Promises, Promises: A Primer on UK Pleadings for American Litigators

Many accomplished American litigators find themselves “separated by a common language” when first exposed to UK legal proceedings, notably including arbitrations.  The following is a brief primer to assist those who may well be more strangers in a strange land than they realize.  This starts with the pleadings that frame the litigation: typically the Points of Claim, Points of Defence, Reply and, sometimes, a Rejoinder.

To many American-trained lawyers, the UK style may seem frustratingly technical and devoid of a certain element of bombast betraying, they may intuitively feel, a lack of conviction in the position.  In short, American lawyers are used to notice pleadings often punctuated by flourishes of advocacy.  UK-style pleadings, by contrast, tend to be characterized by distinctly modest, technically detailed and, yes, dry accuracy.  Why should the former style yield to the latter, beyond the hackneyed observation “When in Rome …”?

The answer begins with the purpose of pleadings in the UK:  to identify the specific issues between the parties, the legal theories in play, the elements of those issues, and the factual allegations which the parties intend (and need) to prove to make good their respective cases.  Thus, what is required is more than simply putting the other side’s advocates on notice of the general nature of the dispute such that they can engage in broad-ranging discovery (including third parties) so as not to be unfairly surprised about arguments their adversaries may raise.  That said, UK pleadings are not an occasion for advocacy in the absence of evidence.  Failure to maintain an appropriate and disciplined balance between sufficient technical detail and excessive hyperbole, in either direction, quite often leads to adverse unintended consequences that may be severe in the extreme.

Reliance on American-style notice pleadings, which often gloss over the fundamental elements required to prevail on the issues truly in dispute, may prove too superficial and, potentially, fatally so by precluding a necessary point on the basis that fair and timely notice was not provided.  As a matter of practice, Tribunals tend not to be attracted to these so-called “pleading points”, especially if the objection is late arising, but it can happen, and this author has seen it.

More common, however, and nearly as forensically prejudicial, are extensive requests for Further and Better Particulars (“FBPs”) by the aggrieved party left to scratch its head about the case it needs to meet.  Importantly, and though FBPs may read like American interrogatories, they are not.  Rather they are polite demands to clarify a case that should have been properly and unambiguously articulated from the beginning.  This is inevitably compounded by multiple cycles of FBPs in response to inadequate further pleadings.  Tribunals are often frustrated by what appears to be a party that either does not understand its own case, or intends to rely on an element of surprise that cannot be allowed to exist consistent with the obligation to conduct a fair proceeding.

Contrarily, overbroad allegations in UK pleadings (e.g., indulgences in advocacy) can themselves pose entirely avoidable tactical difficulties in the disclosure process that follows.  Traditionally, UK proceedings have required every party to provide standard disclosure (subject to privilege, etc.) of all evidence in its possession:  (1) on which it intends to rely; (2) which adversely affects its or another party’s case; or (3) which supports another party’s case.  The scope of the second prong is particularly sensitive to the pleadings.  Although standard disclosure is no longer universal in the UK, the scope of disclosure is defined by the issues raised in the pleadings.  Accordingly, if a party has engaged in a free-flowing stream of consciousness in an attempt to persuade the Tribunal, rather than merely setting forth the facts on which its case relies, that party’s disclosure obligations may be gratuitously broader (and more troublesome) than otherwise required.  Parties seeking to streamline their disclosures do well to keep their pleadings to those allegations which are truly necessary.

Finally, and although not to be persuaded on the merits (for this, UK Tribunals look to the submissions), they do read and rely upon pleadings for the reasons previously explained.  Extravagant allegations about facts that ultimately find no home in the evidence are no more than hollow promises abandoned by the party that made them.  They therefore reflect an “evolving” case in search of itself.  Such cases tend not to age well, and are seldom received warmly.

In short, advocates for all litigants involved in UK-style matters do their clients a great service by stating what needs to be said in the pleadings — nothing less, and nothing more.

