You Received a Cease and Desist Letter—What Now?
Whether you are an entrepreneur or a seasoned corporate executive, receiving a cease and desist letter is never something you want to have happen. To avoid unnecessary legal action, you will need to respond to the demand letter, and you will need to formulate a strategic response that reflects both the relevant facts and the relevant law.
A cease and desist letter can come from a variety of different sources, and they can contain a variety of demands. As a result, upon receiving a cease and desist letter, one of the first steps is to examine the letter carefully. Once you know who is requesting action (or inaction) and why, then you can focus on assessing the validity of the demand and deciding how best to respond.
"Upon receiving a cease and desist letter, it is important to engage defense counsel to examine the letter promptly. Based on the sender and the sender’s specific demands, your defense counsel can determine appropriate next steps and take appropriate responsive action on your (or your company’s) behalf.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.
7 Types of Cease and Desist Letters
While all cease and desist letters serve the same broad purpose— to demand that the recipient terminate allegedly unlawful conduct—these demands can take various different forms depending on the sender and the specific laws or regulations implicated. Seven types of cease and desist letters we most frequently see at our firm include:
1. SEC Cease and Desist Letter
The U.S. Securities and Exchange Commission (SEC) sends a cease and desist letter to companies, broker-dealer firms, and individuals associated with these entities that are alleged to be in violation of federal securities laws and regulations. This may involve allegations of selling unregistered securities, engaging in pump-and-dump schemes, misleading investors, or engaging in any of a variety of other prohibited securities- related practices.
2. CFTC Cease and Desist Letter
The U.S. Commodity Futures Trading Commission (CFTC) sends a cease and desist letter to companies, firms, brokers, traders, and other entities and individuals suspected of violating the prohibitions imposed under the Commodity Exchange Act (CEA) and its enabling regulations. Like the SEC, the CFTC has an active Enforcement Division that pursues suspected violators through a variety of means.
3. FTC Cease and Desist Letter
The U.S. Federal Trade Commission (FTC) sends a cease and desist letter to companies and individuals suspected of defrauding consumers or engaging in anticompetitive practices. The FTC’s Enforcement Division is active as well, and it uses cease and desist letters, civil investigative demands, subpoenas, and other investigative and enforcement tools to gather information and compel compliance.
4. OCC Cease and Desist Letter
The Office of the Comptroller of the Currency (OCC) sends a cease and desist letter to banks and other financial institutions that it finds in noncompliance with the myriad complex rules and regulations falling within its enforcement jurisdiction. Dealing with the OCC presents a variety of challenges, and this is especially true when OCC enforcement staff have already determined that a violation has occurred and are pursuing legal action.
5. EPA, USDA, and Other Federal Agency Cease and Desist Letter
Along with the federal agencies discussed above, various other federal agencies use the cease and desist letter in support of their law enforcement efforts. These include the U.S. Environmental Protection Agency (EPA) and U.S. Department of Agriculture (USDA), among others. While the SEC, CFTC, FTC, and OCC’s enforcement authority is more general in nature, these agencies focus on enjoining prohibited practices within their specific substantive areas of enforcement authority.
6. Attorney General and Other State-Level Cease and Desist Letter
State Attorney General’s Offices and other authorities use a cease and desist letter to compel compliance at the state level as well. State authorities send a cease and desist letter to companies, institutions, and individuals seeking to enjoin unlawful conduct ranging from banking and environmental law violations to securities and consumer fraud.
7. Private Civil Cease and Desist Letter
In addition to court or government agency cease and desist letters, companies and individuals may receive cease and desist letters from private parties opting to pursue legal action as well. Some of the most common reasons for engaging a law firm to send a cease and desist letter include:
Trademark infringement, intellectual property, service mark, and trade dress infringement
Libel and slander (including online defamation)
Breach of contract
Corporate espionage, cybersecurity breaches, and other tortious conduct
Responding to a Cease and Desist Letter
Fundamentally, there are two ways to respond to a cease and desist letter. You can either (i) agree to comply with the sender’s demand, or (ii) dispute the allegations against you or your company.
