Can a Whistleblower Threaten to Report Their Employer?

Without a lawyer, threats to report a company for a violation of the False Claims Act are problematic.  When a dispute arises and legal counsel is not engaged, there is the possibility that the threat may be extortion.  Individuals should therefore be extremely careful when making settlement demands to their employer, or more likely for whistleblowers, their ex-employer.

Extortion happens when a person obtains money or property by wrongful force or threat.  It generally includes instances where you threaten to accuse another of a crime.  There is a lot of grey area regarding what constitutes extortion though, as state statutes may define the crime differently.  This makes threats to go to the authorities, the public or the media with information about a violation of the law very dangerous.

A 2014 California case held that a threatened qui tam lawsuit in a settlement demand was extortion.

In Stenehjem v. Sareen, 2014 WL 2646729, — Cal.Rptr.3d ——, (Cal. Ct. App. June 13, 2014), an ex-employee threatened to file a qui tam lawsuit under the False Claims Act if the employer did not settle his allegations of wrongful termination. The employer refused to settle and filed a counterclaim of civil extortion against its former employee. On appeal, the court held that the prelitigation email demand was extortion and refused to dismiss the counterclaim.




Even Implied Threats Can Be Extortion

Understanding the law, many have tried to circumvent the restriction by using an implied threat. This is dangerous territory because even veiled or implicit threats can qualify as extortion. A prosecutor or court reviewing your actions may nevertheless decide that you have crossed the line.

The First Amendment Doesn’t Protect Against Extortion

People faced with extortion charges have often sought protection on First Amendment principles. However, “the law seems quite settled that the First Amendment provides no refuge for extortion.” Smithfield Foods, Inc. v. United Food and Commercial Workers Int’l Union, 585 F. Supp. 2d 789, 806 (E.D. Va. 2008). Even California’s anti-SLAPP (Strategic Lawsuits Against Public Participation) law, which is designed to protect free speech rights, permits a civil lawsuit against a person committing criminal extortion.

How Do Attorneys Do It?

You may be wondering how lawyers conduct prelitigation demands for settlement given the existence of the crime of extortion. In reality, it is a challenge that requires a carefully crafted letter. More than a handful have stepped over the line and run afoul of the law.

Basically, it is permissible to threaten what you have a right to do, such as go to court, in order to settle the allegations. On the other hand, if you attempt to extract a settlement for your potential case of wrongful termination, and you threaten to reveal unrelated misconduct publicly or go to the government, you may be committing extortion.

Attorneys have stepped over the line and had to defend themselves for extortion. The Vermont Supreme Court upheld the conviction of an attorney for extortion because he used the threat of a report to the Internal Revenue Service to encourage settlement in a divorce. State v. Harrington, 260 A.2d 692, 699 (Vt. 1969). Similarly, the California Supreme Court upheld denial of a motion to dismiss against an attorney charged with civil extortion. Flatley v. Mauro, 129 P.3d 2 (Cal. 2006).

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