Legally, in the U.S. (NY, NJ, FLA), what determines the difference between a THREAT and NEGOTIATING, for either side?

Question

I have been told that lawyers who are "negotiating" a settlement (or similar) have quite a bit of leeway when doing so as far as not being legally held to certain things they may say or offer during the "negotiation." What draws the line legally for the lawyer or the other party?

For sake of this discussion assume all of the below is during a period of both sides trying to settle. One party is the lawyer and one party is a civilian:

If one party were to say "I would like to settle this without litigation but if we have to file a complaint/litigate there is a good chance my complaint will contain information/damages related to:"

• the time you were paid off the books, avoiding taxes
• the time you were encouraged to perform an illicit/illegal act
• purposeful misclassification of employment status, which is a felony

or other similar items. What are threats vs. what are "negotiating tactics?"

Answer 1

This negotiation tactic is not a crime, but it does implicate an ethical rule for attorneys, Rule of Professional Conduct 4.5, which exists in some states, but has been dropped from the national model rules promulgated by the American Bar Association and is a controversial matter from state to state with several variant forms in different states. In Colorado, the relevant rule of professional conduct for lawyers (Rule 4.5 Threatening Prosecution) states:

(a) A lawyer shall not threaten criminal, administrative or disciplinary charges to obtain an advantage in a civil matter nor shall a lawyer present or participate in presenting criminal, administrative or disciplinary charges solely to obtain an advantage in a civil matter.

(b) It shall not be a violation of Rule 4.5 for a lawyer to notify another person in a civil matter that the lawyer reasonably believes that the other's conduct may violate criminal, administrative or disciplinary rules or statutes.

The concern about the statement in the question is that mentioning that certain allegations would be put in a publicly filed complaint is an implicit threat to expose criminal acts of the other party if the other party doesn't cooperate, but to refrain from doing so if the other party cooperates. This violates Rule of Professional Conduct 4.5(a) above, and goes beyond Rule 4.5(b) above which states that it is not improper to simply tell someone that it may have been illegal and a crime to do the things that he did.

The critical distinction is the implied promise not to disclose these crimes publicly if the other party cooperates by not filing the proposed complaint.

Under Rule 4.5, a lawyer can tell someone that certain conduct is probably illegal, and can unilaterally report illegal conduct, but can't hold open the possibility of not reporting illegal conduct to gain a civil advantage. The theory is that it is contrary to public policy for a lawyer to put himself or his client in a position where he is promising to help cover up a crime or other violation of the law.

This is controversial, and is not adopted in all states, because it makes some very subtle distinctions that often hinge on strongly implied concepts, and that it provides benefit when applied in many cases to someone who has broken the law, instead of making their violation of the law something that makes them worse off in civil cases as well as in other contexts. There is not a counterpart to Colorado Rule of Professional Conduct 4.5 in the Rules of Professional Conduct of New York State, New Jersey, or Florida.

So, to the extent that this conduct is subject to ethical rules in any of these states, it would only be indirectly through, for example, through Rule of Professional Conduct 8.4 in each of these states, which is a general catch all clause prohibiting lawyers from committing culpable crimes or that is dishonest or that is prejudicial to the administration of justice. Rule 8.4 is the counterpart for lawyers of the substantive offense in military justice that a military officer has failed to comport himself as an officer and a gentleman. The history of the decision to remove an express prohibition on threatening prosecution from the ethical rules for lawyers is explained in a 2008 ABA article that also discusses how liability might arise under Rule 8.4.

In general, there is nothing wrong with making threats in a negotiation. Often that is precisely what negotiations are about. What is (arguably) wrong is making criminal, administrative or disciplinary charge threats in a civil lawsuit to gain advantage in a civil lawsuit. A prosecutor is perfectly free to make those threats in a criminal case, for example. Similarly, it is perfectly acceptable to make a threat of civil legal action, such as filing a lawsuit, in a civil matter, so long as it doesn't imply a threat to bring criminal, administrative or disciplinary charges if the other side doesn't cooperate.

Whether it is proper for an attorney to do this depends heavily upon the state in which this negotiation is taking place, which is not identified in the question.

Answer 2

In and of itself, a threat to take legal action is not necessarily unlawful. Problems may arise when the threat meets the legal or statutory definition of extortion. For instance, see MCL 750.213:

Any person who shall, either orally or by a written or printed communication, maliciously threaten to accuse another of any crime or offense [...] with intent to compel the person so threatened to do or refrain from doing any act against his will, shall be guilty of a felony

Here, the language "do [...] and act against his will" means accepting a settlement that the party is otherwise inclined to reject.

The examples you outline sound in extortion. Moreover, one or more of those examples may implicate the employer for consenting to or abetting the employee's illegal conduct during the time the parties were in good terms.

If the person making those threats is an attorney, he ought to be reported also with the agency in charge of attorney disciplinary matters in your jurisdiction.

Answer 3

This article by law professor Eugene Volokh looks at the line separating blackmail from lawful threats. According to Volokh the courts look for a "nexus" between the threat and whatever the negotiator is seeking (and yes, the term "nexus" is rather vague). So "pay me the money you owe or I sue" is a lawful threat because the lawsuit is about the money. "Pay me the money or I publish the pictures of you and your lover in bed" is blackmail because the money and the pictures have nothing to do with each other.

Beyond that, threatening to reveal illegal misconduct to get money is specifically blackmail under federal law, so the examples you give would definitely be illegal.

Answer 4

Simply put, if you say "Give me this amount of money, or I will sue you", the opposing lawyer could successfully claim that is extortion and/or blackmail.

But if you prepare your Statement of Claim ready to be filed with the court, and send it to the opponent accompanied with a letter along the lines of:

I am just about to file this with the court. The law requires me to attempt to resolve and settle this matter with you directly before resorting to legal action. If you would like to discuss, please give me a shout before [date].

— that will be negotiation, not threat. The key point here is not to ask for money, but induce the opponent to make you an offer.