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Was well-known lawyer’s demand letter ‘extortion’? Appeals court to hear arguments on judge’s ruling

May 14, 2013, 11:55 am CDT

Comments

Whoa, whoa.  So is it actionable to threaten civil action unless the malfeasant is willing to settle the claims against it?  Or is the problem pointing out that litigation will be unpleasant? Or is the problem waiting until the case is in litigation to exercise the litigation privilege? 

This sounds like some nasty business.  Threatening legal action should not be actionable.  Otherwise, parties have no incentive to resort to law to resolve disputes among them.

By Patrick on 2013 05 15, 6:22 am CDT

The difference seems to be that the focus of the deman letter involved financial issues - claims of embezzlement, breach of fiduciary duties, conversion & misappropriation were leveled and a remedy of compensation and accounting was demanded. The claims of maintaining false books would be consistent with those complaints. But what was the supposed relevance of bringing up sexual liasions unless it was to put pressure on the recipient that if they didn’t agree to forego a suit their name would be dragged through mud?

Perhaps the judge would have considered it differently if the allegation had been that the diverted money had been used for the purpose of funding liasions; then it might have been relevant to the principal claims. As presented, it just sounds like a personal threat.

By Robert B on 2013 05 15, 9:04 am CDT

There is a thin line between zealous representation and blackmail!

By William Able on 2013 05 17, 4:45 am CDT

Isn’t the point that corporate funds were diverted, in part, to pay for sexual liaisons?  If so, that information seems relevant and material to the litigation. 

I think that the standard for a demand letter should at least allow for anything that is arguably admissible as evidence.  If it is relevant and material, then it is arguably admissible and permissible in a demand letter.

By JimfromBham on 2013 05 17, 6:04 am CDT

Even if the person legitimately owes you money, you CANNOT threaten to expose them to public disgrace if they do not give you some kind of PROPERTY.  That’s what lawsuits are for.  And when you put it in writing, it’s a Felony (in California); they treat it as if you ACTUALLY received the property (even though you haven’t).  When done verbally, it’s just an attempt (unless they of course you actually get the property).

You cannot say thing like:  “If you don’t give me that $1,000 you owe me, I’m going to tell everyone you have gonorrhea.”  Robert B is “in point.”  It would have to be quite relevant, and that’s probably a rare thing.  I always highlight that “I will sue you in CIVIL COURT if you don’t pay the money.”  You don’t even want to imply involving the cops (not that this guy did).

The above is not legal advice.  Consult a lawyer.

By Cochise on 2013 05 17, 6:48 am CDT

Cochise is correct.  The “problem” is not that litigation was threatened.  The problem is that a statement was made informing the recipient that if he doesn’t pay up a “public record will be created by a document that will include statements that would tend to cause discord in the family setting and a negative stigma, at the very least, in the work environment.”  If the demand letter stopped at “legal action” or “any and all legal remedies in law or equity at my client’s disposal,” it would have been fine.  By going a step further and stating “my client will pursue legal action and make public statements that could damage your reputation if you don’t pay on this alleged debt,” it is not the result of the legal action that was threatened.  The threat was pay or people will know you did….
It is analogous to a demand letter stating “if you don’t pay, we will make sure your wife knows you tried to have sex/did have sex with other women.”  That is and should be a “don’t do.”

By Geronimo on 2013 05 17, 8:42 am CDT

I do not threaten a suit to collect a debt. I bring the suit.
  .
Unless there are reasons based on statute or contract, the collection effort is delivered by a process server. At least once a month a prospective client asks me to threaten suit. I don’t do it. I never recommend that a client threaten a suit or suggest to a debtor that they will turn a matter over to “their lawyer.” However, if the client will not demand payment, I will not do it either. If they have demanded payment, there is usually no reason for me to repeat the request. If the client insists on a threat but will not bring a suit, I usually send them elsewhere. There are some very limited exceptions, but I have broken my rule on only a few occasions.

