For many business litigators, authoring a "cease-and-desist" letter is the go-to move when their clients face a threat of unfair competition. Although a cease-and-desist letter can be relatively easy in concept to draft, writing an effective one, however, is altogether different task.
The nastiness of a cease-and-desist letter often is inversely proportional to the actual threat posed by a competitor. In many cases, a strongly worded letter looks intimidating but rests on adverb-laden hyperbole, general legal principles, and unfounded assumptions of wrongdoing. These letters may placate a client, but they can do very little to help resolve a dispute. And the letter even can be a source of liability if it is defamatory or interferes with a person's employment opportunities.
So it's essential to write effective letters with a clear purpose. Having written and received many cease-and-desist letters over the years, I have distilled their principal, legitimate functions into three categories:
1. To notify a non-party of contract rights. Even if an ex-employee is clearly violating a non-compete, this does not entitle the enforcing party to seek a claim against the new employer. After all, the new employer may not know of the contract to begin with. In this respect, an employer can use the cease-and-desist letter (really, in this instance a "notification" letter) to establish on the record that the new employer is aware of the ex-employee's underlying breach. The issue of notice is particularly relevant to establishing a claim for contract interference.
2. To assist in making the case for injunctive relief. When an employer has clear evidence of a contract breach or trade secrets theft, a cease-and-desist letter may be an effective tool in helping secure an injunction. An ex-employee's refusal to respond to a clear call to action may prompt a court to understand that its immediate assistance is required. Judges never like hearing emergency injunction petitions, and an attorney who fails to make an attempt to resolve the situation before running into court may face some tough questions from a judge about whether she jumped the gun in filing a lawsuit.
3. To invite constructive follow-up from the recipient to resolve a potential dispute. Since most employers do not seek out litigation, an obvious purpose to a perceived threat is to avoid a dispute in the first place. In this respect, counsel faces a special challenge in drafting a letter in a way that pleases the client while also writing it to yield a constructive, amicable outcome short of a lawsuit.
On this third point, I have noticed that at least four out of every five cease-and-desist letters suffer from the same basic deficiency. They don't invite follow-up and simply generate a vaguely worded, unproductive response.
Something along the lines of this:
"In light of the above facts, Employer demands that you immediately cease and desist from violating the restrictive covenants contained in Paragraphs 1 and 2 of the Agreement, from maintaining any confidential information of Employer, and from interfering with Employer's business relationships. GOVERN YOURSELF ACCORDINGLY!"
Without commenting on the sheer idiocy of lawyers who include phrases like the last one, the call to action in the typical cease-and-desist letter's penultimate paragraph is highly ineffective. Assume the employee provides the letter to his new company. In most cases, corporate counsel will then take the heavy lifting. The cease-and-desist letter invites no response, and a savvy lawyer representing the new employer simply can respond with something as trite as the following:
"We can assure you that NewCo respects and honors its competitors' proprietary information and contract rights. We have assured Employee not to violate any enforceable terms of the Agreement, to disclose any confidential information, or to use any confidential information in working for NewCo. We have communicated your concerns to Employee, and if for any reason we suspect that she has ignored our admonitions, we will contact you promptly."
A more effective cease-and-desist letter follows a two-part format. It first lays out the known facts and the pertinent contract terms. It then reads like a series of specific, written interrogatories that require specific answers.
Examples of the types of questions that employers should ask in this interrogatory format include:
1. Have you contacted for business purposes any Restricted Client (as defined in the Agreement) since leaving Company's employment?
2. If yes to (1), which Restricted Client and what is the name of the key contact person at the client?
3. For each contact with a Restricted Client, what types of services did you sell or offer to sell to them?
4. Have you provided NewCo with any business information belonging to Company and, if yes, to whom?
5. Have you notified NewCo of the terms of the Agreement? If yes, please provide us a copy of that notification and any response NewCo gave to you.
6. Do you contend that any aspect of Company's factual investigation (as outlined above) is inaccurate, and if yes, please describe how.
These are illustrative examples. Each employee's situation, of course, is different and will demand some customization. The idea, though, is to write a very specific letter to get a very specific response. That response may necessitate further fact-gathering, further dialogue among the parties, or the filing of a lawsuit.
But if you serve a generic, threatening cease-and-desist letter, expect a crummy response that does nothing for your client.