$10-Billion Jury Verdict Against Texaco Upheld
A Texas state judge Tuesday upheld the biggest award of damages in U.S. history--the $10.53 billion that a jury last month ordered Texaco to pay Pennzoil for improperly luring Getty Oil out of a merger deal.
Judge Solomon Casseb Jr., who came out of retirement to take over the case from an ailing jurist, granted Pennzoil the full $7.53 billion in actual damages it had sought, plus $3 billion in punitive damages and interest.
Altogether, the nation’s third-largest oil producer was ordered to pay $11.12 billion. That far exceeds the largest previous damage award of $1.8 billion, which a jury granted in 1980 to MCI Communications from American Telephone & Telegraph. An appeals court later threw out the award and ordered a new trial.
Apparently acting to diminish Texaco’s threat to file for bankruptcy court protection to keep Pennzoil from seizing its assets immediately, Casseb also delayed for up to 105 days a Texas legal requirement that the giant company post a $12-billion bond while the case is appealed.
Texaco, whose battery of lawyers and executives fled the crammed courtroom where the showdown took place within a minute of the ruling, said it will file immediately for a new trial and appeal the decision.
“We think (Casseb) is wrong,” said a visibly upset David Boies, one of several prominent New York lawyers brought in by Texaco after the trial ended last month.
Boies said that despite Casseb’s ruling to delay the posting of an appeal bond, it “does not preclude us from filing for Chapter 11" (bankruptcy) reorganization. The company has said it cannot come up with the amount needed to comply with a Texas law that requires defendants that appeal damage judgments to post bonds equal to their potential liability.
Bankruptcy Remote Prospect
But a bankruptcy filing seems a remote possibility after a last-minute bargain struck by the judge and lawyers for both sides during a tense 3 1/2-hour session in the judge’s chambers Tuesday. Under the agreement, Texaco may not sell or dispose of any assets in any transaction not considered part of its normal business activity, and Pennzoil may not seize any Texaco assets for as long as Casseb’s court has jurisdiction over the case--105 days maximum.
“I don’t know why they would now” file for protection under U.S. bankruptcy laws, said a delighted but weary Joseph Jamail, the personal injury lawyer who acted as lead counsel for Pennzoil as a favor to his friend, Pennzoil Chief Executive Hugh Liedtke.
Texaco purchased Los Angeles-based Getty Oil last year for $10.1 billion, the second-largest merger in U.S. corporate history behind Chevron’s $13.3-billion purchase of Gulf Corp.
But a jury ruled Nov. 19 that Texaco unethically broke up a previous merger agreement between Getty Oil and Pennzoil, a much-smaller Houston-based firm.
Texaco argued that Pennzoil and Getty never had an ironclad deal and that it is being punished for taking advantage of a “good business opportunity.”
The hearing requested by Texaco following the 17-week trial and verdict by a jury of East Texans was billed by Texaco as a fight for its life. But over the two days of lawyer arguments last week, the court sessions were surprisingly lacking in passion.
On Tuesday, that changed. Richard Keeton, one of about two dozen Texaco attorneys in the courtroom, engaged Pennzoil’s Jamail in a brief but heated discussion even before the hearing officially commenced at 1:30 p.m. And tensions mounted from that point on.
When Casseb asked if there were any final comments from the two sides and Boies rose to “advise” the judge that Pennzoil and Texaco had held negotiations Tuesday morning and “most of last night” in an “attempt to have Pennzoil consider resolution of the entire matter,” Jamail jumped to his feet and chastised Boies’ remarks as “totally improper.”
Boies later clarified his remarks about the overnight discussions with Pennzoil, saying there never were any settlement negotiations. Rather, the talks centered on freeing Texaco from having to post a bond and persuading Pennzoil not to file liens in an attempt to collect the judgment in the event there was one.
The final agreement does both, “in order to preserve the status quo of this proceeding during the pendency of this matter before this court,” the final order reads.
Neither side will be bound to that pledge, however, if either breaks the pact or if Texaco files for Chapter 11 protection.
Case Could Last a Year
Lawyers familiar with the appeals process predict that it will be 12 to 18 months, at least, for the case to wend its way through the courts. Presumably, Texaco would have to seek approval of appeals courts to continue the agreement reached Tuesday permitting it not to post a bond after the case leaves Casseb’s jurisdiction.
Separately Tuesday, Texaco said it has adopted a “poison pill” anti-takeover measure that will make it much more difficult for others to take over the oil giant.
Some Wall Street analysts have contended that Texaco may be vulnerable to a hostile takeover because of the Pennzoil judgment.