The Volokh Conspiracy

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Free Speech

Threat of Frivolous but Reputation-Damaging Lawsuit Can Be Criminal Extortion,

if it's used as an attempt to get a settlement, the Ninth Circuit rules .


The case is yesterday's U.S. v. Koziol, written by Judge Bridget Bade and joined by Judge Carlos Bea and District Judge Gershwin Drain (E.D. Mich.):

Benjamin Koziol was convicted of attempted extortion under the Hobbs Act, 18 U.S.C. § 1951(a), for threatening to file suit against a well-known entertainer asserting salacious and scandalous allegations of sexual harassment, sexual assault, and assault and battery if the entertainer did not settle with Koziol for $1,000,000.

On appeal, Koziol argues that … the threat of litigation, even a baseless and bad faith threat, cannot constitute "wrongful" conduct under the Hobbs Act…. We affirm [the] conviction ….

Here, there was ample evidence at trial from which a rational jury could conclude that Koziol knew his allegations were baseless and that he had no right to obtain any money from the entertainer. As an initial matter, the uncontested evidence at trial established that it was the manager, not the entertainer, who was present at Sweet's apartment on the night of the massage. Several months after the manager negotiated a settlement with Koziol's wife, Sweet, Koziol accused the manager of "verbally and physically" assaulting him, even though Koziol was not mentioned in the detailed demand letter that Saadian, Sweet's attorney, previously sent to Wright, the manager's attorney.

When Koziol made these allegations against the manager, Koziol was aware that the manager had settled with Sweet and he claimed that Saadian had also represented him. After Wright refused any attempts to extract additional money from her client, Koziol changed his story to accuse the entertainer. He later falsely claimed that he had "never accused [the manager] of anything!" And in his threats to sue the entertainer, Koziol contradicted his earlier allegations and stated that the manager "was never at my apartment and has nothing to do with this case."

Moreover, the uncontested evidence also established the entertainer had never even met Koziol or Sweet. Nonetheless, despite his earlier claims that the manager was the massage customer who assaulted him, Koziol changed his story and claimed that he confronted the entertainer at the apartment on the night of the massage and spoke to him, asserted that "by the look on [the entertainer's] face" he was "obviously surprised to see" Koziol, and accused the entertainer of punching him in the face and knocking him unconscious. Koziol also claimed that he "immediately recognized" the entertainer when he searched for him on the internet. From this evidence, a rational jury could find that Koziol knew that the manager, not the entertainer, was the massage customer and that Koziol knew he did not have a claim against the entertainer.

Koziol also used falsified evidence (the photograph of his purported injuries) to bolster his threats against the entertainer, he lied about the existence of evidence that supported his claims (the video that purportedly showed the entertainer at Sweet's apartment the night of the massage). And in the demand letter that Koziol's wife sent to the manager through her attorney, she also claimed that she had a video showing the massage customer at the apartment—but stated that the video showed the manager at the apartment. Again, from this evidence, a rational jury could conclude that Koziol knew he had no lawful claim against the entertainer.

Among other things, the court concludes that such threats are unprotected by the Petition Clause (which does prevent many kinds of liability based on non-sham litigation):

Koziol fabricated evidence, lied about the existence of evidence, and knew that his claims were baseless, all of which further demonstrates that his threats to file a lawsuit were made with an improper motive. From this evidence, we conclude that Koziol knew that his threatened lawsuit could never prove fruitful if brought before a jury, which is why he attempted to intimidate the entertainer into a settlement based on admittedly falsified evidence and an implied threat that scandalous allegations in a publicly filed lawsuit would irrevocably damage the entertainer's reputation and livelihood.

Therefore, we reject Koziol's argument that his litigation threats did not rise to the level of a sham as a matter of law and conclude that the NoerrPennington doctrine did not immunize Koziol's threats of sham litigation.

Thanks to Howard Bashman (How Appealing) for the pointer. For a similar case, though one in which the threatened lawsuit wouldn't have damaged the defendant's reputation as much, see this 2009 post. A District Court decision names the target of the extortion scheme (who appears to have been entirely innocent here), and so does a press account about the Ninth Circuit decision. News reports about the target (unrelated to the extortion case) do suggest that he is known in part for traditional sexual morality and religiosity, which might explain why the extortionate threats may have been seen as especially potentially damaging.