When May a Lawyer Threaten the Other Party with Criminal Prosecution?
By Alice Neece Moseley
Your client, Joe Merchant, received a bad check from Ben Buyer, a regular patron at Joe’s retail establishment. Joe just wants the check made good; he isn’t really interested in lodging criminal charges against someone who was, until recently, a good customer. But he wants Ben to know that criminal charges could be brought if he doesn’t pay up. May you write a letter to Ben threatening to bring criminal charges if he doesn’t pay, in cash or certified funds, the full amount of the bad check?
Another client, Hy Finance, invested in a business venture organized by Lew Rent. Hy just discovered that Lew has been taking the money Hy thought he was investing. Hy is out over $50,000. Hy wants to sue Lew “for every dime he has” and “to sic the cops on him” but he will agree not to notify the district attorney if Lew will pay him back the $50,000 plus “a little sweetener.” Should you write a letter to Lew informing him that Hy won’t go to the D.A., and will sign an agreement to that effect, if Lew pays him $75,000?
You have a lot of problem clients, but Vin Dictive is the most difficult of all. She is involved in a bitter divorce from her husband, Dodge Dictive. Vin knows that Dodge has been cheating on the income tax returns for his business for years. She thinks that a “more equitable” equitable distribution can be worked out if it is suggested to Dodge that unless he is more cooperative, she will go to the IRS with her information. May you pass this suggestion on to Dodge?
These hypotheticals illustrate just a few of the ethical dilemmas that arise when a lawyer represents a client who has both a civil claim against the opposing party as well as knowledge about the criminal activity of the opposing party. Before the Revised Rules of Professional Conduct were adopted last year, the answer to the questions raised in all three hypotheticals was a simple “no” (or, in the case of the third situation, “hell no”). Under the superseded (1985) Rules of Professional Conduct, Rule 7.5 prohibited a lawyer from “present[ing], participat[ing] in presenting, or threaten[ing] to present criminal charges primarily to obtain an advantage in a civil matter.” But the prohibition in Rule 7.5 was deliberately omitted from the Revised Rules.1In the absence of a specific prohibition, does a lawyer act with impunity when she threatens to present, or presents, criminal charges for the primary purpose of extracting a favorable settlement from the other party? And if a favorable settlement is reached, may the lawyer participate in the preparation of a settlement agreement that promises not to inform the authorities in exchange for some (usually monetary) consideration?
Putting discussion of the last hypothetical aside for the moment, these ethical questions arise most frequently in situations where the same conduct by the opposing party constitutes both a crime and a civil wrong. Also, because the actual institution of criminal charges seldom offers a tactical advantage, the ethical dilemma most frequently occurs when the lawyer is contemplating a threat of criminal prosecution accompanied by an offer to forbear.2 If there is a connection between the civil wrong and the criminal wrong, failing to discuss openly the potential criminal liability with the opposing party may put the negotiations in a false light. But offering forbearance of criminal charges in exchange for compensation is, at a minimum, somewhat distasteful. Although questions remain, the following discussion attempts to provide guidance to the lawyer faced with this dilemma.
The Old Rule and Its Omission from the Revised Rules
Superseded Rule 7.5 was a carryover from the superseded (1975) Code of Professional Responsibility. Code section DR 7-105(A) specifically prohibited a lawyer from using or threatening prosecution “solely” to gain an advantage in a civil matter. The public policy advanced by the prohibition was stated in Ethical Consideration 7-21:
The civil adjudicative process is primarily designed for the settlement of disputes between parties, while the criminal process is designed for the protection of society as a whole. Threatening to use, or using, the criminal process to coerce adjustment of private civil claims or controversies is a subversion of that process; further, the person against whom the criminal process is so misused may be deterred from asserting his legal rights and thus the usefulness of the civil process in settling private disputes is impaired. As in all cases of abuse of judicial process, the improper use of criminal process tends to diminish public confidence in our legal system.