By John in Florida on 2013 05 17, 8:57 am CDT

The first paragraph of the article says precisely that the “partner’s claimed use of company resources for “sexual liasons,” is part of the alleged wrongdoing.  If anyone thinks that the sexual liasons will not be a major focus of discovery and the evidence at trial in a lawsuit you have never litigated a business dispute.  Thus, it seems it would follow that it is fair game in a demand letter.  The threat to reveal these dirty little secrets is no more off base than the threat to reveal that the alleged wrong doer is a fraud and an embezzler.

By OKATTY on 2013 05 17, 9:01 am CDT

To all the commenters here worried about ‘free speech’ rights:  I suggest you look at the definition of “extortion”.  It’s California Penal Code sections 518 and 519.  Extortion is the obtaining of property from another, with consent, induced by a wrongful use of force or fear.  “Fear” for the purposes of this crime may be induced by a treat “to expose, or to impute to him any disgrace or crime, or to expose any secret affecting him.

Thus it is clear:  Attorney Singer obviously and unequivocally crossed the line with his letter threatining to expose this individual if he did not pay up!

I’m all for protecting a lawyers’ ability to do his job legitimately.  But we serve no good purpose when we justify obviously inappropriate conduct.  Singer’s criminality damages the entire legal profession.  Oh, I’m sure it’s made him quite rich.  But is that the standard?

By David W. Simon on 2013 05 17, 10:41 am CDT

Having sent these types of demand letters before, I can say that it’s very important to anticipate the extortion issue when writing them. My most recent letter in a multi-million dollar business dispute was challenged as extortionate, and we passed muster with the trial judge and an appellate panel. Two lessons: First, don’t ask for a dollar amount. Our letter contained only a general invitation for settlement discussions prior to filing the lawsuit. Second, make sure that every allegation in the demand letter is arguably relevant to the claims in the complaint. In my example case, many of the allegedly extortionate allegations were struck from the complaint as “prejudicial” on a motion to strike, but we continued to take discovery on those issues, and the jury trial included many of these issues, precisely because they were relevant.

By Fine line on 2013 05 17, 11:02 am CDT

Put aside technical nuanced arguments about what could conceivably fit within a statutory definition of “extortion.”  Looking at the issue simply, if the sex-based allegations are relevant to the complaint, then they would be protected by the litigation privilege if the complaint was filed in court without any pre-action notice letter.  If that is the case, why should the statement lose this protection merely because the attorney advised the adversary of his intent to file the complaint in an attempt to settle the case before filing?  To deny the protection, would ensure one simple result, the action would be filed in court with all of the embarassing (but protected) allegations, and then afterwards there would be an attempt to settle the case if possible.  But then, the complaint is a public record and it may be too late to contain the allegations and prevent them from being republished elsewhere.

By Mike Z on 2013 05 17, 11:04 am CDT

“We remain confident in prevailing in this litigation because, under the trial court’s analysis, virtually all pre-litigation demand letters routinely sent by attorneys throughout the state would constitute extortion,”

Nonsense.

Using the conditional threat of public exposure in a demand letter is extortion as a matter of law.

If that is the norm in the Beverly Hills Bar Association, then the norm needs to change, not the ruling - which is spot on.

I would urge my former California colleagues (I retired last month) to read Calif. Pen. Code § 519 and Flatley v Mauro, 39 Cal. 4th 299 (2006) cover to cover.

By stephenG on 2013 05 17, 11:17 am CDT

I agree with stephenG, and would add that in my experience there is often a low level of competence, knowledge and/or strategic thinking among entertainment lawyers.  So, for example, they omit integration clauses in contracts, but know and can phone lots of people.

By JS on 2013 05 17, 11:45 am CDT

@5 Cochise and @12 StephenG have it right.

The line between a demand letter and extortion becomes very bright when you threaten to include a statement that your are going to reveal “sexual liaisons with—————————” in a complaint that is essentially “you stole money from me.” 

A different rule would allow every lawyer to extort money by threatening to reveal the secret information in a lawsuit.  Lawyer’s are not exempt from criminal laws.  If you really think it is relevant, put the secret information in the lawsuit and file the lawsuit, don’t just threaten to reveal the information.

By Charles Victor Szasz on 2013 05 17, 1:20 pm CDT

This seems to be balancing on the edge.  The fact that the defendant misappropriated funds to pay for sexual liaisons seems clearly to be part of the basis of the claim.  However, it’s much less clear that publicly disclosing the NAMES of the other parties to the trysts was essential to the claim.  Is that line the boundary between extortion and non-extortion? 

