Chapter E3
Rule 3-Control the Enemy’s Response
If you are a fan of ball games, you already know all about controlling your opponent’s responses. Take cricket. In any ODI format, the trick is to set the pace of either batting or bowling. If you are batting first, your core strategy is to score runs quickly off the early overs and if possible, control the fall of wickets. If you successfully manage this, you can then pace yourself later in the slog overs and control the kind of bawling that comes your way. Thus, you know that if you manage to run up a high score and still have wickets in hand, you then control how your opponent plays their game. The reverse is equally true if you open on the bowling side. It is your task to get as many wickets as possible as quickly as possible preferably giving away as few runs as possible in the bargain. If you can do this, you decide how the other team responds to the situation. In effect, you control your opponent’s responses.
Football is not so different, except that unlike ODI Cricket, you can visibly see the effect of an early goal. Inevitably, the side with more goals scored will slow down the pace of the game. You will see players on the same team pass the ball between themselves far more often than they would if they were determined to score a goal. You will also see them being more obstructionist in their defense. Their main aim is to ‘clear the ball’ from their own half so they rely more on the long loping kicks. Should the other side manage to narrow the goal differential, you will see this side very quickly change tack and become aggressive with their game again. It’s fascinating.
In the context of winning legal wars, what both Cricketers and Footballers try and do is ‘control’ their opponents by taking tactical control the game. In a way, once you accept the idea that controlling initiative as a valid priority tactic, keeping that control becomes a self-evident tactical compulsion. Just as he who controls the initiative to begin with dictates the initial course of the war, he who controls the enemy’s responses controls what happens through the rest of the war. However, beyond mere initiative, there is the whole subtle concept of ‘controlling’ the enemy.
There is perfectly good basis for this need to have control. You cannot successfully fight a war till you can anticipate and pre-empt your enemy’s action. If you do not anticipate and pre-empt, you will have to fight much harder and much longer than you would have needed to if you had pre-empted your enemy. By way of contrast, if you seize the initiative and dictate when and how the fight begins, you also have a head start in controlling the enemy’s responses. You need to both acquire and then keep this control. It’s a continuous process. Victory becomes easier if you can dictate when, how and to what extent your enemy will fight. In military terms, if you think you have most to gain if the enemy attacks, you will induce your enemy to attack. If you think action is not desirable, you would find a way to stop your enemy from attacking. It does not matter how you do this: you can intimidate, induce or just fool your enemy into doing what you want. This same principle finds pride of place in litigation tactics.
How do you dictate to your opponent how and when he fights? Let me give you a simple example. Assume a firm is run by two partners. One is getting out of the partnership. He will naturally ask the surviving partner for a lot of money to leave. If he is smart, he will ask for the money in installments. If the surviving partner gives it to him, he will take what he gets, up his ante and ask for more. If he gets that part too, he will then ask for something else. Why is this? The surviving partner’s main agenda is to protect the business of the firm. He will pay the exiting partner to buy peace. Inevitably, he will set himself up for extortion. At this point, the exiting partner controls the actions of the surviving partner. He holds all the cards. The tactical initiative is clearly with him.
Eventually, the surviving partner will figure out that there will be no end to this extortion. He needs to take back the initiative and control the exit cost. To come to a resolution, the surviving partner will have to find a way to freeze the financial expectation at its maximum. In effect, he will have to stop further payments even though he knows that to close the deal, he will have to pay out something more. Whatever happens after this point, you can immediately see that in stopping payment, the surviving partner has brought the initiative to neutral ground. It is now for the exiting partner to decide what to do.
When the flow of money stops, the exiting partner has only two choices: (1) scale down his expectation and settle his accounts for whatever he can get, or (2) escalate the dispute and start a legal war. If he picks option 2, the format he chooses – civil, criminal, winding up, political interference and so forth – will depend on the stakes, his motivation and of course his value system. The more unscrupulous he is, the more effective he will be. In making this choice, the exiting partner will also decide how far he wants to wrest back the initiative and control the actions of the surviving partner.
