Cease and Desist Letter Strategies
If you have received a cease and desist letter—whether personally or as a company representative—you need to make an informed decision about how to respond. While failing to take appropriate action in response to a cease and desist letter can be dangerous, you (or your company) should not be pressured into ceasing an activity without legal justification.
7 Steps for Responding To a Cease and Desist Letter
As with all legal matters, determining how to respond to a cease and desist letter requires informed decision-making. Here are some strategic considerations:
1. Identifying the Sender
Upon receiving a cease and desist letter, one of the first steps to take is to identify the sender. Did the letter come from a law firm alleging that you are in violation of its client’s rights? If so, how reputable is the firm, and what are its areas of practice? Did the letter come from a state or federal agency? If so, which one, and in what area of the law does the agency focus its enforcement efforts?
The answers to these types of questions will give you a preliminary indication of the risks you or your company is facing. Responding to cease and desist letters from law firms, state agencies, and federal agencies are three very different matters, and identifying the sender will allow you (or your lawyer) to frame your next steps appropriately.
The sender of the cease and desist letter should be apparent from the letterhead. If the sender is not clearly identified or the letterhead seems suspect, there is a possibility that the letter could be a scam.
2. Carefully Reviewing the Demand
Assuming the cease and desist letter is legitimate, the next step is to carefully review the demand. Since the purpose of the letter is to compel you or your company to stop engaging in a certain activity, the letter’s demand should be clear. For example, common reasons for sending cease and desist letters include:
- The U.S. Securities and Exchange Commission (SEC) or U.S. Commodity Futures Trading Commission (CFTC) sending a cease and desist letter to stop investor fraud or other statutory or regulatory violations
- The U.S. Federal Trade Commission (FTC) or Office of the Comptroller of the Currency (OCC) sending a cease and desist letter to stop consumer fraud or financial institution misconduct
- The U.S. Environmental Protection Agency (EPA), U.S. Department of Agriculture (USDA), or another federal agency sending a cease and desist letter to enjoin conduct within the scope of its law enforcement authority
- A state Attorney General’s Office or other state authority sending a cease and desist letter in connection with a law enforcement investigation conducted under state law
- A private party sending a cease and desist letter seeking to protect its trademark rights under the Lanham Act or to protect other intellectual property or confidential information
These are just examples. When reviewing a cease and desist letter, it is important to focus on the letter’s plain language and not make any assumptions. Even if you think you have an idea of why you or your company may have received the letter, it is still important to focus on the contents of the letter specifically as you chart your path forward.
3. Conducting an Internal Review
After discerning the cease and desist letter’s purpose, the focus should shift to assessing the validity of the demand. This starts with conducting an internal review in consultation with, and with the oversight of, outside counsel.
The focus and scope of this internal review should be tailored to the issue (or issues) raised in the cease and desist letter. If the SEC, OCC, or EPA is alleging broadscale compliance failures and demanding that your company cease all unlawful operations, this will be a time-intensive—and time-sensitive—process. If a competitor or other private party is alleging trademark infringement, this requires a prompt investigation as well, though identifying the allegedly infringing uses may be a much more straightforward process. In any case, the key when conducting an internal review is to be as comprehensive as possible, as you (and your counsel) will need all relevant information in order to make informed decisions.
Importantly, conducting an internal review in response to a cease and desist letter entails some strategic considerations of its own. In particular, if the demand implicates potential improper action or inaction by a particular employee (or employees), then these individuals should generally be excluded from participating in the internal review process. Instead, it may be necessary to interview them—and to do so without any suggestion that they may be at risk for disciplinary action. It will be important to timely preserve all relevant communications and files as well. This is true not only for purposes of the internal review, but also for purposes of protecting the company’s interests in the event of future litigation or enforcement action. Failing to preserve communications and files when faced with the prospect of litigation or enforcement action can lead to allegations of spoliation or wrongfully interfering with a government investigation.
4. Conducting a Legal Analysis of the Demand
With a clear and comprehensive understanding of the relevant facts, the next step is to conduct a legal analysis. Is the demand valid? In other words, is it justified by applicable law?
Answering these questions will help you decide whether to comply with the cease and desist letter or refute it. If the demand is valid, then complying may be the best course of action. However, if the demand is unjustified, then you (or your counsel) will need to formulate a response that challenges the demand without engendering unnecessary animosity or increasing the risk of litigation or enforcement action.
5. Formulating a Response
Whether you decide to comply with a cease and desist letter or reject its factual or legal underpinnings, you will most likely want to respond. Rarely is ignoring a cease and desist letter the best approach.
But, responding to a cease and desist letter involves much more than just accepting or rejecting the sender’s demand. When agreeing to comply with a cease and desist demand, it is crucial to formulate a response that helps to mitigate any risk of liability arising out of the alleged violation or misconduct. For example, rather than simply agreeing to comply, it may be more prudent to propose a settlement that results in a waiver of any potential claims related to the sender’s allegations.
Rejecting a cease and desist demand requires a strategic and carefully constructed response as well. Rarely will the sender of a cease and desist letter simply give up in response to a rejection. This is important to keep in mind when formulating a response. Correcting factual inaccuracies and explaining your (or your company’s) legal position can help to facilitate a favorable resolution, though there is a good chance that additional interactions will be necessary. A response rejecting a cease and desist demand should set the stage for these interactions.
6. Anticipating and Dealing with Follow-Up Communications
Regardless of the nature of your (or your company’s) response, you should work with your counsel to anticipate follow-up communications. As we discussed above, dealing with law firms, state Attorney General’s Offices, and federal authorities are all very different prospects that entail different considerations and require different approaches. Experienced defense counsel will be able to anticipate potential counter-responses to your (or your company’s) response, and will be able to formulate subsequent communications in light of the specific circumstances at hand.
7. Assessing the Risk of an Investigation or Litigation
Depending on how these follow-up communications go, at some point it may become necessary to assess the risk of facing an investigation or litigation. If you reject the cease and desist demand and the letter’s sender remains firm in its position, facing some form of formal legal action may be unavoidable.
At this point, dealing with a cease and desist letter becomes no different from dealing with any other type of allegation or complaint from a defensive posture. You will need to work with counsel to clearly and comprehensively set out your (or your company’s) position, and you will need to focus your efforts on achieving a favorable resolution by the most efficient means possible.
Working Diligently and Strategically To Target a Favorable Resolution
Regardless of how things progress after you respond to a cease and desist letter, you will need to see the matter through. Whether this means convincing the sender to terminate its efforts, negotiating a settlement, defending against a petition for injunctive relief, defending against a state or federal investigation, or fighting the sender’s allegations at trial will depend on the circumstances involved. Ultimately, your goal should be to resolve the issue as diligently as possible, and you will need to work with experienced counsel who can provide strategic advice and representation.
Did You Receive a Cease and Desist Letter? Contact Oberheiden P.C. Today
Have you received a cease and desist letter? If so, we can help. To discuss your options with an experienced lawyer at Oberheiden P.C. in confidence, please call 888-680-1745 or request a complimentary consultation online now.