No doubt, many of us have encountered the aggressive negotiator who in a distributive bargaining zero-sum situation makes an “outrageous” settlement demand in the hopes of acquiring as much of the pie as possible. Our response is typically to be angry and to rail against both the demand and the negotiator.
A recent California appellate decision involved the fine line between aggressive negotiating and extortion. In Falcon Brands, Inc et. al. v Mousavi & Lee, LLP et. al., Case No. G059477, (January 27, 2022) the Fourth Appellate District held that the defendant law firm crossed the line from aggressive settlement negotiations into extortion.
It all started when Nick Honard employed Amy Mousavi and her firm to bring a wrongful termination lawsuit against Falcon Brands, Inc., a cannabis business firm. Allegedly, Falcon fired Honard after learning he had submitted false reimbursement expense reports and hired an employee without authorization. (Id. at 3.)
On September 6, 2019, Mousavi e-mailed counsel for Falcon advising she had been retained to represent Honard and requesting certain employment records. (Id.).
When she failed to receive a response, she again e-mailed Falcon’s counsel on October 8, 2019, complaining about the silence, that if she did not receive a response by the next day, she would notify Harvest Health & Recreation and Jason Vedadi – a company about to acquire and merge with Falcon- about the lawsuit and its possible liability if the merger occurred. (Id.) However, her e-mail then alleged that Falcon had committed eleven violations of law including “bribing a [deputy district attorney] when a Falcon employee named Ronald was arrested driving cannabis across interstate line.” (Italics original) (Id.) The email concluded by making a settlement demand that bore no relation to the alleged misconduct. (Id. at 3-4)
Counsel for Falcon responded the next day cautioning her not to contact its merger partner. Mousavi replied rebuffing the admonition. (Id. at 5.)
Then on Friday, October 11, 2019, Mousavi sent another e-mail advising she had put the attorney for Harvest Health & Recreation, Inc on notice of the lawsuit but had not yet advised counsel of the alleged illegal activities of Falcon including the bribing of a deputy district attorney but planned to do so that next Tuesday. (Id. at 6.)
Not hearing from counsel for Falcon, on Tuesday, October 15, 2019, Mousavi sent an e mail to Falcon’s counsel stating that she “would move forward accordingly.” (Id. at 6.). Falcon’s attorney responded accusing her of extortion. Mousavi responded stating that if Falcon wanted to resolve this matter, now was the time to do it. (Id. at 6.)
The matter did not settle and so the complaint was filed. Falcon filed a cross- complaint alleging, among other things, extortion. (Id. at 6-8). Mousavi moved to strike the cross-complaint arguing that her emails were part of settlement negotiations and so were protected speech. (Id.)
The trial court granted Mousavi’s motion to strike finding that her e- mails were “presumptively protected …because they were made in connection with litigation but would not be protected…. if they were illegal as a matter of law.” (Id. at 9.)
The appellate court reversed as to the claim of extortion finding that the emails of October 8 and 11th, when taken together amounted to extortion:
… “threats 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. [Citations.] Furthermore, the crime with which the extortionist threatens his or her victim need not be a specific crime.” (Flatley, supra, 39 Cal.4th at p. 327.)
In other words, it is the threat to reveal damaging information, not any subsequent revelation, that makes the conduct illegal when the threat is linked to a monetary demand. Many, perhaps most, extortionate threats may never actually be conveyed to either law enforcement or the media. The reason for this is obvious enough: the threat had its desired effect. “[T]he accusations need only be such as to put the intended victim of the extortion in fear of being accused of some crime… (Id. at 14)
Here, the two emails taken together essentially threatened that Mousavi would advise Harvest Health & Recreation, about Falcon’s alleged bribe of the deputy district attorney unless her settlement demand (bearing no connection to actual damages or to alleged criminal conduct) was met immediately. As the appellate pointed out, extortion occurs upon the mere implied threat: it need not be carried out. Mousavi’s e mails were attempts to obtain property from another without the latter’s consent by use of force or fear, contrary to California Penal Code Section 519. In short, Mousavi crossed the line from making aggressive settlement demands into extortion. (Id. at 16-17.)
So, while it is all well and fine to be an aggressive negotiator, do not link it to a threat- implied or otherwise- as it may then be deemed extortion.
… Just something to think about.
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