A law firm in Washington D.C. has been given the go-ahead to pursue two of its four lawsuit claims against Wells Fargo after being scammed out of $84,000 in a fraudulent scheme involving a fake client and a bad check. The decision was made by U.S. District Judge Jia M. Cobb, who stated that Kalbian Hagerty law firm was able to pursue claims for breach of contract and failure to provide timely notice when dishonoring a check. However, the law firm could not pursue claims for breach of fiduciary duty and negligence.
The scam began in December 2018 when someone claimed to be John. R. Lopez contacted a Kalbian Hagerty lawyer via email. This person stated they had signed an engagement letter retaining the lawyer in an employment dispute with Sunbelt Rentals. On the 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, while the other stated that Sunbelt Rentals owed $126,000 to Lopez.
The law firm responded to the emails 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, despite being drawn from a Citibank account. 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. However, the check was counterfeit.
Kalbian Hagerty claimed 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. Another law firm that sued Well Fargo in a similar situation claimed it received a check with the same phony account number.
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Kalbian Hagerty filed a lawsuit against Wells Fargo, alleging a breach of fiduciary duty, negligence, and breach of contract. The law firm also claimed that Wells Fargo failed to provide timely notice when dishonoring a check.
Judge Cobb stated that the allegations in the lawsuit do not support a fiduciary relationship beyond a bank-depositor relationship. However, the law firm can amend the lawsuit if it has additional allegations to support the claim. Cobb also said there is no support for the negligence claim as the banking relationship “does not impress a specific duty of care upon Wells Fargo.”
Kalbian Hagerty sued 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 the litigation,” Cobb said.
The law firm was also able to 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.
Kalbian Hagerty’s lawyer Eric Siegel stated that the law firm is still analyzing the decision and has not yet provided further comment. This ruling is significant as it could have implications for similar cases involving financial institutions and fraudulent transactions.
