With advances in technology, both consumers and professionals whose services they utilize conduct more and more business electronically. For many, including attorneys, email has become the primary mode of communication. Unfortunately, cyber hackers are aware of this. Not only have we seen attacks on escrow companies, but hackers have increasingly targeted law firms and, in particular, wire transfers of settlement payments. If an attorney inadvertently facilitates the wire transfer of funds to a bad actor who has hacked into opposing counsel's email account, the attorney may be held liable and/or his client may have to fund a settlement twice.
California has no published case law establishing the confines of such legal liability. Accordingly, we look to the law of other jurisdictions, which is limited. Essentially, an attorney must use ordinary care when transmitting or receiving confidential information, including wire instructions. While no bright line rule exists establishing what constitutes ordinary care, there are a number of factors to be examined, including whether and to what extent: (1) there was there any verification of the wire instructions ostensibly provided by plaintiff's counsel; (2) there were any indicators that plaintiff's counsel's email had been compromised; (3) attorney warned the parties of a suspected attack on his email account or he otherwise received suspicious email(s); and (4) adequate security measures were in place with respect to the attorney's email account, such as anti-mal- and spyware programs and/or utilization of logging or other tracking functionality within the email environment itself.
As hackers have already begun to target attorneys facilitating large wire transfers of settlement funds, both cyber and legal malpractice policies can be implicated. We have experience handling both aspects of such claims and anticipate an increase in the same as hackers become more creative and sophisticated in their efforts to target large settlements.
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