Chapter D7
Rule 7 - Avoiding Entanglements
This is a book about winning legal wars. You would expect that it would focus on how to beat up your opponent. In all this time, we have focused on victory but, we have failed to ask ourselves how to snatch defeat out of the very jaws of victory! I am not kidding. In my long career, I have seen many highly winnable cases transform into a disastrous defeat. Every time this happened, I have asked myself: why? Bear in mind that in itself, defeat is not that big a deal. It all comes down to objectives. By the time you have completed your “Five Rules to Decide if you want to Fight” survey, you already know what is going to become of your case. You may still decide to go to war. It may be that you have other ‘non-military’ objectives to pursue. It may be that you don’t care about losing just so long as you can beat your enemy up a bit. It may even be that you had no choice. The main thing is that if you use the rules in this book, it would be rare for you to not be able to predict the reasonable result of your war. Yes, there are always unquantifiable risks. It is always possible that you are done in by the unknown unknowns! But that is the exception. The results of most legal wars are decided before the war starts. Indeed, that is the central conceit of this book: Because the result of a war is known before it starts, you know which wars you should start, and which not!
So how does one go about snatching defeat from the jaws of victory? In my experience, for the most part, the root cause is excessive enthusiasm. Court cases always create complications, triggering new realities and unforeseen situations. In the heat of the moment, many situations seem like great opportunities but they are not. It is very easy to get ‘sucked into’ a situation which then becomes uncontrollable. This last strategic rule is about such situations. It’s about entanglement. It’s about how to ensure that you do not get entangled in a web you cannot extricate yourself from, or end up in a fight you cannot disengage from.
In a sense, this last strategic rule is a kind of stress test. Whatever strategy you may create, you have to subject it to a scenario analysis. Is there a real possibility that you may get entangled? If such a possibility does exist, you have only a simple choice to make: you can either modify the strategy to avoid the entanglement, or you can abandon the strategy. There is no other option.
In my experience, there are three ways in which a litigation strategy leads to entanglement:
(a) Acting when you should be inactive;
(b) Acting without understanding the terrain you are on; and
(c) Acting without sufficient information.
Let us understand each of them.
(a) Acting when inaction is advised
We live in a world where hyperactivity is by definition its own justification. You can’t be on a vacation without all your friends asking you what you ‘did’. It’s the same in daily life. When you are at home, what do you ‘do’ on the weekend? If you haven’t had sensory overload, have you even lived? In the corporate word, the most overused word is ‘proactive’. Have you ever had an occasion to be attacked for being too proactive or had to explain why you were like that? When you stop to think about it, as a concept, idea that being pro-active is great by default is misconceived.
Think of the recent pandemic. Through 2020, most people were asymptomatic while testing Covid positive. If one person in a family came down with sickness, most others were either asymptomatic or tested negative or both. A great deal of neurosis was created around a disease that didn’t sicken most people and when it did, most did no worse than they would have if had a bad case of flu. Yes, there were tragedies in our amidst but if you think about it, death rates have not exceeded 10% of those who die annually of diabetes. Indeed, they are still lower than Indian’s annual road-kill rates. I am diabetic and drive a car. But the sweet shop next door is selling the laddus in wild abandon and the car dealer keeps trying to sell me cars I have nowhere to drive because no friend wants to see me and risk infection. Why do I need to be proactive about Covid? I have much bigger problems.
Okay, not many will agree with my views on this phantom menace called Covid! Fear has a way of bending judgment. Let me give you a more typical example of legal wars situation where being ‘pro-passive’ is probably the smartest thing you can do. These are situations where ‘action’ is not a solution: it is a big part of the problem. A very good place not to be pro-active is appeals against unfair tax assessments. I will give you an example.
I can’t think of a time when the Government’s first response to an economic turndown is anything but to instruct the tax department to terrorize the very few people who do pay taxes in India. There has been a repetitive pattern to it throughout my 42 years of law practice. Desperate for money to fund its developmental projects, tax departments become aggressive, almost predatory, raiding and reopening tax settlements to coerce companies to pay more. This is hardly new. The Indian Government is very good at failing to tax most people and making sure that those who do choose to pay taxes never sleep peacefully. If our tax tribunals were quick and efficient, this would not be a problem. But life gets in the way. Indian businessmen have learnt that the best way to deal with the tax authorities is to never start a legal war. Instead, most make a deal with the department at the level of the tax assessing officer. The idea that you should start a legal war because you have a good legal defense is pretty bizarre! A client of mine found out the hard way.
