Otto v. Catrow Law PLLC, No. 19-0361

CourtSupreme Court of West Virginia
Writing for the CourtArmstead, Chief Justice
Citation243 W.Va. 709,850 S.E.2d 708
Parties Richard OTTO and Patricia Otto, Petitioners v. CATROW LAW PLLC, Respondent
Docket NumberNo. 19-0361
Decision Date02 November 2020

243 W.Va. 709
850 S.E.2d 708

Richard OTTO and Patricia Otto, Petitioners
v.
CATROW LAW PLLC, Respondent

No. 19-0361

Supreme Court of Appeals of West Virginia.

Submitted: September 2, 2020
Filed: November 2, 2020


Christian J. Riddell, Esq., Stedman & Riddell, PLLC, Martinsburg, West Virginia, Counsel for Petitioners.

Susan R. Snowden, Esq., JACKSON KELLY PLLC, Martinsburg, West Virginia, Counsel for Respondent.

Armstead, Chief Justice:

850 S.E.2d 711

Sadly, Petitioners in this action were clearly victims of a phishing/spoofing scheme.1 An unidentified scammer was able to impersonate Petitioners’ real estate agent and Petitioners wired to the scammer a total sum of $266,069.22, which has never been recovered. We sympathize with Petitioners. However, under the facts of this case, they were unable to establish that Respondent breached any duty owed to them. Therefore, for the reasons stated herein, we affirm the circuit court's denial of Petitioners’ motion to alter or amend that judgment.

I. FACTUAL AND PROCEDURAL BACKGROUND

. In 2015, Petitioners Richard and Patricia Otto were residents of the State of Wisconsin and sought to relocate to the Eastern Panhandle of West Virginia. To assist them with that process, they contracted with Lynn Frum ("Frum"), a real estate agent employed with Coldwell Banker Innovations ("Coldwell").2

Petitioners located a home in the Falling Waters area of Berkeley County that they desired to purchase. An offer on this home was made and accepted in the amount of $265,000.00, which amount Petitioners intended to pay in cash. To handle the closing, Respondent Catrow Law PLLC was retained. Thereafter, Respondent set the closing for October 26, 2015.

Leading up to closing, Respondent sent the wiring instructions for the settlement funds to Frum3 via encrypted email. These instructions identified the account name into which the purchase money was to be transferred as "Catrow Law PLLC Real Estate Trust Account" along with the account and

850 S.E.2d 712

routing numbers for an account at "MVB Bank, Inc." in Fairmont, West Virginia. Frum printed out the wiring instructions, scanned them, and sent them to Petitioners via unencrypted email.

In fact, in the days prior to closing, multiple encrypted emails were exchanged between Respondent and Frum and multiple unencrypted emails were exchanged between Frum and Petitioners. On October 20, 2015, an email purportedly from Frum's email address to Petitioners started a series of emails4 between Petitioner Richard Otto and the scammer:

The title company need you to Wire the closing funds, They want to ensure they receive the funds before closing this will enhance a smooth and early closing on this property also buyer to get a credit of $5000 to the buyer since we will close before the closing date, Please kindly let me know if you can make the closing funds so i can send over the Wire instructions.

Petitioner Richard Otto responded to this email. However, the email address to which the response was sent (lfrurn@gmail.com) was not the same email address from which the initial email purportedly from Ms. Frum was sent that day (lfrum@cbimove.com).5 Indeed, every email from the scammer appeared on its face to be from lfrum@cbimove.com, but when a reply was generated to each email, such replies went to lfrurn@gmail.com. This went unnoticed by Petitioners. In response, Petitioner Richard Otto asked for confirmation of the amount to be wired, when the wire should be sent, and questioned the $5,000 credit. The scammer replied that:

The $5,000 will be credited to you on closing day, This is coming up as a requirement because the title company would like to record the closing funds earlier than we expected, the closing funds is being wired to the title's trust account which will be provided soon as you agree to this, The amount you will wire tomorrow is: $266,069.22, I will forward you the account today so you can make the wire tomorrow morning.

Congrats.

Replying to this email, Petitioner Richard Otto wrote:

The credit kind of makes the $20/day interest seem like a pretty good deal. Does this mean we might walk away with a check Monday as that figure looks familiar?

I've already transferred the line of credit to our checking so that's sitting with $286,000 in it – which is a tad more than usual. From what we've been told, we'll just need to stop at the bank tomorrow to initiate the transfer.