The comment to Rule 7.5 was more succinct: “[The criminal courts] are not intended to provide forums for the adjustment of civil disputes.” Nevertheless, with clogged courts and plenty of serious crimes to prosecute, district attorneys are not always adverse to the private resolution of claims that have criminal ramifications.
The committee3 that proposed the adoption of the Revised Rules followed the ABA Model Rules by deliberately omitting the prohibition on threatening criminal charges. The omission was consistent with the committee’s philosophy of following the Model Rules when experience and common sense so dictated. The prohibition was omitted from the Model Rules because it was overbroad and redundant. Other rules already prohibited extortion and abusive threats of prosecution.4 This explanation is provided in ABA Formal Opinion 92-363:
Implicit in the view of the drafters of the Model Rules that no general prohibition on threats of prosecution is justified is the proposition that such a prohibition would be overbroad, excessively restricting a lawyer from carrying out his or her responsibility to ‘zealously’ assert the client’s position under the adversary system….When the criminal charges are well founded in fact and law, their use by a lawyer does not result in the subversion of the criminal justice system that DR 7-105 sought to prevent.5
The State Bar committee also concluded that the application of the rule to conduct had been problematic. The rule appeared to limit a lawyer’s ability to advise a client about the criminal as well as the civil remedies for a wrong.6 It implied that the lawyer’s client had to chose between seeking civil or criminal justice.7 Moreover, if the lawyer wasn’t constrained in advising the client, she at least felt constrained in her communications with the opposing party. Demand letters contained veiled and indirect forewarnings that the client would pursue “all remedies allowed by law.” The elimination of the rule was intended to open the lines of communication with clients as well as opposing parties. It was not intended to foster extortion or abuse of the legal system.
Extortion? Compounding a Crime? Abuse of Process?
Rule 7.5, by prohibiting threats of prosecution only if intended “primarily” to gain an advantage in a civil matter, emphasized the motive of the lawyer acting on behalf of the client.8 So long as seeking an advantage in a civil matter was one motive, but not the primary motive, the threat of criminal prosecution was not unethical. Roger W. Smith, the renowned North Carolina criminal lawyer, suggests that this emphasis on motive helped the lawyer, and her client, to avoid the crime of extortion and the civil wrong of abuse of process.9
Extortion is classified as a Class F Felony in G.S. §14-118.4. It is defined as communicating a threat to another “with the intention thereby wrongfully to obtain anything of value or any acquittance, advantage, or immunity.” The related common law crime of compounding a felony is defined in State v. Hodge, 142 N.C. 665, 55 S.E.2d 626 (1906). It occurs when one with knowledge that another has committed a felony agrees not to inform the authorities in exchange for something of value.
Abuse of process, on the other hand, is the civil wrong of using legal process for an ulterior motive to accomplish a purpose for which the legal process is not intended.10 The Academy of Trial Lawyers’ Prima Facie Desk Manual for Civil Actions contains the following quote on the elements of the tort:
The existence of an ulterior motive, malice or bad intent in bringing the suit does not alone give rise to an action for abuse of process. There must also be a willful act by the defendant, after process is issued, whereby the defendant attempts to use that process to harass or pressure the plaintiff with respect to a matter outside the scope of the original writ.11
If the client’s motive in threatening criminal prosecution is “wrongfully” to receive compensation for a civil wrong; if the client agrees not to inform the authorities about a felony in exchange for compensation; or if, after initiating criminal charges, the client uses the charges to harass or pressure the defendant to compensate him for the civil wrong, there may be exposure for the crimes of extortion and compounding a felony and the civil wrong of abuse of process. A lawyer who participates in these activities may be exposed to discipline for violating ethical rules even in the absence of a specific prohibition on threatening criminal prosecution.
