(L to R) Derek Foran and Michael Komorowski of Morrison & Foerster (Photo: Courtesy Photo)

Jeff Bezos is riding high after refusing to cave to a tabloid shakedown. American Media Inc., publisher of the National Enquirer, faces renewed scrutiny and possible criminal prosecution for extortion after Bezos revealed that AMI lawyers sent emails threatening to publish compromising photographs of him in exchange for shutting down a Washington Post investigation of the tabloid. Bezos stood firm, choosing to go public with the contents of the photos himself and turn the tables on his antagonist. The bold move has made national headlines as a high-stakes episode in an ongoing Trump-versus-the media saga, but should alert lawyers and their clients to the dangers of demand letters that could be construed as extortionate.

According to recent reports, federal prosecutors have renewed their attention on AMI for its potentially criminally extortionate conduct. Federal law criminalizes extortion under 18 U.S.C. §875(d). While there is no civil counterpart to this statute under federal law, some states, including California, do recognize a cause of action for civil extortion. As a result, lawyers and their clients face potential civil liability for extortionate statements in demand letters.

In California, an emerging body of law is developing that singles out pre-litigation demand letters for special scrutiny. Ordinarily, these letters are shielded by California’s litigation privilege and the state’s anti-SLAPP law. Strongly-worded demand letters are part and parcel of zealous advocacy, and California has long protected their authors under its absolute litigation privilege, encompassing statements made in connection with a lawsuit. What’s more, the state’s anti-SLAPP statute permits a party to file a special motion to strike a complaint that seeks to chill the exercise of protected speech. Demand letters often fall squarely in this category and any claim that a letter is extortionate would face long odds of overcoming an anti-SLAPP motion.

This landscape changed dramatically in 2006 when the California Supreme Court issued an opinion holding that some pre-litigation demand letters receive no protection under the anti-SLAPP statute. Flatley v. Mauro, 39 Cal. 4th 299 (2006). The case involved rape allegations against Michael Flatley, Irish dancer of Riverdance fame. Dean Mauro, attorney for the plaintiff who alleged that Flatley had raped her in a Las Vegas hotel, sent Flatley a demand letter seeking an unspecified settlement that Mauro later confirmed as at least seven figures. Mauro threatened to publicize the allegations in major media outlets and to notify “appropriate authorities” of Flatley’s various legal wrongdoing—including alleged tax and immigration violations—if he did not settle. For good measure, he followed up with phone calls that reminded Flatley that “it will be publicized every place he goes for the rest of his life.” Flatley refused to settle and sued Mauro and his client for civil extortion among other causes of action. Mauro filed an anti-SLAPP motion to strike Flatley’s complaint and raised the litigation privilege as an argument that the court should grant the motion. The trial and appellate courts both ruled in Flatley’s favor. The California Supreme Court affirmed, holding that because the letter was extortionate as a matter of law, the anti-SLAPP statute did not apply. Because extortionate conduct falls outside the anti-SLAPP statute, the court declined to find that the litigation privilege barred Flatley’s claims.

Since Flatley, courts have struggled to mark the boundary between permissible demand letter pressure and extortion. The only bright-line rule to emerge is that it is nearly always extortionate to threaten to report alleged wrongdoing to government authorities if a party does not settle a civil claim.

Some examples provide guidance. A terminated employee sent an email to his former employer seeking settlement for defamation and wrongful termination that threatened the employer with a qui tam action for defrauding the federal government. Stenehjem v. Sareen, 226 Cal. App. 4th 1405 (2014). Similarly, in Mendoza v. Hamzeh, 215 Cal. App. 4th 799 (2013), an employer’s attorney threatened in a demand letter to report a former employee to prosecutors and the IRS for tax fraud if he did not settle. And in Cohen v. Brown, 173 Cal. App. 4th 302 (2009), an attorney notified another attorney that if a fee-sharing dispute between them could not be settled, the State Bar would subject him to an “unrelenting” investigation. Courts found all of these threats extortionate.

Beyond the rule articulated in these cases, the line between permissible, but intense pressure and extortion is very much in the eye of the beholder. As far as threatening publicity, lawyers and their clients would be best advised to tread lightly. Mentioning the attendant publicity that any lawsuit will receive likely would not be viewed as extortionate. But threatening to disseminate press releases to major newspapers and TV networks and hound a party with media attention for life, as in Flatley, likely crosses a line. In an unpublished opinion, a divided court of appeal held a pre-litigation demand letter that threatened to publicize business owners’ tax fraud, sexual relationship with an employee, and cocaine use to be protected by the litigation privilege. Stark v. Withrow, 2009 WL 3957538 (Cal. Ct. App. Nov. 20, 2009). The court noted that the letter only threatened publicity via the courts but did not mention publicity in other media, as the Flatley letter had.

Trickier ground for lawyers concerns the content of any threats. In Bezos’s case, it appears that AMI badly miscalculated when it threatened to expose details of Bezos’s sex life in exchange for suppressing a Washington Post investigation. As in many California cases, where there is no nexus between the subject of the threat and the alleged injuries suffered by a plaintiff, it is more likely that the conduct will be extortionate. In Flatley, a threat to expose Flatley’s violations of tax and immigration law was unconnected to the alleged rape.

Where threatened revelations arise from the same facts as the alleged injury, however, courts have found that the litigation privilege and the anti-SLAPP statute apply. That’s true even where highly personal or embarrassing details are in play. In a dispute between restaurant general partners, Marty Singer, attorney for one of the partners, sent another partner a demand letter alleging embezzlement of restaurant funds. Malin v. Singer, 217 Cal. App. 4th 1283 (2013). The letter threatened to publicize via a complaint allegations of specific “sexual liaisons with older men” facilitated by these misappropriated resources. Singer promised that the complaint would name names, including a judge. Reversing a trial court decision that held Flatley applied, the court of appeal found that the demand letter threats were “inextricably tied” to the embezzlement allegations. Because the allegedly embezzled funds paid for the sex arrangements, a sufficient nexus had been established and Flatley did not apply. Singer’s experience here couldn’t be more timely: he now finds himself on the other side as counsel for Bezos’s head of security and the recipient of threatening emails.

Staying on the right side of the Flatley line in an era of social media publicity and a daily barrage of celebrity and political gossip can require finesse. Aggressive demand letters surely have their place, but lawyers and clients should be careful to stick to the facts of the alleged injury when building up leverage.

Derek Foran is a partner at Morrison & Foerster in San Francisco. He is a business litigator and trial lawyer representing companies in high-stakes commercial litigation in state and federal court. Contact Derek at dforan@mofo.com.

Michael Komorowski is an associate at Morrison & Foerster in San Francisco. He is a litigator working on a range of securities and commercial matters. Contact Michael at mkomorowski@mofo.com.