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Demanding Settlement for Clearly Baseless Lawsuit = Criminal Extortion:

That's what State v. Hynes, decided by the New Hampshire Supreme Court yesterday, basically holds.

N.H. Rev. Stat. Ann. § 637.5 provides, in relevant part, that "A person is guilty of theft" if he gets money by threatening to do any "act which would not in itself substantially benefit him but which would harm substantially any other person with respect to that person's health, safety, business, calling, career, financial condition, reputation, or personal relationships." Of course, threatening to file a well-founded lawsuit unless one is paid a settlement is quite legal, and generally properly so. Under the statute, that would be a threat to do an act which would in itself substantially benefit the threatener. But, the court held, a baseless lawsuit would not in itself provide a substantial benefit to the plaintiff, so threatening such a lawsuit in order to get a settlement is extortion.

The court did not discuss what mental state the plaintiff would have to have to be punished, since the defendant didn't preserve the issue for appeal. But I take it that under general criminal law principles, the plaintiff would have to know that the lawsuit was baseless, or at least to know that there was a substantial and unjustifiable risk that the lawsuit was baseless.

Here, by the way, is the court's summary of the facts that the jury could have found in convicting the defendant:

The defendant is an attorney who was admitted to the New Hampshire and Massachusetts Bars in 2006. In December of that year, he sent a "Cease and Desist/Demand Letter" to Claudia Lambert, the owner of Claudia's Signature Salon in Concord (the salon). The letter, written on "Daniel P. Hynes Esq." letterhead and noting his admission to the New Hampshire Bar, stated:

I am writing in regards to your company's policy of pricing for different types of haircuts. It has been brought to my attention that your business charges $25 for haircuts but $18 for a Men's cut and $12 for a children [sic] haircut. Such a distinction in price based on gender and age is discrimination in violation of the law. Accordingly, I demand you immediately cease this unfair pricing and charge customers in a more appropriate manner, such as by the length of their hair or the amount of time it would take.

The letter claimed that the salon's practice was both unlawfully discriminatory in violation of RSA 354-A:17 (2009), and constituted an unfair trade practice in violation of RSA chapter 358-A (2009). The letter went on to state:

I demand that you immediately cease your unlawful practice of charging for haircuts based upon age and gender. Should you not comply I will be forced to file a complaint with the State Commission for Human Rights while reserving all rights to remove and file in Superior Court. In addition, I demand payment in the amount of $1000 in order to avoid litigation .... I believe $1000 is a fair amount as it is the minimum that would be awarded for an unfair trade practice alone. You have ten (10) days to comply .... Should you fail to comply additional steps will be taken including filing with the State Commission for Human Rights and potential removal to Superior Court. If such action is necessary I will seek all remedies available including but not limited to an injunction, damages for discrimination, damages for the unfair trade practice, ill-gotten gains, punitive damages, attorney fees and costs. If you object or otherwise wish to discuss the above matter you may have your attorney contact me.

The court concluded that the threatened lawsuit would have been baseless, chiefly because the relevant statutes would not have provided Hynes with a cause of action, since defendant "lacked a client and did not personally patronize the salon" and therefore didn't have standing to challenge the discrimination. A dissenting judge disagreed, concluding that "the defendant could have realistically believed that he had standing," because

[T]here is at least some suggestion in our jurisprudence, albeit in the context of employment discrimination, that to bring this type of claim, a person need not actually sustain an injury as a result of a discriminatory practice. While I agree with the majority that our employment discrimination cases can be distinguished from the instant case, the fact remains that, until today, we have not distinguished them.

Pro Natura (mail):
I hope a felony conviction will lead to the permanent disbarment of this shyster por la encouragemant les autres.
8.6.2009 8:03pm
PatHMV (mail) (www):
The request for $1,000 is what does the defendant in, for me. I'm leery of the result here, because as obnoxious as baseless litigation, and threats of litigation, are, the potential to chill people from asserting their legitimate rights are large. Where you do have a power business on the one hand, and a small, poor potential plaintiff on the other, I would hate to let the business add the threat of criminal prosecution for extortion to their defense arsenal.

