SLAPPS: FINE LINE DISTINCTION BETWEEN LEGITIMATE CIVIL DEMAND LETTER AND CRIMINAL EXTORTION

    The illegality as a matter of law doctrine, expounded by our High Court in Flatley v Mauro (2006) 39 Cal.4th 299, is, perhaps, the most overused and abused exemption from anti-SLAPP motions.  While illegality can be a lifesaver for plaintiffs in those rare cases where it is an appropriate bar to a SLAPP motion, very often, illegality ends up being the typical SLAPP plaintiff's argument of last resort but ultimately unavailing.  The general rule is that the anti-SLAPP statute is to be construed broadly. [CCP § 425.16, subd. (a)].  But the corollary to this rule is that exemptions from the anti-SLAPP statute, like illegality and those under CCP § 425.17, must be construed narrowly.  Members for an Honest Election Club v. Sierra Club (2008) 45 Cal.4th 309; Hutton v. Hafif (2007) 150 Cal.App.4th 527, 543-545.  

    Malin v. Singer (filed 7/16/13; No. B237804) illustrates the extreme narrowness of Flatley's illegality doctrine in distinguishing the pre-litigation demand letter in Malin from the criminally extortionate demand letters in Flatley and Mendoza v. Hamzeh (2013) 215 Cal.App.4th 799.  Malin, Moore, and defendant Arazm are general partners of Geisha House, LLC (company).  In 2011, Arazm consulted her attorney, Martin Singer, regarding Malin and Moore's alleged misappropriation of company assets.  Singer sent Malin a demand letter and draft of Arazm's proposed complaint.  The demand letter contained what Malin contends was an extortionate threat to disclose certain personal information if he did not pay to settle Arazm's claims.  

    The demand letter stated in pertinent part: "As a result of your embezzlement, conversion, and breach of fiduciary duty, you have misappropriated more than a million dollars from my client.  As a result, my client intends to file the enclosed lawsuit against you, Moore and [others]. `As alleged in the complaint', you, Mr. Moore, and [others] have been embezzling and stealing money from Ms. Arazm and Geisha House for years."  In substance, the letter went on to detail the allegations of the civil complaint regarding the schemes Malin and Moore devised to embezzle money, information regarding insurance scams defendants perpetrated as part of the complaint, and illegal transfers of money embezzled in an effort to avoid taxing authorities.  Finally, the letter set forth the allegation of the complaint charging Malin had misused company resources to arrange sexual liaisons with older men, including an unidentified L.A. Superior Court Judge (retired) (name intentionally left blank but provided a photo of judge and stated that the name would not be blank if the complaint were filed).    

    After he received the demand letter, Malin sued Singer and Arazm for civil extortion, violation of civil rights, and intentional and negligent infliction of emotional distress.  The latter two causes of action were based on illegal computer hacking and wiretapping tapping activities.  The Malin court held that the latter two causes of action were based on activity that was illegal as a matter of law relying on Gerbosi v. Gaims, Weil, West & Epstein (2011) 193 Cal.App.4th 435, 445-446.  In contrast, Malin found that the civil extortion claim based on the demand letter did not constitute criminal extortion as a matter of law, that the demand letter constituted protected petition activity under the anti-SLAPP statute, and that the claim was barred by the litigation privilege on CC § 47(b) on prong two.  Malin reversed the trial court order denying the SLAPP motion as to the civil extortion claim but affirmed in all other respects.      

    Malin distinguished a similar demand letter in Flatley, which constituted criminal extortion as a matter of law.  Criminal extortion is defined as "obtaining of property from another, with his consent... induced by a `wrongful' use of force or fear ... (Pen. Code § 518).  Fear for purposes of extortion may be induced by a threat, either:... 2. to accuse the individual threatened, or any relative of his, or member of his family, of any crime; or, 3. To expose, or impute to `him or them' ... any deformity, disgrace or crime; or, 4. To expose any secret affecting `him or them'.  (Pen. Code § 519).  ~Every person who, with intent to extort money or other property from another, sends or delivers to any person any letter or writing, ... expressing or implying... any threat such as specified in Section 519, is punishable in the same manner as if such money or property were actually obtained by means of such threat.  (Pen. Code § 523).  Indeed, the Rules of Professional Conduct specifically prohibit attorneys from `threatening to present criminal, administrative, or disciplinary charges to obtain an advantage in a civil dispute. Flatley, at 327.

