Culture & the Family

Expert says Paycom should face $105 million sanction

May 3, 2021

Ray Carter

An expert analysis has concluded Paycom should face a “minimum” sanction of $105 million to deter the company from again filing frivolous lawsuits against the Oklahoma Council of Public Affairs (OCPA) and similar entities.

With the company facing financial liability, Paycom CEO Chad Richison has sought to distance himself from the lawsuit and his attorney has unsuccessfully argued in court that Richison should not be placed under oath as part of the pending fees-and-sanctions hearing.

In 2020, Paycom sued OCPA claiming defamation and tortious interference occurred when an OCPA article briefly mentioned Richison’s public advocacy for broader business closures and government control of how people and businesses operate, including how they buy groceries, in response to the spread of COVID-19. Richison’s comments were made in a public letter written under his name and on Paycom letterhead.

In dismissing the case with prejudice, the court ruled that Paycom’s “claims against OCPA relate to or are in response to the OCPA’s exercise of the right to free speech.” The court deemed the lawsuit meritless and ruled there was an “absence of any evidence of actual malice by OCPA.”

Paycom now faces sanctions for filing a meritless lawsuit dismissed under the Oklahoma Citizens Participation Act, an anti-SLAPP (Strategic Lawsuit Against Public Participation) law designed to protect free speech. Under that law, individuals or entities found to have filed lawsuits to stymie free speech face sanctions that must be sufficiently large to deter the filing of similar lawsuits by the plaintiff in the future.

An attorney representing Richison argued in court this week that neither Richison nor Paycom Software is party to the lawsuit, saying only Paycom Payroll, LLC is responsible for any sanctions.

Paycom Payroll, LLC is a subsidiary of Paycom Software. Richison is listed as CEO of both entities.

“They’re asking them to talk about the financial condition and net assets and wealth of Mister Richison, the net assets and wealth of Paycom Software, nonparties, to justify their $105 million request for sanctions,” David Donchin, an attorney representing Richison, said during court proceedings.

He told the judge that Richison is “somebody who’s not even party to the case.”

That position is in stark contrast to previous filings made by Paycom in the case. When OCPA initially sought dismissal of the lawsuit, arguing that Richison the individual and not Paycom the company was the proper plaintiff, Paycom responded that when “corporate entities act, it is through the actions of their agents, employees, executives and/or managers” and argued the court should not “allow OCPA” to make “a false distinction between alleged proposals being made by Richison personally and those being made by Richison as Paycom CEO on Paycom letterhead.”

James S. Denton, a CPA with Arledge and Associates, was retained by OCPA to determine the size of a sanction necessary to financially deter Paycom from filing frivolous lawsuits to thwart free speech. Denton’s recommendations have been entered into the court record.

In that analysis, Denton noted, “Paycom Payroll, LLC is a subsidiary of Paycom Software, Inc. A parent entity can be liable for the debts of a subsidiary if among other things, the Plaintiff acts as the alter ego of a single business enterprise. In this case, Chad Richison (Richison) filed his lawsuit using Paycom Payroll, LLC as the Plaintiff. All the while, his own actions that provoked the Defendant to speak up were on Paycom’s letterhead signed using his own name. It is clear to all that Paycom Payroll, LLC is the alter ego of Paycom Software, Inc. and Richison, the person.”

The analysis noted that Paycom Software, Inc. has a market capitalization of $23.3 billion, and as of December 31, 2019 disclosed assets of $2.4 billion and revenues of $737.6 million. Richison has a publicly reported net worth of $3.4 billion and in 2020 purchased a home in Malibu, California for a reported $26.5 million. The Wall Street Journal recently reported that Richison’s 2020 compensation was awarded at $211 million, but that the underlying share value of the package was closer to $702 million.

“This case centers around a fundamental, constitutional right,” Denton wrote. “That is the right to speak up in the arena of ideas. Such a right is essential to a civil society. When a person uses their company or personal wherewithal to sue another sufficient to shut them up, then Oklahoma law provides for a appropriate sanction which should be proportionate to the wealth that allows them to fund their abusive lawsuits and appeals.

“My conclusion is that in this case, $105,488,000 is the minimum amount that is material and important to the plaintiff,” Denton continued. “I divided the amounts into three categories of importance. Richison’s company, his personal wealth and his spending.”

Judge Richard C. Ogdon ruled that Richison can be deposed regarding any role he may have played in the lawsuit targeting OCPA and related matters.