Most businesses will eventually face legal issues or find themselves in situations where the customer or vendor does not want to follow an agreement that was previously made or pay their invoice. This is especially not uncommon in the world of tech startups. For a first-time business founder, it may be hard to navigate through such situations without spending tons of time, and money.
How to create your legal demand, how it should look, who it should come from, what the common mistakes are and lots more will be discussed today. I had the opportunity to sit down with Michael Sherman, the founder of the legal letter startup LetterDash, and talk to him about these issues in great detail.
Here’s some of our conversation transcribed below.
For those startups or businesses that have a customer that isn’t compliant with the binding agreement or refuses to pay an invoice, what should they do? What advice would you give them?
First, I would send a very brief-polite email letting the client know they need to pay their invoice by a certain date. If they do not respond within 48 hours, I would then send a follow-up explaining that you have been forced to send the matter to your legal team. If at that point, they continue ignoring you or refuse to pay up, you need to have a demand letter sent to them.
These demand letters are a tool typically utilized before formal legal action (a lawsuit). Such letters are also commonly referred to as legal letters, letters of demand, or cease and desist letters.
Usually, these letters are prepared, drafted and sent out by a licensed attorney. The message is the most effective when it is written by an attorney on their particular firm’s letterhead.
What are typical mistakes when working on demand letters?
There are three very frequent mistakes we see.
The first one is not having an attorney draft and send your letter. Far too often, people write and send their out demands only to find out the recipient doesn’t take their letter seriously. Only then do they decide to lawyer up.
The issue with having done it this way is that, whether you send it yourself or hire an attorney to do so, the probability of a successful outcome lessens with each letter that is sent and ignored. Statistically, the more letters that are sent out to the recipient, the less likely it is that the recipient complies with your demands. Conversely, it seems that clients who only send a single letter of demand which came from an attorney have experienced the greatest success.
The second mistake is trying to think of the situation in terms of “can I win the case in court?” rather than “how can I produce a letter that will result in the desired outcome?”. “How can I persuade the recipient to do what I want?” is the question you want to answer when drafting a demand letter. You get caught up questioning if there’s a statute of limitations or case law that negates their claims. However, most recipients have little knowledge of the law and statutes, so such information is unimportant in terms of the outcome when looking at the statistics specifically. The focus should be on sending a strong letter, from a licensed attorney, that will put the recipient in a position to comply or be sued immediately.
Finally, and this is a very common mistake, a surprisingly large number of our clients think their demand letter is a legally enforceable document. This is not the case. You can’t call the cops or sheriff and ask them to enforce your letter. You can’t go to court and ask the judge to do something with your letter, other than potentially reference it and its contents in the event of a lawsuit, as can the recipient.
There’s one other really interesting observation definitely worth mentioning and this one applies to attorneys as well as our clients. That is, the idea that simply stating “FOR SETTLEMENT PURPOSES” and/or “CONFIDENTIAL AND PRIVILEGED” at the top of your letter automatically means the letter being sent and its contents are inadmissible in a courtroom. This is simply not true and writing those words on your letter does not protect you from the letter being used against you in a lawsuit.
Okay, so if I have a legal conflict and want to put some pressure on my opponent, I simply hire a lawyer to draft the letter, right?
Yes, but I wouldn’t say it’s exactly “simple” to just hire a lawyer. The task of searching for and finding an attorney to perform the task of writing a demand letter for you is quite challenging in and of itself. The thing about the demand letter is attorneys don’t treat the demand letter as a ‘piecemeal’ product offering. Solo practitioners and large firms aren’t using their resources to master the demand letter. They’re busy trying to build their practice, not sit there and send demand letters out all day. So our clients have found it quite difficult to find an attorney that has the time or is willing to write and send ‘just’ a demand letter.
As a result, searching for a licensed attorney who will help you out can be a long, exhausting, and expensive process. As attorneys are generally not interested in one-off jobs, you might find that most attorneys ignore your request, respond very slowly or require hefty fees ranging from $750-$3,000 for the time to draft and send a single letter. Otherwise, most attorneys will require a $1,500-$3,000 minimum retainer which they can draw from for their time.
Wow, that’s expensive for sure. I understand your company addresses most of these issues?
Yes. It is expensive but remember attorneys have had to pay for their education, their licensing, their insurance, their practice, etc. Of course if you can’t afford to hire an attorney or use a service, you can always try to draft and send the letter on your own. Our stats definitely show that sending a letter yourself is rarely successful but it’s always worth a shot nonetheless.
And yes, LetterDash does focus on and address each and every pain-point: the speed, the price, the quality. We’ve hand-picked the attorneys that draft and send these letters for our clients. We reject attorney applications constantly because we’re only willing to work with the very best.
Our mission is to continuously increase the probability of a positive outcome for the client. So, we use data and human analysis to analyze hundreds and thousands of letters and responses, which helps in creating more effective letters. We look at everything: the language used in each letter, the letterhead design used by the attorney, even the paper the letter is printed on.
Overall, in what cases can legal demand letters can be used?
The uses of a demand letter are very wide-ranging. We see everything from breach of contract cases to tortious interference, and a very high percentage of cases that come through LetterDash are related to slander, defamation, harassment, etc. by an individual, a neighbor, someone on social media, etc.
We also see plenty of cases related to employment, discrimination, wrongful termination, insurance claim related demands, medical malpractice, transactional dissatisfaction, copyright and trademark infringement, etc.
What is your advice to anyone who faces the need for writing such letters right now?
Don’t write it yourself. Find an attorney to draft and send it. Make sure the facts are clear, accurate and precise. Don’t over-demand in hoping to negotiate. Make sure it looks official, reads well, mentions case law when possible and isn’t more than two pages long. Send it with exhibits and supporting documentation. Have the attorney show you the final package before it’s put in the mail. Be prepared to sue if you threaten to.
Also, I would recommend sending a demand letter even if the expectation is rejection. Why? Because when your claims and demands are rejected, the recipient of your letter or their agent will sometimes “show what they’re holding” and give a good indication of what defenses would be raised if a suit is filed later on.