Can a lawyer threaten to report an opposing party to a regulatory or administrative agency to gain leverage in a civil settlement?

Plain-English summary

The opinion analyzes whether a lawyer may seek an advantage for a client in a civil dispute by threatening to instigate an ancillary non-criminal proceeding against the adverse party, for example threatening to report the party's conduct to an administrative or regulatory agency unless the party settles. The committee starts from the text of Rule 3.4(e), which bars threatening "criminal charges solely to obtain an advantage in a civil matter." Because the rule by its terms reaches only criminal charges, the committee concludes (consistent with NYSBA Op. 772 and its own Op. 2015-5 on threats to file disciplinary complaints) that Rule 3.4(e) does not prohibit threats to instigate non-criminal proceedings.

The committee then stresses that the inapplicability of Rule 3.4(e) does not give lawyers free rein. Three other constraints apply. First, a threat that amounts to criminal extortion or similar conduct will likely violate Rule 3.4(a)(6) (illegal conduct) and Rule 8.4(b) (illegal conduct reflecting on fitness); whether particular conduct is extortion is a legal question the committee does not decide. Second, a threat the lawyer knows is legally or factually baseless, including a stated intent to bring a proceeding the lawyer does not intend to pursue, may violate Rule 4.1 (false statements to third persons) or Rule 8.4(c) (dishonesty), and a frivolous threatened proceeding may implicate Rule 3.1.

Third, even a threat that is grounded in fact and law, has a substantial purpose beyond harassment, and is not criminally extortionate may violate Rule 8.4(d) (conduct prejudicial to the administration of justice). The committee, following ABA Formal Ops. 92-363 and 94-383, ties this to "relatedness": a threatened proceeding that seeks the same relief as the civil claim (for example, an investor threatening an NYSE proceeding over the same misappropriation he is suing on) generally does not prejudice the administration of justice, while a threat about matters extraneous to the dispute (such as North Carolina Op. 2005-3's threat to report an opposing party's immigration status) is more likely to be extortionate in nature and to harm the justice system.

In practice

Under this opinion, conduct that involves threatening a non-criminal proceeding to gain a civil-settlement advantage is not, by that fact alone, a Rule 3.4(e) violation, because that rule reaches only threats of criminal charges. The opinion holds, however, that such a threat is constrained by other rules as they stood at the time of the opinion: it must not amount to criminal extortion (which would implicate Rules 8.4(b) and 3.4(a)(6)), must have a sufficient basis in law and fact (or it may violate Rules 3.1, 4.1, and 8.4(c)), and must not concern matters extraneous to the parties' dispute (or it may violate Rule 8.4(d)). The opinion frames the Rule 8.4(d) analysis around whether the threatened proceeding is an alternative means of vindicating the same claimed right, in which case it generally does not prejudice the administration of justice.

Common questions

Q: Does Rule 3.4(e) stop me from threatening to file a regulatory complaint to push a settlement?

A: No. The opinion concludes that Rule 3.4(e) applies only to threats of criminal charges, so a threat to instigate a non-criminal proceeding (such as a complaint to an administrative or regulatory agency) is outside that rule's text.

Q: So any non-criminal threat is fine?

A: No. The opinion identifies several other limits: the threat may be criminal extortion (then Rules 8.4(b) and 3.4(a)(6)); it may be baseless and therefore violate Rules 3.1, 4.1, or 8.4(c); or it may be prejudicial to the administration of justice under Rule 8.4(d).

Q: When does a threat violate Rule 8.4(d)?

A: The opinion says it generally turns on relatedness. A threatened proceeding that seeks the same relief as the underlying civil claim ordinarily does not prejudice the administration of justice, while a threat about matters extraneous to the dispute, used only as leverage, is more likely to.

Q: Can I threaten to report an opposing party's immigration status?

A: The opinion cites North Carolina Op. 2005-3 with approval for the view that exploiting an unrelated matter like immigration status purely for settlement leverage furthers no legitimate interest of the adjudicative system and may violate Rule 8.4(d).

Background and rules framework

The opinion interprets New York Rule of Professional Conduct 3.4(e) (its retained version of former DR 7-105(A), which the ABA deleted in 1983), together with Rules 8.4(b), 8.4(c), 8.4(d), and 8.4(h) (misconduct; Model Rule 8.4), Rule 4.1 (truthfulness to third persons; Model Rule 4.1), Rule 4.4(a) (respect for the rights of third persons; Model Rule 4.4), Rule 3.1 (non-meritorious claims; Model Rule 3.1), and Rule 3.4(a)(6) (illegal conduct). It relies on ABA Formal Ops. 92-363 and 94-383, NYSBA Op. 772, and its own Op. 2015-5.

Citations and references

Rules of Professional Conduct:

• Model Rule 3.4(e) / NY RPC 3.4(e) (threatening criminal charges to gain civil advantage)
• Model Rule 8.4(b), (c), (d) / NY RPC 8.4(b), (c), (d), (h) (misconduct)
• Model Rule 4.1 / NY RPC 4.1 (truthfulness in statements to third persons)
• Model Rule 4.4(a) / NY RPC 4.4(a) (means with no substantial purpose but to embarrass or harm)
• Model Rule 3.1 / NY RPC 3.1, 3.4(a)(6) (non-meritorious claims; illegal conduct)

Cases:

• People v. Harper, 75 N.Y.2d 313 (1990), threat of criminal prosecution to extract money in a civil suit
• In re Smith, 848 P.2d 612 (Or. 1993), baseless threat as prejudicial to the administration of justice
• State v. Hynes, 978 A.2d 264 (N.H. 2009), extortion conviction for a baseless threat to sue

Other opinions cited:

• ABA Formal Op. 92-363 (1992): threats of criminal prosecution and the relatedness requirement
• ABA Formal Op. 94-383 (1994): threats of disciplinary charges to gain civil advantage
• NYSBA Ethics Op. 772 (2003): threats of non-criminal complaints outside DR 7-105(A)
• North Carolina Formal Ethics Op. 2005-3 (2005): threats to report immigration status

See also

• ABA Formal Op. 06-439: Truthfulness in negotiation and mediation
• NYC Bar Ethics Op. 2015-5: Threatening to file a disciplinary complaint
• NYC Bar Ethics Op. 2019-1: Defining an ex parte proceeding under Rule 3.3(d)

Source

• Landing page: https://www.nycbar.org/reports/formal-opinion-2017-3-ethical-limitations-on-seeking-an-advantage-for-a-client-in-a-civil-dispute-by-threatening-ancillary-non-criminal-proceedings-against-an-adverse-party/
• Original PDF: http://documents.nycbar.org/files/2017159-2017-3_Formal_Opinion_Negotiation_Threats.pdf