No one likes receiving demand letters. Demand letters are often sent by a would-be plaintiff to a would-be defendant before a lawsuit is filed. They demand payment of money, and say that a lawsuit will be filed if the defendant doesn’t pay. If you ever receive one, and the amount demanded is relatively small, you might be tempted to take solace in the small amount demanded. After all, common sense says that a small disputed liability is better than a large one.
This is one of those times when common sense is wrong.
Oregon has a statute that provides for a mandatory award of attorney fees where the plaintiff demands $10,000 or less from the defendant in a pre-suit demand letter. The statute is subject to a number of requirements and exceptions, but the bottom line is that if the statute applies, and the plaintiff recovers more at trial than the defendant’s best offer in response to the letter (strict deadlines for responses apply), the court must award the plaintiff his attorney fees, along with any other amount recovered at trial.
The statute is meant to encourage settlement of small claims. But, the scheme can also put defendants in a precarious legal position when they fail to properly respond to a demand letter that meets the statutory requirements. If, for example, a plaintiff sends a qualifying letter that demands $1,000, the defendant fails to it, and the later plaintiff recovers just $1 at trial, the defendant will be obligated to pay the plaintiff’s attorney fees along with the $1 verdict. Thus, a $1,000 problem can easily become a much larger problem.
If you ever receive a demand letter, the best practice is to involve an attorney as soon as possible. The attorney will be able to determine if the letter potentially triggers a mandatory attorney fee award under the statute, and will be able to properly respond in light of the risk of such an award. Often, this will lead to savings of thousands of dollars if a lawsuit is filed.
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