Monthly Archives: May 2013

The Effective (and Ineffective) Use of Demand Letters

     Many lawyers and their clients love demand letters. The reason for this is simple: it is a potential cost saver. If the lawyer can clear up with a demand letter, what could otherwise be accomplished only through a time-consuming and expensive lawsuit, the client has won a tremendous battle. Litigation is often decided based upon costs. Thus, if counsel can save his client substantial  sums, by resolving a case with a demand letter only, the client has won. However, demand letters are subject to certain pitfalls which counsel should be careful not to fall into.

  1. When to Send  A Demand Letter

     I confess that I do not like it when clients approach me to “just sent a demand letter”.  As lawyers, we greatly prefer clients who are prepared to follow through on their threats. We do not want to be enlisted by a bluffer. After all, a client who only wants his lawyer to send a demand letter is basically asking to exploit the lawyers’ letterhead for a discount or no fee at all hoping that his adversary will fold at the mere sight of the lawyer’s name. Moreover, if all I do is send a demand letter which is not followed by an actual lawsuit it will likely diminish my reputation as a litigator and label me with the opposing side as a bluffer. This a reputation that I do not have and that I do not want.  

      2. What to Say in the Demand Letter

     The demand letter should identify your client, the basis for his or her claim and state the amount of money requested. For consumer cases, a disclaimer as required by the Fair Debt Collection Practices Act should also be included. The demand letter should contain a time reference within which the opposing party has to comply. Demand letters with open ended response times have no effect and will often be ignored.

     Additionally, you may want to consider ignoring such catchphrases as “Please Govern Yourself Accordingly.” What does that mean anyway? Wouldn’t it be better to simply use English and say – – “if you do not respond, you will be sued.” I like that better; it is more direct and there is no doubt as to what the consequences will be if the opposing party fails to respond.

     3, What Not to Say in the Demand Letter.

     In a recent case from California,  a lawyer who sent a demand letter was later sued by the opposing party because of the statements made in the letter. In the demand letter in question, the lawyer threatened to expose  certain sexual liaisons of the opposing party unless the lawsuit,  which had not yet been filed, was “resolved to his client’s satisfaction.” The demand letter was also followed by several efforts to hack the opposing party’s e-mail and eavesdrop on their telephone conversations. The California Superior Court thought this was just too much and denied the motion to dismiss filed by defense counsel for the lawyer. The matter is now on appeal and has been widely discussed in the legal press. See generally http://www.abajournal.com/news/article/was_well-known_lawyers_demand_letter_extortion_appeals_court_to_hear_argume/?utm_source=feedburner&utm_medium=feed&utm_campaign=ABA+Journal+Top+Stories&utm_content=Google+Reader.

      What is the lesson to be learned from this case? The first lesson is to be careful what you say. If you want something for your client, and most of the time in the commercial context it is money, be specific. Show in your demand letter that your client is entitled to the money by attaching a copy of the contract or invoice. Do not say things such as “unless this matter is resolved to my client’s satisfaction”. What exactly does that mean? This is likely one of the things that the California court found troubling (not to mention the computer hacking and eavesdropping).

     The California case provides an excellent example of a lawyer going “over the top” in order to accomplish the ends of his or her client. Lawyers should be careful not to over-promise their clients a particular result. Let’s face it, if we really wanted to help assure the client’s objective to collect money, rather than filing a lawsuit, we could simply send Luca Brasi[1]  to the opposing party’s place of business and cut off the heads of one of their horses. My guess is that the Bar would probably not appreciate this. This is not our profession. Our profession requires us to act zealously within the bounds of the law. Toward that end, it is the careful lawyer who tells his client what his limitations are and that if he wishes to obtain another type of justice, another type or professional might be required.

For a portion of the briefing on the California case, see http://www.scribd.com/doc/141257870/Respondent-Brief.

 

 


[1] For more information on this character in the Godfather, see http://en.wikipedia.org/wiki/Luca_Brasi

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Constitution: 101 – Why Individual States Are Not Permitted to Have Their Own Foreign Policy

Constitution: 101 – Why Individual States Are Not Permitted to Have Their Own Foreign Policy.

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Constitution: 101 – Why Individual States Are Not Permitted to Have Their Own Foreign Policy

     Generally, the United States Government is responsible for creating and implementing foreign policy. Foreign policy  is not the responsibility of individuals states. Otherwise, rather than being denominated the ”United States of America” we might as well be called the “Individual States of America.” Most states of  the Union seem to understand this. Florida, however, does not appear to be one of them.