Other Rules, Other Prohibitions
The decision to eliminate Rule 7.5 from the Revised Rules was made with the knowledge that other provisions of the Revised Rules prohibit extortionate and abusive conduct by a lawyer. As observed in ABA Formal Opinion 92-363, Rules 8.4, 4.4, 4.1, and 3.1, “set the limits on legitimate use of threats of prosecution.”12
Rule 8.4(b) provides that it is professional misconduct for a lawyer to “commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness, or fitness as a lawyer in other respects.” If a lawyer participates in conduct that constitutes the crime of extortion or of compounding a felony, the conduct violates Rule 8.4(b). Such conduct also violates Rule 8.4(d) which provides that it is professional misconduct for a lawyer to engage in conduct that is prejudicial to the administration of justice. Moreover, if the lawyer’s threat of criminal prosecution implies an ability to influence the district attorney, the judge, or the criminal justice system, it is a violation of Rule 8.4(e) which provides that it is professional misconduct for a lawyer to “state or imply an ability to influence improperly a government agency or official.”
Rules 4.4 and 4.1 also circumscribe a lawyer’s discretion in threatening or initiating criminal prosecution. Rule 4.4 prohibits a lawyer from using tactics “that have no substantial purpose other than to embarrass, delay, or burden a third person….” Rule 4.1 requires a lawyer to be truthful in her communications with third persons. Thus, a lawyer who threatens criminal prosecution for the sole purpose of harassing the other party or who threatens criminal prosecution with no intention of bringing charges is engaging in unethical conduct.13
Lastly, Rule 3.1 prohibits a lawyer from asserting a frivolous claim. Rule 3.1 is violated if a lawyer threatens to bring criminal charges that are not well founded in fact and law, or threatens criminal prosecution to advance a frivolous civil claim.14
The ABA and the State Bar Reach the Same Conclusion
If the other rules prohibit extortion and abusive threats, when may a lawyer offer to forego reporting criminal activity in exchange for a civil settlement without crossing the line into unethical conduct? ABA Formal Opinion 92-363 offers an answer:
The Model Rules do not prohibit a lawyer from using the possibility of presenting criminal charges against the opposing party in a civil matter to gain relief for her client, provided that the criminal matter is related to the civil claim, the lawyer has a well-founded belief that both the civil claim and the possible criminal charges are warranted by the law and the facts, and the lawyer does not attempt to exert or suggest improper influence over the criminal process.15
When there is a relationship between the criminal matter and the client’s civil claim, the opinion reasons, the threat of criminal prosecution may not constitute the crime of extortion. Under the Model Penal Code, for example, threats of criminal prosecution are not criminalized if the property obtained thereby “‘was honestly claimed as restitution for harm done in the circumstances to which such accusation, exposure, lawsuit or other official action relates, or as compensation for property or lawful services.’”16 Although no caselaw on point was found, a similar observation can be made about the definition of criminal extortion in G.S. §14-118.4: extortion occurs only when a threat is communicated with the intention of “wrongfully” obtaining something of value. If the person threatening criminal prosecution has a legitimate claim for civil restitution, the key element of wrongful intent may be absent.
A relationship between the civil claim and the threatened criminal charges may also insulate the lawyer and the client from the criminal charge of compounding a crime according to the ABA opinion. The Model Penal Code provides that it is an affirmative defense to that crime if “‘the pecuniary benefit did not exceed an amount which the actor believed to be due as restitution or indemnification for harm caused by the offense.’” [emphasis added].17
In 1988, following a study by a special committee, the Council of the North Carolina State Bar sent a proposal to amend Rule 7.5 to the North Carolina Supreme Court for approval.18 Proposed four years before ABA Formal Opinion 92-363 was published, the amendment incorporated the conclusions reached in ABA Formal Opinion 92-363. The proposed amendment read:
A lawyer shall not present, participate in presenting, or threaten to present criminal charges to obtain an advantage in a civil matter unless the criminal charges are related to the civil matter and the lawyer reasonably believes the charges to be well grounded in fact and warranted by law [revision in italics].
