The Fine Line Between Protected Demand Letters and Extortion
| Jurisdiction | California,United States |
| Author | By Felix Shafir and Jeremy Rosen |
| Citation | Vol. 28 No. 1 |
| Publication year | 2015 |
By Felix Shafir and Jeremy Rosen
Felix Shafir
Jeremy Rosen
Lawyers have long sought to resolve disputes without filing a lawsuit. They often do so through prelitigation demand letters that lay out a client's grievance against a potential litigation adversary and threaten to file a civil action unless the dispute is settled for a monetary payment.
The legality of these letters has come under increasing scrutiny. In 2006, the Supreme Court concluded that an attorney's prelitigation communications can amount to extortion. (See Flatley v. Mauro (2006) 39 Cal.4th 299.) Since then, intermediate appellate courts have struggled to identify the dividing line between an extortionate letter and the paradigmatic demand letter the law protects. Among the most significant distinctions courts have drawn is the fine line between letters that merely threaten to file a civil lawsuit (considered to be proper) and letters threatening to file a criminal complaint, especially a criminal complaint that is unrelated to a pending or threatened civil action (typically deemed to be improper).
"As any competent attorney is aware, access to the courts is not an end in itself but only one means to achieve satisfaction for a client. If this can be obtained without resort to the courts — even without the filing of a lawsuit — it is incumbent upon the attorney to pursue such a course of action first." (Lerette v. Dean Witter Organization, Inc. (1976) 60 Cal.App.3d 573, 577.) Consequently, it is "well established legal practice to communicate promptly with a potential adversary, setting out the claims made upon him, urging settlement, and warning of the alternative of judicial action." (Ibid.) Such demand letters "airing grievances and threatening litigation if they are not resolved are commonplace." (Sussman v. Bank of Israel (2d Cir. 1995) 56 F.3d 450, 459.)
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Modern demand letters are "frequently much more elaborate than a pro forma demand for payment or a simple and inflated settlement demand." (Subrin & Main, The Integration of Law and Fact in an Uncharted Parallel Procedural Universe (2004) 79 Notre Dame L.Rev. 1981, 2002.) "Demand letters now often include a sophisticated and integrated narrative of law and fact written to persuade," such as a synopsis of the facts, an explanation of the alleged liability and damages, and accompanying photographs supporting the threatened legal claim. (Id. at pp. 2002-2003.) "These letters read much like a closing argument to a judge or jury. The tone is determined by what the lawyer thinks will persuade the other parties to settle." (Id. at p. 2003.)
The Penal Code section 518 prohibits extortion, which is defined as "the obtaining of property from another, with his consent, induced by a wrongful use of force or fear...." (People v. Goodman (1958) 159 Cal.App.2d 54, 61.) The necessary fear may be induced by a variety of different threats. In Flatley, 39 Cal.4th 299, the Supreme Court concluded that certain threats made in an attorney's prelitigation communications — including in a demand letter — could amount to an extortionate use of fear.
Flatley found a lawyer's statements were extortionate threats because, in addition to a demand letter threatening to bring a civil lawsuit on behalf of the lawyer's client against a well-known entertainer for alleged rape, the lawyer: (1) threatened in the letter and subsequent phone calls that he would directly and personally publicize Flatley's alleged rape of his client to 'worldwide" media; (2) threatened to publicize completely unrelated (and unspecified) additional criminal activity of Flatley having nothing to do with the lawyer's client or the potential civil lawsuit against Flatley for the alleged rape; and (3)...
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