Legal Alerts

Lewis Brisbois Cargo & Logistic Team Successful in Matter That Highlights New Internet Scam Targeting Brokers, Carriers, and Warehouse Operators

Phoenix, Ariz. (March 21, 2023) – Lewis Brisbois’ National Cargo & Logistics Practice was established to advise clients on the wide range of issues they face in the transportation industry—from catastrophic accidents and employee liability to government regulations and risk management. According to the Federal Bureau of Investigation’s (FBI) annual Internet Crime Report, released this month, Americans lost $10.3 billion to an array of internet scams during 2022. Although news regarding cyber scams in the financial services, retail, and healthcare industries often make headlines, other industries have seen an increase in fraudulent schemes in recent years. Specifically, a new type of internet-based scam involving phony purchase orders has penetrated the transportation industry. The lawyers who comprise our National Cargo & Logistics and Transportation Practices have successfully defended brokers, carriers, and warehouse operators that have fallen victim to this type of malicious activity, and have assisted clients with avoiding recently emerging scams altogether.

For example, Chair of Lewis Brisbois’ National Cargo & Logistics and Transportation Practices Julie E. Maurer and Partner Aaron C. Schepler recently obtained summary judgment in a case against a warehouse operator who was wrongfully accused of converting goods belonging to the plaintiff. In this matter, the plaintiff—a computer equipment wholesaler in Ohio—received purchase orders, via e-mail, for laptop computers and other equipment from a well-known research institution that was also located in Ohio. The plaintiff shipped the orders to the address shown on the purchase orders. Oddly, however, the shipping address was not the research facility’s address, but rather that of the warehouse operator, also in Ohio. The plaintiff apparently failed to notice the discrepancy. As the plaintiff soon learned, the purchase orders were fake. That is, after the purported customer failed to pay for the goods, the plaintiff called the research institution, which informed the plaintiff that it had not placed the order. Suspecting that the warehouse operator was the culprit, the plaintiff filed a lawsuit, alleging that one of the warehouse’s employees orchestrated the scam.

But the truth was much more complicated. As it turned out, a scammer—likely from overseas—issued the phony purchase orders in the name of the research institution and asked that the goods be sent to the warehouse. The same scammer, posing as a different business, contacted the warehouse operator—again, via e-mail—and asked it to perform cross-docking services on the goods ordered from the plaintiff. The warehouse operator simply followed its “customer’s” instructions by repackaging the laptops and other items, and shipping them to an air terminal in New York almost as soon as they were received. It is suspected that the goods were flown to an overseas location where the scammer and his cohorts were waiting to receive them.

The plaintiff filed a complaint in the Ohio Court of Common Pleas, alleging claims against Lewis Brisbois’ client—the warehouse operator—for conversion, breach of contract, and gross negligence. Lewis Brisbois subsequently filed a motion for summary judgment, which the court granted. In dismissing each of the claims, the court determined, as a matter of law, that the plaintiff failed to prove that the warehouse operator was aware of, or participated in, the scam, or that it failed to exercise appropriate care in handling the shipments. Among other things, the court considered the report of the warehouse operator’s expert, who concluded that the warehouse was the victim of a sophisticated “social engineering attack.” According to the expert, the attack succeeded even though the warehouse operator had exercised due care. Following the court’s dismissal of all the plaintiff’s claims, the plaintiff did not appeal.

Unfortunately, this case is not a “one-off” or an isolated incident. Scams like those described above—perpetrated via the internet by sophisticated fraudsters—are on the rise. Brokers, carriers, and warehouse operators across the country have fallen victim to similar scams or, in some cases, have only narrowly avoided them.

For more information on this case or trend, contact the authors of this alert. We welcome the opportunity to assist you. Visit Lewis Brisbois’ Transportation and Cargo & Logistics Practice pages to view more alerts in this area.

Authors:

Julie E. Maurer, Partner

Aaron C. Schepler, Partner

Related Practices

• Cargo & Logistics
• Transportation

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