Although the Supreme Court did not approve the amendment, its adoption by the State Bar suggests that a lawyer who follows the ABA formulation will not face disciplinary proceedings in North Carolina. This conclusion is bolstered by the discussion found in the executive summary of the proposed Revised Rules published in conjunction with the publication of the proposed rules for comment.19 The executive summary notes Rule 7.5 was eliminated from the Revised Rules because it inhibits legitimate, good faith efforts to resolve a civil matter when there are related criminal charges.20
Nevertheless, neither ABA Formal Opinion 92-363 nor the revision to the North Carolina Rule 7.5 proposed in 1988 provide guidance relative to the second part of the ethical conundrum presented by the abolition of Rule 7.5: may a lawyer participate in a settlement in which her client agrees not to report the potential criminal conduct?21 It is noted in the ABA opinion that the Model Rules do not prohibit a lawyer from participating in such a settlement agreement “so long as such agreement is not itself in violation of law:”
Although there is no express prohibition against such an agreement, a lawyer must be careful to avoid the criminal offense of compounding a crime, which in turn would violate Rule 8.4(b)’s prohibition against “criminal act[s] that reflect adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects.”22
The lawyer must also be careful to avoid any implication that the settlement includes the client’s agreement to testify falsely or to evade a subpoena in a criminal proceeding should criminal charges subsequently be brought by the authorities. Such conduct clearly violates the prohibitions in Rule 3.4(a) and (b) on counseling or assisting another to destroy or hide evidence, testify falsely, or avoid serving as a witness.
The Hypotheticals and Your Conduct
There is a relationship between the criminal charges and the civil matters in the two hypotheticals that start this article. Under the ABA analysis, the lawyer, if she reasonably believes that the criminal charges are well founded in fact and law, might threaten criminal prosecution in both scenarios without violating the Revised Rules. But let’s go back to the third hypothetical. There is no relationship between the client’s civil claim (equitable distribution of marital property) and the opposing party’s alleged criminal activities (federal tax evasion). A lawyer who, by threats of criminal prosecution, exploits knowledge of the opposing party’s criminal activity to the advantage of the client in an unrelated matter “furthers no legitimate interest of the justice system, and tends to prejudice its administration.”23 Conduct prejudicial to the administration of justice violates Rule 8.4(d). The lawyer may also be guilty of extortion—clearly a violation of Rule 8.4(b) which prohibits criminal conduct that reflects adversely on the lawyer’s trustworthiness, honesty, or fitness. If the unrelated criminal charges are presented, the lawyer may expose the client to an abuse of process claim. There is no confusion here: under no circumstances should a lawyer present or threaten to present criminal charges primarily to gain an advantage in an unrelated civil matter.24
Similarly, making a demand for something in excess of pure restitution in exchange for refraining from presenting criminal charges, as suggested in the second hypothetical, is unethical. Again, such a threat raises questions of criminal conduct and prejudice to the administration of justice.
So what can a lawyer do? It is safe to conclude that a lawyer may present, participate in presenting, or threaten to present criminal charges to obtain an advantage in a civil matter if the criminal charges are related to the civil matter and the lawyer reasonably believes that the charges are well grounded in fact and warranted by law and, further provided, the lawyer’s conduct does not constitute a crime under the law of North Carolina. Whether the lawyer may participate in a settlement of the civil matter that specifies that the client will not present criminal charges is, as yet, unanswered. At a minimum, the lawyer may not participate in a settlement agreement that contains any promise by the client that the client will hide, leave the jurisdiction, or otherwise avoid testifying truthfully in any subsequent criminal proceeding.
The elimination of Rule 7.5 may help lawyers to represent their clients’ interests zealously and to avoid some of the subterfuge that previously accompanied the resolution of civil claims. However, its elimination did not give license to criminal activity or abuse. When discussing with the opposing party the potential criminal charges that may flow from the transaction that also gave rise to the client’s civil claim, the lawyer should do so in an effort to resolve the client’s claim fairly and not in an effort to browbeat, embarrass, or harass the other side. n
Alice Neece Moseley is the assistant executive director of the State Bar, counsel to the Ethics Committee, and director of CLE and Specialization.