On the other hand, I also think lawyers who do this sort of thing are some of the lowest forms of scum. A license to practice law is not a license to go around threatening to sue everybody for everything, shaking them down for $1,000 a pop in return for NOT suing. That's why I think the demand for $1,000 to not sue, when he was not himself a patron of the salon and had not suffered any damages, makes this extortion. This is not a case where somebody arguably did suffer some actual injury, and he was offering the defendant a pre-litigation opportunity to settle. He suffered no injury, and was merely trying to take advantage of state consumer protection laws to enrich himself, rather than protect the public. Any actual consumer protection public interest lawyer would require that any settlement of claims include actually ceasing the illegitimate business practices. The offer to settle for $1,000 and no change of business practices makes this extortion.
8.6.2009 8:07pm
Mike& (mail):
Good ruling. The distinction between litigation and extortion has never made sense. The same conduct would be black mail - or not - depending upon whether a lawsuit was threatened.
8.6.2009 8:08pm
TomHynes (mail):
I really don't like to read about cases titled "State vs. Hynes"
8.6.2009 8:17pm
Doc Merlin:
8.6.2009 8:26pm
Tollhouse:
This fellow has been in the news before in NH. He has blast sued several businesses, typically bars, for women not needing to pay cover fees on ladies nights and other typical crap. Sorta sounded like a typical crank. Good to see him slapped down.
8.6.2009 8:32pm
Pro Natura (mail):
By the way, IANAL, but isn't this very close to the crime of barratry?
8.6.2009 8:38pm
ReaderY:
I am very uncomfortable with making filing a groundless lawsuit a crime. Although in general I think there should be greater checks on groundless lawsuits given that they impose substantial costs, making such conduct criminal goes far beyond the monetary sanctions and malicious prosecution countersuits which are normally considered strong medicine for frivolous lawsuits.

In my view, a decision to make such conduct criminal should, at the very least, be undertaken by a legislature. The very purpose of the rule of lenity, in my view, is to ensure that courts will not take standard legal terminology and novelly re-interpret it to make criminal conduct which has never been regarded as a crime in any jurisdiction. The rule of lenity is essential to securing liberties and ensuring the legislature, not the courts, initiates novel definitions of crime.
8.6.2009 8:39pm
ShelbyC:

I am very uncomfortable with making filing a groundless lawsuit a crime


It's not, any more than me showing your wife pictures of you fooling around is. But if I demand money not to do it...
8.6.2009 8:42pm
Steve:
Hrmm, I know its off topic, but is there room for a lawsuit here and monies to be made? "The Obama White House may be breaking the Privacy Act of 1974 by asking citizens to report "fishy" political speech."... or would this be baseless.

Even more baseless than the lawsuit referenced in this post.

However, you're not going to jail unless you try to shake down the Obama Administration in exchange for you not filing that lawsuit, which I wouldn't recommend in any event.
8.6.2009 8:49pm
guest890:
Hmm, I wonder if the RIAA has sent threatening letters to anyone in New Hampshire recently....
8.6.2009 8:49pm
Oren:

The court concluded that the threatened lawsuit would have been baseless, chiefly because the relevant statutes would not have provided Hynes with a cause of action, since defendant "lacked a client and did not personally patronize the salon" and therefore didn't have standing to challenge the discrimination.

Yup, this particularly time the lawsuit really was baseless.

One hopes that, going forward, the courts interpret the term "baseless" in line with the individual example in this instance.
8.6.2009 8:55pm
Steve:
The next question, as we slide down the slippery slope, is whether it will become a common tactic to file a criminal complaint or threaten to do so in response to every demand letter that is considered "baseless" (which is most of them).

Of course, if the threatened lawsuit is not in fact baseless, the filing of a criminal complaint may be unethical or even a crime in itself. So those who think our court system should be "loser pays" may get something even better: loser goes to jail!
8.6.2009 8:59pm
ShelbyC:

as we slide down the slippery slope


I'm not sure that's sliding down the slope :-)
8.6.2009 9:09pm
Linus (mail):
I know at least one jurisdiction where it is explicitly unethical to threaten criminal action in order to gain an advantage in a civil action.
8.6.2009 9:22pm
Soronel Haetir (mail):

Hmm, I wonder if the RIAA has sent threatening letters to anyone in New Hampshire recently....


Except how many of those have actually been baseless? They might not be intelligent from a business standpoint, but they are usually well grounded in the law.
8.6.2009 9:30pm
Andy Rozell (mail):
The Texas constitution has an "open courts" clause that I think would probably prevent a result like this here.