    Michael Flatley, "the Lord of the Dance" was threatened with rape allegations by Ms. Robertson.  Her attorney, Mauro, sent Flatley a demand letter, which expressly threatened to go public (to the media worldwide) with rape allegations and report him to various immigration, taxing, and other authorities if Flatley did not pay $1,000,000 for Mauro and Robertson's silence within 30 days.  This threat was reiterated in a phone call to Flatley's attorney.

    The Flatley exemption holds that the plaintiff must show that the defendant has either "effectively conceded, or that the evidence `conclusively' establishes, that the assertedly protected speech or petition activity was illegal `as a matter of law'" - such there can be no factual dispute on the point.  If such a showing is made, the defendant is barred from using the anti-SLAPP procedure to dismiss the case regardless of merit.   Moreover, the illegality established must constitute a violation of a specific criminal statute. G.R. v. Intelligator (2010) 185 Cal.App.4th 606.

    The Flatley court found that Mauro's demand letter constitutes criminal extortion as a matter of law and thus Mauro could not challenge Flatley's complaint with a SLAPP motion even though the court assumed, without deciding, that the litigation privilege of CC § 47(b) applied.  Flatley observed that the two statutes are not co-extensive. Flatley, at 322.

    A key to understanding the Malin/Flatley distinction is the precise relationship between the anti-SLAPP statute's official proceeding prongs and the litigation privilege of CC § 47(b).  An informed anti-SLAPP analysis must begin with the general rule, articulated by our High Court in Briggs v. Eden Council for Hope and Opportunity (1999) 19 Cal.4th 1106, 1115 that where a communication is privileged under CC § 47(b), it will ordinarily be subject to a special motion to strike under the official proceeding prongs of subds. (e)(1),(2) of CCP § 425.16 as both statutes were intended to protect certain aspects of the First Amendment right of petition albeit in different ways.  Malin, at 10.  In contrast, the illegality exception in Flatley and Mendoza merely holds that simply because liability is based on a privileged communication under CC § 47(b), that does not, by itself, necessarily mean that the communication qualifies as a protected act under the anti-SLAPP statute and vice versa. Flatley v. Mauro (2006) 39 Cal.4th 299, 322-325.  While the two statutes do not target precisely the same activity, there is significant overlapping coverage.  

    Malin observed that the "secret" that would allegedly expose Malin and others to disgrace was inextricably tied to Arazm's pending civil complaint.  The demand letter accused him of embezzling money and simply informed him that Arazm knew how he had spent these funds.  We cannot conclude that Malin's alleged activities [arranging sexual liaisons with old men] would subject him to any more disgrace than the claim that he was an embezzler.  Second, to the extent Malin claims the threatened disclosure of secrets affecting a third party, his alleged sexual partner, necessarily constitutes extortion, he is mistaken.  The third party - a retired judge - was neither a family member nor a relative under PC § 519.  Most importantly, the Malin court concluded "We see a critical distinction between Singer's demand letter, which made no overt threat to report Malin to prosecuting authorities or the IRS, and the letters in Flatley and Mendoza, which contained those express threats and others that had no reasonable connection to the underlying dispute."




This article was previously published in the Los Angeles Daily Journal on July 23, 2013.

James J. Moneer, Esq. has been representing plaintiffs and defendants at all stages of anti-SLAPP litigation since 1994 and frequently testifies as an attorney fee expert.  He has been a regular panelist on the The Rutter Group's Anti-SLAPP seminars and has been recognized as an expert in California anti-SLAPP law in Ramona Unified School Dist. v. Tsiknas (2005) 135 Cal.App.4th 510, 523-525.  His website is www.slapplaw.com.