Settlement Demands, Extortion and the Litigation Privilege

In People v. Toledano, 2019 WL 2577211 (June 24, 2019), the court addressed an important question of first impression, holding that the litigation privilege, California Civil Code Section 47, may apply as a defense to a criminal prosecution for extortion based on a settlement demand, where the demand is made in a good faith belief in a legally viable claim, and in serious contemplation of litigation, and the statements made are sufficiently connected to the litigation.  The court in Toledano found that the lower court’s refusal to so instruct the jury was prejudicial error, requiring a reversal of the conviction against the attorney for extortion.


Attorney Toledano represented Michael Roberts, a personal trainer, in connection with a potential claim against Mrs. M, a married women, with whom Roberts had a long term close personal relationship.  The attorney wrote a demand letter indicating that he was retained by Roberts to take legal action against Mrs. M concerning defamation, unlawful harassment and interference with Robert’s life, including loss of income from a successful business with annual income of $250,000 to $350,000 per year.  The attorney’s letter said he would file a civil complaint within 10 days absent a response from Mrs. M.  Toledano sent a second letter, and Mrs. M hired her own counsel, Paul Roper.


Mrs. M sought a restraining order against Roberts.  Toledano and Roper met and Toledano said if Mrs. M failed to pay $350,000 he would disclose Mrs. M’s affair with Roberts, and provided photos and letters, and indicated he had subpoenaed Mr. M to the hearing on the restraining order.  Mrs. M denied the affair.  Roper reported the situation to law enforcement.  The parties proceeded to negotiate a resolution, with Roberts requesting additional consideration, including a gift letter.  Toledano accepted Roper’s offer to pay Toledano $10,000 in legal fees.  At some point the parties agreed the money would be delivered, and Roberts arrived for the delivery and was arrested at the scene.  Then law enforcement executed a search warrant at Toledano’s office.


Toledano was charged with several crimes, among them extortion under Penal Code Section 518, which involves obtaining property from another with consent induced by wrongful use of force or fear, with specific intent to induce such consent, which does in fact induce consent.  Fear may be induced by threatening to expose a disgrace or secret unknown to the public that would affect the person’s reputation in an unfavorable way.  The court refused to give an instruction on litigation privilege, and the jury found Toledano guilty, and he appealed the conviction.


The litigation privilege applies to communications made in judicial proceedings, by litigants and other participants authorized by law, to achieve the objectives of the litigation, as to statements that have some connection or logical relation to the action.  Prelitigation communications are covered “only when it relates to litigation that is contemplated in good faith and under serious consideration.”  Hollow threats are not protected, but the protection applies even when communications are made with malice or intent to harm, and regardless of whether the alleged conduct is fraudulent, perjurious, unethical or even illegal.  A party’s failure to follow through with a litigation threat creates an inference that a demand letter was not sent in good faith.  A mere possibility of litigation being initiated does not support invocation of the litigation privilege. 


The evidence showed that Toledano conducted an extensive interview with Roberts, met with Roberts on multiple occasions, and received information and photographs supporting Roberts’ potential claims.  Two experts testified at trial.  The prosecutor’s expert testified that although he found a billing entry for drafting a complaint and another for reviewing files, he did not find a complaint, nor did he find a draft of a complaint, nor any legal research or memoranda, or other evidence in Toledano’s file showing Roberts had a valid legal claim.  The defense expert testified that the demand letter was a standard cease-and-desist letter and opined that disclosure of sensitive information prior to litigation was appropriate as it may lead to serious negotiations.


Ultimately, the appellate court held that a reasonable jury could find that when Toledano issued his demand, he and Roberts were seriously considering and contemplating litigation, in good faith, against Mrs. M.  Accordingly, the court held that the courts refusal to give the instruction was in error.

 

Carole J. Buckner, Partner and General Counsel, Procopio, Cory, Hargreaves & Savitch LLP


**No portion of this summary is intended to constitute legal advice. Be sure to perform independent research and analysis. Any views expressed are those of the author only and not of the SDCBA or its Legal Ethics Committee.**