I don't like the idea of putting people in jail for filing civil lawsuits, but I think what this guy did probably violates a Disciplinary Rule somewhere.
8.6.2009 9:37pm
Mike S.:
I recall once getting a notice about a class action suit against a major manufacturer. They were, it seems, accused of occasionally reducing the price of their product (that is, having occasional sales.) The settlement was 7 figures to the attorneys and a few dollars in coupons for the consumers. I doubt there was a statute, but criminal extortion doesn't seem morally wrong. Certainly lawyers who bring suits like that should be disbarred permanently within 10 seconds of filing.
8.6.2009 9:54pm
Oren:
Mike, I tend to file official letters of rejection in those cases (I have a form one that I modify) explaining to the court that, as a member of the aggrieved class, I find the settlement absurdly disproportionate and blah blah blah.

I doubt they are ever really considered in earnest, but they do become part of the official record.
8.6.2009 9:59pm
Oren:

I don't like the idea of putting people in jail for filing civil lawsuits, but I think what this guy did probably violates a Disciplinary Rule somewhere.

But this case is so easy -- his threat was so egregiously baseless as to qualify.

The only question is "how baseless is baseless".
8.6.2009 10:00pm
Ricardo (mail):
The next question, as we slide down the slippery slope, is whether it will become a common tactic to file a criminal complaint or threaten to do so in response to every demand letter that is considered "baseless" (which is most of them).

Maybe the expert in slippery slopes here can weight in but I don't see how this slope is particularly slippery. There appear to be two facts unique to this case:

1. The lawyer who sent the letter had not business or personal relationship to the owner of the salon nor did he mention representing a client who did have such a relationship.

2. He offered to drop litigation in exchange for a cash settlement. This was not a cease and desist letter which is what one (at least a layman, anyway) would typically expect from a lawyer nor was it a demand for a refund. Rather it was simply a pay-me-so-i'll-drop-this-lawsuit letter.

These two facts make this an extremely dubious situation for the attorney. It seems to me it is only in special cases that demanding a cash payment to not do something that harms the person the demand is made of is not considered extortion. And this appears to be a drive-by lawsuit of the most egregious kind. People shouldn't have to spend their own money to be protected from this kind of nonsense.

I mean, the least he could have done was get a haircut there himself and then complain about feeling "devalued" or "patronized" as a man by being charged less than a woman. In that case, he would have looked like a kook rather than a criminal, at least.
8.6.2009 10:13pm
Upend, Coming:
I watched the move A Civil Action the other day. In response to Travolta's complaint, one of the defendants filed a Rule 11 motion to sanction plaintiff's counsel for filing frivolous litigation.

The judge responded to the motion saying: Do you know what Rule 11 is? I had to look Rule 11 up - it is that old and rare. And then he denied the motion.

***

I remember from Contracts I and a bastardy case. In response for not filing the bastardy proceedings, she expected payment. It came down to the question of whether the potential filer had a good faith basis for instituting the law suit.

These facts remind me of that basic first-year doctrine.
8.6.2009 10:25pm
Eric Rasmusen (mail) (www):
This case sounds very important. I hope other states follow the example. It's so rare for a judge to rule that any case a fellow lawyer files is frivolous-- so rare as to make me wonder about the apparent "the poor lawyer's only trying to earn some money-- let him have a try" ethos of the judiciary.

Another feature noteworthy in this case is that even if the litigant had standing, paying him off would not help, since every other citizen of New Hampshire would also have standing. Thus, the payoff is not really for avoiding the legal penalty, but for avoiding the hassle of one particular crank filing a case that is sure to lose.
8.6.2009 11:18pm
Eric Rasmusen (mail) (www):
My comment of a minute ago, by the way, is an example of how experience with game theory can help explain law. Paying off the extortioner does not help if the hairdresser is really liable, since somebody else would sue. Thus, the paying off must be for something else, unique to that extortioner. That unique item is his ability to be bothersome with a lawsuit irrespective of whether it had a chance of succeeding.
8.6.2009 11:21pm
ohwilleke:
This 3-2 decision of the New Hampshire Supreme Court is very troubling. This is a very small settlement involving a consumer claim that may well be valid on the merits, on the ground of lack of standing -- in a context where there was no clearly established precedent. The fact that this attorney had only three years of experience is also relevant.

There was no precedent for criminal prosecution for a suit like this one in New Hampshire and it wasn't clear on the face of the statute that lawsuits were covered.

Even if demand letters threatening suit aren't entitled to the absolute immunity from civil and criminal liability that attends to lawsuits that are actually filed, there ought to at least be qualified immunity when the law is not clearly established, as is the case in civil rights actions against people acting in their official capacity.

