If the threat of getting in trouble with the State Bar is not enough, maybe the threat of both civil and criminal actions will get attorneys to toe the line.
You know that it is an ethical violation for an attorney to threaten criminal action as a means to extract a civil settlement. For example, California’s Rules of Professional Conduct state that “a member shall not threaten to present criminal, administrative, or disciplinary charges to obtain an advantage in a civil dispute.” (Rule 5-100.)
Then there are the criminal extortion laws:
Extortion is the obtaining of property from another, with his consent . . . induced by a wrongful use of force or fear. . . .‟ (Pen. Code, § 518.) Fear, for purposes of extortion ‘may be induced by a threat, either: [¶] . . . [¶] 2. To accuse the individual threatened . . . of any crime; or, [¶] 3. To expose, or impute to him . . . any deformity, disgrace or crime[.]’ (Pen. Code, § 519.) ‘Every person who, with intent to extort any money or other property from another, sends or delivers to any person any letter or other writing, whether subscribed or not, expressing or implying, or adapted to imply, any threat such as is specified in Section 519, is punishable in the same manner as if such money or property were actually obtained by means of such threat.’ (Pen. Code, § 523.)
Despite these prohibitions, some attorneys can’t resist throwing a threat of criminal action into their demand letters. They apparently think (if they give it any thought at all) that an express or veiled threat of criminal action will be protected under the litigation privilege, but that is not the case. If you include a demand for money in a letter that threatens to pursue criminal action, you have committed extortion, and as Flatley v. Mauro held, that is not protected speech because criminal acts are not protected.
The most recent example of this was discussed in the just published decision of Miguel Mendoza v. Reed K. Hamzeh. According to the opinion, an attorney named Reed K. Hamzeh was representing Guy Chow, seeking to recover money allegedly owed to Chow by Miguel Mendoza. The dispute concerned Mendoza’s employment as the manager of Chow’s print and copy business. Hamzeh sent a letter to Mendoza’s attorney, which according to the opinion stated:
As you are aware, I have been retained to represent Media Print & Copy (“Media”). We are in the process of uncovering the substantial fraud, conversion and breaches of contract that your client has committed on my client. . . . To date we have uncovered damages exceeding $75,000, not including interest applied thereto, punitive damages and attorneys’ fees. If your client does not agree to cooperate with our investigation and provide us with a repayment of such damages caused, we will be forced to proceed with filing a legal action against him, as well as reporting him to the California Attorney General, the Los Angeles District Attorney, the Internal Revenue Service regarding tax fraud, the Better Business Bureau, as well as to customers and vendors with whom he may be perpetrating the same fraud upon [sic]. (Emphasis added.)
The letter goes on to list Mendoza’s alleged transgressions, including failure to pay Media’s employees, sales taxes and bills.
What followed next was Flatley all over again, with some additional twists. In May 2011, Mendoza responded to the demand letter by filing an action against attorney Hamzeh, asserting causes of action for (1) civil extortion, (2) intentional infliction of emotional distress and (3) unfair business practices. Just as in Flatley, Hamzeh thought his letter was protected under the litigation privilege, and brought an anti-SLAPP motion to strike Mendoza’s complaint. But here, plaintiff’s counsel had the benefit of the already decided Flatley, and wrote to Hamzeh to say that the anti-SLAPP motion would be frivolous since the facts fell squarely under that decision. Hamzeh decided to go ahead regardless, and after the court denied the motion it awarded attorney fees on the grounds that the motion had indeed been frivolous, given the plain reasoning of the California Supreme Court in Flatley. (The anti-SLAPP statute does not make attorney fees reciprocal, but the court can award attorney fees to the plaintiff if the motion is found to be frivolous.) Hamzeh then appealed from the denial of the anti-SLAPP motion (and from the award of attorney fees), and lost. The action against Hamzeh for civil extortion and the other causes of action will now proceed (although Mendoza has a real uphill battle for the reasons explained here).
The takeaway from Hamzeh’s experience is that the standard for civil extortion is very low. On appeal, Hamzeh argued that his demand letter was not nearly as egregious as the one utilized in Flatley, which was absolutely true, but as the court found, the issue is not how far the letter goes, it is whether it amounts to extortion as a matter of law. As you can see from the Penal Codes above, that requires only a demand for money in conjunction with a threat to “expose, or impute to him . . . any deformity, disgrace or crime . . . .” That standard is incredibly broad! It doesn’t even matter whether or not a crime occurred that can be properly reported. In other words (and I think this is why so many attorneys fail to see this), even if you are threatening to do something you are entitled to do, it is still extortion if it is coupled with a demand for money.
Further, the threat doesn’t need to concern criminal conduct; it is enough to threaten “disgrace.” If an attorney wrote a letter suggesting that the defendant should settle to avoid the embarrassment of a lawsuit (which was also present in Flatley), that would constitute extortion. Arguably, the letter in this case also threatened “disgrace” with the reference to informing customers and vendors.
Bottom line: Limit your demand letters to the merits of the case, and leave out any secondary threats. You and your client are free to report the conduct to any agency you chose, and that is protected, but don’t threaten to do so in conjunction with a demand for money.
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