Thomas

INTRODUCTION

This case presents an issue of first impression in California: Which party bears the risk of loss when an imposter causes one party to a settlement to wire settlement proceeds to the imposter instead of the other settling party? After plaintiff and defendants settled a personal injury lawsuit for $475,000, an unknown third party purporting to be plaintiff’s counsel sent “spoofed” emails 1 to defendants’ counsel providing fraudulent wire instructions for the settlement proceeds. Defendants’ counsel wired the settlement proceeds to the fraudulent account and the third party absconded with the funds. Once the fraud was discovered, plaintiff asked for the settlement money, but defendants refused to pay. Plaintiff then applied ex parte to enforce the settlement agreement. Noting the lack of California authority discussing this topic, the trial court applied persuasive federal case law that uniformly shifts the risk of loss to the party in the best position to prevent the fraud. (See, e.g., Beau Townsend Ford Lincoln, Inc. v. Don Hinds Ford, Inc. (6th Cir. 2018) 759 Fed.Appx. 348, 359 (Beau Townsend Ford); Ostrich Int’l Co., LTD v. Michael A. Edwards Grp. Int’l Inc. (C.D.…