Why it matters: Protected speech or extortion? A California appellate court decided that a former employee’s e-mail threatening to report his employer to the U.S. Attorney and file a federal lawsuit unless the employer agreed to a settlement was not speech protected under the state’s anti-SLAPP statute – instead, it constituted extortion as a matter of law. After he was fired, an employee announced his plans to file a defamation and wrongful termination complaint and sent the threatening e-mail when the employer declined to discuss the potential suit. An actual complaint followed. The employer responded with an extortion cross-complaint that the employee countered with a motion to strike under California’s statute protecting free speech (better known as the anti-SLAPP law, for strategic lawsuit against public participation). A trial court granted the motion to strike, but the appellate court reversed. Although the employee argued that his e-mail merely expressed “a benign desire” to discuss his claims, the court disagreed. “The absence of either an express threat or a demand for a specific sum of money in the e-mail does not negate its fundamental nature as an extortionate writing,” the panel wrote, setting a standard for employers facing similar communications. While the facts of the case may be unusual, the decision stands for the proposition that even a vague threat against an employer may constitute extortion.

Detailed Discussion

A series of legal filings began with a termination. Jerome Stenehjem was fired from his job at Akon, Inc. Eighteen days later, his attorney reached out to Akon’s counsel to inform him of Stenehjem’s defamation claim (he alleged that Surya Sareen, Akon’s chief executive officer, spread a false rumor that Stenehjem had physically attacked a female coworker). Estimating his client’s damages in the $2 million range, the lawyer sought to initiate settlement discussions and suggested a prelitigation deal of $675,000.

Akon’s counsel rejected the “bogus” claim and refused to engage in settlement negotiations on more than one occasion. Stenehjem (after firing his attorney) then wrote an e-mail to Akon’s lawyer, in which he stated that he “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.” He also stressed that he had no desire to “enrich a bunch of bottom feeding attorneys” and said he did “not wish to make a Federal case out of this or create any unnecessary stress on Mr. Sareen or any Akon employees.” The missive, which was titled “Qui Tam,” also included a reference to legally questionable “documents” created by Stenehjem for Sareen.

When that didn’t work, Stenehjem sued the company and Sareen for defamation and wrongful termination because he had protested illegal activities by the defendants.

The defendants filed a cross-complaint against Stenehjem for extortion. The former employee filed a motion to strike the cross-complaint under the anti-SLAPP statute. He argued that his e-mail qualified for protection under the law as a “written or oral statement or writing made in connection with an issue under consideration or review by a . . . judicial body.”

A trial court agreed and granted the motion to strike. But an appellate panel reversed, finding that Stenehjem’s e-mail was illegal as a matter of law and therefore not protected by the anti-SLAPP statute.

The court stressed that it was “important to consider the context under which the e-mail was sent. This backdrop included Stenehjem’s initial settlement demand through counsel of $675,000; [Akon’s lawyer’s] repeated statements that Stenehjem’s claims had no merit; and [Akon’s lawyer’s] having previously rebuffed any idea of settling the claims.”

Stenehjem’s reference to preparing “documents” makes it “readily apparent that Stenehjem is accusing Sareen of having engaged in illegal activity,” followed by a reference to involving federal authorities in the dispute, the court said.

“Stenehjem’s reference to the potential involvement of specified federal agencies, by itself, may be unclear,” the panel wrote. “But viewed in light of Stenehjem’s accusation of Sareen’s misconduct, and his alluding to bringing a qui tam action, it is plain that Stenehjem is threatening to assert a claim that Sareen had violated the federal False Claims Act and potentially other federal statutes.”

Stenehjem argued that the e-mail contained no demand for money, involved no threat to Sareen, and that he “merely discuss[ed] litigation procedure” and his wish to meet “face to face” to discuss his claims.

The court found this position to be without merit. “The absence of either an express threat or a demand for a specific sum of money in the e-mail does not negate its fundamental nature as an extortionate writing,” the court said. Even poor writing or less-than-explicit language did not make the e-mail any less illegal, the panel added.

“Here, the plain implication of Stenehjem’s [e-mail] was a threat that unless Sareen accepted Stenehjem’s ‘extension of one last opportunity to settle . . . in a gentlemens [sic] manner,’ he would ‘involve the United States Attorney General, the Department of Justice or the DOD’ through a qui tam action alleging Sareen had violated the federal False Claims Act,” the court said. “Stenehjem’s stated ‘request to discuss the matter,’ viewing the totality of the e-mail and the six-month history leading up to its transmission, was in reality a demand to negotiate and settle his personal claims or face the potential exposure of unrelated allegations that Sareen had committed criminal acts.”

Mindful that prelitigation negotiations may not necessarily amount to extortion, even with threats of lawsuits or the reporting of criminal behavior, the appellate panel concluded that when considered in context, Stenehjem’s missive did constitute extortion and was therefore not protected speech under the state’s anti-SLAPP statute.

To read the decision in Stenehjem v. Sareen, click here.