Disciplinary action such as a public reprimand or brief suspension, in connection with the individual's New Hampshire bar admission would have been far more appropriate, if New Hampshire's Supreme Court really felt that this conduct was out of line.

The New Hampshire Supreme Court notes that there is a circuit split within the federal courts over whether it is constitutional to ever impose criminal liability for a demand letter threatening a mere civil lawsuit. It seems to me that this is a cert worthy case for the U.S. Supreme Court.
8.6.2009 11:22pm
krs:
Sounds like this guy is auditioning to be an alj in DC. I hope his dry cleaners are careful.
8.7.2009 12:06am
PatHMV (mail) (www):
ohwilleke... Just because he's a lawyer does not give him special rights, such that when he commits a crime, he only has to face bar discipline. Note that he did NOT say: "Give me $1,000 for my damages and enter into a formal settlement agreement to stop your unfair trade practices." He said "give me $1,000 or I'm going to file a lawsuit against you, in my own name, even though I've never actually been your customer."

Had he merely threatened to file suit, fine, no problem. But he demanded $1,000 in return for not doing so. That makes it clear, to me, that his intent was criminal, not anything proper under the law.
8.7.2009 12:34am
ExFed (mail) (www):
Flatly v. Mauro, the California case discussing the line between protected settlement demands and extortion, is considerably narrower, and more focused on the nature of the demand rather than the validity of the case.
8.7.2009 12:42am
David M. Nieporent (www):
Had he merely threatened to file suit, fine, no problem. But he demanded $1,000 in return for not doing so. That makes it clear, to me, that his intent was criminal, not anything proper under the law.
Exactly; it's clearly extortion. The only thing unusual here is that the court actually treated it as such literally, rather than merely figuratively.
8.7.2009 12:52am
Steve:
Had he merely threatened to file suit, fine, no problem. But he demanded $1,000 in return for not doing so. That makes it clear, to me, that his intent was criminal, not anything proper under the law.

I don't really follow this. If he had a good-faith belief that the law permitted any citizen to file a lawsuit and claim statutory damages whether or not they were actually a customer of the defendant, then I see nothing wrong with demanding a cash settlement. The law doesn't require him to be a do-gooder and insist on the defendant ceasing their unlawful practice; maybe he figures they'll have to stop unless they want to be sued by the next guy, or maybe he just doesn't care. But if the law permits me to sue you and recover X dollars, of course I'm allowed to demand that you just pay me X dollars in a pre-suit settlement instead. There's nothing about the nature of the demand itself that proves this was extortion rather than a settlement demand.
8.7.2009 1:13am
Richard A. (mail):
This is very similar to the litigation that got New Jersey Governor Jim Mcgreevey to resign. In theory, it was based on a charge of sexual harassment. But everyone knew that the real threat was that the mere filing of the suit would unveil McGreevey's life as a closeted homosexual.

It was no accident that the day after McGreevey had his "I am a gay American" press conference, the putative plaintiff flew to a county from which extradition to the U.S. is quite difficult.
8.7.2009 1:35am
David M. Nieporent (www):
If he had a good-faith belief that the law permitted any citizen to file a lawsuit and claim statutory damages whether or not they were actually a customer of the defendant, then I see nothing wrong with demanding a cash settlement.
How could he have had such a good faith belief, when (as the court pointed out), the statute clearly conferred standing only on an injured party?

The law doesn't require him to be a do-gooder and insist on the defendant ceasing their unlawful practice
But the law does require him to receive a "substantial benefit." And the defendant himself claimed (again, according to the court) that the "benefit" he was receiving from his action was "satisfaction in eliminating an instance of gender-based price discrimination." And yet the only thing he actually demanded was cash for himself, not the elimination of gender-based price discrimination.
8.7.2009 1:40am
Ricardo (mail):
Steve, this is a good point but the whole argument here is that good faith is not plausible -- at least not according to the State Supreme Court. To assume good faith, though, we have to assume that a certified member of the New Hampshire Bar thought 1) he had standing to file the lawsuit and 2) that he could recover damages despite his lack of standing and despite suffering no material harm. I don't know New Hampshire law and am not a lawyer but if I was, I would think to check the language of the statutes and the case law carefully before sending a letter like this.

Being a lawyer does not give one a license to shake down random strangers who are not well-versed in the legal system and who are too intimidated by the stress and high expense of litigation.
8.7.2009 1:48am
Steve:
Look, I wasn't defending the guy, I was responding to a comment which seemed to claim that the nature of the demand, standing alone, was enough to tell you the guy was up to something shady. I would contend that without concluding that the suit had no legal basis, you wouldn't be able to say either way.