John C. Lenzen, FCIArb

John LenzenPromises, Promises: A Primer on UK Pleadings for American Litigators
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Strength in (Fewer) Numbers: The Inverse Relationship Between the Sizes of Negotiating Groups and Their Effectiveness

We have all seen it in movies, and many of us have experienced it in reality.  One or two negotiators sit patiently in a conference room awaiting the other side, who are late.  At long last they enter, and a large phalanx of principals and lawyers deliberately walks in, sitting in precisely their assigned seats so as to eclipse the opposite side.  Each of them slaps down large volumes of documents on the table.  The lead negotiator sits in the middle, directly across from the outnumbered party and slyly grins, thinking that a profound power imbalance has been established.

It has.  And so has an informational asymmetry.  In this author’s experience, which includes countless examples of this dynamic, the one or two opposite should greet that moment with a genuine smile from ear to ear.  This is particularly so if each of them sits in front of a blank sheet of paper because every detail of the dispute is completely committed to memory.  (Quite another power imbalance arises when one side can recite what matters without notes, but the other needs to ask someone at the end of the table to rummage through a briefcase.)

Typically, if not invariably, only the lead negotiator of the large group speaks, or perhaps one more on occasion.  The rest are relatively junior window dressing, and none of them has authority to say anything.  This is because the lead negotiator is trying to manage the messaging personally, but it is only the smaller side, ideally a single negotiator, that can truly do that.  The larger side is at a systematic disadvantage of its own making.

It is an almost hackneyed observation that 93% of human communication is nonverbal.  The exact percentage is immaterial, but clearly most is.  We are programmed to read people without hearing them, and this starts at birth when the words we hear are nothing but gibberish and miscellaneous sounds.  Anyone who has enjoyed making faces with a curious baby sitting a few tables over understands this.  Additionally, nonverbal cues are very difficult to fake.  Even professional poker players routinely wear hats and sunglasses to hide their tells – and one might be forgiven for assuming that they should have fairly good “poker faces.”

The problem for the large group is that only two people are talking to each other across the table.  Presumably they are the most senior and/or most capable in the room.  Some in the large group are there to learn.  Others are having a billing event because the client believes the other side will be intimidated by their mere presence.  Still others, and these are the most important, are truly on the inside and know exactly what the lead negotiator is thinking and why – needs, wants, fears, night terrors, “squeak points,” etc.

What is inevitably true for all of the “bit players” on the large squad, however, is that all of them are gratuitously communicating nonverbally (and without authority) throughout every session, and not one of them is a professional poker player wearing a hat and sunglasses.  They may be observing the small team, but so is the more experienced lead negotiator to whom they answer, and that person is staring across the table seeing the same things they are, and understanding it all at least as well.  In other words, they can do plenty of damage to their cause, but can add little, or no value.

By contrast, the other side has the benefit of saying what is meant, meaning what is said, and at all times staying on message, both verbally and nonverbally.  Moreover, while doing so, that negotiator has the benefit of absorbing the nonverbal feedback of relatively junior people who just left the breakout room and know what their lead is thinking and feeling.  This author has seen such people literally nod in response to suggestions that might have been thought to be outrageously aggressive.  Cues like this can make an enormous difference in outcomes.

As the world finally gets back to normal, and people meet face-to-face to reach agreements sealed with actual handshakes followed by wet signatures, negotiating parties should bear this in mind:  Sometimes less is more, and more is less.

John C. Lenzen, FCIArb

John LenzenStrength in (Fewer) Numbers: The Inverse Relationship Between the Sizes of Negotiating Groups and Their Effectiveness
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Oy To The Vey: The Need For More Kibitzing In Mediation

Parties to mediations frequently become frustrated at the number and length of mediator-party caucuses.  Some resign to them and make themselves busy (one former colleague was fond of watching “The Godfather” while the mediator was elsewhere).  Others take solace by imagining that the mediator is “working over” the other side and, to be fair, that is often the case with some mediators.  But the more senior the participant, the more likely he or she is to be irritated at what is perceived to be a waste of time without tangible action or movement.

