"Pay Me, Or Else…": California Court Rules Employee's Pre-Litigation Qui Tam Threat is Extortionate

by Littler

A California appellate court recently issued a warning to employees who try to negotiate settlements with their employers by making veiled threats to report an employer's real or imagined criminal activity.  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 qui tam action under the federal False Claims Act unless the employer tendered payment.  This is an encouraging legal development for employers, and may signal an increasing willingness of the courts to curtail over-the-top pre-litigation settlement practices.   


In January 2011, the plaintiff was terminated from employment with Akon, Inc., a supplier of microwave products based in San Jose, California.   Shortly thereafter, the plaintiff claimed that the employer defamed him when the company's president and CEO told other employees that the plaintiff was terminated because he assaulted and battered a female coworker.  The plaintiff hired an attorney who demanded that the company pay $675,000 to settle the plaintiff's defamation and other civil claims.  After the company rebuffed all settlement attempts made by the plaintiff's counsel, the plaintiff took matters into his own hands and unilaterally emailed the president and CEO's counsel.  It is this email that forms the basis of the company president and CEO's extortion claim.  

The Extortionate Email

The subject of the email was entitled "Qui Tam."  Among other veiled threats, the email indirectly accused the president and CEO of engaging in illegal activity by ordering the plaintiff to create false accounting documents.  The email also stated that the plaintiff "never wanted this to become a long and expensive process let alone involve the United States Attorney General, the Department of Justice or the DOD." The email asserted that the plaintiff did "not wish to make a Federal case out of this," and that it was "not [his] first choice to procede [sic] with the Qui Tam option," but that he had consulted with attorneys who specialized in such cases.         

The Anti-SLAPP Statute

When the president and CEO's counsel failed to respond to the plaintiff's email, the plaintiff sued the company and its president and CEO for (among other things) defamation and wrongful termination.  The president and CEO countersued for civil extortion.  Thereafter, the plaintiff filed a special motion to strike the extortion cross-complaint under California's anti-SLAPP statute (California Code of Civil Procedure § 425.16). "SLAPP" is an acronym for "Strategic Lawsuit Against Public Participation."  A SLAPP suit is one where the plaintiff seeks to chill a party's exercise of his or her constitutional right to free speech.  Under California's anti-SLAPP statute, SLAPP suits may be disposed of summarily by a special motion to strike.  If the alleged protected speech is illegal as a matter of law, however,  the defendant cannot avail itself of the statute.       

In his anti-SLAPP motion, the plaintiff argued that his settlement email to the president and CEO's counsel was a pre-litigation settlement communication expressly protected by the anti-SLAPP statute.  In opposition, the president and CEO argued that the plaintiff's email was extortionate, and therefore not a valid exercise of free speech protected under the statute.      

Extortion as a Matter of Law

The California appeals court rejected the plaintiff's arguments, finding that the plaintiff's pre-litigation email demand constituted extortion as a matter of law in that it "threatened to expose [the president and CEO] to federal authorities for alleged violations of the False Claims Act unless he negotiated a settlement of [the plaintiff's] private claims."  Accordingly, the plaintiff was not protected under the anti-SLAPP statute.     

In so holding, the court considered the totality of the email and the history between the parties leading up to its transmission, including the company's repeated declinations to engage in settlement negotiations.  Considering the context, the court reasoned that the plain implication of the email was that, unless the president and CEO accepted the plaintiff's settlement demand for his personal claims, the plaintiff would, through pursuit of the "qui tam option," expose his employer's alleged criminal wrongdoing.  The court found it significant that the alleged criminal activity that the plaintiff threated to expose in the qui tam action was "entirely unrelated to any alleged injury suffered by" the plaintiff, as alleged in his defamation and wrongful termination claims.  

The court explicitly rejected the plaintiff's argument that the email was not extortionate because there was no threat to file a false criminal complaint, nor a demand for money, finding that: "The absence of either an express threat or a demand for a specific sum of money in the email does not negate its fundamental nature as an extortionate writing." The court observed that threats are often made vaguely, by innuendo, and that parties guilty of extortion commonly deal in mysterious and ambiguous language.      


Pre-litigation settlement negotiations can be heated and parties often take aggressive positions.  A party crosses the line, however, by threatening to go to the authorities or the media with claims of criminal wrongdoing.  It remains to be seen whether the holding of Stenehjem applies where the employee is a whistleblower who contends that she has been terminated for reporting wrongdoing that would violate the federal False Claims Act.  In that case, the qui tam threat would be directly related to the employee's personal claims.  At a minimum, the Stenehjem decision forewarns that, under certain circumstances, employees (or their counsel) that make veiled criminal threats in order to leverage their own personal claims are liable for extortion.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Littler | Attorney Advertising

Written by:


Littler on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.