     The idea that it is the Federal Government which creates foreign policy stems from a portion of the Constitution many people do not know about called the Supremacy Clause. The Supremacy Clause provides that Federal law shall be the Supreme law of the land and generally preempts state law.

     As a matter of Constitutional law, if there is a conflict between a federal law and a state law, courts generally defer to the federal law and override the state law. Florida lawmakers would do very well to remember this simple concept. However, shockingly, Florida legislators routinely seem to ignore this. Additionally, as a political matter, there appears to be general resistance to the idea that the federal government creates the supreme law of the land.  These issues have often resulted in court proceedings one of which has a very recent vintage and relates to an issue that is greatly controversial here in South Florida – – economic trade with Cuba.

     Odebrecht v. the Florida Department of Transportation, the United States Court of Appeals for the Eleventh Circuit was called upon to review the constitutionality of a law referred to as the “Cuba Amendment” enacted by the State of Florida and signed into law by Governor Rick Scott. Generally speaking, the Cuba Amendment was created in order to prevent any company that does business in Cuba, or does business with a company that does business in Cuba, from bidding on public contracts in the State of Florida.    Odebrecht, a construction company, historically did substantial business with the State of Florida.  Odebrecht itself did not do business with Cuba. However, one of its parent companies, based in Brazil, did. This created a problem for Odebrecht insofar as this created a potential violation of Florida’s Cuba Amendment.

     Odebrecht filed a lawsuit against the State of Florida seeking a preliminary injunction to prevent the enforcement of the Cuba Amendment. The United States District Court granted the injunction and the Eleventh circuit, on appeal, affirmed the injunction. In order to prevail on the injunction,  Odebrecht had to satisfy the four-part test required for a preliminary injunction:  (i)  a substantial likelihood of success on the merits of the underlying case; (ii) that the moving party would suffer irreparable injury in the absence of the requested injunction;  (iii) the harm suffered by the moving party would outweigh the harm suffered by the non-– moving party in the absence of the injunction; and (iv) the     deciding to uphold the injunction granted by the District Court , Eleventh Circuit on appeal relied upon the Supremacy Clause of the United States Constitution. Under this clause, the United States Congress has the ability to “preempt” state law. Preemption generally occurs when state law actually conflicts with federal law.

     The ultimate question decided by the Eleventh Circuit was the question of whether the Cuba Amendment created an obstacle to the enforcement of a well calibrated foreign policy as that policy relates to Cuba. The Court began its analysis by noting that there are many federal statutes already on the books which relate to United States economic policy towards Cuba. As most readers are aware, United States trade with Cuba is the subject of an embargo. The President of the United States, by executive order, has the right under Federal law to limit the ability of American citizens to trade with Cuba. Nonetheless, the regulations currently in place do not prevent a parent or subsidiary corporation located outside of the country from trading with Cuba.  Thus, the Court found that there was a conflict in between the Cuba Amendment and federal law. Moreover, while federal regulation generally restrict trade with Cuba, Federal statutes and regulations generally permit  certain exceptions which were not permitted by the so-called Cuba amendment. Accordingly, the Cuba Amendment was found to conflict with the federal statute.

     The Eleventh Circuit found that the Cuba amendment conflicted with federal statutes in at least three ways: (i) the Cuba Amendment punishes companies for doing business with Cuba in ways that would otherwise be permitted under federal law; (ii)  the Cuba Amendment has its own penalty provisions which are more extensive and severe than those in the federal statute; and (iii) the Cuba amendment undermines the President’s ability  to regulate trade with Cuba. As a result, the Eleventh Circuit found that Odebrecht satisfied the requirements for a preliminary injunction and enjoined the enforcement of the Cuba Amendment.

 

     In short, the case is a victory for the United States Constitution and the concept that the states are “United” and not able to enact statutes which conflict with federal statutes. While there are many areas left to be regulated by the states, foreign policy towards nations outside of the United States borders is not one of them and the Eleventh Circuit was correct in its decision to uphold an injunction enjoining the enforcement of the Cuba Amendment by the State of Florida.