From the viewpoint of the surviving partner, it is risky for him to follow the first option unless he has a reliable ceiling on his potential liability. Let me explain this. The exiting partner may only ask for Rs 10 to settle the matter but unless the deal closes very quickly, the exiting partner can easily scale up this demand during settlement negotiations. If the settlement talks break down, what the surviving partner has counter offered will become the floor and the exiting partner will deploy his war machine to demand even more money.
What is means is really that even though the first option is the most sensible for both parties, the surviving partner cannot engage in settlement talks with any confidence because he is afraid of setting a floor to the exiting partner’s expectations. The surviving partner is then forced to maneuver in a way where the exiting partner starts a legal process and binds himself to a maximum expectation. If the surviving partner achieves this, he has set the agenda. The exiting partner is substantially in control.
Once the exiting partner’s maximum expectation appears on paper, the surviving partner now controls what happens next. The surviving partner can make some intelligent calculation on whether it is cheaper to settle or invest majorly in the fight. What he chooses to do depends on both his financial and his commercial compulsions. Frequently, the surviving partner’s main compulsion is to preserve the firm. He owns it now. Whatever preserves the business of the firm best is his best option. Too much litigation does nothing for him. That said, he does have to look at his financial compulsions. If the expectation is only a little over his own calculation, and he has the money, the surviving partner would do a perfunctory dance with this expectation for a little while, cut the numbers and then settle.
That’s not true of the exiting partner. He is leaving the firm behind. Enmeshing it in legal problems does not hurt him. Indeed, it may help him. His self-interest lies in escalating the conflict. At the same time, the exiting partner doesn’t want to do such a spectacular job that the firm he is trying to get money out of collapses! He knows the exiting partner will trade the firm’s continuing good health for his cash out. In the result, the exiting partner seriously threatens a firm but doesn’t allow it to be irretrievably damaged. It’s a tightrope walk.
Now comes the aggressive negotiation. The Justice Machine has been set into motion but how far should the surviving partner invest in it? Everyone knows that commercial good sense lies in settling the matter, sooner rather than later. Meanwhile, the surviving partner is using money he could have used to buy peace to instead escalate the fight. This means that the kitty he has to settle the demand is being eroded even while the expectation remains the same. He has a choice to make. In truth, it’s a simple calculation to make: how long does he needs to fight to progressively reduce the exiting partner’s expectation even as he spends money doing it. Remember, spending money on the Justice Machine may cost more than the discount he will get on the final exit price. If the surviving partner is not smart, he will spend too much to save too little. Fortunately, he now controls what happens next and he can always make the financially commonsensical choice.
And that is the essential dynamic of ‘control’ driving this tactical rule. You can see how control flows backwards and forwards between parties in a legal war. If you want to dominate the tactical game, you have to keep your eye focused on seizing and keeping this control for most, if not all of, the time. In practice, it comes down to you controlling both what happens next in your legal war and the frame in which it happens. In the example we are discussing, what is simple enough: these former partners either fight or they settle.
That can’t be said of the frame in which it happens. To control the frame in which things happen, you have to control what your enemy does. You do this through managing your provocations. You have to file cases (or applications in cases) one after the other in such a way that your enemy has no choice but to respond in a predictable way. You can never be sure that he will react in a predictable way, but if you are smart about the legal action you take, the options he has to counter you will always be limited. In this way, you more or less control what he does. Indeed, in some cases, it is possible to corner the opponent till you have him checkmated and this tactic is enough to win the war. Let me try and illustrated this generically.
Let us assume that your litigation is big enough to justify filing multiple cases in different court on related issues. You can carefully frame a case in a very precise way to extract a standard form defense from your enemy. This defense would be good advocacy in that particular case but damages you enemy’s defense in a second case you are planning to file. Since your enemy doesn’t know what you have planned to do next, he files his defense and compromises himself by admitting to something or accepting some status or acknowledging some fact etc. If all goes to plan, you can now unveil your nuke and blow him to smithereens with your final case. Just so I am not misunderstood, this same principle applies to filing applications in a single case as well.