I would point out to Ricardo that for criminal liability to be imposed, he probably has to know the suit is BS. Failure to perform due diligence might expose him to sanctions, but I'd be surprised if it's enough to send him to jail.
8.7.2009 1:59am
Seattle Law Student:

This fellow has been in the news before in NH. He has blast sued several businesses, typically bars, for women not needing to pay cover fees on ladies nights and other typical crap. Sorta sounded like a typical crank. Good to see him slapped down.


Shouldn't this guy be declared/found to be a vexatious litigant? Generally that is reserved for people who proceed pro se, but in this case it would seem appropriate. In California the language is propria persona which means on your own behalf, in which case this guy might well qualify even though he is a lawyer. Perhaps an admonishment from the New Hampshire bar would be an effective remedy.
8.7.2009 2:15am
Steve:
You know what else would be an effective remedy? Convicting him of extortion!
8.7.2009 2:57am
Brian Sc (mail):

How could he have had such a good faith belief, when (as the court pointed out), the statute clearly conferred standing only on an injured party?


I don't see how this can possibly be the case, since one of the judges dissented.

If one of the judges thought that this plaintiff could have had standing to sue, how can it be baseless to the point of criminality for the plaintiff to believe he had standing to sue? If the issue of his standing is not utterly clear to ALL the members of the NH Supreme Court, it can't possibly be transparent and obvious enough for us to demand that the plaintiff go to jail for acting as if he believed he had standing.

I don't like frivolous litigation, and I don't like the discrimination statutes this plaintiff was trying to employ, but this seems like a fairly straightforward attempt to criminalize routine litigiousness. This decision would demand that police and prosecutors decide which threatened civil actions were legitimate and which weren't. As a practical matter, I think we can be sure that this decision will be translated into an informal rule that you can't threaten to bring a civil action against anyone with the ear of a prosecutor. It certainly would not be safe to threaten litigation against any politically connected figure in New Hampshire at this point.
8.7.2009 3:33am
Brian Sc (mail):
It also seems a bit silly to claim that he doesn't have standing because he wasn't a patron.

Again, I don't support the underlying law in general, but if we're going to have laws supplying people with a cause of action for "discriminatory pricing", it doesn't make sense to claim that only people who make a purchase have standing. Because that would mean that if you showed up at a place of business, and were informed that you had to pay triple because you were black, if you refused to pay the higher price but instead said, "You can't do that, I'm going to get a lawyer," and left, you wouldn't have standing to sue because you never actually became a patron. And it can't possibly be the intent of the law that you actually have to give in and pay the discriminatory price before you can have recourse to litigation to challenge the discriminatory pricing scheme.
8.7.2009 3:44am
Malvolio:
it doesn't make sense to claim that only people who make a purchase have standing. Because that would mean that if you showed up at a place of business, and were informed that you had to pay triple because you were black, if you refused to pay the higher price but instead said, "You can't do that, I'm going to get a lawyer," and left, you wouldn't have standing to sue because you never actually became a patron
Being refused service would also give you standing, but this guy couldn't even have achieved that -- if he had gone to the salon and asked to pay $25 for a haircut instead of $18, they would certainly have accommodated him.
8.7.2009 4:09am
Ricardo (mail):
If the issue of his standing is not utterly clear to ALL the members of the NH Supreme Court, it can't possibly be transparent and obvious enough for us to demand that the plaintiff go to jail for acting as if he believed he had standing.

First of all, the dissent didn't say the issue of standing wasn't clear. It said the defendant could have realistically believed he had standing, citing employment law as a case where the requirements for standing aren't as stringent. Not being familiar with New Hampshire employment law, I don't know whether this is a valid argument or not.

Second, there is no law saying that because members of a state Supreme Court disagree over a point of law, that means the person charged with a criminal offense who is appealing should not be convicted or go to jail. Again, the issue isn't whether he actually had standing under the law -- the answer there appears to be no. It's whether he could have reasonably believed it since there was no explicit court ruling before saying he didn't have standing.
8.7.2009 4:33am
Avatar (mail):
Is it possible that the majority's decision, while focusing on the standing issue, was possibly influenced by the utterly ridiculous legal claim that the lawyer was advancing? I mean, okay, even if you admit the standing question is possibly open to interpretation, does that mean that his legal claim, against a traditional practice of long standing, over the entire nation, and one that is utterly ubiquitous in the industry concerned, suddenly gains legal merit?