For further information see and please read the actual opinion: http://www.ca11.uscourts.gov/opinions/ops/201213958.pdf

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SCAMMING THE LAWYERS

     Virtually every morning now, in my email inbox, is a letter from a person that I do not know inquiring as to whether I will represent them.   Sometimes the emails seem plainly bogus; other times, it is not so obvious.  It is astonishing that there are numerous hucksters trolling the internet whose purpose appears to be to scam lawyers.   One would think that lawyers would be one of the least likely targets for this type of activity.   However, if you are a lawyer, you should think again – – you have become a target of internet scammers.  Let me give you an example of correspondence I recently received which I determined to be bogus: 

Dear Counsel:

I wish to file a contempt Petition against my ex-spouse for failure to make  court ordered payments in child support, spousal support, equitable distribution and medical support.  Please advise if you handle such a case.  

     Most often these letters/emails will come from people who claim to be in China or Japan with return addresses reflecting same.   The letters will explain that, because of the time difference, it would be difficult to contact them by phone and, as a result, the sender would prefer to communicate by email.   Often the letters come accompanied with a teaser with respect to the amount owed and offering a contingent fee for collection of sums in excess of $1,000,000.   A common theme is the caveat that the case is close to being settled and all the sender really needs is a lawyer to send a demand letter .  Naturally, the lawyer will be entitled to a substantial fee for handling the file. One rule of thumb to follow in law and in life  – if something seems too good to be true, it generally is.

     More often than not, these unsolicited emails are a scam the purpose of which is to defraud the lawyer out of substantial sums of money.   While there are several variations of this scam, there are several characteristics common to most of them.  First, the lawyer signs and sends an engagement letter to the author of the email and requests a retainer. Almost always the prospective “client” will sign the letter but not send the funds.   Before the ink on the retainer agreement is dry, a check will arrive in the lawyer’s office from the prospective defendant made payable to the law firm’s trust account usually for a substantial sum to “settle” the case which has obviously not yet been filed. My advice is to recognize these scams for what they are and, whatever you do, don’t deposit the check.

     There are myriad reasons not to deposit the check. First, some banks will spot a bogus check immediately; others will not. Bankers are people too and can be easily fooled. There are several cases in which a bogus check is deposited into a law firm trust account and the bank has actually verified that the check is supported by collectible funds. In at least one instance that I am aware of, the bank has wired transferred the “settlement funds” to the alleged “plaintiff” who is actually the scammer. When the bank realizes that the check is no good they often contact the lawyer seeking reimbursement. There may be insurance coverage to cover a lawyer for this type of scam but the best practice is to avoid it altogether. See http://www.insidecounsel.com/2013/03/21/law-firm-that-was-victimized-by-check-scam-is-enti?t=litigation&page=2.

      There are more artful ways of running the same scam using phony wire transfers and things of that nature but the point is the same.   The scammer gets the money, the lawyer gets stuck holding the bag.

     If you receive these emails on a daily basis, as I do, you have to ask yourself the question of whether you are obligated to respond to them.   My answer is yes.   The problem with these emails is that the one time that you fail to respond will be the time that the prospective client will be real and claim that you were actually his or her lawyer and that you failed to timely respond.   Then there is the possibility that this person will file a Bar complaint against you.   Accordingly, the emails discussed above create a special problem.  

     Generally, it is easier than you think to form an attorney-client relationship.   In fact, you can form an attorney-client relationship with practically anyone even in the absence of a retainer agreement or retainer funds.   If you sit in a bar with a friend discussing a legal matter, and you dispense legal advice during the course of the conversation, your friend may be able to come back and claim that you were his or her lawyer.  No engagement letter or exchange of funds are required.  Thus, when you receive a solicitation email like the one referenced above, it is in your interest to respond and advise that either you do not handle such cases or you do not accept solicitations from clients who are not referred by known sources.   Keep a record of your responses in case the internet scammer turns out to be real.

    If you find a lead that comes through email to be genuine, do some due diligence on it.   For example, insist on a telephone call.   Make efforts to verify the existence of the company through public data bases or on Google.   Confirm the existence of an alleged debt with opposing party and, most of all, be careful with your trust account because that is where the problem will likely arise.  

     For a time, I was beginning to believe that I was the most popular American lawyer in Japan since a different Japanese woman appeared to be emailing me each and every morning requesting my services in order to recover sums from delinquent ex-husbands.   Where do they get my name?    I have really no idea but I suspect that it comes, in part, from this blog or our firm’s website.  

     Some Florida lawyer will be taken in by this scam this year.   You should just make sure that you make every effort to ensure that it is not you.

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