This one was American, and Americans have very assertive legal departments. They also have compliance laws that extend jurisdiction of things done in India to American regulators and courts. This means that if the Indian subsidiary of an American company violates some laws in India, the American in-house lawyer takes liability. About this time, this client received a large tax demand based on a very fanciful interpretation of the law. It was a transparent case of officially sanctioned extortion. The client would have done well to ‘compound’ the case at the departmental level, but that is not what Indian tax lawyers advised. They had several layers of defense. First, the department had reopened an assessment already made without any ‘reason to believe’ that taxes had been evaded. Second, the demand was made on the basis of a change in the calculation of taxes but the change in law was not retrospective in operation. Third, the demand was made on the basis of an interpretation of this change of law which interpretation did severe violence to simple English. The client thought it had the fire power to pick a fight with the tax authorities. In truth, it did, but where was the level playing field?
The practical reality was and remains that courts that hear appeals against tax laws don’t exist to help tax payers; they exist to validate the predation of tax authorities. Since a lot of them are manned by decent people, the law compensates for the human factor by legislating that you don’t get a hearing till you have deposited part of the disputed claim as security in case you lose. It is understood that it’s the appellate authority’s job to ensure that you lose again. When you do inevitably lose, you need to go to the High Court and the charade plays out again. The High Court does not hear you till you deposit another percentage of the disputed tax amount. I haven’t said a word yet about the delays. By now. you have deposited 50% of the claim already and you still have to wait a decade before your case is heard. When you finally reach that point, very likely, the High Court doesn’t want to interfere. Not that it matters. Even if the High Court does help you, the department will appeal and you will find yourself before the Supreme Court facing a battle that could last another decade. I would not want to be the one to remind you of the lawyers bills you would have paid already. When you get to the Supreme Court, now you are going to pay really serious money. Since twenty years have gone by and inflation has taken its toll, is the disputed amount big enough to fight for any more?
This is not the worst of it. The Americans found that the High Court looked at the Department’s documentary evidence, gave the benefit of doubt to the Department and then directed the Americans to disclose more documents! It said it needed a clearer picture. These additional documents now became grist for the Department’s extortion mill and it led to new demands for additional back taxes. It was the worst of all self-goals. The Americans were truly entangled. Eventually, they ate humble pie, made their peace with the Department and paid whatever was demanded. Still, it was a great salvage job it could have gone downhill from there too.
I part with this subject by recalling the ITC case. ITC tried to save taxes on their cigarettes by part manufacturing them in a tax haven. The Department taxed that part of the value-add too. ITC won all the way to the Supreme Court. Faced with a humiliating defeat, the Government now retrospectively amended the law. This was bad law but to fight it meant more legal bills than were worth the fight. ITC caved in and made a deal. The Government kept the deposits already made and the Government gave up the rest of the claim. What was saved after ITC’s legal bills were added up is a question I did not ask!
Too often, you think you may have started a winnable legal war but you end up entangled and unable to exit the brawl. More often than not, this happens because you thought you needed to ‘do something’ when truly doing nothing or very little would have been the better choice. If you are compelled to act in all circumstances, you are inviting a disaster. Not all problems are soluble through action: some are soluble through inaction and some are insoluble. Sometimes, it is through inaction that we achieve optimal action.
(b) Acting on an incorrect appreciation of the ‘Turf’
There is a common joke in our law firm that you do not go into a full contact martial art by preparing to be a good batsman. When you enter the world of legal wars, your first duty is to understand the ‘turf’ on which you play, the rules by which you play and the end game towards which you play. This in essence is the Doctrine of Turf. Know the game before you play it.
Let me give you a very simple example. Civil cases are played on an entirely different ‘turf’ than Criminal cases. Civil cases are a contest between two parties. Think of it as a game of football in which you win by keeping the ball in your enemy’s half the majority of the time. Let’s assume there are six ‘issues’ in the case. To win your case, you have to win six games where each ‘issue’ is taken up one at a time and you must keep the ball in the other guy’s court on each issue more than 50% of the time. In legal terms, this is called the “burden of proof”. If you keep the ball in the opponent’s half, you have ‘discharged’ the burden of proof. In a civil case, the burden of proof shifts all the time between the two teams just as the balls moves from side to side in a football game. You don’t need to score a goal. Since the judge has to decide one way or the other, all you have to do is persuade him that your case is more believable than his. You have to do it for each of the six issues, which really means six short games where you dominate the play. Civil cases therefore make for very pro-active games, where both warriors try strategize to keep the ball out of their half at all times, jockeying and fighting, always planning. It’s a sapping battle and the winner is not merely the guy who has the better team to play with (meaning has the better case to fight) but also the guy who is positioning better, strategizes better, fights better (meaning does a better job of fighting the case).