There is an alternative way to achieve the same result. Parties are not at standstill as cases progress. Hearings in court cases stretch over long periods of time. Lulls are followed by frenzied actions and then there is another lull. That doesn’t mean that life stops moving in the meantime. There is stuff happening on the street, in your business and in your home. The things you and your enemy do during the lulls give you ammunition to trigger more legal actions. This often has the result of progressively compromising one party or the other. Consider this: a party may posture whatever its lawyer’s advice in a court of law but out there on the street, it has to do what its commercial compulsions demand. As this party acts on its commercial compulsion, it creates a contradiction between its action and its legal postures in court. This creates an opportunity for check mate.
To summarize, cases are often filed to compel the enemy to ‘reveal its hand’, clarify its position on some issue, or even opt for one type of defense as opposed to another. Indeed, sometimes, cases are filed not because the guy filing them expects to win but because he wants to force the opponent to take a specific position on the facts. Cases get filed in order only to force the enemy to reveal its strategy, or disclose some facts. This is the heart of the rule on controlling the enemy’s response.
The permutations and combinations of the manner in which this rule may be applied are countless. This is why we see multiple cases being filed in large complex litigations. You could argue that this rule applies only to complex large budget litigation, but that is not true. Even within the limits of small litigation, this principle is good. Let us look at a small case in which this was done, in a simple way, in a simple case, fought by a weak litigant against a very strong defendant.
The Manglik case
Manglik was a senior manager at ITT, one of India’s top business houses. He had a great twenty-year long track record with ITT. He had a thick file of papers to prove it too: certificates, confidential reports, increment letters, and so on. ITT was originally a trading powerhouse but life in the license-permit Raj changed its focus. Back in the day, if you could get your hands on a Government approval for a project, you ran with it, whether or not you understood the business. As India changed in the 1990s, it dawned on ITT that it had diversified too much into unrelated businesses. With rising competition in the decades that followed, ITT responded by refocusing on its core competence. It spun off these unrelated businesses into independent companies, each a profit center in itself. Where possible, it brought in third party investors and converted these companies into joint ventures, handing over management control to the venture partner. Lampro was one such company.
Lampro was principally in the real estate business. Its primary skill lay in venturing beyond the municipal limits of fast-growing towns, bulk purchasing land, getting approval to change land use from agricultural to residential and then laying out large colonies. Manglik had worked for several ITT companies over the years. When Lampro was spun off, he worked for Lampro though he was paid by ITT. He didn’t think Lampro’s changed ownership structure meant anything: it was still an ITT company. In the six years he worked at Lampro, ITT continued to pay his salary and his job was subjected to ITT employee standards and benefits.
As frequently happens in metropolitan India, Lampro’s flagship project turned out to be something of a cesspool. This large housing project drew gasps of admiration from the general public but those who paid for those high-end residential facilities were bitterly disappointed. For one, owners did not get what they paid for. Too many bells and whistles were promised but never built. Up front capital cost payments were taken for backup power, security, clubhouse and so forth but all this money was spent elsewhere (if spent it was). Some years later, when owner moved into their flats, they were asked to pay again for these facilities on a monthly basis. Finally, owners were told they would get substantial refunds on their capital investments in these facilities but when they sold these flats, Lampro had no money to pay them. Manglik, as an old ITT loyalist, found this troubling. He protested what he thought were unethical business practices and his relationship with his bosses plummeted. Anyone could see that sooner rather than later, something would give way.
From time to time, ITT management encouraged Manglik to stand down on his disagreements with Lampro policies but he remained undeterred. He claimed his relationship with both ITT and Lampro remained civil. He continued to work undisturbed. Eventually, Lampro’s flagship project came to be completed and his services became unnecessary. Manglik now expected to be transferred back to ITT. He approached ITT’s Human Resource Department to let him have his next assignment. The assignment never came. Soon thereafter, his salary cheques also stopped.
It took some months for Manglik to notice this! He came from a wealthy background: it seems he rarely bothered to check his bank account. By the time he figured it out, he hadn’t received a salary credit for many months. He now started doing the rounds of ITT’s departments, seeking clarity on his position. Eventually, the grapevine told him he was out of ITT: they treated him as a Lampro employee and he was not their problem. Since they didn’t want to start an argument, they would act like he didn’t exist. The best he could hope for, he was told, to start his own argument and exit with some sort of VRS package. But here is the funny part: Manglik had the impression that he was viewed as ‘legally’ a workman even though he was a very senior manager! It looked like he would make money out of this confusion.
