own costs.

 AFFIRMED IN PART, REVERSED IN PART, AND
REMANDED.
