Received a Demand Letter From a Lawyer? What a California Business Should Do

Last updated: October 2026

A demand letter from a lawyer is not a lawsuit, but it is usually the last step before one. A California business that receives one should calendar the deadline, preserve every related document and email, check its insurance policies for coverage, and respond briefly and factually without admitting anything. Kolmogorov Law, P.C. defends and resolves demand-letter disputes for businesses in Orange County, Los Angeles, and across California, often before a complaint is ever filed.

Call (909) 235-6116 or contact us online to discuss a demand letter your business has received.

What a demand letter is, and what it is not

A demand letter is a lawyer's statement of a claim, usually with a dollar figure and a deadline. It has no legal force by itself. Nobody has sued you yet.

What it does do is start a clock. From the day you receive it, the other side can argue that you knew a dispute existed. That matters for document preservation and for insurance notice.

I see these letters every month. Some come from counsel who have already drafted the complaint. Others are written in an afternoon to see whether you will pay to make a problem disappear. The letter rarely tells you which kind you are holding. The facts do.

Read the deadline, then identify the sender

Most demand letters give between seven and thirty days. The deadline belongs to the sender, not the court, and missing it does not create a default. It does mean the other side may file without further warning, so treat it as real.

Then look at the sender. A letter from a firm that regularly files business cases in Orange County or Los Angeles reads differently from one written as a favor by a general practitioner. Notice whether it cites specific contract provisions and dates or speaks only in generalities. Vague letters are often weak letters, though not always.

Do not respond emotionally, and do not go silent

The two most common mistakes run in opposite directions.

The first is the angry reply. An owner reads an accusation he considers false and fires back an email at eleven at night. That email becomes Exhibit A.

The second is silence. Ignoring a demand letter does not make it expire. It usually produces a complaint, sometimes one filed in a hurry with inflated claims because the plaintiff assumes you will never engage.

Preserve documents, then check your insurance

Once a business reasonably anticipates litigation, it has a duty to preserve relevant evidence. Issue a short written litigation hold to the people who touched the deal: stop deleting, suspend auto-purge on the relevant mailboxes, and pull the contract file, invoices, and text messages. Missing evidence can lead to sanctions and a judge who no longer trusts your side.

Then send the letter to your insurance broker the same week. Many business policies, including general liability, directors and officers, and cyber coverage, treat a demand letter as a claim and require prompt notice. Late notice can forfeit coverage.

Whether to respond, and how

In most cases, a response is worth sending. It should be short and factual, it should not admit liability, and it should preserve your defenses. A good response corrects obvious factual errors, asks for the documents the sender relies on, states that the business disputes the claim, and proposes a path forward if there is anything to discuss.

What it should not do is argue the whole case. You will not win in a letter.

One practical point for settlement discussions. Under California law, an offer to compromise, and the statements made in negotiating it, are inadmissible to prove liability for the loss. (Evid. Code, § 1152, subd. (a).) That protection is real but narrow. It covers the offer and the negotiation, not every factual admission you volunteer along the way, so keep the two separate.

Fee clauses, limitations periods, and the real exposure

If the contract has an attorney fee clause, California makes it reciprocal: the party who prevails on the contract recovers fees whether or not the clause names that party. (Civ. Code, § 1717, subd. (a).) This cuts both ways. It raises the cost of losing, but a plaintiff with a thin claim is also risking your fees, which is a strong reason to settle. Our guide to attorney fee clauses explains how courts apply the rule.

Check the calendar too. Depending on the theory, most California business claims carry a two-, three-, or four-year limitations period, and a demand on a stale claim may be disposed of quickly. Our statutes of limitations guide lists the common periods.

If the letter accuses your business of harming someone through speech, petitioning, or public statements, California's anti-SLAPP statute may allow an early motion to strike, with attorney fees to a prevailing defendant. (Code Civ. Proc., § 425.16, subd. (c)(1).) Our anti-SLAPP page explains when it fits.

What we do, and where these disputes end up

We read the letter and the underlying documents, tell you candidly whether the claim has teeth, and draft the response. Where it makes sense, we negotiate a tolling or standstill agreement so both sides can exchange information without a filing deadline forcing anyone's hand. Many of these disputes end there.

When a complaint does follow, we are already positioned to defend it. Our first 30 days guide walks through what happens after service, and our litigation cost guide explains what a defense typically involves.

Disputes that do not settle are heard in the Superior Court: for Orange County, usually the Central Justice Center in Santa Ana; for Los Angeles, the Stanley Mosk Courthouse. Cases with a federal claim or out-of-state parties may land in the Central District of California instead.

Frequently asked questions

Do I have to respond to a demand letter?

No law requires it. But silence usually leads to a lawsuit, and a short, careful response often resolves the matter or at least reveals how serious the other side is. The exception is a letter so baseless that any reply would only encourage the sender.

Can what I say in my response be used against me?

Yes. A response letter is not privileged. Offers to compromise and the negotiation around them are generally inadmissible to prove liability (Evid. Code, § 1152, subd. (a)), but factual admissions made outside that context can appear in a complaint or at trial. Keep responses factual and brief.

How long do I have to respond to a demand letter in California?

Whatever the letter says, typically seven to thirty days. That is the sender's deadline, not a court's, and missing it does not create a default judgment. It may trigger a lawsuit, though. If you need more time, ask for it in writing before the deadline.

Should I just pay to make it go away?

Sometimes. If the amount is modest, the claim has merit, and a fee clause exposes you to more, an early payment can be the rational choice. But paying a weak claim invites the next one. We weigh the merits and the fee exposure before recommending either path.

Does receiving a demand letter mean I will be sued?

Not necessarily. Many demand letters never become complaints, especially when the recipient responds credibly and the sender learns the claim is weaker than assumed. Others arrive with a complaint already drafted. Treat every letter as if a lawsuit may follow.

Talk to a California business litigation attorney

If your business has received a demand letter, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is located at 327 Magnet, Irvine, CA 92618, and represents businesses in Orange County, Los Angeles, and throughout California.

This page provides general information about California law and is not legal advice. Outcomes depend on the contract, the facts, and the court.