When Does Negotiation Become Extortion: Jeff Bezos, Michael Flatley, And The Line Between Extortion And Settlement Negotiation Drawn By The California Supreme Court
By Christopher Sargent and Jack Russo
What is the difference between an aggressive demand for a negotiated settlement of civil claims and the crime (or civil tort) of extortion? Over a decade ago the California Supreme Court addressed the precise question, which is now being played out in the media regarding Jeff Bezos’ revelations about discussions with the lawyers for the National Enquirer he called “extortionate” and “blackmail.” The National Enquirer says it was just a negotiation; Mr. Bezos and his lawyers say it was extortion. Who is correct?
Jeff Bezos, currently the richest person on the planet1, posted on medium.com a post summarizing his most recent encounters with American Media, Inc. (“AMI”), the owner of the National Enquirer2. In January 2019, the National Enquirer published a story about an extramarital affair Mr. Bezos had, including text messages3. Following that article, and in particular the publication of private photos. Mr. Bezos began an investigation into how AMI acquired those photos, hiring an expert in private investigation, namely, Gavin de Becker4. According to Mr. Bezos, this investigation made David Pecker, the CEO of AMI “apoplectic” and led another “AMI leader” to approach Mr. Bezos and Mr. De Becker with an “offer.”5 In the medium.com post, Mr. Bezos included what he claimed were copies of emails sent AMI representatives to an attorney representing Mr. De Becker. Mr. Bezos uses the word “extortion” (or a derivative of it) at least three times in this post and “blackmail” at least twice to describe these communications.6
Legal experts have publicly questioned whether the communications described qualify as the crime of “extortion,”7 while others noting the “closer call” involved than what is otherwise expected, believe a prosecutable crime occurred.8 AMI has maintained the legality of its communications and actions as good faith settlement discussions.9 The parties agree that no actual monies changed hands; they also agree that no mediator, no mediation, and no other third-party intermediary was involved in the discussions. How would a Court (at least in California) likely rule?
California Law Promotes Settlement Discussions But Not Ones Based on Extortionate Threats
In the oft-cited10 decision of Flatley v. Mauro,11 the California Supreme Court wrestled with an analogous version of this precise question. In that dispute, the dancer Michael Flatley sued Chicago-based attorney D. Dean Mauro for extortion and other claims based on a letter that purported to be a settlement demand. Mr. Flatley was accused of rape, and Mr. Mauro represented the woman making the rape claim. Mr. Mauro sent a letter to Mr. Flatley demanding a non-negotiable $1 million payment (of which Mr. Mauro said he would receive 40%), otherwise he would report Mr. Flatley to specific criminal authorities, such as the I.R.S., “Immigration” and “all appropriate authorities,” and to publicize the claims to specifically named news outlets, like Fox News and The New York Times.12 Mr. Mauro did not dispute that he sent this letter to Mr. Flatley. Mr. Mauro argued that it was a communication protected by the First Amendment13 filing a special motion to strike under California’s SLAPP statute14.
The California Supreme Court, as had all preceding lower courts, rejected Mr. Mauro’s motion, finding that the communication was not speech protected by the First Amendment.15 This rejection was based on a finding that the letter described above was extortion as a matter of law.16 The facts described by the Court in support of this holding include the following:
- Threat to publicly accuse Mr. Flatley of “unspecified violations of various laws;”
- Demand for payment;
- Statement that Mr. Mauro would receive 40% of the payment;
- Threat of public exposure of personal assets;
- Threat of punitive damages;
- Limited time for response, including statement that there will be “no continuances nor any delays;”
- Threat to issue press releases;
- Repeated threats to “go public;”
- Threat to “ruin” Mr. Flatley.17
Essential to the Court’s holding is that, “the threat to disclose criminal activity entirely unrelated to any alleged injury suffered by Mauro’s client ‘exceeded the limits of respondent’s representation of his client’ and is itself evidence of extortion.”18
How would the California Courts Likely Treat AMI communications with Mr. Bezos and Mr. De Becker?
