When a Demand Letter Arrives: A Step-by-Step Guide to Responding to Business Tort and Unfair Competition Claims

Responding to a demand letter requires an informed and strategic approach. If your company is facing allegations from a competitor or another party, the steps your company takes in response to these allegations could have significant legal and financial ramifications. Engaging experienced legal counsel is the first step toward avoiding unnecessary and unwarranted consequences, and business leaders must be prepared to work with their company’s legal counsel to make sound decisions going forward.

If your company has received a demand letter alleging a business tort or unfair competition, the steps you take now could have serious and long-term consequences. While taking an informed and strategic approach can help set the stage for a favorable resolution, making uninformed and legally unsound decisions could lead to consequences that could—and should—have been avoided.

What Should You Do if Your Company Received a Demand Letter Alleging a Business Tort or Unfair Competition?

With this in mind, there are several steps that business leaders should take promptly upon receiving a demand letter alleging a business tort or unfair competition. In this scenario, key preliminary steps include:

1. Engage Legal Counsel to Evaluate the Demand Letter

Companies that are facing business tort and unfair competition claims should promptly engage outside litigation counsel to assist with formulating and executing their response. These are high-risk matters that require informed and strategic decision-making taking into account all relevant facts and applicable law.

2. Implement a Legal Hold

Targeted companies should work with their counsel to implement a legal hold. When facing the possibility of litigation, companies have an obligation to preserve all potentially relevant records for discovery. Implementing a legal hold involves ensuring that potentially relevant files and communications do not get deleted or destroyed—whether by employees acting on their own or in accordance with the company’s normal record retention and destruction policies.

3. Conduct a Risk Assessment and Determine Whether Corrective Action is Warranted

Any time a company is facing allegations from a competitor or another party, it is critical to conduct a comprehensive risk assessment to inform the company’s next steps. In the context of a business tort or unfair competition claim, this includes assessing whether any ongoing business practices are continuing to increase the company’s liability exposure. If corrective action is warranted, it will be important to take a strategic approach that avoids the appearance of an admission of error.

4. Evaluate Potential Defenses and Their Likelihood of Success

In all cases, when faced with a demand letter, it is important to evaluate all potential defenses and each defense’s likelihood of success. Once you have a clear understanding of your company’s defensive posture, then you can make informed and strategic decisions about how best to proceed.

5. Determine Whether Any Counterclaims Are Warranted

Along with assessing the company’s defensive posture, it will also be important to assess whether any counterclaims are warranted. If your company has grounds to issue a demand letter of its own, this could significantly alter the nature of the dispute and help facilitate an efficient and favorable resolution.

6. Determine Whether any Third-Party Claims Are Warranted

Likewise, when facing business tort or unfair competition allegations, it is important to assess whether any third-party claims may be warranted as well. If your company has an indemnification claim against a vendor or supplier, for example, asserting this claim could help extricate your company from the matter at hand.

7. Formulate Your Company’s Initial Response

Finally, after gathering all necessary insights, it is time to formulate your company’s initial response. This response could take numerous forms, and the ultimate goal of your company’s initial response will be determined by the circumstances at hand. If the allegations in the demand letter can be substantiated, then targeting a settlement could be the best approach—although it will be important to assess any potential counterclaims and third-party claims as discussed above. Alternatively, if the demand letter is misguided, then demonstrating why this is the case could be key for securing a favorable resolution without going to court.

FAQs: Responding to a Demand Letter Alleging a Business Tort or Unfair Competition

What should I do if my company received a demand letter?

If your company has received a demand letter, it will be important to promptly engage experienced legal counsel to assist with evaluating the allegations in the letter and formulating an appropriate response. In this scenario, it is critical to ensure that you are making legally sound decisions with your company’s long-term best interests in mind.

Is my company required to respond to a demand letter?

Technically, no. If your company received a demand letter from a competitor or another private party, your company is not required to respond. However, ignoring the letter could lead to a lawsuit being filed. As a result, it is best to issue a response in most cases. However, before you respond, it is critical to ensure that you have a clear and comprehensive understanding of the legal issues at hand.

What if my company committed a business tort or engaged in unfair competition?

If your company committed a business tort or engaged in unfair competition and is now facing the prospect of litigation, you will need to make strategic decisions about your next steps. This starts with gaining a clear and comprehensive understanding of the circumstances at hand. Once you have the information you need to make confident decisions, then you can work with your company’s legal counsel to determine how best to proceed.

Speak with a Business Litigation Attorney at Rendigs

Our firm has extensive experience representing companies accused of business torts and unfair competition. If your company has received a demand letter, our attorneys can provide the advice and insights you need, and we can use our experience to help protect your company’s interests by all means available. To speak with an experienced business litigation attorney at Rendigs in confidence, call us at 513-381-9200 or contact us online today.