Responding to a Cease and Desist Letter: When You Agree to Comply
Let’s say you are willing to comply. After conducting an internal review, you determine that the allegations in the desist order can be substantiated, and you decide that it is in your (or your company’s) best interests to acknowledge the mistake and move on to avoid further legal action. In this situation, responding to the cease and desist letter will typically involve taking steps including (but not limited to):
Take (or Begin) Appropriate Remedial Action – Once you decide to comply with a cease and desist letter, the first step—generally—is to take (or at least begin to take) appropriate remedial action. Not only will this serve as a sign of good faith; but, if continuing to engage in the unlawful conduct is increasing your (or your company’s) liability exposure, then you will want to rectify the situation as promptly as possible to avoid legal repercussions.
Acknowledge Receipt of the Letter – In most cases, it will make sense to informally acknowledge receipt of the letter and convey your (or your company’s) general intent to comply. This is true whether the sender is a state or federal governmental authority or a law firm representing a client.
Respond to the Letter More Formally – Once you have a handle on the situation and you have fully formulated your strategy and next steps, you will want to respond to the letter more formally. As with the initial acknowledgment we just mentioned, this formal response should come from your (or your company’s) defense counsel. Sending a documented response is important, and drafting a clear and well-thought-out response can help set the stage for an efficient, amicable, and favorable resolution.
Seek to Resolve All Potential Claims – While complying with a cease and desist letter can help protect you or your company against the costs of litigation, it saves the sender from the costs of litigation as well. As a result, even if you or your company is in the wrong, you still have some leverage in this scenario. Rather than simply agreeing to comply, you may be able to leverage a settlement that insulates you and your company against the risk of facing claims in litigation related to the underlying allegations.
Responding to a Cease and Desist Letter: When You Dispute the Allegations
Now, let’s consider the opposite scenario: You have received a cease and desist letter, and you are confident that the allegations underlying the letter are misguided. Maybe state or federal authorities are overlooking relevant information, or maybe the other party is overreaching in attempting to enforce its intellectual property rights. In this scenario, the steps involved in responding to such a letter will include (but are not limited to):
Document the Justification for Your Response – The decision to reject the demands contained in a cease and desist letter needs to be made based on an informed understanding of the relevant facts and law. After analyzing the relevant facts and law, the recipient’s defense counsel should carefully document the justification for the recipient’s forthcoming response. This justification could be factual in nature (i.e., demonstrating that information a company allegedly withheld was actually properly disclosed), legal in nature (i.e., arguing that the recipient’s trademark is not “confusingly similar” to the sender’s mark), or involve a combination of factual and legal issues (i.e., the sender’s claimed trademark rights are invalid because the recipient has priority).
Formulate and Carefully Draft the Response – After documenting the justification for the recipient’s response, the next step is to craft the response itself. This may involve sending a letter, reaching out to the sender via phone or email, or a combination of both. The key is to approach this initial response strategically and with an understanding of how the sender is likely to respond (or at least an understanding of the ways in which the sender may respond).
Formulate Your Next Steps – After communicating the initial response, it is time to focus on next steps—understanding that these next steps will depend, in part, on how the sender reacts to the response. Depending on the circumstances, this could involve going on the offensive (i.e., claiming that the sender is the true infringer), preparing to cooperate with state or federal authorities to steer their investigation toward a favorable resolution, or preparing for the possibility of litigation.
Prepare to Defend if Necessary – Ideally, a clear and well-drafted response to the cease and desist letter will put the matter to rest. But, more than likely, this is not going to happen—at least not right away. When rejecting a cease and desist demand, it is important to anticipate the possibility of litigation and legal proceedings—and to factor this possibility into the recipient’s overall response strategy.