Extortion and Blackmail: Lawyers’ Settlement Demand Letters

Scott Greenfield:

Daniel Hynes was a newly minted lawyer, only one month in, when he apparently came up with a bright idea, according to this report in the New York Lawyer.

    Fifteen months ago, Daniel Hynes of Manchester told a Concord hair salon to pay him $1,000 or face a lawsuit because its different prices for men and women were discriminatory. In one court document, he said the unequal prices at Claudia Lambert’s salon caused him mental anguish. That’s even though the salon charged women more than men.

Well, how is a young lawyer supposed to make a living when he’s got no clients and needs a haircut?

Unfortunately, a jury was unimpressed by Hynes’ career move, and convicted him of misdemeanor theft by extortion. 

Hynes, apparently relying on his vast legal experience, disagreed with the jury.

    “The conviction goes against the First Amendment,” he said. “People have a right to petition the courts.”

It’s unclear which 1st Amendment rights he’s talking about, since sending out demand letters is a little different than petitioning a court for redress. 

But he does have a point about lawyers sending out letters to people or businesses who, they believe, are doing something actionable and trying to settle.

Where do we draw the line?  People often feel the “lawyer letter,” that demand that you pay money “or else” or stop doing something “or else,” is extortionate.  After all, the express threat is “pay me or pay to go to court and then pay me.” There’s certainly something extortionate there.

(HT: Pasquale via Reynolds) My take on this is that the problem is not lawyers’ demand letters but the underlying legal rules. After all, a demand letter that rests on no cognizable legal claim is not much of a threat.

Here, in California, for example, there used to be quite a cottage industry of two-bit shysters using California Business and Professions Code Section 17200 et seq., the so-called Unfair Competition Law, to extrort settlements out of small businesses. One big problem was that the statute authorized plaintiffs who had never suffered any personal loss or injury to sue on behalf of the “general public.” Indeed, it allowed recovery upon a mere determination that the challenged conduct was “unfair” or “likely to deceive a reasonable consumer,” without any proof of actual injury to anyone. Another was that such plaintiffs were not required to meet other traditional class action requirements. The pleading requirements and standards of proof set out in the statute also were very lax.

The solution was not to ban lawyers from sending out demand letters. The solution was to amend the underlying law. A few years ago, Proposition 64 amended the UCL to require the plaintiff to show he suffered an actual injury as a result of alleged unfair competition.  Because Proposition 64 cross-references California’s class action statute, all representative actions under the UCL must meet all regular class action requirements.

Put another way, the problem may not be that we are overlawyered, but simply that we are overlawed. See Philip K. Howard’s The Collapse of the Common Good: How America’s Lawsuit Culture Undermines Our Freedom or Walter Olson’s The Rule of Lawyers. If you want to get rid of demand letters, prune the tree of law.

Finally, while we’re on the subject of blackmail and extortion, I can;t resist an extended quote from PG Wodehouse’s wonderful novel, Much Obliged Jeeves, in which Jeeves explains the difference between the two:

‘Didn’t I tell you, Bertie? Wasn’t I right? Didn’t I say the child of unmarried parents would blackmail me?’

A fellow with the excess weight of L.  P.  Runkle finds it difficult to stiffen all over when offended, but he stiffened as far as he could. It was as if some shareholder at the meeting had said the wrong thing. ‘Blackmail?’

‘That’s what I said.’

‘It is not blackmail. It is nothing of the sort.’

‘He is quite right, madam,’ said Jeeves, appearing from nowhere.  I’ll swear he hadn’t been there half a second before. ‘’Blackmail implies the extortion of money. Mr Runkle is merely
extorting a cook.’

‘Exactly.  A purely business transaction,’ said Runkle, obviously considering him a Daniel come to judgment.

‘It would be very different,’ said Jeeves, ‘were somebody to try to obtain money from him by threatening to reveal that while in America he served a prison sentence for bribing a juror in a case
in which he was involved.’

A cry broke from L. P. Runkle’s lips, somewhat similar to the one the cat Gus had uttered when the bag of cat food fell on him. He tottered and his face would, I think, have turned ashy white if
his blood pressure hadn’t been the sort that makes it pretty tough going for a face to turn ashy white. The best it could manage was something Florence would have called sallow.

Do yourself a favor and buy all three:

Posted on Tuesday, March 25 2008 | Permalink

As I see it, a lawyer who sends a demand letter is stating that the demand is legally reasonable. A non-lawyer can either cave in or hire a lawyer at unrecoverable expense to advise him. If the demand is not reasonable under the law then it is obviously extortion. Legal costs to the victim should be the responsibility of the lawyer who sent the letter. I also believe it should be a felony.

There is no constitutional right for lawyers to make a living at the expense of the general public.

Posted by  on  03/25  at  10:44 PM

Everything I know about law you could fit in a thimble. But still, PB’s claim that: “After all, a demand letter that rests on no cognizable legal claim is not much of a threat” smells to me. To continue Ken’s point, after all, PB’s claim rests on epistemic privilege. Sure, it wouldn’t be threatening—to _another lawyer_. But to the regular ol’ Joe? At the very least, this is highly unethical, even if legal (and I don’t know if it is).

Posted by  on  03/25  at  11:12 PM

Did Mr.Hynes happen to graduate from NYU? IIRC a class there had issued similar letters to salons in NYC, for a class project, at the direction of their instructor.

