Determining admitted facts can be one of the more difficult aspects of preparing a pretrial stipulation. Parties often propose factual statements that are advantageous to their position, while resisting facts that may favor their opponents. There is also a tendency to take a cautious approach and require an opponent to prove all facts in support of their case at trial. This approach, however, likely is contrary to counsel's duty to litigate a matter "efficiently and effectively" and to "cooperate as officers of the court and not waste time on issues not legitimately in dispute," as in Itron v. Consert, (Del. Ch. Jan. 15, 2015).
In Itron, the plaintiff challenged the defendant's refusal to agree to proposed admitted facts drawn from its answer and discovery responses. On the plaintiff's motion, the court found that facts the defendant previously admitted in its pleadings and discovery responses were admitted for purposes of the pretrial stipulation and trial. Additionally, the court sanctioned the defendant for failing to negotiate in good faith and ordered an in-person, on-the-record meet-and-confer to be attended by each party's senior-most non-Delaware and Delaware attorneys.
The plaintiff, Itron Inc., and the defendant, Consert Inc., were parties to a development agreement, under which Consert claimed to be owed $60 million. Itron initiated the action seeking a declaration that it owed Consert nothing under the parties' agreement. The parties conducted discovery for two years, which included the exchange of 55,000 documents, responses to over 300 interrogatories and requests for admission and depositions of over 28 fact witnesses and four expert witnesses. Trial was scheduled for five days.
In an effort to narrow the facts and issues to be decided at trial, counsel for Itron provided a form of pretrial stipulation that included 164 proposed admitted facts. In response, counsel for Consert returned a red-line version that deleted entirely, or in substantial part, approximately 90 percent of the proposed admitted facts. The court noted, "Consert struck even benign and undisputed facts such as the dates on which drafts of documents were exchanged." After exchanging drafts of the pretrial stipulation, the parties held three meet-and-confer sessions and exchanged written correspondence. During the meet-and-confer sessions, Consert explained that it had deleted many of the proposed admitted facts because they were either irrelevant or required other facts or evidence to be presented along with them. Consert, however, addressed some of the same or similar facts in its statement of the case or in the admitted facts it proposed.
Thereafter, Itron provided a revised draft of the pretrial stipulation that removed more than 70 of the originally proposed admitted facts. Instead of engaging in discussions regarding the remaining admitted facts, Consert responded by identifying "just 16 rudimentary background facts to which it would agree, claiming an 'advocacy interest' in forcing everything else to be addressed at trial."
The court began its analysis by noting that Court of Chancery Rule 16, which governs pretrial procedure and management, requires that the parties confer in good faith with regard to reaching agreement on the contents of the pretrial stipulation. Consert argued it could not be ordered to stipulate to facts that are not "'admitted and required no proof,'" citing Rule 16. Citing J.F. Edwards Construction v. Anderson Safeway Guard Rail, 542 F.2d 1318, 1322 (7th Cir. 1976), Consert further argued that "on its face, Rule 16 ... does not authorize a court to force parties to stipulate facts to which they will not voluntarily agree."
In contrast, the court found it indeed had the power to determine that particular facts had been admitted, or are beyond legitimate dispute, based on the discovery record or on statements made by counsel during the pretrial conference. The court noted that it was not unusual for a court to make a determination that a particular fact has been admitted or is not legitimately subject to dispute. For instance, courts routinely make such determinations when evaluating whether there is a genuine issue of material fact on a motion for summary judgment. Courts may also adjudicate admitted facts if parties submit competing forms of pretrial stipulations under Rule 16(b). Next, the court reviewed Consert's answer and discovery responses to determine whether certain of the proposed admitted facts had been admitted therein. With respect to Consert's answer, the court noted specific facts that Consert admitted, but later rejected when included in Itron's proposed pretrial stipulation. The court also found that other facts were drawn from admissions in Consert's answer and, therefore, should have at least been partially admitted. By rejecting such facts in their entirety, Consert failed to act in good faith.
Similarly, the court found that Consert had no good-faith basis for rejecting facts it admitted in its responses to Itron's requests for admissions. Consert also did not act in good faith when it rejected, in their entirety, facts that were partially admitted in its responses. With respect to Consert's interrogatory responses, the court found that statements in "interrogatory responses ... do not, by themselves, constitute admitted facts." They can, however, "be found to constitute an admitted fact if it is not legitimately subject to dispute." As Consert did not identify a good-faith basis for withdrawing, modifying or otherwise disputing its prior responses, it "should have accepted the portion of the proposed admitted fact drawn from the associated interrogatory response and conferred with Itron about any disagreements over phrasing."
Finally, Itron argued that Consert failed to meet and confer in good faith with regard to certain other facts that were not previously admitted, but, if admitted, would streamline the trial. The court agreed. In so finding, the court rejected Consert's claims that the proposed admitted facts were written from an advocacy perspective, took facts out of context or involved inadmissible, irrelevant or immaterial facts. Instead, the court found that Consert's approach was indicative of an "entrenched adversary, hostile to the prospect of agreement." Particularly telling, according to the court, was Consert's refusal to engage in discussions regarding Itron's significantly reduced scope of admitted facts. The court found it "inconceivable that after two years of discovery, there are only 16 facts not legitimately subject to dispute."
Ultimately, the court sanctioned Consert for failing to meet and confer in good faith and ordered it to pay Itron's attorney fees for preparing the proposed pretrial stipulation, including the time spent meeting and conferring, and for briefing and arguing the instant motion. The court further required each party's senior-most non-Delaware and Delaware attorneys to meet and confer in-person regarding the narrowed scope of proposed admitted facts. Prior to the meeting, Consert was to provide a written response regarding each proposed admitted fact, including identification of all evidence that refutes any contested fact. Finally, "during the in-person meeting, the senior lawyers shall review, one by one, each of the items and attempt to reach agreement. A court reporter shall transcribe the meeting."
The Itron decision plainly sets forth the Court of Chancery's expectations with respect to negotiating admitted facts in a pretrial stipulation. Instead of merely rejecting all but the most benign factual statements, counsel must make a legitimate, good-faith effort to reach agreement on facts that may narrow the scope of trial. The failure to do so may result in the court declaring certain facts admitted and imposing sanctions. Counsel are wise to avoid this outcome by acting reasonably and agreeing to facts that were previously admitted or are not legitimately subject to dispute.