12:33pm PT by Eriq Gardner
Starz Must Face Claim of Firing Executive for Refusing to Fabricate Revenue Numbers
Keno Thomas will be moving forward in a lawsuit that alleges his former superiors at the cable network Starz ordered him to falsely inflate revenue and subscriber figures to take to the company's board of directors.
Thomas, who was hired as senior vp, sales and affiliate marketing in 2004, originally filed an expansive complaint against Starz that, among other things, blamed his ouster on how he complained about allegedly illegal business practices and how he advocated for gender and racial equality within the network. Thomas withdrew some of these claims, including ones directed personally at chief executive Chris Albrecht, but has continued to push those premised on wrongful termination and retaliation.
U.S. District Judge Christina Snyder sees enough in the allegation pertaining to an alleged directive to inflate revenue number to allow that claim to survive a motion to dismiss. On Monday, her ruling became public.
In the lawsuit, Thomas says that in September 2014, Kara Tefft, director of finance at Starz, told staffers during a meeting that Albrecht and chief revenue officer Michael Thornton didn't want to present unfavorable revenue figures to the board. The meeting happened in the aftermath of a deal between Starz and DirecTV extending a license for the network.
"Tefft directed [Thomas] to show her which revenue and subscriber figures to artificially inflate and how to provide plausible sounding explanations justifying those fabricated increases," states an amended complaint. "She explained that this was necessary because Thornton and Albrecht were concerned that the 'optics did not look good' to them and they wanted to present a false picture of favorable financial projections resulting from the DirecTV extension to the Starz Board, while maintaining plausible deniability in the event that the Board ever realized the revenue and subscriber figures had been fabricated."
Thomas further alleges he "understood he was being ordered to materially falsify Starz's financial and operational performance and that this false information would ultimately be presented to the company's investors in order to give Starz's shares a greater value than they really possessed."
In response to such claims, Starz contended that the numbers referred to "revenue targets ... used for internal budgeting," and ones that impacted Thomas' own bonus compensation, but the company's main argument on a motion to dismiss was that Thomas had failed to sufficiently plead with particularity the requisite facts supporting his retaliation claim.
Snyder, though, finds the allegations of fraud "relatively straightforward," and deems Thomas as having adequately alleged the time, place and content of what happened.
Although Thomas survives this hurdle, which will likely mean he can conduct discovery, too, Starz is able to defeat some of the other claims in the lawsuit.
For instance, Thomas asserted that he suffered retaliation after raising concern how Starz board member Derek Chang might use trade secrets gleaned from DirecTV, where Chang formerly worked.
"Ultimately, however, based upon a review of the allegations in the operative complaint, the Court finds that plaintiff does not appear to have 'disclosed,' flagged, or complained of anything that was not publicly known and fully understood by those whom he discussed his concern," responds Snyder, dismissing that claim.
Thomas also can't push forward a claim (discussed in more detail here) connected to the way that Gregory Maffei, a board member at both Starz and Charter, allegedly manipulated the Charter/Time Warner Cable merger to Starz' advantage. The judge rejects this claim because Thomas wasn't really a whistleblower as he didn't "disclose" the information to anyone but Thornton, who allegedly was in on the conspiracy and was the person who first told him about it.
Snyder also won't let Thomas pursue a claim for intentional infliction of emotional distress because it's preempted by the California Workers' Compensation Act.