First, the threat by AMI was to release embarrassing photos, not threats of reports to criminal prosecuting authorities. However, most extortion statutes do not distinguish between the nature of threats, and instead rely upon the wrongfulness of the threat.19
The communication that most directly links the promise not to release embarrassing photos is the February 7, 2019 email from Mr. Fine, identified as Deputy General Counsel of AMI. That email starts with, “Here are our proposed terms…” Thus, unlike Mr. Mauro’s letter, the message at least implied openness to negotiation. Also, unlike Mr. Mauro’s letter, it does not place any strict time in which to respond to the offer. The key similarity, though, is that the “proposed” terms link matters not genuinely related—the release of embarrassing photos and statements regarding AMI’s coverage of Mr. Bezos and the continuing threat to release them in the future if Mr. Bezos breaches the agreement.
In other words, AMI made repeated threats of claims against Mr. Bezos for defamation regarding statements about AMI’s motivation for its recent story about Mr. Bezos’ extramarital affair, but the release of unpublished, personal photos of Mr. Bezos does not relate to those claims. Thus, as with a key holding in the Flatley decision, a threat was implied “entirely unrelated to any alleged injury” suffered by AMI and “is itself evidence of extortion.”
However, unlike in Flatley, the threat to release the photos was only implied; it was not explicitly threatened upon failure of Mr. Bezos to comply with AMI’s demands, nor are exact times to respond stated. For example, the February 5, 2019 email from Mr. Howard of AMI describes the photos and says that “I hope common sense can prevail—and quickly.” Is this enough to trigger the Flatley exception? The answer is probably not and certainly not without a substantial expansion of the Flatley exception.
The reason is this: though the Flatley decision shows that the highest Court in California holding that a document that purports to be a settlement offer can be found to be criminally extortionate, whether the communications from AMI to Mr. Bezos fall within that exception is not perfectly clear and no Court in California has yet held the innuendo suffices. In summary, AMI will likely have a defense (at least under California law) but the detailed analysis goes far beyond a simplistic defense that it was just a “settlement” discussion. The label “settlement” will not get AMI through this morass.20 The key to any defense will be whether all the facts and circumstances add up to an explicit threat; here, if judged on the emails alone (and not any phone or other communications) there may not be enough proof to carry a criminal case but there may be enough for a civil action that would test whether the exception in Flatley should be expanded particularly against a tabloid that can dramatically injure the reputation of a newsworthy individual. Whether the Courts in the State of Washington (where Mr. Bezos resides and arguably was injured) or the Courts in the State of New York where AMI is located would treat the matter in the same manner as the Courts in California where Mr. De Becker resides, is an open question which we leave for another day. To date, few Courts in other states have cited or followed Flatley21.
10 According to Westlaw on February 11, 2019, this decision has been cited 4,541 times, including 1,010 citations in cases.
11 Flatley v. Mauro, 39 Cal. 4th 299 (2006).
12 Flatley, 39 Cal. 4th at 308-309.
13 Flatley, 39 Cal. 4th at 306.
14 SLAPP is an acronym for Strategic Lawsuit Against Public Participation. The SLAPP law was enacted by California in 1992. Cal. Civ. Proc. Code § 425.16.
15 Flatley, 39 Cal. 4th at 320.
16 In this context, “as a matter law” likely means that the facts were not in dispute, i.e. Mr. Mauro did not dispute that he sent the letter; therefore, the only question was a legal one: what were the legal implications of that letter?
17 Flatley, 39 Cal. 4th at 329.
18 Flatley, 39 Cal. 4th at 330–31.
19 “The term ‘extortion’ means the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.” 18 U.S.C.A. § 1951 (West).
20 Flatley also points the way to other potentially interest discussions, such as whether a litigation privilege applies to these discussions, immunizing AMI from civil liability at least, because they made in the context of threatened litigation. Also unknown is what state’s law would apply. Mr. Bezos is, of course, in Washington; Mr. De Becker and his attorney are in Southern California; and AMI appears to be in New York or Florida. Each state has different laws regarding SLAPP (Fla. Stat. Ann. § 768.295; Davis v. Cox, 183 Wash. 2d 269 (2015), extortion and litigation privilege, not to mention the potential application of federal criminal law given the interstate nature of the communications.
21 Rogers v. Dupree, 340 Ga. App. 811, 817 (2017) (discussing the relationship between purported settlement discussions and extortion); Dillon v. Seattle Deposition Reporters, LLC, 179 Wash. App. 41, 83 (2014) (discussing what qualifies as protected activity under Washington’s SLAPP law; however, Washington’s SLAPP law was later held unconstitutional under the Washington constitution; Davis v. Cox, 183 Wash. 2d 269 )