Posted by  on  03/25  at  11:14 PM

Put another way, the problem may not be that we are overlawyered, but simply that we are overlawed.

The fact that our legislatures are dominated and controlled by lawyers has absolutely nothing to do with the number of laws, eh?

Lawyers never see themselves as the problem.

But tell me please, to whom do lawyers have a greater obligation, their clients or the rules and canons of their profession?

Posted by Bozoer Rebbe  on  03/25  at  11:25 PM

Of course considering the esteem lawyers are held in these days, I wouldn’t be surprised if one died in car accident after sending out a demand letter to a small business.  It is getting to the point that it is more economical to turn to the Mafia rather than engage the other organized criminal organization, otherwise known as the bar association.

Posted by  on  03/25  at  11:28 PM

Hoshi Coupe (http://www.yelp.com/biz/hoshi-coupe-iii-new-york) still has a sign for $30 haircuts. So women with long hair go there. There are very few other places to go, around Columbia University. But *after* they cut their hair, claim that for “long hair” it costs $45. I saw a girl there once, hit with this bait-and-switch BS, why literally only brought $35 cash to sit in a chair for a half hour. So I physically pushed the old ugly female Japanese owner down the stairs, and paid zero money for my own haircut, and despite their scratching nails, I escorted the poor $30 girl out of there, too. The place still exists, on Broadway and 108th in NYC. So sue me for telling this story, Mz. Buzzcut scamming CRIMINAL.

So I switched to the Spanish Harlem place. Old guys knew my names, even. I thought I was on top of world. $12 instead of $30, except for ONE thing: REVERSE DISCRIMINATION. One day, the shop being divided into two, a man with a large beer in a paper bag cut my hair in utterly PERFECT manner, like all the locals got, but the *next* time I went, and asked to use the “right” side of the shop, I was quickly pushed back to the “old guy buzz cut” side. So the Hispanics were walking out with perfect haircuts, but the black kids and us white college kids were getting hack jobs, after all. That place is called Miguel’s Barbershop on Amsterdam and about 103rd St.

So I bought a head shaver, instead:
http://www.amazon.com/s/ref=nb_ss_gw/102-1816223-1717710?url=search-alias=aps&field;-keywords=wahl+balding&x=0&y=0

“First, let’s kill all the barbers.” - William the Spear Shaker

Posted by  on  03/26  at  04:18 AM

For the very worst in lawyering, take a look at the secret settlement that cost the taxpayers $9M in an attempt to hide the text messages of the mayor.

Lawyers could end up being cellmates of the mayor.

Legal sleaze at an incredible level, including a joint safety deposit box to hide the text messages from the city council and the judge.

Sweet.

Posted by  on  03/26  at  12:41 PM

Actually, I think Stefani, the police officers’ lawyer who agreed to the deal to keep quiet about the text messages in order to get his clients the 8.5 million, was most likely the source for the Detroit Free Press. He’s never denied that he gave them the Kwame/Beatty text msgs.

I don’t think the cops’ lawyers will get into trouble but the city’s lawyers are a different issue. The cops’ lawyers just represent the cops. The city’s lawyers are entrusted with representing the people and it appears that they acted more like Kwame’s private attorneys. The Wayne County Prosecutur has indicated that she’s investigating the actions of the city’s legal department in regard to obstructing her investigation in Kwame’s perjury.

Wayne County judges are also part of the story. Worthy, the prosecutor, apparently had an ex parte discussion with the chief judge about recusing all the 36th district (Detroit) judges. A visiting judge presided over the arraignment, and it’s been reported that a couple of sitting judges will be called as witnesses in the case.

Dan Webb, Kwame’s mouthpiece is not happy about that. The jury pool will be drawn from Wayne County, not just Detroit and without a sympathetic judge who’s part of the black Detroit political mob it’s going to be harder to acquit.

Frankly, I think it’s all about Kwame trying to protect the mother of his children. The whole scandal started allegedly when Carlita showed up unexpectedly during a party at the mayor’s mansion, saw a stripper “touching” her hubby and proceeded to beat her with a baseball bat. The stripper was later shot to death with a Glock 40, standard issue to Detroit cops. I don’t think Kwame ordered the hit, I think it was Carlita.

Political wives are just as ruthless and unprincipled as their husbands.

Posted by Bozoer Rebbe  on  03/26  at  07:29 PM

Prof. Bainbridge, you might find the California Supreme Court’s decision in Flatley v. Mauro (July 2007) interesting.  (I looked quickly in Google for a free source for it without success.)

In it, the California Supremes dealt with a case by the Lord of the Dance against the attorney for a woman who had accused him of rape.  The thrust of the opinion is that the attorney’s tactics constituted extortion, and thus was outside of the scope of California’s anti-SLAPP law, which the lawyer had invoked when Flatley sued him. 

It’s a very thorough treatment of the line between negotiating and extorting under California law.  I like it because it’s well written and clients can follow it when I send it to them after they demand to do things like “tell them to give me a million dollars to settle my claim tomorrow or I will go to the papers.” Because the underlying principle is not well-known, it’s also fun to cite it in responses to demand letters from attorneys and laypeople that cross the line.

Posted by Ken  on  03/27  at  12:00 AM
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