Ah, counter ethics with legality? It's legal in some jurisdictions to confiscate the property of a person and sell it before that person has seen the inside of a court. There was an article recently on HN about that, but Jello Biafra spoke of the problem as far back as the 1980s. Using your litmus test, this activity must be ethical because it's legal.

I do not think it's ethical to scare the other party by threatening actions that you have zero intention of carrying out.