Honest Belief Defense to Extortion Requires Subjective Belief and is a Question For the Jury

The Court of Appeals of Georgia decided a question of first impression on Wednesday, February 24, 2021, ruling that the honest belief exception to extortion under O.C.G.A. § 16-8-16(c) requires a subjective belief. Naffis v. Tzavaras, A20A1970, 2021 WL 714486 (Ga. Ct. App. Feb. 24, 2021). In Naffis, the Plaintiff entrusted the Defendant with $1.5 million to invest. Years later, the Defendant voluntarily delivered to Plaintiff an "Acknowledgement of Debt." Plaintiff then had his attorney draft a promissory note formerly embodying Defendant's obligation. Part of the consideration of the note was "forbearance of [Plaintiff] in filing criminal charges, and initiating a civil suit against [Defendant], arising out of [Defendant's] embezzlement, misappropriation, fraud and defalcation in receiving and misusing or misappropriating funds..." Id. at *2.

Once Plaintiff sued on the note, Defendant argued that the agreement was unenforceable because the threat of criminal prosecution amounted to extortion. Id. Plaintiff, however, claimed protection under the honest belief affirmative defense to extortion. The trial court found the reasonable belief defense did not apply because any reasonable factfinder would find that Plaintiff committed extortion by demanding more than he was owed in exchange for promising not to file criminal charges against the Defendant. Id. at *5. Accordingly, the trial court granted partial summary judgment to Defendant.

Georgia law states that if the consideration for a promise “is illegal in whole or in part, the whole promise fails.” O.C.G.A. § 13-3-45; Starr v. Robinson, 181 Ga. App. 9, 10, 351 S.E.2d 238 (1986). “A person commits the offense of theft by extortion when he unlawfully obtains property of or from another person by threatening to…[a]ccuse anyone of a criminal offense[.]” O.C.G.A. § 16-8-16(a)(2). However, there is an affirmative defense to the crime of extortion where the property demanded “was honestly claimed as restitution or indemnification for harm done in the circumstance to which such accusation, exposure, legal action, or other official action relates[.]” O.C.G.A. § 16-8-16(c).

The Court of Appeals noted that only one case cites O.C.G.A.16-8-16(c). See State v. Cohen, 302 Ga. 616, 807 S.E.2d 861 (2017), In Cohen, the Supreme Court of Georgia explained in dicta that threatening litigation in exchange for obtaining property from another may serve as the basis for an extortion charge, but noted that a defendant would have an opportunity to defend such a charge by arguing to a jury that he had an honest claim to the property in question. Id. at n.9. Relying on this dicta, the Court of Appeals held that a party's honest claim defense is a question for the jury after trial and should not be made by a judge at the summary judgment stage, thereby reversing the trial court's grant of partial summary judgment.

House Bill Amending the Corporate Code to Allow Remote Shareholders' Meetings Passes House

The Georgia house passed H.B. 306 on Wednesday, February 26, 2021 to amend O.C.G.A. §14-2-701 allowing for remote shareholders meetings.

As the COVID-19 pandemic continues to affect businesses across the country, Georgia has decided to amend the Corporate Code to allow for the use of remote video conferences for both annual shareholders' meetings and special meetings of the shareholders. The amendments allow for such remote video conferences unless the bylaws or articles of incorporation expressly state otherwise.

The same amendment also includes a new code section, O.C.G.A. §14-2-708, that allows for shareholders and holders of proxies of any class or series to be deemed present in person, vote at meetings, and otherwise participate in such meetings despite the remote access so long as each act is authorized by the board of directors.

The corporation will be tasked with implementing reasonable procedures to verify that the person on the remote video conference is actually a shareholder or holder of the proxy, however, a one-time password that is unique to each shareholder will probably take care of the task. Many video conferencing platforms implement such an action item in their product.

The bill has been sent to the Senate and referred to committee.