Letters of formal notice are invaluable tools for creating cases, resolving disputes and much more. But, they can backfire and hold the sender and even his attorney liable for threats or demands that are legally inappropriate. Today we’ll cover some of the basics when demand letters go too far.
What is a warning letter for?
Many things fall under the umbrella of a “demand letter” for the purposes of this article: a cease and desist letter, notice of default, notice of violation, notice of violation, demand repair, etc. Request “letters” are usually written, but for the purposes of this article, I am also including unwritten requests (i.e. a phone call).
In a typical demand letter, the sender asks the recipient to stop doing something or take corrective action. Recipients often ignore these letters or respond and claim they have done nothing wrong. Even in these cases, it can be helpful to warn a party of wrongdoing to create a case. It may also satisfy a contractual requirement before the sender can take formal legal action.
For the rest of this article, I want to look at two examples of where demand letters go too far: extortion and breaches of attorney ethics.
When formal notices can become extortion
Extortion is generally a criminal offense depending on the state. I practice in California, where extortion is in our penal (criminal) code. Here is what the law says in part:
(a) Extortion is the obtaining of property or other consideration from another, with his consent, or the obtaining of an official act from a public officer, induced by an abusive use of force or fear, or under official law.
(b) For the purposes of this chapter, “consideration” means anything of value. . . .
Simply put, if someone uses an unwarranted threat of force or fear to obtain something of value, that is extortion. A clear example of potential extortion could be the threat to falsely report someone to the police for a crime if they don’t comply with a request. See Mendoza v. Hamzeh215 Cal.App.4th 799, 805 (2013):
“The threat to report a crime may constitute extortion even if the victim actually committed a crime. The threat to report a crime may in itself be legal. But when the threat to report a crime is accompanied by a demand for money, the threat becomes illegal whether or not the victim owes the money demanded.
This is a potential minefield for the cannabis industry. Cannabis is illegal at the federal level and may even be illegal at the state level. Our dispute resolution team has seen countless examples where parties and even attorneys have made demands that threaten to report the conduct to authorities (this is especially dangerous for attorneys, which I discuss below). This type of threat can result in liability for the party making the claim that they would not otherwise have faced.
Improper formal notices can violate legal ethics rules
In addition to general prohibitions on extortion, lawyers are not allowed to use threats of administrative or criminal sanctions to obtain an advantage in civil proceedings. This is true even before the applicant files a case. So, in addition to extortion issues, threatening to report someone to an agency or have them sued can lead to additional liability for a lawyer.
So what is appropriate in a demand letter?
Almost all demand letters make some kind of “threat”. Some are fine, some are not.
Let’s say a cannabis landlord demands that his tenant pay rent and threatens to sue for damages if he doesn’t. It’s usually a legitimate request. It would almost certainly be extortion if the landlord threatened to burn down the tenant’s house if the tenant did not pay.
Here’s a less clear example: the same landlord discovered that his tenant was violating cannabis regulations on the premises. He sent in a request for a cure and threatened to report it to the police and the cannabis agency and sue him if he didn’t. The threat of an action for damages is probably legitimate in many cases. But reporting threats could be prohibited by state prosecutor ethics rules.
The bottom line here is that there are areas where the demands are clearly inappropriate. Sometimes it can be hard to tell where to draw the line. A good attorney will be able to guide a client through the best course of action for making a claim. And a good lawyer will also be able to help a client determine what recourse they have when they receive an abusive request.