You Received a Letter Threatening a Lawsuit. Here's What Not to Do.
A letter arrives. It's from a lawyer, or maybe just an angry business partner, and it says, something along the lines of: pay this, fix this, or we'll see you in court.
For most people, this is unfamiliar territory, and the instinct in the moment is rarely the right one. Below are the most common mistakes we see people make in the days after receiving a demand letter or a notice of intended litigation, and what to do instead.
Mistake #1: Assuming It's a Bluff
Some threatening letters go nowhere. Others are the opening step in a case that could be filed within weeks. The problem is you often can't tell from the letter alone whether the threat of litigation is serious or not.
Treating every letter as an empty threat is a gamble, and it's one that can cost you the chance to respond properly, gather evidence, or negotiate from a position of strength. Take the letter seriously enough to have it evaluated by a lawyer, even if you suspect it's nothing.
Mistake #2: Responding Immediately, and Emotionally
The most common mistake is firing back an angry or defensive, or even apologetic reply within hours, before thinking through what that letter might mean.
Anything you say or write in response can be used later, whether in negotiations or in court. An angry email that admits partial fault, minimizes the issue, or makes promises you can't keep, may come back to haunt you later in the dispute. Slow down. A letter threatening litigation almost always has more room for a considered response than it appears to.
Mistake #3: Missing the Deadline
Many demand letters include a response deadline – “respond within 14 days” or something similar. That deadline typically isn't a real legal deadline, but ignoring it can still matter. It can be used as evidence that you didn't take the matter seriously, and it can encourage the other side's decision to start a legal action.
If there's a real legal deadline indicated in the letter – a limitation period, a statutory notice requirement, a contractual cure period – missing that one can be far more serious, sometimes hampering your ability to defend yourself or preserving a claim you would otherwise have.
Mistake #4: Talking to the Other Side Directly
If the letter came from a lawyer, resist the urge to call that lawyer yourself, and resist the urge to call the person or company on the other side to try to resolve the issue. Conversations like this rarely go the way people hope. They tend to produce off-the-cuff statements that may be used against you later, out of context, in a way that damages your position.
Once you have retained a lawyer, all communication should go through him or her. If you haven't retained a lawyter yet, it's still worth pausing before you speak to anyone about the substance of the dispute.
Mistake #5: Destroying or Losing Relevant Documents
Once you're aware a dispute may lead to litigation, you have an obligation to preserve documents and information that could be relevant – emails, texts, contracts, invoices, photos, internal notes. This is sometimes called a “litigation hold.”
Deleting emails, “cleaning up” files, or letting an auto-delete email policy or rule run its course after you've received a demand letter can be treated by a court as spoliation of evidence, which can result in serious consequences, including adverse inferences against you. Preserve documents first, sort out relevance later.
Mistake #6: Posting About It Online
Venting on social media, in online reviews, or in group chats about the dispute, or about the person threatening to sue you, may feel satisfying, but can create real problems. These posts are discoverable, they can be used to establish tone, intent, or admissions, and in some cases they can even give rise to new claims (such as defamation). Say nothing publicly until you've spoken to a lawyer about what is safe to say.
Mistake #7: Agreeing to Demands Out of Fear
When a letter is aggressively worded, some people will agree to whatever is being demanded just to make the problem go away. Sometimes that may be the right call, depending on the strengths and weaknesses of your position. But often it isn't. A demand is often inflated, or the underlying claim is weak, or there is a much better resolution available once someone actually examines the facts and the law.
Don't negotiate against yourself before you understand your actual exposure and how the facts may affect your legal position.
Mistake #8: Not Checking for Insurance Coverage
Many disputes that are the subject of a threatening letter may be covered by an existing home insurance policy, business liability insurance, professional liability or errors and omissions coverage. Sometimes, even certain credit cards may provide insurance coverage. People frequently pay lawyers out of pocket for months before realizing their insurer would have covered the defence, or even engaged their own lawyer on their behalf. Check your policies, and check them early.
Mistake #9: Waiting Too Long to Get Legal Advice
The single biggest source of many of the mistakes above is delay. People often wait because they are hoping the letter isn’t a real threat, they're worried about legal fees, or because they simply don't know where to start. But early legal advice is usually inexpensive relative to the cost of the mistakes it can prevent. It may also provide you with more options than advice sought after you have already responded hastily, missed a deadline, or said something you wished you hadn’t.
What to Do Instead
If you've received a letter threatening litigation:
- Don't respond right away. Read it carefully, note any deadlines, and set it aside for a moment.
- Preserve everything that could be relevant. Don't delete, discard, or any materials that could be evidence.
- Don’t post about the dispute on social media.
- Check your insurance policies for potential coverage.
- Seek advice promptly, even if only to confirm the letter is low-risk.
A threatening letter is stressful, but it's rarely as urgent or as final as it feels in the moment. The mistakes above can be more damaging than the letter itself. Getting ahead of them with a calm, informed response is usually the difference between a dispute that resolves quietly and one that ends up in court.
This post is general information and not legal advice. If you've received a letter threatening litigation, contact Iain MacKinnon for a consultation specific to your situation.