Manglik now changed tack. He demanded an exit package. He implied that he would go quietly if he was given one. ITT seemed delighted with this development. At least they wouldn’t need to avoid him any longer. They offered him his package. It flattered only to deceive. It was calculated on the basis that he left ITT when he moved to Lampro. If they added the six years he had worked at Lampro, the package would double. He wasn’t mentally prepared to take that kind of hit. He protested vigorously. Predictably, ITT relapsed into default: they pretended he didn’t exit. He needed legal help.
The lawyers weren’t very encouraging. He didn’t have a ‘right’ to a job, like an industrial workman did. All he could claim was his salary (till his services were terminated). Since he hadn’t worked for ITT for six years, it didn’t look like he could force a VRS out of ITT. There were too many open-ended legal hurdles. It would be a long slow fight through the arteries of the Justice Machine. Manglik didn’t care how long it took. He could not see himself suing his company after 20 years of distinguished service. But then, there always comes a point when outrage and self-interest overcome loyalty and diffidence. One year later, he wanted blood.
Lawyers created a legal storyline. If he was not an ITT employee, why had ITT offered him a VRS package six months after ITT exited Lampro? This wasn’t an argument about his status: it was about how much of a VRS he deserved. Besides, he never did receive a termination letter. What is a VRS package? It’s a financial package in acceptance of Voluntary Retirement. How could he be offered such a package unless he was an employee. He was and remained an employee till he agreed to retire voluntarily.
ITT was in no position to contest this. They didn’t have a letter transferring his services to Lampro and they had never said this to him even after they exited their investment in Lampro. All of Manglik’s letters to ITT had elicited silence, not denial. Would they fabricate a backdated termination letter to make a case against him? Manglik didn’t think his former colleagues were made of that kind of cynical stuff. They were a stodgy bureaucracy but they were utterly respectable. Most managers worried about their jobs: saving ITT money wasn’t their priority. Why will they forge documents and commit a crime to help a faceless employer?
That left one final problem: sex appeal. That A owes B money and A goes to court has no sex appeal. Cases like that last longer than a lifetime. Who cares? Manglik was already middle aged and only had half a lifetime left to live. To win the case, he needed to supply B with some incentive to settle. In other words, Manglik needed to control how ITT would react to his case.
It’s important to understand that when dealing with senior officers (as opposed to labor), Companies do not dole out VRS packages because they have a legal compulsion to do it: they do it to be seen as good reliable employers. If you choose to be hostile with them, they will simply pay you what they legally owe you and ask you to go fly kites. Manglik could legally sue ITT only for his outstanding salary. If he filed a simple money recovery case against ITT, he could expect that ITT would terminate Manglik’s services formally on that date and send him a cheque. Any hope of a VRS would go up in smoke. What was Manglik to do?
Manglik needed a grand shakedown scheme. Could he demonstrate to a court that there was something fishy about the way he was treated? Was he sidelined for collateral reasons? Could he pre-empt ITT and ‘prevent’ them from terminating his services if they chose? Don’t please misread this. Nobody can stop a company from doing something daft, no matter how illegal it may be. Manglik needed a grand conspiracy story to tell a court if his services were terminated. He needed to ‘force’ a settlement so to speak.
Manglik already had a ready-made story. He had steered Lampro’s flagship project. He knew where flat owners had been ripped off. He had a thick file of correspondence showing him protesting Lampro’s conduct repeatedly and in very vocal terms. He need not say it, but if he went ‘public’, both Lampro and ITT would face public ire, possibly regulatory scrutiny, possibly criminal prosecutions. It made more sense for ITT to offer him a better VRS package than to fight him and face the shitstorm.
