WIRE FRAUD

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Broker Liability for Closing Instructions Wire Fraud 

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Bain v. Platinum Realty, (1) 2018 U.S. Dist. LEXIS 24031 (2) 2018 U.S. Dist. LEXIS 105519 (2018) 

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United States District Court for the District of Kansas 

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Facts: Prior to closing, home buyers received an email purportedly sent by the sellers’ agent that contained instructions for wiring closing funds for the transaction. The buyers complied and wired $196,622.67 to the purported sellers’ account as indicated. The instructions were fraudulent and the account did not belong to the sellers. The wired funds were never recovered. The buyers alleged that a hacker intercepted an email from a title company to the sellers’ agent containing the legitimate wiring instructions. The hacker changed the instructions to direct the funds to another account, created an email address similar to the title company’s, and sent the fake wiring instructions to the sellers’ agent. The sellers’ agent then allegedly sent the fake instructions to the buyers, who followed them. The buyers sued the sellers’ agent for negligent misrepresentation. The sellers’ agent denied sending the fake wiring instructions, and thus argued that she did not make any representations, negligent or otherwise. The sellers’ agent also argued that, even assuming that she sent the fake instructions, she could not be held liable for negligent misrepresentation because she merely forwarded the email without making any “positive assertion” about them. The buyers and the sellers’ agent both argued that the other party should have noticed suspicious “red flags” about the emails. The sellers’ agent moved for summary judgment. A jury later found in favor of the buyers and assigned 85 percent of the fault to the seller’s agent and 15 percent to the buyers. Accordingly, the U.S. District Court entered judgment for the buyers in the amount of $167,129.27. 

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Issue: (1) Was the sellers’ agent entitled to pretrial summary judgment? (2) Was there sufficient evidence to support the jury’s findings? 

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Held: (1) No. The intricate details of the several emails at issue make it impossible to the factual issues as a matter of law. Also, under Kansas laws, “misrepresentation” may include not only written or spoken words, but also other conduct that amounts to an un- true assertion. Therefore, a reasonable jury could find that the fake email, if the agent sent it, was a representation that the closing instructions were correct and should be followed by the buyers [Bain v. Platinum Realty (I)]. (2) Yes. Judgment affirmed. The jury could reasonably have found that the sellers’ agent forwarded the fake email and by doing so impliedly asserted that the instructions were correct. The jury also could have reasonably concluded that the sellers’ agent failed to act with reasonable care because she “conceded in her testimony ... that she did not confirm that she had the correct instructions, despite oddities in the instructions ....” such an incomplete out-of-the-area bank address. And, there was sufficient evidence to support the jury’s finding that the buyer relied reasonably on the fake email, even though the buyer was an experienced investor [Bain v. Platinum Realty (II)].