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Pre-Litigation Demands That Amount to Extortion? That's A Problem for Plaintiffs


Stenehjem v. Sareen - California Court of Appeal, Sixth Appellate District


Facts:  Stenehjem filed suit against his former employer and its president and CEO for alleged defamation and wrongful termination, among other claims.  The defendants filed a cross complaint against plaintiff for civil extortion due to plaintiff's pre-litigation demand.  Specifically, plaintiff included in his demand a threat that unless the defendants paid plaintiff's claims, plaintiff  would file a False Claims Act and report defendants to federal authorities for allegedly forcing plaintiff to create false accounting documents.  The lower court granted plaintiff's motion to strike the cross complaint and the cross complaint was subsequently dismissed. 

Holding:  The California Court of Appeal held that the former employee's pre-litigation demand was an unconstitutional extortion and therefore the cross complaint was improperly dismissed.  When the Court of Appeal looked at the pre-litigation demand, it held that the threat to report the employer to federal authorities due to alleged criminal activity was "entirely unrelated to any alleged injury suffered by" the employee.  As a result, the demand constituted extortion and was not protected speech under the California anti-SLAPP statute.   

Judgment:  The Court of Appeal reversed the lower court's granting of plaintiff's motion to strike defendant's cross complaint.  Therefore, defendants could proceed on their cross complaint as to plaintiff's alleged acts which could be held to be extortion.

The Takeaway:  This is a relatively straight forward opinion by the court:  Parties should avoid making any threats to report criminal activity or file an unrelated claim unless settlement demands are met.  It is somewhat common sense, but employers (and employees) should be careful with demands that are made.  Tread carefully!

Majority Opinion Judge:  Judge Marquez

Date:  June 13, 2014

Opinion:  http://www.courts.ca.gov/opinions/documents/H038342.PDF


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