Tuesday, June 17, 2014
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C.A. Says Ex-Employee’s Settlement Demand Was Extortion
Panel Says Order Dismissing Cross-Complaint Under Anti-SLAPP Statute Was Error
By KENNETH OFGANG, Staff Writer
A fired worker who sued his ex-employer for defamation and wrongful termination committed extortion when he threatened to instigate a federal investigation of the company’s business practices if his demands were not met, the Sixth District Court of Appeal ruled.
Because Jerome Stenehjem’s prelitigation conduct was extortionate the court said, it was not protected for purposes of the anti-SLAPP statute. The court ordered that his ex-employer’s cross-complaint for civil extortion be reinstated.
Stenehjem was fired by Akon, Inc., a San Jose-based manufacturing company, in 2011. He subsequently sued, claiming he was falsely accused of having assaulted a female co-worker; that the company discriminated against him because he was male and not of Asian origin; and that the true reason for his firing was that he had protested illegal activities by the company, including tax and duty invasion and government contracting fraud.
Settlement Demands
In its cross-complaint, Akon accused Stenehjem of having committed extortion in the last of a series of settlement demands prior to filing. In an email, ostensibly sent without his lawyer’s knowledge, Stenehjem told Akon’s attorney that while he did not want to “make a Federal case out of” his employment dispute, he had been told by attorneys that if he initiated a qui tam action under the False Claims Act, it would “involve the United States the United States Attorney General, the Department of Justice or the DOD.”
Stenehjem said he did not want “to enrich a bunch of bottom feeding attorneys such as yourself and the ones I have been meeting with,” and that he had not signed a retainer agreement with a lawyer specializing in qui tam suits and would not do so if the company’s president, Surya Sareen, would meet with him “face to face” and offer a settlement.
Stenehjem, who hired a new lawyer for the suit, moved to strike the complaint on the ground that his pre-litigation settlement demands constituted protected activity under Code of Civil Procedure §425.16.
Opposition to Motion
In opposition, Akon and Sareen’s attorney, John P. McDonnell, filed a declaration explaining that within three weeks of the plaintiff’s termination, his then-lawyer told McDonnell that the company had defamed his client and that he believed he could recover nearly $400,000 in lost wage and perhaps $2 million in general and punitive damages.
McDonnell responded that Akon had no intention of settling a “bogus” claim, and that if the plaintiff were to sue, the company was prepared to present several employees who would testify to having been abused by him. When Akon rejected the demand, McDonnell said, the plaintiff’s lawyer requested mediation.
When McDonnell responded that there would be no mediation, Stenehjem followed with his missive, including the threat to involve the federal authorities and the direct accusation that Sareen had ordered him to falsify submissions to the government.
Santa Clara Superior Court Judge Mark H. Pierce denied the motion, concluding that the demand email constituted activity in anticipation of litigation and that the cross-complaint would not succeed because it was barred by the litigation privilege.
Flatley v. Mauro
But Justice Miguel Márquez, writing for the Court of Appeal, said the demand was extortionate under Flatley v. Mauro (2006) 39 Cal.4th 299.
The court held there that an Illinois attorney who threatened to sue entertainer Michael Flatley on behalf of a woman who claimed she was raped—and to disseminate information about the case to “any and all appropriate authorities” if the claim was not settled—had committed extortion and could not use the anti-SLAPP statute to block Flatley’s lawsuit. The attorney also accused Flatley of having committed unspecified violations of tax and immigration laws.
Márquez explained:
“We conclude that Stenehjem’s August e-mail constituted extortion as a matter of law. It threatened to expose Sareen to federal authorities for alleged violations of the False Claims Act unless he negotiated a settlement of Stenehjem’s private claims. Even were it true that Sareen had in fact committed acts violating the False Claims Act—and there is no evidence to support this, since Stenehjem filed no declarations in connection with the motion other than his attorney’s fee declaration—this is ‘irrelevant’ to whether the threatened disclosure was extortion….and it is of no consequence that the e-mail did not specifically identify the crime of which Stenehjem intended to accuse Sareen.”
Also significant, the justice said, was the fact that the alleged criminal activity was unrelated to the alleged wrongful termination and defamation that were the subject of the lawsuit, similar to the conduct that the attorney in Flatley accused the plaintiff of, apart from the rape allegation.
While Stenehjem’s email “may not involve a threat as extreme as the one in Flatley,” the jurist wrote, “it is nonetheless extortion as a matter of law.”
The case is Stenehjem v. Sareen, 14 S.O.S. 2966.
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