1. Executive Summary of the Report of the Committee to Review the Rules of Professional Conduct, in Materials for the North Carolina Supreme Court on the Proposed Revised Rules of Professional Conduct, at 3, N.C. State Bar, Raleigh, N.C., (Apr. 4, 1997) (hereinafter Executive Summary).
2. ABA Comm. on Ethics and Professional Responsibility, Formal Op. 363, at n. 3 (1992) (hereinafter ABA Formal Op. 92-363).
3. The Committee to Review the Rules of Professional Conduct of the North Carolina State Bar was active from December 1992 until April 1997. The committee’s recommendations for revisions of the rules were adopted by the State Bar on April 4, 1997, with few changes.
4. ABA Formal Op. 92-363 (“‘extortionate, fraudulent, or otherwise abusive threats were covered by other, more general prohibitions in the Model Rules and thus there was no need to outlaw such threats specifically.’” (quoting C.W. Wolfram, Modern Legal Ethics (1986) sec. 13.5.5 at 718)).
6. Letter from Roger W. Smith to Gerald H. White, August 6, 1987 (copy on file with author). This letter was subsequently included in a CLE manuscript on professional responsibility presented by the North Carolina Bar Foundation.
10. North Carolina Prima Facie Desk Manual for Civil Actions, North Carolina Academy of Trial Lawyers, p.1 (1981). The manual lists the following elements of the tort of abuse of process: (1) a willful act committed by defendant, (2) with bad intent or ulterior motive, (3) after valid process has been issued, (4) whereby the defendant attempts to use the process to accomplish a purpose for which it was not intended.
11. Id. (citing Carpenter v. Hanes, 167 N.C. 551, 83 S.E. 577 (1914); Jerome v. Shaw, 172 N.C. 862, 90 S.E. 764 (1916); Wright v. Harris, 160 N.C. 542, 76 S.E. 489 (1912)).
12. ABA Formal Op. 92-363.
16. Id. (quoting Model Penal Code, §223.4). The opinion also notes that Model Penal Code, §223.2(3) provides that threats are not criminally punishable if they are based on a claim of right, or if there is an honest belief that the charges are well founded.
17. Id. (quoting Model Penal Code, §242.5).
18. Threatening Criminal Prosecution: Council Adopts Amendment to Rule 7.5 of the Rules of Professional Conduct, N.C. State Bar Newsl., vol. 13, no. 3, at 1, N.C. State Bar, Raleigh, N.C.(Summer 1988).
19. Executive Summary, supra note 1.
21. In deciding whether to participate in such an agreement, the lawyer should consider two ethics opinions on the related subject of whether a lawyer may participate in an agreement to refrain from reporting misconduct by licensed professionals. See The 1996 North Carolina State Bar Lawyer’s Handbook, N.C. State Bar Q., vol. 42, no. 1, at 190 and 218 (Winter 1996). The opinions imply that such agreements should be avoided for reasons of public policy. RPC 84 prohibits a lawyer from participating in the settlement of a civil dispute that includes an agreement not to report lawyer misconduct because “[i]n order for the North Carolina State Bar to fulfill its responsibility to regulate the legal profession, it is imperative that persons who are aggrieved by apparent lawyer misconduct…feel free to transmit relevant information to the Grievance Committee for investigation.” Although policy is not discussed in the opinion, RPC 159 prohibits a lawyer from participating in the settlement of a civil dispute involving allegations against a psychotherapist of sexual involvement with a patient if the settlement is conditioned upon an agreement not to report the misconduct to the appropriate licensing authority.
22. ABA Formal Op. 92-363.
24. See 86 DHC 6 (1986) (lawyer received public censure for attempting to coerce a favorable settlement in a civil case by threatening to expose the adverse party’s alleged criminal conduct in an unrelated matter).
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