Employer's Threat Of Criminal Charges For $5 Theft Leads To Extortion Lawsuit By Employee

By harley erbe

In a rather unusual case that involved a claim for money damages for extortion against an employer, on January 25, 2017 the Iowa Court of Appeals issued a decision in Louise A. Nath v. Pamida Stores.  Louise Nathworked for Shopko.  Pamida Stores owns the Shopko store chain.

Nath was accused of stealing a bottle of water while she was working.  Shopko management told Nath that she owed Shopko $4.99 for the full case of water, as individual bottles were not readily salable at Shopko.  During the meeting, Shopko management produced a document entitled “Teammate Consent to Restitution,” which Nath was asked to sign.  Nath claims she was badgered after she repeatedly denied wrongdoing, and management told her that the police would be called and Nath would be prosecuted if she didn't admit wrongdoing and sign the reimbursement consent.  Because Nath believed that she would not be prosecuted if she paid the $4.99, she gave Simpson $5 and signed the document.

The story might have ended there, but Nath's payment of restitution to Shopko didn't fully satisfy the store.  A week later, Nath’s employment was terminated on the basis of theft.  Follow-up letters were sent by Shopko threatening civil proceedings to recover its costs of investigating and recovering the cost of the bottle of water and again mentioning the possibility of criminal charges.  There is no indication any criminal charge was filed.  

Nath responded to Shopko's threats by suing Shopko.  She filed a lawsuit alleging that Shopko had obtained the $5 and the restitution document by threatening a criminal charge—or, in other words, by extortion.  Nath sought money damages for lost wages, pain and suffering, punitive damages for having been falsely accused of theft, reimbursement of the $5 she paid Shopko, attorney fees in this action, and expenses incurred in her efforts to obtain her unemployment benefits.  Shopko denied that it had requested that Nath pay $5 and sign the restitution document in exchange for not filing a theft charge.

The trial court dismissed Nath's extortion claim because it concluded that Nath couldn't prove that she had agreed to pay $5 and sign the restitution document in response to threats of criminal charges.  On appeal, the Court of Appeals observed that extortion can form the basis for a claim for money damages under Iowa law and that the important issue was whether Nath had proof of a threat: "In this case the critical issue is whether there is a material dispute of fact as to whether Shopko threatened to accuse Nath of a public offense.  There is no dispute that Shopko received something of value, even though it was of limited value, if in fact a threat was made."  The court of appeals determined that there was a material dispute of fact as to the existence of a threat adequate to support a civil money damages claim for extortion.

Another issue on appeal was whether Nath could recover emotional distress damages if she could prove that Shopko committed extortion.  The court of appeals ruled that she could.  Shopko argued that the exclusive remedy for Nath's alleged emotional distress was through Iowa's Workers Compensation Act.  The court of appeals disagreed.

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