In this author’s experience, the time spent caucusing individually with parties on a confidential basis is vastly underrated and, if anything, needs to happen more.  A joint session is no place, for example, to explore tax clienteles and, thus, the possibility and magnitude of tax arbitrage.  Such sessions are likewise incompatible with candid discussions about the tensions between underlying dynamics and insurance-coverage issues (e.g., the interplay between privilege in a mass tort and a related coverage dispute).  The parties’ needs and wants must be coaxed out gently in a safe place, or they will remain hidden and, frankly, useless in bridging gaps.  If that happens, opportunities are lost for everyone involved.

Exploration is the only way that a mediator can understand where the parties actually are and, far more importantly, where they truly want to be.  Obviously this needs to be confidential, and this promise of confidence needs to be sacred to both the mediator and the parties.  Once all involved have agreed to those terms, real movement toward a solution that is the least unpalatable to everyone is most likely to appear.  No settlement makes everyone happy.  They involve compromises from the parties’ considered and principled positions.  The key is to minimize those compromises on all sides, and for that the participants may need to be patient for the kibitzing (i.e., confidential chatting) necessary to obtain the optimal outcome.

John C. Lenzen, FCIArb

John LenzenOy To The Vey: The Need For More Kibitzing In Mediation
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Get There Faster: Early, Private Mediation is Always Better than the Alternatives

Eleventh-hour mediations (or efforts to settle, for that matter) always frustrated this author.  In the litigation context, particularly in the United States, they are judicially imposed.  Under the best circumstances, the parties are ordered to mediate by a busy judge before a private mediator trusted by the court.  Often, however, the mediation is conducted by a magistrate, or, worst case, by the judge him/herself.  This is a tactical disaster for at least one party, but often all of them.

Where an arbitration clause governs, especially in a cost-shifting environment (e.g., most Bermuda-form insurance policies and contracts containing international arbitration clauses), late settlement dialogues may be economically worse.  Enormous costs have already been incurred by both sides and the loser (in the event the matter cannot be resolved) is responsible for essentially all of it.  The potentially winning party, by contrast, must walk away from its cost recovery even if the matter settles.  These dynamics can lead to desperate negotiations.

All of this can be avoided if the parties are proactive as early as possible.  This requires those parties to take control of the negotiations, and to own the process.  With no disrespect intended to fellow members of the Bar, complex disputes invite a principal-agent tension that is candidly enhanced by fears of professional liability.  It is far easier (and safer) to pound through warehouses of documents in search of the last piece of evidence that nothing was missed than it is to acknowledge that litigation/conflict is resolved in a context of imperfect information.  Only the client can do that.  Litigation, like war, is about deception.  (Carl von Clausewitz.)  Perfect information does not exist in that space.

Wise parties choose to resolve their disputes early in the process, and to do it privately, either across a table, or with a mediator of their choosing.

John C. Lenzen, FCIArb

John LenzenGet There Faster: Early, Private Mediation is Always Better than the Alternatives
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To Do, or Not to Do: Mediator Views on the Merits

A consistent question in the realm of mediations is whether the mediator should express views on the merits of a matter, or, in the extreme case, make a “mediator’s proposal.”  The short answer, in this author’s view, is “not unless both parties request it.”  But the long answer, if one is honest about the process, is more grey.  The question does not invite a binary answer unless the mediator’s role is to make runs up and down a hallway conveying proposals and counter-proposals.  That adds no value.

At the least, a mediator needs to assist the parties by coaching their respective negotiating moves so that they progress toward a reachable solution.  This is particularly the case where an imbalance of power, or negotiating skill, exists.  It is simply not possible to do that without at least implicitly acknowledging the merits, for that is the BATNA against which the negotiation is inevitably conducted.  In other words, it is impossible for a mediator to assist the parties meaningfully without helping the parties to confront the alternative, namely not settling, and that is impossible without spotting the elephant in the room.

