by Jeremy G. Suiter
For lawyers, threats are a tool of the trade. Lawyers threaten to file lawsuits, end contract negotiations, or bring motions all the time. But some threats can violate the California Rules of Professional Conduct, and, as one high-profile California lawyer recently learned the hard way (U.S. v. Avenatti, S.D.N.Y. Cr. No. 1:19-cr-00373-PGG), result in a criminal conviction for extortion. This article discusses the line between a permissible threat and one that could subject you to attorney discipline, civil liability, or criminal prosecution.
California Rule of Professional Conduct 3.10 Drawing the ethical line for threats begins with Rule 3.10 of the California Rules of Professional Conduct, which prohibits threats “to present criminal, administrative, or disciplinary charges to obtain an advantage in a civil dispute.” As the Rule explains, “administrative charges” include the lodging of a complaint with any governmental body that has the power to order or recommend the loss or suspension of a license, but do not include bringing charges with an administrative body required by law as a condition precedent to maintaining a civil action. The term “civil dispute” is defined to include an actual or potential controversy “over the rights and duties of two or more persons under civil law, whether or not an action has been commenced . . . .”
Rule 3.10 is intended to prohibit lawyers from making threats to present charges to gain an advantage. A violation of the Rule occurs if a lawyer says that the conduct in question will not be reported as long as the other party agrees to settle the civil dispute or do something else to give the lawyer’s client an advantage. Take, for example, a plaintiff who sues a defendant for fraud arising from a suspected Ponzi scheme. It would not be a violation of Rule 3.10 for plaintiff’s counsel to demand the return of plaintiff’s investment. But it would be a violation of the Rule if plaintiff’s counsel threatened to notify the police about the Ponzi scheme unless the defendant refunded plaintiff’s investment. Similarly, it would be a violation of Rule 3.10 for defendant’s counsel to then threaten to notify the State Bar of plaintiff’s counsel’s ethical violation unless the plaintiff promptly dropped the lawsuit.
The official comments to Rule 3.10 provide some important caveats. First, Rule 3.10 does not prohibit a threat by a lawyer to present criminal, administrative, or disciplinary charges unless the threat is made to obtain an advantage in a civil dispute. As long as the lawyer believes in good faith that the conduct of the opposing lawyer or party violates criminal, administrative, or disciplinary laws or rules, and does not tie the situation to the resolution of the dispute, the lawyer may threaten to report that conduct to criminal, administrative, or disciplinary authorities if it continues. For example, if opposing counsel communicates directly with a lawyer’s client to encourage settlement, and the lawyer believes in good faith that opposing counsel’s conduct violates the California Rules of Professional Conduct (in this case, Rule 4.2 regarding communications with a represented person), Rule 3.10 permits the lawyer to state that if the conduct continues, the lawyer will report opposing counsel to the State Bar.
Second, Rule 3.10 does not prohibit a lawyer from threatening to file a civil action or pursue “all available legal remedies,” or similar words, unless the other party complies with the lawyer’s lawful settlement demand. Such threats are made by lawyers every day in the normal course. Nor does Rule 3.10 prohibit a lawyer from actually making criminal, administrative, or disciplinary charges, even if the effect of doing so creates an advantage in a civil dispute. It is only in the context of tying such charges to a prior improper threat that a lawyer can get into trouble.
Third, Rule 3.10 does not apply to a threat to initiate contempt proceedings for a failure to comply with a court order, or an offer of a civil compromise in accordance with a statute such as Penal Code sections 1377 and 1378 (permitting the dismissal of certain misdemeanors after the defendant compensates the victim for the damages caused).
Fourth, for government lawyers, Rule 3.10 does not prohibit an offer of a global settlement or release-dismissal agreement in connection with related criminal, civil, or administrative matters.
Extortion Laws Another factor to consider is whether a lawyer’s threat may violate extortion laws. California defines extortion as “the obtaining of property or other consideration from another, with his or her consent, . . . induced by a wrongful use of force or fear . . . .” Cal. Penal Code § 518. For purposes of extortion, “fear” may be induced by a threat (1) to do an unlawful injury to the person or property of the individual or of a third person; (2) to accuse the individual, or the individual’s relative or family member, of a crime; (3) to expose, or to impute to the individual, a deformity, disgrace, or crime; (4) to expose a secret affecting the individual; or (5) to report the individual’s immigration status. Cal. Penal Code § 519.