It would be nice if action by the bar prevented this sort of thing. Obviously bar associations are not self-policing adequately, and more stringent regulation is required. And if that requires lawyers to be more careful about phrasing demands that people give them money or get dragged into court, I'm sure that the public will cry a river...
8.7.2009 5:03am
David Schwartz (mail):
Brian Sc: You are making a self-contradictory argument. You are saying that whatever the standard is, it must be higher than it is. No standard can be higher than it is.

Two judges felt it met the standard. One felt it fell just short of the standard. Now you are arguing that this is not enough, or, to put it another way, you are arguing that "utterly clear" is not enough -- it must be utterly clear that it is utterly clear.
8.7.2009 5:19am
Brett Bellmore:
The problem isn't that a judge finally noticed that threatening to file a baseless lawsuit can be an element of the crime of extortion. (By the same reasoning, actually filing a frivolous lawsuit ought to be regarded as some kind of assault, right?) The problem is that judges are hardly ever willing to admit that a lawsuit is actually baseless, and sanction it.

If tort law does not sanction frivolous lawsuits, than the court is essentially like a club lying there in the street, which anybody who wants to can pick up and LEGALLY bash somebody over the head with.

That's what tort law has become, and the courts will generally not do anything about it, because they're run by lawyers, and even frivolous lawsuits profit the fraternity of lawyers.
8.7.2009 7:41am
T Gracchus (mail):
There are relevant California precedents arising from use of B&PC 17200.
8.7.2009 8:16am
Fub:
Soronel Haetir wrote at 8.6.2009 9:30pm:
[quoting guest890 at 8.6.2009 8:49pm] Hmm, I wonder if the RIAA has sent threatening letters to anyone in New Hampshire recently....
Except how many of those have actually been baseless? They might not be intelligent from a business standpoint, but they are usually well grounded in the law.
At least one has been egregiously baseless in the facts it alleged.

Tech reporter Declan McCullagh wrote of the 2003 case:
... Last Thursday, the RIAA sent a stiff copyright warning to Penn State's department of astronomy and astrophysics. Department officials at first were puzzled because the notification invoked the Digital Millennium Copyright Act and alleged that an FTP site was unlawfully distributing songs by the musician Usher. The letter demanded that the department "remove the site" and delete the infringing sound files.

But no such files existed on the server, which is used by faculty and graduate students to publish research and grant proposals. Matt Soccio, the department's system administrator, said that he searched the FTP server "for files ending in mp3, wma, ogg, wav, mov, mpg, etc., and found nothing that would precipitate this complaint." ...
The story can be found on Prof. David Farber's email discussion list archives.
8.7.2009 9:25am
Kenvee:
In Texas, a husband and wife (both lawyers) were convicted of theft after the husband threatened to file lawsuits against four men the wife had affairs with. He ask for over $25,000 from each man. The defendants were Ted and Mary Roberts, and the case was affirmed on appeal in 2008. 278 S.W.3d 778.
8.7.2009 9:30am
CheckEnclosed (mail):
If threatening baseless litigation is extortion &if the fellow did it repeatedly could those be predicate acts for purposes of a civil RICO action against him? (And would that count as farce or tragedy?)
8.7.2009 10:06am
byomtov (mail):
The next question, as we slide down the slippery slope, is whether it will become a common tactic to file a criminal complaint or threaten to do so in response to every demand letter that is considered "baseless" (which is most of them).

What should be the response to a baseless demand letter? Look. This stuff causes lots of stress and probably at least some legal expense and loss of time on the part of the recipient.

And no, slaps on the wrist or nasty letters from the bar association don't really do the job.

Is this extortion? Seems like it to me.
8.7.2009 10:16am
David M. Nieporent (www):
I don't like frivolous litigation, and I don't like the discrimination statutes this plaintiff was trying to employ, but this seems like a fairly straightforward attempt to criminalize routine litigiousness. This decision would demand that police and prosecutors decide which threatened civil actions were legitimate and which weren't. As a practical matter, I think we can be sure that this decision will be translated into an informal rule that you can't threaten to bring a civil action against anyone with the ear of a prosecutor. It certainly would not be safe to threaten litigation against any politically connected figure in New Hampshire at this point.
Even if your worry didn't appear to be an exaggeration, note that nothing in this case pertains to bringing litigation. Only to threatening to bring litigation. If you really have a good faith belief, you can go ahead and file the suit, regardless of how "politically connected" the defendant is.
8.7.2009 11:30am
Steve:
What should be the response to a baseless demand letter? Look. This stuff causes lots of stress and probably at least some legal expense and loss of time on the part of the recipient.

