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Pennzoil and Texaco Go Back to Court : Federal Judge to Rule Today on Request to Bar Texas Judgment

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Times Staff Writers

The battle between Texaco and Pennzoil moved back into the courtroom Thursday after weeks of negotiations, as a federal judge indicated that he will decide today whether to enjoin Pennzoil from enforcing its $11.1-billion judgment against Texaco before the completion of Texaco’s appeals in Texas and federal courts.

Meanwhile, Texaco attorneys in Houston filed motions for a new trial of the company’s dispute with Pennzoil. The company also sought the disqualification of Judge Solomon Casseb, who was brought out of retirement late last year to hear the last quarter of the 4 1/2-month trial after the original judge stepped down because of illness.

The dual developments suggested that the two companies have turned over their fight entirely to their legal teams following the collapse of negotiations to reach an out-of-court settlement.

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No New Talks Set

Texaco Chairman John K. McKinley, speaking during a recess in Thursday’s federal court hearing in White Plains, N.Y., on Texaco’s motion for the injunction, said no negotiating session is currently scheduled. However, he reiterated the company’s position that it “has indicated its willingness to discuss any issue.”

McKinley also firmly denied the charge by Pennzoil Chairman J. Hugh Liedtke on Wednesday that Texaco was responsible for wild gyrations in Pennzoil’s stock this week by inspiring rumors that it would buy Pennzoil.

“That seems to me to fly in the face of common sense,” he said. “What reason do you have that Texaco would put out a rumor that would drive up the price of their stock, increasing their bargaining power and decreasing ours?”

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On the New York Stock Exchange on Thursday, Pennzoil shares fell $2.50 to close at $72, while Texaco was down 25 cents at $30.125.

The court maneuvers stem from a state court jury’s award in Houston last month of $10.53 billion plus interest in damages to Pennzoil on its contention that Texaco improperly interfered with its planned 1983 acquisition of a 43% stake in Los Angeles-based Getty Oil. Texaco outbid Pennzoil, acquiring 100% of Getty in early 1984.

Texaco has said it believes that it can overturn the jury award, the largest such damage award in history, on appeal. But it contends that a Texas law requiring it to post a bond equal to the award plus interest--now totaling more than $12 billion--raises such an insuperable barrier to appeal that it might be forced to seek bankruptcy court protection instead.

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Texaco’s concern was illustrated by an offer it made to Pennzoil on Dec. 9--a day before Casseb formally entered the jury award--and disclosed in court papers Thursday.

The offer, proposed in a letter from McKinley to Liedtke, was of a $50-million payment in return for Pennzoil’s agreement to hold off implementing the jury award pending appeal. He also offered to place the earnings of 3/7ths of the Getty properties in escrow, pending completion of the appeal. Pennzoil officials were unavailable Thursday to comment on the offer.

In the federal court case, Texaco has asked U.S. District Judge Charles E. Brieant to enjoin Pennzoil from executing a lien on Texaco’s $5 billion in assets in Houston and surrounding counties and to block Texas from imposing the bond requirement.

In oral arguments before Brieant in his suburban White Plains courtroom, Texaco attorney Paul Curran called the Texas trial a “pervasively tainted proceeding . . . from gate to wire.” Curran repeated Texaco’s assertions that the original trial judge may have been biased because he had received a $10,000 campaign contribution from Pennzoil’s trial counsel, Joseph Jamail, and consistently ruled in Pennzoil’s favor during the trial. Casseb, who replaced that ailing judge, later misstated the controlling New York laws in his charge to the jury, Curran complained.

Pennzoil lawyers, in response, argued that the federal judge has no right to enter the case until Texaco exhausts its right to appeal in Texas courts.

In its motion against Casseb filed Thursday in Houston, Texaco contends that he was ineligible to hear the case at all because he was drafted out of retirement to hear it without having the 12 years’ credit for previous service on the bench required by Texas law. Casseb served eight years as a judge and had added military service credit of three years and several months, or a few months shy of the 12-year threshold.

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Texaco is asking that Casseb excuse himself, or failing that, be removed by Presiding Administrative Judge Thomas J. Stovall from further proceedings. Texaco sources said, however, that Stovall has already indicated to them that he will reject the motion.

Michael A. Hiltzik reported from New York and Debra Whitefield from Houston.

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