Hot Docs: Threats to report criminal activity in demand letter is extortion, rules CA court

May 2, 2013

ExtortionAs an attorney, there are plenty of ethical pitfalls to beware, some of them with potentially disastrous consequences.

A new ruling out of California provides an example of such a trap.

In Mendoza v. Hamzeh, decided on April 22, 2013, the California Court of Appeals ruled that an attorney’s demand letter containing threats to report the recipient’s alleged criminal activity was extortion prohibited by both the California criminal code and the California Rules of Professional Conduct for attorneys.

The lawsuit arose from a May 6, 2009 demand letter that attorney Reed Hamzeh sent to Miguel Mendoza while Hamzeh was representing a client named Guy Chow.  The letter was sent over a dispute between Chow and Mendoza concerning Mendoza’s employment as the manager of Chow’s print and copy business.

The demand letter begins:

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.

Okay, so far, nothing wrong with that.

But the next part is where it takes a bad turn:

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].”

The letter then goes on to list Mendoza’s alleged wrongs, including failure to pay Media’s employees, sales taxes, and bills.

We don’t really know what happened in the interim, but Mendoza filed a civil lawsuit against Hamzeh almost two years later, in May 2011.  The suit asserted causes of action for civil extortion, intentional infliction of emotional distress, and unfair business practices.

In September 2011, Mendoza responded with an anti-SLAPP motion, seeking to dismiss the complaint.

“SLAPP” stands for “strategic lawsuit against public participation,” and such lawsuits are brought with the intention of silencing critics with expensive litigation.

State anti-SLAPP laws are intended to protect against such practices, with California’s laws being particularly hostile to potential SLAPPs (more on SLAPP laws here).

In bringing his anti-SLAPP motion, Hamzeh claimed that the demand letter constitutes a protected litigation communication under the anti-SLAPP statute.

However, the trial court disagreed with him, finding that the communication at issue was not covered by the anti-SLAPP statute because it constituted criminal extortion as a matter of law.

Hot Doc: Mendoza v. Hamzeh

Source: Thomson Reuters News & Insight – National Litigation

On appeal, Hamzeh argued that the trial court erred because the authority relied upon, Flatley v. Mauro, did not apply in the present case because Flatley involved much more egregious facts.

Flatley is a similar case to this one.  It involved Michael Flatley, the “Lord of the Dance,” being the recipient of an analogous threat via demand letter.

The demand letter was sent to Flatley by attorney D. Dean Mauro on behalf of Tyna Marie Robertson, a woman who claimed that Flatley had raped her.

The letter, along with subsequent telephone calls Mauro made to Flatley’s attorneys, demanded a seven-figure payment to settle Robertson’s claims, or else Mauro would “publicly accuse Flatley of rape” and report and publicly accuse him of other violations of various laws, including immigration and tax law and the Social Security Act.

It’s possible to see the logic in Hamzeh’s argument, since the demand letter in Flatley’s case included not only threats about criminal prosecution, but also public disclosure of damaging facts related to a well-known celebrity.

The court of appeals wasn’t convinced, however, instead finding that Flatley doesn’t protect litigation communications containing criminal extortions that aren’t “particularly extreme or egregious” under anti-SLAPP laws.

Perhaps making this loss worse for Hamzeh is the award of attorney’s fees to Mendoza after the court found Hamzeh’s anti-SLAPP motion to be frivolous in light of Flatley (which Mendoza’s attorney made Hamzeh’s attorney aware of beforehand).

Although Hamzeh escaped disciplinary action from the state bar for the extortionary statement, the consequences for the letter are, obviously, disastrous regardless.

Thus, it’s important to be aware of how you conduct your practice of law, lest, through actions taken in one legal dispute, you create a much larger one than the original.