A California appellate court recently issued a warning to employee whistleblowers bringing claims against their employers. In Stenehjem v. Sareen, No. H038342 (Cal. Ct. App. June 13, 2014), the court held that an employee’s pre-litigation settlement demand was extortionate where the employee threatened to expose criminal activity by filing a whistleblower lawsuit under the federal False Claims Act unless the employer paid a settlement to the employee.
The lawsuit arose after the plaintiff was terminated from employment by Akon, Inc., based out of San Jose, California. The plaintiff accused Akon of fabricating murmurs to other employees that he was terminated because he assaulted and battered another female coworker. The plaintiff hired attorneys to bring his claims. During the course of prelitigation claims correspondence, the plaintiff personally emailed the company CEO, threatening that if the employer did not pay him with a settlement, the plaintiff would notify and involve the United States Attorney General, Department of Justice, and Department of Defense. when the company did not respond to the plaintiffs demands, the lawsuit was initiated against the company for wrongful termination and defamation. The company countersued for civil extortion, and the plaintiff filed a special motion to strike the extortion counterclaim on the basis that it was protected by California’s anti-SLAPP statute, and considered very speech. In reviewing the case however the court made a determination that the prelitigation threat by the plaintiff was indeed extortion and was not protected free speech.
When claims are brought by discharged demoted, or terminated employees, they are often emotional and difficult to resolve painlessly. Whistleblowing claims, in particular, can pose unique challenges because the company is being accused of defrauding the government, which can result in exposure to qui tam / False Claims Act claims.
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