Are you a solo practitioner? Do you have a small or medium size law firm? This article is for you to protect your assets, business and reputation from fraudsters who have conned hundreds of lawyers and corrupted many practices.
The storyline can develop in a number of ways, but conceptually it goes as follows. First, you receive an email with a simple question: do you handle breach of contract claims? If you do or don’t but are willing to ask about it, and thus say yes, then you receive a follow-up email with a brief description of the problem:
We appreciate you giving us the opportunity to discuss our case. We ordered several items from XXXXXX in August 2014 and the terms of the sales contract required us to pay 50% of the total cost of the ordered items before shipment and the balance after we receive the same items. However, after we made our initial 50% deposit, we did not receive any items as required. Goods should be shipped by September 2014. More time was given to them to deliver the goods, which they still haven’t been able to fulfill. Therefore, we asked for a refund.
We’ve made several attempts to get them to refund the initial deposit, but to no avail. Therefore we have decided to use legal means due to an existing agreement prior to the transaction. Find the supplier details below for your conflict check.
The email also indicates that the client’s company is overseas, and they may have difficulty getting there due to the distance. You exercise due diligence and surf online looking to see if foreign companies and local offending companies are real. Both exist and are usually serious companies with proficient websites.
So far so good, standard situation between buyer and seller, typical breach of contract – freshman year of law school. You reply that your fee is on a contingency basis, and you will charge 33% of the recovery. You also say – of course you want to represent a foreign company and possibly market yourself in the perspective of an international commercial litigation firm – that because the Client suffered damages as a result of the breach, they are also entitled to consequential damages. Next, you ask them for more documentation to assess the case and the loss.
On the same day, the answer will be in your e-mail box:
Following our request for a refund, they appealed to arrange payment in 2 installments in monthly intervals, whereby the first installment was paid on November 20, 2014 amounting to $497,500.00 after so many reminders and threats involving lawyers (proof of payment attached as well). The balance was due in December 2014 and since then, all our attempts to remit the funds have proved unsuccessful. All details are contained in our attached correspondence with XXXXXX.
Conclusion;
Total amount of items ordered: $2,540,891.00
Initial deposit to XXXXXX: (i.e. 50% of the total amount): $1,270,445.00
Amount refunded (as of November 20, 2014): $497,500.00
Total outstanding balance to Kyoei Steel Ltd: $772,945.00
“Dear God, this is the case I’ve been waiting for, my prayers have been answered: I will pay off my loan and buy a new car; I will also vacation in Hawaii and buy a Pomeranian for my daughter.” Not too fast, breath. They ask for a retainer, which you will send to them. They also attached all the documentation: contracts for the sale of goods, payment orders, bank remittance applications, correspondence with local companies, etc. You check everything carefully: name, date, item, bank name: everything looks legit! OK, you put together a standard retainer who might read it in its entirety the first time and happily attach it to a reply email: inhale, exhale, send. Now, you wait nervously as the CEO of a wealthy foreign company analyzes the retainer and drops the green light.
You’re looking at Salvador Dali’s famous painting “The Persistence of Memory” because time has slowed down drastically, and you haven’t slept in 3 days thinking about the Pomeranian. You will never forget that sunny and pleasant morning, when you received an email from a foreign CEO in which they congratulated you on the new hire and attached the last page of the retainer with a signature. You cry, hug your partner, and do the victory dance. For the first time in years, you said “hi” to the people at the front desk, smiled, and blew air kisses to the cleaning lady who wowed them for hours. You fly like a butterfly.
Compliments today. After reviewing your retainer agreement, we are unanimously satisfied with the details described therein and have decided to use your company’s services to assist in bringing legal action against XXXXXX for breach of sales contract.
Find the attached signed page of the fee agreement and the corresponding letter form XXXXXX. We have informed our debtors XXXXXX of our desire to retain your law firm from taking legal action against them. Thus, We received a response from them. All related letters received from XXXXXX will be forwarded to your attention.
Once in the office, you send an email to the local infringing company informing them that you are representing an overseas company in a breach of contract claim and all communication between the companies must cease. The contract also provides for the winning party’s attorney’s fees. Now you have it.
You start drafting complaints and strategizing litigation patterns. But you can’t believe your eyes when you receive an email asking not to file a lawsuit because the company XXXXXXX miraculously decided to comply after a year of negotiations. Hm, it must be because you were hired. The offending company now promises to issue a partial payment within days:
We’re asking you to give us a week to send you the full payment. Partial payments of $489,650.00 will be shipped between today and Wednesday. We guarantee that you will receive the funds/Damage caused by our company in less than seven working days to avoid taking this case to court, as this will damage our company’s reputation.
Day X has arrived. You’re enjoying penne a la vodka with Greek salad ordered from a local Italian restaurant, when the secretary brings you an envelope with the back address of the local XXXXXX violation company. A chill goes down your body. With trembling hands you open the envelope and… you pass out, because you receive a check for a partial payment of $489,659.00 from XXXXXX company and a letter promising to issue another check with a balance within a week.
You lie on the floor with a goofy grin and stare at the ceiling. When your staff brings you back to your senses, you start acting fast. First, shoot an email to the client; secondly, deposit the check into the trust account; third, order a three-month Pomeranian, and order a box of Cuban cigars.
You walk the local bank like a boss. You don’t see anyone. Everyone feels the vibe that you are the one. The branch manager rushes up to you, shakes your hand, and asks if he can help. You slowly take the check out of your folder and hand it over to the manager. You see how his pupils dilate, his breath drops, and sweat drips down his forehead. You know exactly what he’s thinking. He ran back to his office and from then on the chaos died down in the bank. When the check is deposited, you walk out of the bank like a champ: the manager holds the door for you, and everyone looks at you because they know: you’ve made it in your life.
Your client is happy. They thank you and praise you, they want to hug and kiss you, but they can’t because they are abroad. The client asks you to send funds (minus the 33% chance of $163,219.67) within 24 hours because they have responsibilities under another contract. At this time, you don’t see, hear, speak, or understand. You carefully subtract your contingencies from the total and quickly transfer $326,439.33 to a foreign bank and close the office early, giving everyone two days off. Life is great!
Two days passed. You drive to your office listening to the breaking news that Donald Trump has just filed a lawsuit against the dark forces that requested the order, when your personal banker calls you and tells you that the check you sent him a few days ago bounced…
You park at a Shell gas station. You frankly see cars and people passing by. Seconds turn to minutes, minutes turn to days, days turn to eternity. Brutal realization slowly takes hold of your mind.
Don’t want this to happen to you? Here are some tips for determining a scam:
• Contact local companies in suspected violations and investigate contractual issues.
• Look at the form of the email address where you received the email: make sure it comes from the same server as the company website and not from @comcast.net; @XXX.edu and the like.
• If the company is overseas, calculate the time difference and track the time when you receive an email from them: see if the calculation fits into the normal or possibly extended workday schedule in the client’s home country.
• Recognizing the client’s competence in the field of law. The more expertise the client has, the more suspicion you should have.
• Request a Skype call.
• Use common sense and listen to your gut.