Written by Daniel Booth – Edited by Robert Nuddleman
Brian Thomas v. Corbyn Restaurant Development Corp. offers a warning about the growing risk of wire fraud in legal settlements. Thomas sued Corbyn for injuries sustained in a workplace altercation. The parties agreed to settle for $475,000, with payment to be made to the client trust account of Thomas’s counsel.
Before the funds reached their destination, an unknown fraudster—posing as Thomas’s attorney—contacted defense counsel and provided fake wiring instructions. Relying on this information, defense counsel wired the entire $475,000 settlement to the fraudster’s account.
When the fraud was discovered, Thomas’s counsel requested the settlement funds, but Corbyn refused to pay a second time. The court believed that the burden of loss from wire fraud falls on the party best positioned to prevent it. In most settlement contexts, that’s the party responsible for disbursing the payment. . The court decided that the employer bore the responsibility for ensuring the funds were sent to the correct party and ordered Corbyn to pay the full settlement. Again.
This case reinforces a key principle: Be cautious when dealing with online communications. Courts(and clients) expect diligence, especially when transmitting large sums of money.
Ways for Law Firms and Clients to Protect Against Fraud:
There are several steps you can take to prevent settlement fraud. The first is being diligent when verifying the identity of email addresses. Speaking directly with opposing counsel via a known number can save you and your client time and money. Verify their identity through independent contact before wiring funds.
Second, be aware of suspicious activity. The method of money transfer should be included in the settlement agreement. If an email asks you to change that method later on, it should raise concerns.
Finally, educate clients about the danger of wire fraud, phishing, and email spoofing. Be proactive and smart around settlement payments; it might help your client avoid paying twice.
The Nuddleman law firm represents employers and employees in a variety of employment disputes. Robert Nuddleman focuses on educating clients so they can achieve the best results. If you have a question about workplace disputes, contact the Nuddleman Law Firm.