Criminal law on the other hand is a whole different kettle of fish. Every man in Indian criminal law is innocent till proven guilty. On first principles, no accused has anything to prove. It’s for the prosecution – be it the police or the revenue department or anti evasion wing – to show that the accused has something to defend. The prosecution brings evidence to convince the judge that the accused is guilty of a crime. If the evidence is inconclusive (meaning it can be interpreted in more ways than one), the interpretation most beneficial to the accused will be taken. This is called the ‘benefit of doubt’. This why in a criminal case, guilt has to established ‘beyond reasonable doubt’.
In gaming terms, this would be a football game with only one pair of goal posts. It’s the prosecution’s job to score a goal and it’s the other side’s job to stop a goal from being scored. If a goal is scored, the scoring side wins. If no goal is scored and defending team wins. The defending side doesn’t care where the ball goes just so long as it doesn’t go through the goal posts. This difference in philosophy means that civil lawyers and criminal lawyers have very different mindsets. Civil law is about shifting the burden of proof to the other side: criminal law is about stopping the prosecution from establishing guilt beyond reasonable doubt. Civil lawyers jockey for positional advantage: criminal lawyers fend off attacks and try to slip through the gaps in the wall that the prosecution creates. These are two entirely different skills – civil and criminal laws – and while I wouldn’t say a lawyer can’t be both, it is rare of a lawyer to be equally good at both.
We can multiply such examples easily. Lawyers who practice civil law cases have very different skills from lawyers who mainly handle writs in the High Court. Writ practice is very narrow in scope. It is mainly about enforcing well-established constitutional rights. The court has wide discretion to give or deny giving favorable orders. Writ lawyers seek to invoke the sympathy of the court. The want its ‘conscience pricked’. The judge has to believe the Government has wronged the petitioner before it will bail him out. Writ lawyers understand human nature better than most people and play to these fine human instincts a lot. Civil lawyers on the other hand, need more technical skills. They understand how to put together ‘the facts’ in a way that proves a case. They know which ‘evidence’ (mainly documents) will effectively prove the case and what wouldn’t work. They know how to get a witness to make the right statement in court. They know how to cross examine the other side’s witnesses. They also know how to finally put together the case in a grand ‘final argument’ and convince the judge that their client needs the court’s orders. Civil Lawyers have a lot of procedural rules to deal with and a lot of technical rules of evidence to master. As you can tell, I do believe that you aren’t a complete lawyer till you understand how to win a civil law case!
There are so many other circumstances where you would apply the same principle of turf. You don’t argue a case the same way or tug at the same heart strings in the Supreme Court of India as you would when you argue a case in the court of the District Judge at Korba in Madhya Pradesh. You have to be focus on the sensibility you are appealing to, the cultural context of your audience, the precise cord of the judge’s heart you are trying to tug. There is a time and place for technical legal exposition, and there is a time and place for appeals to a judge’s sense of humanity, charity and sentiment. To be a successful warrior, you have to know what are the applicable rules on that playing field, what will work and what will not. You have to know how to manage the narrative within the overall world view of the judge.
This then is the key message: when you set out to fight your war, you must first understand the turf on which you play, pretty much as a tennis or hockey player does. A grass court is not the same as a clay court, and a traditional hockey field is not the same as astro-turf. Once you understand how that turf works for you or against you, you must play ‘with the turf’. If you don’t do that, you are fighting not just your enemy but also fighting the turf. You have made your job harder and the turf will entangle you even if the enemy doesn’t.
(c) Acting without sufficient information
In the world of full contact warfare, a world replete with violence and bloodshed, there is no sin quite as great a cowardice. In the world of legal wars, a world replete with knowledge and intellectual excellence, there is no sin quite as great as ignorance. It is impossible to develop a strategy if you do not understand the world in which you operate. Your understanding of this world is constructed using mainly two building blocks: one, raw data and two, the assimilation of this data in an intellectually coherently framework of knowledge. To be deficient in either is to be ignorant of the reality you face. In the face of such ignorance, not only is victory impossible, it is also practically impossible to carry the confidence of the people you must rely on – and that includes the judge – to bring you down on the winning side of your legal war.
Little purpose will be served by making speeches about the risks you take when you let your life ride on ignorance. We all know that to manage any business, we need to understand the business; in playing any game, we need to understand the subtle nuances of that game; and indeed, to live a good life, we need to understand the art of effective living! Knowledge is a key ingredient in the menu of a good life and effective action is the key ingredient in the menu of success! When fighting a legal war, our strength flows from our awareness of the legal game.