Hey, look, I see more than my share of baseless demand letters. I'd love to be able to do something about them. But not every demand letter that someone regards as baseless actually IS baseless, and it would be problematic to turn the cops into some kind of pre-litigation review board, analyzing whether a threatened lawsuit would be frivolous in order to determine if the threatener ought to be prosecuted?

In this particular case, it's pretty easy to look at the guy's letter and determine that it's a frivolous claim. But what if I threaten my doctor with a malpractice suit, knowing full well he's done nothing wrong? How much analysis and document review would the cops and prosecutors have to do in order to determine that the threatened case is frivolous?

And what's the recourse against me if the case actually wasn't frivolous, but I thought it was, or maybe I just got the cops involved as a tactic to try and scare the plaintiff off?

You don't have to be a fan of frivolous lawsuits to see that there are problems here.
8.7.2009 11:31am
Brian Sc (mail):

Brian Sc: You are making a self-contradictory argument. You are saying that whatever the standard is, it must be higher than it is. No standard can be higher than it is.

Two judges felt it met the standard. One felt it fell just short of the standard. Now you are arguing that this is not enough, or, to put it another way, you are arguing that "utterly clear" is not enough — it must be utterly clear that it is utterly clear.


No, I'm saying that if in order for it to be feasible for the defendant to be charged with theft, it has to have been unreasonable for him to think he had standing, the fact that a NH Supreme Court judge does not find it unreasonable should automatically make it impossible to pursue a criminal charge.

How can this plaintiff be obligated, in an utterly novel case, to know that his belief is unreasonable, if NH Supreme Court justices don't agree that it is?

Until this novel, bizarre, and narrowly-decided finding by the NH Supreme Court, was it reasonable for an attorney practicing in NH to think that sending a demand letter was extortion?

If this attorney had sent many such letters, and had entered into settlements as a result of these letters, at least some of those settlements probably involved opposing counsel. If it was utterly unreasonable to believe he had standing, apparently nobody realized this until now. If it was obvious enough that he had no standing that mens rea was created, why did no officer of the court ever notice this before this case?
8.7.2009 11:46am
ShelbyC:
@Steve, lets work backwards. If A knows he doesn't have a claim against B, but demands money not to file a claim, because he knows B will likely pay to avoid the cost of having to defend the claim, is that extortion under current law?
8.7.2009 12:44pm
arbitraryaardvark (mail) (www):
If the only defect in his threatened suit was standing, I think the court got it wrong. I can pretty much always find a plaintiff in that kind of a case, often within a day.
I wouldn't have sent a letter like that, or brought such a suit, and there might be ethical problems. Hmm, maybe that's part of it. He wasn't asking for $1000 for his client, but for himself. That might be unfair to the hypothetical client.
Rassmussen's comments raise an issue that has interested me.
Let's say the business wants to pay the $1000. (Let's say it the facts were different, the business was actually doing something wrong,and the lawyer is willing to take money to go away and the business is willing to pay it.) How, ethically, do you structure the settlement so the lawyer can't just come back the next day with a new client? My practice deals with government officials who are routinely censoring political speech of candidates and others in unlawful ways, where it doesn't matter too much exactly who my client is. They generally won't talk settlement until a court rules against them. It would be advantageous to me if there is a practical way to address such situations.
8.7.2009 1:41pm
ShelbyC:

I think the court got it wrong. I can pretty much always find a plaintiff in that kind of a case, often within a day.


Well, even if you say, give me $1000 or I'll find a client and sue you, that's still probably extortion unless you can show you would have made $1000 in legal fees.
8.7.2009 2:34pm
Barbara Skolaut (mail):
Don't know anything about NH ethics rules, and don't have time to look them up, but in a lot of (most?) states this kind of crap would be an ethics violation.