This email also included the account and routing numbers for Respondent's real estate trust account, which had been sent to him from Frum via unencrypted email.

Subsequently, Petitioners received this email:

Rick,

I just confirm from the title company, The closing funds should be wired to the title's trust account which, I will email you the account when they confirm it to me, once payment is made tomorrow, early recording of the transaction and a payment receipt will be issued when it has been received also the wire fees can be deducted from the closing costs too.

I will forward you the account details shortly.

Followed by this email:

Rick,

Wire $266,069.22 to the title's trust account, Let me know if you receive it.

Congrats.

This email included wiring instructions identifying the account name as "DRC Global Services Inc.," the bank as "Wells Fargo Bank" in Albany, New York, and contained different account and routing numbers than those previously transmitted. Petitioner Richard Otto acknowledged this discrepancy:

Just printed it and it is a different bank and account than before. I'll shred the
850 S.E.2d 713
other to avoid confusion–which is way too easy at this point.

Rick

The scammer replied:

Okay, Once payment is made tomorrow, Please send me the proof of payment so i can file it also send it to the title company.

Thank you

Congrats.

The following day, Petitioners presented the new wiring instructions to their bank, instructing them to transfer funds from their account to the scammer's account. The scammer later emailed Petitioners to verify that the funds were wired and Petitioners replied that they had been. Several additional emails not relevant to our analysis were exchanged.

On the date appointed for closing, Respondent revealed that the funds had not been received in its trust account. At that time, it became apparent that Petitioners were victimized by a scammer and law enforcement was contacted.

Petitioners then filed suit in the Berkeley County Circuit Court against Frum, Coldwell, and Respondent. Following the settlement of their claims against Frum and Coldwell, Petitioners, with leave of the circuit court, filed an amended complaint, which alleged that Respondent had breached its duties in the following ways:

a) Prior to wiring any funds, [Petitioners] should have been personally contacted by [Respondent], or, at a minimum, [Petitioners] should have been advised and alerted by [Respondent] to call her office and confirm the instructions.

b) Although [Respondent] appeared to have used an encrypted email, [Respondent], knowing full well that wiring instructions were to be communicated via email, should have taken any precautions to determine if Coldwell[’s] ... and the [Petitioners’] emails were encrypted and otherwise secured.

c) [Respondent] should have informed the [Petitioners] as to the prevalence of wire fraud schemes, and that if an email seemed suspicious, they should take no action until they confirmed, by independent means, that the communication was legitimate.

Respondent sought summary judgment on the grounds that that Petitioners had not, as a matter of law, established the elements of legal malpractice. Specifically, Respondent challenged that it had not neglected a legal duty and was not the proximate cause of Petitioners’ damages.6

In response below, Petitioners argued that they could demonstrate two ways in which Respondent had neglected its duty. First, Petitioners offered the expert opinion of lawyer T. Summers Gwynn ("Gwynn")7 on the applicable standard of care. Second, Petitioners alleged that bulletins sent to Respondent as an agent/attorney for Old Republic Title Insurance Company ("Old Republic") warning of phishing scams gave rise to a duty for Respondent to warn Petitioners against someone substituting fake wiring instructions into the transaction.

The circuit court found that Gwynn was not competent to give an opinion as to the standard of care under West Virginia law. "Gwynn placed a disclaimer in his retainer agreement ... that stated that he was unable to render an opinion as to West Virginia law." Because of these limitations, Gwynn could not demonstrate that Respondent's actions "were a ‘departure by members of the legal profession in similar circumstances.’ " Similarly, the circuit court found that the "bulletins and notices ... from [Old Republic] do not prove that [Respondent] breached any duty of care it owed [Petitioners]."

Based upon this reasoning, the circuit court found that Petitioners did not establish that Respondent had breached a reasonable duty as a matter of law and granted Respondent's motion for summary judgment. Following the grant of summary judgment, Petitioners filed a motion pursuant to

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1 practice notes
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    ...that while Mr. Conley would benefit from production through payment of royalties, if the lease is not extended or SWN does not undertake 850 S.E.2d 708 development activities within the five-year term, the lease will expire. In that event, Mr. Conley would have the benefit of the initial bo......
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    ...that while Mr. Conley would benefit from production through payment of royalties, if the lease is not extended or SWN does not undertake 850 S.E.2d 708 development activities within the five-year term, the lease will expire. In that event, Mr. Conley would have the benefit of the initial bo......

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