Thus, all mediators are “on the spectrum” between helping the parties to negotiate to a solution and dropping a mediator’s proposal on them.  The question is where the mediator lands on that spectrum, and the answer should be provided by the parties.  At the outset, the mediator should ask the parties whether they wish him or her to provide open views as to the merits and, potentially (e.g., if they insist on a firm deadline for the process) to provide a mediator’s proposal, but, in this author’s opinion, the inquiries should go further.  Separately, the mediator should explore with each party confidentially what role they wish him or her to play.  Only then can the mediator envision a process most likely to yield a successful result.  At that point, the mediator’s role is to facilitate the chosen process, but, as always, the parties are the ones mediating.

John C. Lenzen, FCIArb

popdevteamTo Do, or Not to Do: Mediator Views on the Merits
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Hiding in Plain Sight:  Why Halliburton Could Not Have Won (the Antecedent Coverage Arbitration)

The judgment of the Supreme Court of the United Kingdom in  Halliburton v. Chubb  has rightfully prompted worldwide commentary.  Its implications for arbitrator disclosure are both profound and unsurprising.  What has received precious little attention, though, is the arbitral decision that preceded that judgment.  The outcome of that arbitration, which would typically be confidential, is public as a result of Halliburton’s unsuccessful attempt to remove the third arbitrator (or “chair”).

According to the judgment, the arbitral Tribunal found that Halliburton’s settlement of the underlying exposure to the loss of the Deepwater Horizon (“DWH”) was unreasonable.  Having “lived with” the matter and had personal responsibility for its outcome for a decade on behalf of ACE/Chubb, there is much this author cannot disclose about that arbitral decision and the process that led to it.  Those of us who have experience dealing with insurance disputes, however, will note that the finding that the settlement was unreasonable is remarkable.  Why would the Tribunal reach such an unusual conclusion?  Publicly available information holds a possible answer.

  • It was widely known that Halliburton had posted a $1.3 billion loss-contingency provision for the multi-district litigation arising out of the DWH disaster.
  • Judge Carl J. Barbier had already held that the indemnity agreement was binding, and that Halliburton’s only potential liability to the underlying plaintiffs was for punitive damages, if any.
  • This was a bench trial, and that trial was already concluded.  Indeed, Judge Barbier had finished writing the judgment.
  • Halliburton settled two days before the judgment was to be released, and the settlement would not prevent that from happening.  Two other defendants remained, so the outcome as to liability for punitive damages, if any, for all of them, would be revealed with that judgment.  To be fair, this was only the first of two unusual aspects of this settlement.
  • The settlement was facilitated by the creation of a new “settlement class.”  This was the second unusual aspect.  Due Process requires any putative member of such a class to have a reasonable time to receive notice and decide whether to opt out.  This process required many months to conclude, and as a result the opt-out deadline would follow long after the judgment as to liability, if any, for punitive damages would be released.
  • Halliburton Won.

The combination of both unusual “settlement” features is unprecedented in this author’s experience, and for good reason.  As it happened, virtually no plaintiffs opted out, which was to be expected.  Halliburton prevailed months earlier, so a share of more than a billion U.S. dollars was better than nothing.  But had Halliburton lost, every plaintiff could have opted out and Halliburton would have been faced with precisely the downside the “settlement” was supposed to extinguish:  litigation over the magnitude of punitive damages.  One could therefore say that this was not a settlement at all, but rather a guarantee that the plaintiffs would be paid a ten-figure sum even if they lost.

In short, Halliburton could not possibly have prevailed in the coverage case because it paid well over a billion U.S. dollars and received nothing in return.  The “peace” it sought by “settling” was a mirage.  Plainly, no one on Halliburton’s legal team recognized this structural failure.  Had anyone perceived this timing problem, at the very least, Judge Barbier would have been faced with a joint motion to delay the judgment until after the opt-out deadline for the new settlement class had expired.  No such motion was made.

All of this was known to the public, and obviously Halliburton, contemporaneously.  The implications of these facts this author leaves to others.

John C. Lenzen, FCIArb

popdevteamHiding in Plain Sight:  Why Halliburton Could Not Have Won (the Antecedent Coverage Arbitration)
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