The Power of the Demand Letter

            Week after week, I meet small business owners and just individuals that complain about someone breaking a deal or a contract, but that a lawyer is just too expensive.  Now, I’m not one to advocate pulling the litigation cord every time a deal goes south, but the blanket statement that a lawyer is just too expensive means that either (1) they’ve never actually hired an attorney or (2) they’ve hired a bad attorney.  And there’s a reason behind that analysis – those that have hired good attorneys know that deciding whether or not litigation is worth pursuing isn’t about the attorney being too expensive; it’s about the return on investment.

            Litigation is a complicated matter, and one that folks without a law degree should NOT be handling.  You don’t (or shouldn’t, at least) perform medical procedures on yourself, do you?  Of course not (again, I hope).  So, why would you think it’s a good idea to draft a complaint and attempt to get a judgment in Court alone?  Sure, it’s true that some matters are simpler than others, but that doesn’t mean you aren’t setting yourself up for huge risks.  To continue the medical analogy, I think we can all agree that we wouldn’t perform heart surgery, but what about dealing with a laceration?  Maybe skip the stitches for a solid bandage job on your own?  You’ve done it before and nothing went wrong, but what happens if it gets infected?  Same here.  Sure, maybe you won a small claims case before, but that doesn’t mean you won’t make a mistake in a filing that will later preclude you from an even bigger lawsuit or maybe you forget to sue a bigger pocket – too bad, too late.

            Now, the point of this little snippet isn’t to berate anyone into hiring a lawyer.  No, instead, it is to highlight some of the advantages, and, mainly, to give some advice on how to get the most “bang for your buck”, so to speak.  One of my favorite tools in the litigation bag is the demand letter.  This is one of the most flexible and inexpensive tools, but can be the most effective if done properly.  It generally costs about $250.00 and is easily tailored to the individual matter.  (Note: beware of the form demand letter).  Many lawyers do one of three things wrong – either (1) overlook the importance; (2) use it to give the opposing party a roadmap of their litigation strategy; or (3) use it as a forum to show how much the lawyer really wishes he or she was a mob boss.  Sure, a mean letter may strike some fear into the other party, but is that really your point?  Often, it surprises a new client when I ask straight forward – what is your point in being here?  If the answer is anything, but get a resolution, they need to find a new attorney.

            A demand letter should have one very simple point – get a resolution.  That’s not to say the result will always be a resolution, but if utilized properly, it gives you a good start.  Most often, the resolution is money.  Someone had a contract to provide a thing or a service, and the receiver decided not to pay.  So, the resolution – money!  Sometimes, the resolution is to stop a behavior, whether it is the misuse of a trademark or the defamation of a business, the resolution is the same – stop the unwanted behavior.  Across the board, it really comes down to three qualities for a good demand letter:

1.         Be unemotional – which basically boils down to not being angry or mean.

2.         Don’t ‘Hide the Ball’ – get out of the whole ‘do this or else!’ mindset.  You’re making this demand for a purpose…state it.  And show the other party why you feel entitled.  In a breach of contract, show the contract, point to the provision.  Nothing is gained by the other party being confused.

3.         Be Realistic – no one is going to get a demand letter and write you a check for everything you demand if you demand the world.  In a breach of contract, don’t go itemizing every single dime that could have, in some way, been affected by the breach.  First off, you probably couldn’t even get it in court and second, remember, you want paid.  Be realistic about your demand and make it possible for them to be met.  Therefore, don’t give 10 days to get your $20,000.  It won’t happen.  Give at least 30.  Trust me.

            Even a good demand letter doesn’t always produce results, but it does a helluva a lot more than a badly written one.  And sometimes, the demand letter doesn’t work because the opposing party is broke.  If that’s the case, then at least you know before you run off filing litigation.

            So, what’s the take-away?  It’s two-fold: (1) you’re not a lawyer, don’t try to be one; and (2) when you hire that lawyer, hire one that knows how to use a demand letter.  Return on investment is the name of the game, and the demand letter is your last chance for a resolution without the cost of litigation, arbitration, or mediation – so use it and use it well.