Charging Cashiers for Mistakes Isn’t Extortion, Court Finds

SAN FRANCISCO (CN) – A retailer’s efforts to recoup losses caused by the mistakes of its cashier does not amount to criminal extortion – as a trial court had found in refusing to strike the cashier’s class action, a California appeals court ruled Thursday.

Krizel Gallano worked as a salesclerk and cashier for discount retailer Burlington Coat Factory. After nearly a year on the job, her store’s loss prevention agents confronted her about mistakes she’d supposedly made ringing up merchandise.

Gallano says the agent coerced her into signing a confession admitting to several mistakes, including processing a return of perfume that resulted in a $400 loss to the store and ringing up items for customers that other employees had marked with the wrong price tags.

Despite stating she did not gain personally from the mistakes and had not acted with illegal intent, Gallano says the store made her sign a promissory note for $880 and was told the store wouldn’t press criminal charges if she paid the debt and resigned.

After resigning, Gallano says she received a civil demand letter from a law firm seeking $350 for “shoplifting, theft or fraud” pursuant to California Penal Code section 490.5.

Gallano filed a class action on claims of labor code violations and unfair business practices. She claims Burlington routinely uses the penal code section to intimidate employees into indemnifying the company for business losses when in reality, California’s labor code requires businesses to indemnify employees for losses caused by employees during the course of their duties.

Burlington moved to strike Gallano’s complaint under California’s anti-SLAPP statute, arguing that all of Gallano’s claims arose out of its demand for payment – a demand authorized by penal code. But Gallano argued her lawsuit was based on labor code violations and was therefore in the public interest, and that Burlington’s actions are not protected activity.

The trial court agreed and denied Burlington’s motion to strike, finding it hadn’t offered any evidence to support its motion and further that its conduct toward Gallano and other employees amounted to criminal extortion.

Burlington appealed, and in a 12-page unpublished opinion issued Thursday, a panel of the First Appellate District ruled that Burlington’s actions under the penal code amounted to protected activity.

“The allegations in plaintiff’s complaint fall squarely within Penal Code section 490.5. Each of plaintiff’s causes of action allege that defendant’s actions under the statute amounted to an improper attempt to shift liability for ‘ordinary business losses’ to its employees. Accordingly, defendant has made a prima facie showing that plaintiff’s complaint is based on protected activity,” Associate Justice Robert Dondero wrote for the panel.

Furthermore, the panel ruled that Gallano offered no concrete evidence that Burlington’s actions amounted to criminal extortion.

“Defendant does not concede that it engaged in any unlawful acts. And while defendant’s actions were assertive, there are no allegations that its conduct, in and of itself, exceeded the scope of that which is statutorily authorized by Penal Code section 490.5,” Dondero wrote.

“For example, there are no allegations that defendant’s accusations were fabricated. The demand letters also do not threaten to expose plaintiff to criminal liability unless payment is made. Rather, the complaint alleges that defendant is using the shoplifting procedures to achieve an unlawful result, namely to coerce employees into paying for ordinary losses. The conduct as alleged in the complaint does not on its face arise to the ‘extreme’ levels such that the conduct is illegal as a matter of law.”

The panel remanded the case to the trial court for a determination on the second prong of the anti-SLAPP statute: whether Gallano has presented enough evidence of wrongdoing on Burlington’s part to make it likely she’ll prevail in the case.

Presiding Justice Jim Humes and Associate Justice Kathleen Banke rounded out the panel.

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