If I were the judge in the underlying case, I would entertain a motion to redact the names of the nonparty sexual partners from any document filed of record in the case.  But I would be doing that to protect the THIRD PARTIES, not the defendant, which leads me to question the defendant’s standing.

Besides, there is no question that the complaint would, and did, accuse the defendant of being a thief.  That’s OK, but accusing him of being a philanderer isn’t?

By FJP912 on 2013 05 17, 2:53 pm CDT

They should have filed in federal court for declaratory and injunctive relief because CA Supreme Court already decided the case in Flatley vs Mauro and another court decided last month Mendoza v Hamzah the same issue. The CA DCA has nowhere to go since it is binding authority and exactly on point.

By Mataele on 2013 05 17, 3:34 pm CDT

“However, it’s much less clear that publicly disclosing the NAMES of the other parties to the trysts was essential to the claim.  Is that line the boundary between extortion and non-extortion?”

No, a practitioner crosses the line into extortion when a conditional THREAT of exposure is coupled with a demand for anything of value (e.g., money or property).

This is a different issue from whether salacious or reputation damaging information included in complaint is gratuitous or germane to the suit.

Essentially when it comes to reporting criminality to police or “outing” reputation damaging or embarrassing behavior in a pleading (or otherwise), do it or don’t do it, but if you conditionally threaten it in a comunication demanding money or property you have committed an act of extortion under California civil and penal law.

Note that the fact that the victim may be guilty of the crimes or other embarassing behavior you threaten to report to police or out is not a defense to an extortion charge.

By stephenG on 2013 05 17, 5:41 pm CDT

Let me get this straight….In southern California, multiple sexual liaisons with someone who is not your partner is considered a BAD thing?

By Diggs on 2013 05 18, 10:29 am CDT

@18:  Such person WOULD be your partner for the purpose of said liaisons.

By Patrick on 2013 05 18, 10:35 am CDT

Another example of a lawyer being surprised to learn that legal immunity from otherwise criminal behavior is not conferred on us by a JD degree.  I have twice had the pleasure of watching defense attorneys who insulted large, very aggressive tug captains by accusing them of lying during depositions discover that those captains were quite willing and able to toss the lawyer out of a window even with their JD degree.  The defense attorneys were able to grovel and apologize their way out of receiving well deserved retirbution for their unprofessionalism.

By rosslaw on 2013 05 20, 8:54 am CDT

stephenG: “Essentially when it comes to reporting criminality to police or “outing” reputation damaging or embarrassing behavior in a pleading (or otherwise), do it or don’t do it, but if you conditionally threaten it in a comunication demanding money or property you have committed an act of extortion under California civil and penal law.
Note that the fact that the victim may be guilty of the crimes or other embarassing behavior you threaten to report to police or out is not a defense to an extortion charge.”

In that case, the definition of extortion in the CA statute is dangerously overbroad.  How WOULD you make a pre-litigation settlement demand for any civil claim based on any kind of intentional conduct?  I go back to my previous point—let’s say the sexual liaisons were left out of the demand letter. The gravamen of the claim was still embezzlement.  So, the demand letter still would have said, in essence, if we do not settle this on terms satisfactory to the plaintiff, the plaintiff will need to file a complaint accusing you of being a thief.  How is that different, if the statute is that broad?

By FJP912 on 2013 05 21, 11:51 am CDT

“We remain confident in prevailing in this litigation because, under the trial court’s analysis, virtually all pre-litigation demand letters routinely sent by attorneys throughout the state would constitute extortion,” attorney Jeremy Rosen, who represents Singer, tells the Hollywood Reporter.

Wrong…most demand letters are supposed to be germane to the subject of the demand.  It’s ok to say we will sue you if you don’t comply with our demand…that’s the essence of a demand letter and the legal process.

By SME on 2013 05 21, 2:17 pm CDT

@1:  Didn’t the lawyer who sent the letter threaten something more than “legal action?”

By Steven on 2013 05 22, 10:25 am CDT

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