As the California Supreme Court explained in Flatley v. Mauro, 39 Cal. 4th 299 (2006), extortion “has been characterized as a paradoxical crime in that it criminalizes the making of threats that, in and of themselves, may not be illegal.” Id. at 326. As the court further explained:
[T]hreats to do the acts that constitute extortion under Penal Code section 519 are extortionate whether or not the victim committed the crime or indiscretion upon which the threat is based and whether or not the person making the threat could have reported the victim to the authorities or arrested the victim.
Id. at 327. As the Flatley court also made clear, lawyers are not exempt from the extortion laws in their professional conduct, and “a threat that constitutes criminal extortion is not cleansed of its illegality merely because it is laundered by transmission through the offices of an attorney.” Id. at 328. Accordingly, a lawyer who commits extortion is subject to criminal prosecution and civil liability, in addition to discipline for violating Rule 3.10.
In Flatley, the entertainer Michael Flatley sued an opposing lawyer for extortion based on the lawyer’s pre-litigation demand letter and phone calls demanding an immediate payment of $1 million to settle his client’s rape allegations against Flatley. The lawyer threatened that, absent Flatley’s immediate payment of that amount, “all pertinent information and documentation” will be turned over to law enforcement and “press releases will be disseminated” to more than a dozen news media organizations. The Flatley court held that the lawyer committed extortion as a matter of law because he threatened to accuse or impute to Flatley “crimes” and “disgrace” unless Flatley paid $1 million (of which the lawyer was to receive 40%): “That the threats were half-couched in legalese does not disguise their essential character as extortion.” Id. at 330.
In Malin v. Singer, 217 Cal. App. 4th 1283 (2013), the California Court of Appeal further defined the scope of the extortion laws as applied to attorney threats. There, the court held that a lawyer’s pre-litigation demand letter, though threatening to expose unsavory allegations in the pleadings, was not extortionate because it did not threaten to report any wrongdoings to the authorities or the news media. The lawyer in that case sent a demand letter threatening to sue his client’s business partner for embezzlement and other related causes of action unless the matter was “resolved to his client’s satisfaction” within five days. The letter alleged that the business partner embezzled money from the lawyer’s client to facilitate sexual liaisons with older men. The demand letter enclosed a photograph of one of the men, a judge, and attached a draft complaint in which the men’s names were blank. The letter threatened that the final complaint filed in superior court would include all of the men’s names.
The Malin court concluded that the lawyer did not commit criminal extortion because, unlike the letter in Flatley, the lawyer’s letter did not make any “overt” threats to disclose the business partner’s alleged misconduct to a government agency or the public at large. Malin, 217 Cal. App. 4th at 1299. And while the demand letter threatened to expose unsavory allegations, the court ruled that this did not constitute extortion because those allegations were directly relevant to the allegations of the complaint. Id. at 1300-02.
Lawyers also can be prosecuted under federal extortion laws. In July 2021, California lawyer Michael Avenatti was convicted of attempted extortion, in violation of 18 U.S.C. § 1951, arising from his settlement negotiations with Nike in which Avenatti claimed his client had damaging information about Nike. U.S. v. Avenatti, S.D.N.Y. Cr. No. 1:19-cr-00373-PGG. Similar to the facts in Flatley, rather than simply threaten to file suit and reveal that information in court, Avenatti threatened to cause economic and reputational harm to Nike by holding a press conference on the eve of Nike’s quarterly earnings call and the start of the NCAA basketball tournament unless Nike paid $1.5 million to Avenatti’s client and another $15 million to Avenatti himself to conduct an “internal investigation” for Nike. Avenatti was sentenced to thirty months in federal prison.
Conclusion Lawyer threats are common, but they can cross the line into unethical or illegal conduct. Make sure to consider Rule 3.10 and the extortion laws before making any threat to bring criminal, administrative, or disciplinary charges that could be perceived either as seeking an advantage in a civil dispute or as extortionate conduct.
Jeremy G. Suiter is a shareholder with Stradling Yocca Carlson & Rauth, PC in Newport Beach, California, where he specializes in business litigation and serves as the firm’s deputy general counsel. Jeremy is a member of the OCBA’s Professionalism and Ethics Committee. He can be reached at jsuiter@stradlinglaw.com. The views expressed herein are his own.