Demand Letters 2.0
One of the first batch of posts I wrote for this blog was about demand letters. A major job of a litigator is to avoid litigation, and so some of the skills involved in the job involve making someone afraid of what would happen in a lawsuit without actually going to court. There are not a ton of rules when it comes to demand letters; they really are just letters, but below I share some updated thoughts on the letters lawyers send before filing a lawsuit.
Why should you read this updated post about demand letters?
You received a demand letter and you’re freaking out.
You want to write a demand letter that is less likely to be ignored.
You’re interested in a timeless art form.
An Attempt to Avoid a Lawsuit
No one in a lawsuit likes being in a lawsuit. They are a lot of work, not just for the lawyers, but also for the client. They can be expensive and they can take a long time. The details are often available to the public, which can be embarrassing for everyone involved. And they are disruptive to relationships: it's hard to carry on doing business with someone who is suing you.
So when people hire a lawyer to get them something, the lawyer often recommends trying to avoid a formal lawsuit. And one way she may propose doing this is with a letter asking the other side to voluntarily agree to provide her client what she wants. This letter is often called a "demand letter."
Demand letters may look like this. (Image Credit)
Demand Letters Should Communicate the Possibility of Litigation
Ideally, a demand letter should make the other side aware that, if they do not give you something, you may sue them. It should do that in two ways:
First, the letter communicates to the other side that you have hired a lawyer. The mere act of hiring a lawyer is the first step towards suing someone. So once the other side knows you took that first step, they may take the possibility you'll actually sue them more seriously. And if you hired a fancy lawyer, the letter may also communicate that you are willing to spend a lot of money to get what you want, which may suggest that they will need to spend a lot of money to defend themselves if they do not agree to some or all of your demands.
And second, the letter may set forth a description of your claims, including specific laws and legal citations, that may convince the other side that it may actually lose a lawsuit. A demand letter will rarely convince someone that they are wrong, because few people ever believe that they are wrong. But if a letter contains a good explanation of the relevant facts and law, it can help the other side's lawyer explain to their client why it may be better to settle than to litigate, or to cease and desist from conduct that may provoke a lawsuit. This may be because the letter explains that your claims are for a lot of money, and a lawyer may advise her client to settle to avoid even a small risk of paying a large sum. Or it may be because the letter explains a claim that the other side recognizes may be costly to defend, even if it prevails.
Sometimes, demand letters are required. For example, in order to win a lawsuit that alleges a violation of some consumer protection laws, you need to show that you raised the violation in writing to the defendant and gave them a certain time period to address the violation before suing them.
There Are Reasons Not to Send Demand Letters
Demand letters aren't always a good idea, though.
First, good demand letters can be expensive because it takes a lot of time to make a letter that contains enough details and legal research to convince the other side that (a) your claims could possibly win in court and (b) you're willing to spend a lot of money and so it's better for them to settle than to fight you.
Second, the other side could just ignore them. If the other side ignored your demands before you hired a lawyer, they may not take them much more seriously just because a lawyer wrote them out nicely.
And third, the demand letter may contain admissions that you may not like later on. Lawsuits can go on for years, and usually the parties understand the issues much better after studying them for years than immediately after the underlying acts take place. As a result, any written communications about the dispute may contain admissions (either of facts or of legal issues) that you wish you hadn't made once you have a better understanding of the case. Demand letters are often protected from use as evidence once a lawsuit starts, but not always, and so there is some risk in sending the other side your facts and theories.
Usually a demand letter includes a deadline for the other side to respond. That way, the other side feels some urgency to respond to your demand. And a good demand letter makes clear that you are not waiving any of your rights by issuing the letter.
Good Demand Letter Style
I think a demand letter is more effective when it contains a lot of substance and very little flash. Letters that contain a lot of angry rhetoric can be dismissed as unserious. And letters that demand a lot of money but fail to support the demand with details are similarly subject to being ignored. I see letters like the kinds I have described in this paragraph and I often tell clients that the lawyers who wrote them are likely not serious or not likely to successfully assert their clients’ claims.
But a letter that reads like a short legal brief, setting forth facts and legal support, without any emotional language, often communicates that the author has a serious legal claim that the recipient would be wise to address.
Responding to a Demand Letter
The right thing to do when someone receives a demand letter is to contact a lawyer. The lawyer may evaluate the letter and the matter to help assess the risk of litigation and the risk of exposure to liability. After assessing the risk, the lawyer may advise the client to either ignore the letter (not often the right decision), to have the lawyer informally contact the author to propose a settlement or explain why no settlement is forthcoming, or to launch a litigation proactively.
Many lawyers may suggest drafting a response letter, but I find this approach to have the same problems that a demand letter may have: a response letter may be expensive, ineffective, and contain admissions that may be unhelpful later in a lawsuit.