Thomas v. Corbyn Restaurant Dev. Corp., 111 Cal. App. 5th 439 (2025)

The parties involved in this personal injury lawsuit settled the case for $475,000. An unknown third-party purporting to be plaintiff’s counsel sent “spoofed” emails to defendants’ counsel providing fraudulent wire instructions for transmitting the settlement proceeds. Defense counsel wired the settlement proceeds to the fraudulent account, and the third party absconded with the funds. In the absence of authority under California law, the trial court applied “persuasive federal case law” that uniformly shifts the risk of loss to the party that is in the best position to prevent the fraud. In this case, the trial court determined that defense counsel was in the best position to prevent the fraud because they had failed to notice that the “spoofed” email address differed from plaintiff’s counsel’s authentic email address in several subtle ways and because the imposter’s primary phone number was “inoperable” at that the time of the transfer, all of which should have been “red flag” warning signs to defense counsel. Several weeks later, the parties discovered they were victims of a cyber scam and that the settlement proceeds had been wired to a fraudulent account. The Court of Appeal affirmed, holding that the “numerous red flags, backed by substantial evidence in the record,” supported the trial court’s factual finding that defendants were in the best position to prevent the fraud.