Manglik went into battle on the basis that he had a job with ITT but was deputed to Lampro. He said he learnt that Lampro was cheating its customers and he didn’t like it. He protested. This upset Lampro and ITT. They were now threatening to kick him off the team. He needed the court to stop this victimization. He wanted back wages and future salary. In truth, what he wanted was tosh. The law does not force you to employ this cook or that driver, as opposed to another, or to have no cook or driver. You can’t enforce a contract of personal service through a court. A court will give you back wages but it won’t give you future wages!
ITT know the law better than most people but they didn’t need a dirty dog fight over petty cash. As soon as they received a notice from the court, they send him a cheque of past dues and terminated Manglik’s services. It was all a bit surreal. They wouldn’t talk to him for three years but the moment he sues them, bingo, he gets all his money. It was like everyone sympathized with him, but didn’t want to be seen to be taking sides against the Company by paying him. From a legal standpoint, he now had nothing to fight for. From the psychological standpoint, there was the VRS to argue about. Mercifully, there was this business of skullduggery and fraud blowing in the wind. ITT would have to pay their way out of this.
Manglik now converted the long-term threat of exposure and public outrage to front burner status. He filed a couple of applications. First, he wanted the court to force ITT to disclose his complete HR record at Lampro and ITT. He said this would show that a conspiracy had taken him down. This was indeed a nasty weapon. At the very least, it would show a great track record. When nothing conspiratorial shows up eventually, he could then claim that IIT and Lampro had destroyed evidence. It would be a mess.
Second, he wanted Lampro to show all its project related files and paper This.s was nastier. No construction project is every squeaky clean. Everyone cuts corners, if not to make money, at least to avoid doing stuff twice and wasting money. If you hunt long enough, you will always find dirty laundry.
By filing these applications, Manglik took complete control of his opponent’s actions. He had the right to demand documents in the ‘power and possession’ of IIT and Lampro. ITT (and Lampro) now had only a simple choice left: produce the records and risk a shitstorm, or pay off Manglik.
ITT and Lampro tried to avoid the inevitable. They gave the judge a bunch of reasons not to allow this fishing expedition. The judge was unconvinced. If Lampro had nothing to hide, why were these guys so neurotic about showing their records? He allowed both applications and the two were left with nowhere to run
Manglik now opened two new fronts. First, he instigated Lampro’s customers to demand compensation for constructing substandard flats. He told them he would provide the paperwork to help them prove their case. The Project Welfare Society was delighted: scores of flat owners issued such notices to Lampro and ITT.
At the same time, Manglik tipped off a journalist friend. This project had become the preferred domain of Page 3 glitterati: how could the journalist resist? The guy did his own research, interviewed residents and filed a provocative piece on murky dealings in high places. He didn’t forget to tell his readers about what happened to the whistleblower! From that point on, the story acquired a life of its own. The follow up stories in the media were even more entertaining, and excessive! Sentences such as “the possibility of some of these ill-gotten gains finding their way into the hands of senior ITT employees cannot be ruled out” were liberally sprinkled about the full feature.
Lampro did not particularly care what was published at this point: all their facilities had been sold and the promoter had made enough money to retire. ITT, on the other hand was alarmed.
In no time, an ITT messenger was at Manglik’s door. He offered a superior VRS package. Parties negotiated and eventually settled. Manglik took five years of last drawn salary and corresponding benefits. It was understood and accepted that he was bound to confidentiality. He kept his word and in the absence of support, Lampro property owners subsided.
Manglik’s case is particularly instructive because its typical of the type of problem professionals face in their everyday life. When faced with such a case, most of the adopt a straight-line approach, which means filing a simple money suit with no larger plan in sight. Then nothing happens and in time, it all grinds down to nothing. Manglik’s case also a simple money claim. He had not worked for a year, had no right to a job and had no legal ‘right’ to a job: they could sack him whenever they wanted. The difference was that he knew exactly what would happen to his straight-line case and he thought up a way to avoid a war of attrition. Instead, he found a strategy by which he could control how his enemy would react. He successfully set up a case which shifted the paradigm, presented the enemy with a trap from which there was little escape. By predicting and planning for all alternative scenarios and then controlling his enemies’ responses, he made war too expensive for his enemies and won the war.