Answer: the “party in the best position to prevent the fraud.”
In the digital age, where cyber-attacks are becoming more sophisticated, all legal professionals should take heed of the recent decision in Thomas v. Corbyn Restaurants Dev. Corp., D083655, 2025 WL 1499055 (2025). In Thomas, a third party “spoofing” as Plaintiff's counsel emailed defense counsel settlement payment bank wiring instructions. Defendant sent the $475,000 payment to the “spoofer,” not Plaintiff. Plaintiff filed a motion for enforcement of the settlement.
The court affirmed defendant's responsibility to issue another $475,000 to Plaintiff, holding that the “risk of loss” shifts to the “party in the best position to prevent the fraud.”
This case underlines the importance of firms on both sides of the “v” taking extra security precautions when facilitating settlement payments. Some of these precautions may include:
- Only sharing settlement payment instructions through encrypted messages;
- Verifying payment instructions via videoconference with opposing counsel; and
- Maintaining up-to-date cybersecurity protections and practices to prevent access to unique information that will allow for more sophisticated scams.