Wonder if the court would like to add insult to injury and hit him with that, too? ;)
8.7.2009 5:00pm
arbitraryaardvark (mail) (www):
@shelby: I can't show I would be paid $1000, but I can easily show I can bill $1000, 4.25 hours at my standard rate of $235. Open file, research statute and case law, meet with client, meet w/ client's banker, draft complaint, draft demand letter, file complaint, update file.
8.7.2009 6:48pm
ShelbyC:

@shelby: I can't show I would be paid $1000, but I can easily show I can bill $1000,



I'd imagine you would have to show that you were giving up ~$1000 in upside by not finding the client. You could find a client in a day that had been damaged enough that you could ethically charge $1000?
8.7.2009 7:23pm
David Schwartz (mail):
No, I'm saying that if in order for it to be feasible for the defendant to be charged with theft, it has to have been unreasonable for him to think he had standing, the fact that a NH Supreme Court judge does not find it unreasonable should automatically make it impossible to pursue a criminal charge.
No, in order for it to be feasible for the defendant to be charged with theft, it has to be utterly unreasonable for him to think he had standing. One of the three judges thought it was very slightly less unreasonable than that.

Call the standard X. One judge though it was slightly less than X. Two judges thought it was X.

You are saying "it must be clear that it meets X". But that is incorrect. X already contains the "it must be clear" part. The standard need not be higher than itself.
8.7.2009 8:21pm
neurodoc:
Barabara Skolaut: Don't know anything about NH ethics rules, and don't have time to look them up, but in a lot of (most?) states this kind of crap would be an ethics violation.

Wonder if the court would like to add insult to injury and hit him with that, too? ;)
The New Hampshire Supreme Court upheld this attorney's conviction for criminal extortion. Do we need to know the specifics of NH ethics rules to be supremely confident that this was an ethics breach without the court pronouncing it such? Is there any place in the US where this wouldn't amount to an ethics violation, one almost certain to cost this guy his law license?

Do we know what penalty the trial court imposed? Has the defendant been disbarred or will he be disbarred?

The jury instructions might have been critical in this case, but according to the NH Supreme Court, that issue wasn't raised at the time, and hence the defendant couldn't make it one of the issues on appeal. That sounds like a huge mistake for the defendant's trial counsel to have committed (did he perchance represent himself?), maybe malpractice. What do others think about this aspect of the case?
8.7.2009 9:06pm
arbitraryaardvark (mail) (www):
I said "bill" not "charge". Generally civil rights statutes and consumer protection statutes involve fee-shifting.
Haven't read the NH statute, since I'm having a hypothetical discussion and don't practice in NH.
Incidentally, http://mylegalspot.com/2009/08/demanding- settlement-for-clearly-baseless-lawsuit-criminal-extortion/
here's a blog that seems to just be a mirror of volokh.com - is it an authorized one?
8.8.2009 12:35am
markm (mail):
I don't like the use of criminal law for frivolous demand letters. Not only does it seem excessive to me, but it leaves the remedy up to the discretion of a DA - who is often no better ethically than the pond scum that send out such letters. But something is certainly needed.

Under our current system, generally the only cost of sending out letters threatening suit on bogus grounds is the lawyer's time, paper, ink, and stamps. Like spam, it costs the sender so little that it can be profitable with a success rate of under 1/1,000. Unlike spam, it often costs the targets thousands of dollars in legal fees just to establish that they have nothing to worry about. Lawyers are supposed to regulate themselves through the bar association, but that seems to mean that the ethically challenged are whitewashed by a committee of the ethically challenged.

What's needed to prevent abusive lawsuits isn't rarely-applied sanctions against a few percent of the egregious cases, but loser-pays. And what's needed to prevent abusive demand letters is simply to make loser-pays apply to them. That is, if the barber shop owner hired a lawyer to respond to Hynes' letter (as I assume any reasonable person would do), and Hynes subsequently dropped the matter, he would have to pay the legal fees for the response. If Hynes chose to actually pursue a lawsuit and lost, it would become much, much more expensive for him. If he neither filed the lawsuit or paid up, the barber's lawyer could take him to court, and collect those costs as well as the original bill.

Or for another example, when the RIAA sends out shotgun cease and desist letters, without even having a human review their search engine's output to determine if a copyrighted song was actually present, they would find themselves writing a lot of checks to innocent recipients.

Under this system, the only reason for anyone to pay a settlement is if there is a significant probability that they would lose in court, while the cost of threatening legal action would nearly always outweight the possibility of gain unless the probability of winning is at least 50%. It would end legal extortion and not be much of a hurdle to clearly meritorious lawsuits. The one downside (or not, depending on your point of view) is that it would raise the hurdles for suits that attempt to overturn laws and old precedents; you might have to collect twice as much money to get them started, to cover the chance that you'd lose and have to pay the opposition's fees, too.
8.9.2009 1:18am

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