A federal appeals court Wednesday held that Richardson-based property management-software company RealPage, a recent victim of a phishing expedition, cannot recover $6 million in stolen funds from its insurer, which affirmed a lower-court ruling that reached the same conclusion.
The ruling by the appeals panel, which included Chief Judge Priscilla Owen and Circuit Judges Cory Wilson and Edith Jones, was a win for the National Union Fire Insurance Company of Pittsburgh and Beazley Insurance Co.
In a 10-page opinion, the court ruled that RealPage was not covered by its insurance because it never “held” the diverted funds, siding with the insurer’s argument that phished funds were not covered losses because RealPage never “held” them.
Instead, the court ruled, they were held by RealPage’s third-party payment processor, Stripe. The phishing expedition occurred after a RealPage employee clicked on a fake link that purported to be from Stripe and provided login information for RealPage’s account with Stripe.
The weight of RealPage’s reimbursement weighed on which of the seven definitions of “hold” the Fifth Circuit agreed with from Black’s Law Dictionary. RealPage argued that “control” rather than “possession” properly defined hold, but the court did not agree.
“RealPage’s proposed dictionary definitions that actually relate to holding property ultimately distill to possessing the property, not merely being able to direct someone else to do something with it,” Judge Wilson wrote for the panel. “To recap, RealPage never possessed its property manager to clients’ funds that got caught in the phishers’ net. And, crediting RealPage’s argument that it could nonetheless ‘hold’ the funds’ without ‘possessing’ them, RealPage did not control the lost funds, either, notwithstanding the routing instructions it provided to Stripe.”
RealPage was Pillsbury Winthrop Shaw Pittman. Its team included Vincent Morgan Tamara Bruno, Elizabeth Dye from the firm’s Houston office and Barry Fleishman of Washington, D.C., who also handled oral arguments. Dallas attorney Cort Thomas from Brown Fox also represents RealPage.
Gray Reed & McGraw represented National Union Fire Insurance Company of Pittsburgh, and the team includes Darin Brooks and Kristen Kelly of Houston and Kenneth Stone and Trenton Patterson of Dallas. Kelly handled oral arguments. Beazley is represented by Michael Keeley and John Riddle of Clark Hill Strasburger’s Dallas office. Riddle handled oral arguments.