SANTA ANA, Calif. (Legal Newsline) - A lawyer’s zealous representation of a man who had been fired from a cannabis company crossed the line into extortion when she interfered with a $200 million merger and threatened to turn over allegations of criminal behavior to state officials, a California appeals court ruled.
The decision by Division Three of the Fourth Appellate Division against attorney Amy Mousavi established a line between the routine bluster of lawyers engaged in litigation and illegal extortion, ruling that otherwise legal statements can be illegal when they link threats to reveal damaging information with demands for money. The appeals court rejected Mousavi’s argument her statements were covered by California’s anti-SLAPP law protecting speech in the context of litigation.
Falcon Brands sued Mousavi after she e-mailed an escalating series of demands on behalf of her client Nick Honard, who was fired by Falcon in August 2019 for what Falcon said were fraudulent expense reports and hiring someone without authorization.
In her initial letter to Falcon in September 2019, Mousavi informed Falcon of Honard’s claim of improper dismissal and requested his employment records. Mousavi renewed her request in October, adding a number of threats including that she would inform Harvest Health & Recreation, which had agreed to buy Falcon, that it could become a defendant in an employment lawsuit.
She also described a dozen examples of alleged illegal and criminal behavior by Falcon, including bribing a district attorney to drop charges against a Falcon driver and making illegal deliveries of cannabis.
Mousavi demanded $490,000 from Falcon to settle the threatened litigation, saying if she didn’t receive a response by the next day she had “no choice but to contact Harvest Health & Recreation Inc. and file a complaint.”
Falcon’s lawyer responded by warning Mousavi against contacting Harvest Health, describing her threat as a tortious attempt to interfere in their merger agreement. Falcon’s lawyer said he had a phone conversation with Mousavi on Oct. 9 in which she also threatened to turn over the allegations of illegal activities to the California Bureau of Cannabis Control unless Falcon settled.
Two days later, Mousavi e-mailed Falcon to say she had informed Harvest Health of Honard’s employment claim, “without disclosing other issues.” She said she would forward the letter with the allegations of illegal activity to Harvest Health within several days and when Falcon didn’t respond, told the company she would “move forward accordingly.”
Finally, on Oct. 16, Mousavi said she had been trying to resolve Honard’s dispute “but all I get from you are threats and evasiveness. I waited patiently to no avail…if you want to resolve this matter, now is the time.”
Honard sued in January 2020, making several allegations of illegal activity without linking them to his dismissal. Falcon countersued in May, saying Mousavi’s threats caused Harvest Health to rescind its agreement to buy Falcon and demand $51 million in previous payments it had made to the company, citing allegations of illegal activity.
Mousavi moved to strike under California’s anti-SLAPP law (for Strategic Lawsuit Against Public Participation), which courts have interpreted to protect not only general speech on matters of importance to the public but most statements made in litigation. The trial court granted her motion to strike, concluding that Mousavi’s statements were protected by the litigation privilege and her threat to contact Harvest was not “entirely unrelated” to the employment dispute. There was no proof she sent the letters “with the intent to extort money by fear,” the court said, “thus, extortion cannot be found as a matter of law.”
Falcon appealed, and the Fourth Division court, in a Jan. 27 decision by Judge Thomas Goethals, reversed.
“Mousavi’s escalating series of threats ultimately transformed what had been legitimate demands into something else: extortion,” the court concluded.
The key California decision in this area involved entertainer Michael Flatley’s lawsuit against attorney D. Dean Mauro for sending a demand letter on behalf of a woman who claimed Flatley had raped her. The California Supreme Court in 2006 affirmed a judgment against Mauro, ruling that his demand was extortionate and not protected under the anti-SLAPP law.
In that case, the California Supreme Court described extortion as a “paradoxical crime” because it makes illegal threats which, by themselves, may not be illegal. Mousavi argued she was merely engaging in typical bluster on behalf of her client, the appeals court said.
“This argument will strike a familiar chord with many lawyers who might ask, isn’t this type of posturing standard operating procedure for aggressive litigators?” the court observed. “Don’t lawyers regularly link settlement demands to threatened consequences?”
Many threats are never carried out, the court said, for an obvious reason: “The threat had its desired effect.” It is the fact the threat is directly linked to the monetary demand that is critical.
Mousavi’s first letter was innocent, the court said, but the second was “a closer call,” since she raised the issue of alleged criminal acts without linking her settlement demands to them. “A skeptical observer” might wonder why she put both elements in the same letter, the court said, adding: “Indeed, we share that curiosity.”
Considered with the third letter, however, Mousavi crossed the line, the court concluded. In that letter, she said she had informed Honard’s employment claims and was planning to forward the previous demand letter with allegations of illegal behavior to Harvest if Falcon didn’t settle.
“The implication is clear: settle the case now or Harvest will become aware of Falcon’s alleged criminal misconduct next week,” the appeals court said.
Mousavi may have had a legitimate legal reason to inform Harvest about Honard’s claims of illegal behavior, the court said, but it was illegal to threaten Falcon that she would do so unless the company met her demands.
“Such conduct falls squarely within the statutory definition of extortion,” the court concluded.