Law firm scammed out of nearly $84K may pursue two claims against Wells Fargo, federal judge says
A law firm scammed out of nearly $84,000 in a scheme involving a fake client and a bad check can proceed with two of its four lawsuit claims against Wells Fargo, a Washington, D.C., federal judge ruled on Friday.
U.S. District Judge Jia M. Cobb, an appointee of President Joe Biden, said the Kalbian Hagerty law firm could pursue claims against Wells Fargo for breach of contract and failure to provide timely notice when dishonoring a check.
But the law firm can’t pursue claims for breach of fiduciary duty and negligence, Cobb said.
The scam began in December 2018 when someone claiming to be John. R. Lopez said in an email to a Kalbian Hagerty lawyer that Lopez had signed an engagement letter retaining the lawyer in an employment dispute with Sunbelt Rentals.
That same day, someone purporting to be the chief financial officer of Sunbelt Rentals sent two emails to the law firm. One confirmed the John R. Lopez email and the other said Sunbelt Rentals owed $126,000 to Lopez.
A Kalbian Hagerty lawyer responded with instructions on how to pay the money. The next day, the lawyer received a cashier’s check for $126,000 payable to Kalbian Hagerty. The check contained a variety of fonts and had an HSBC watermark even though it was drawn from a Citibank account, Cobb said in her opinion.
The law office manager deposited the check and received a Wells Fargo transaction receipt indicating the money would be available the next day. Kalbian Hagerty then sent $83,985 to Lopez’s account, as instructed by Lopez, and withheld a contingency fee of $42,000. The check was counterfeit.
Kalbian Hagerty says it received a notice five days after the deposit that said the check had been returned unpaid and $126,000 had been deducted from the law firm’s trust account.
Kalbian Hagerty says another law firm that sued Well Fargo in a similar situation had received a check with the same phony account number.
Cobb said the “sparse and conclusory allegations” in Kalbian Hagerty’s lawsuit don’t support a fiduciary relationship that goes beyond a bank-depositor relationship. The law firm could amend the lawsuit, however, if it has additional allegations to support the claim.
Nor is there support for the negligence claim. The banking relationship “does not impress a specific duty of care upon Wells Fargo,” Cobb said.
But Kalbian Hagerty can sue for breach of its deposit account agreement, which requires the bank to exercise “ordinary care” when collecting a deposit. “What that broad standard demands, and whether Wells Fargo satisfied those expectations, are questions reserved for later in litigation,” Cobb said.
Kalbian Hagerty can also sue under a District of Columbia law that requires banks to provide a notice of dishonor by midnight the day after learning of a bad check, Cobb said. The bank contended it did provide proper notice, but that evidence is “outside the pleadings” and can’t be considered at the motion to dismiss stage, Cobb said.
Lawyer Eric Siegel of Kalbian Hagerty told the ABA Journal that the law firm is still analyzing the decision. He did not have further comment.