THE TRIAL: Tactics Irk an ‘Ordinary’ Jury

BACKGROUND OF A BATTLE In the two months since a Houston jury returned an $11.1-billion verdict against Texaco in a lawsuit brought by Pennzoil, many have wondered just what the panel heard during 17 weeks of trial to persuade it that Texaco’s alleged interference in Pennzoil’s planned takeover of Getty Oil warranted such damages.

In a search for answers, Times Staff Writer Debra Whitefield reviewed the trial transcript--all 25,445 pages--plus various depositions, trial briefs, exhibits and motions. She also conducted interviews with lawyers, jurors and the judge.

The two stories below are a reconstruction of how, through a complex series of events, Getty Oil came to be acquired by Texaco and of how Texaco apparently fumbled in defending itself against the Pennzoil lawsuit.

There is nothing ordinary about Martin Lipton. Many regard the sophisticated Wall Street lawyer as the master tactician of corporate takeover law. And like the best strategists in the hard-charging, money-driven business of mergers and acquisitions, he is blessed with a keen intellect, an eye for detail and a big ego. Because he is rarely outmaneuvered, Lipton is sought out by one side or the other on almost every big corporate takeover.

But when he met up with a master of courtroom crusades, Joseph D. Jamail Jr., in a tiny, dingy Texas courtroom three months ago, it was precisely those things that worked to his disadvantage.

“Are you saying that you (see) some distinction between just us ordinary people making contracts with each other and . . . a $10-billion deal?” Jamail, Pennzoil’s chief trial lawyer, shot back when the ever-precise Lipton tried to draw a distinction between negotiating over $10 and $10 billion.

“Yes, indeed,” Lipton replied.

It was vintage Jamail, a personal-injury lawyer who has made millions defending what he calls ordinary people. His gift for picking and persuading juries and sensing what will irk a jury contributed greatly to Pennzoil’s history-making verdict against Texaco. And he was at his finest grilling Lipton and making him out to be “not one of us ordinary people.”

By the time Jamail finished with Lipton, jurors were rolling their eyes and shaking their heads--convinced, they later said, that the distrust many ordinary people feel for the likes of Lipton is well-deserved.

Lipton “not only admitted he was a fast-talking double-dealer, he bragged about it,” juror James Shannon Jr. said when the 17-week trial was over. “By the time he left the stand, he had driven the last nail in Texaco’s coffin.”

“He was disastrous,” a lawyer in the Texaco camp said later. “I’m not sure we ever came back from that.” Thus far, Lipton has not responded to such comments.

Lipton didn’t single-handedly lose the case for Texaco, of course. Some bad lawyering by the Texaco side, questionable decisions by the trial’s two judges, simple bad luck and--jurors are quick to point out--the case itself, had a lot to do with the outcome. To be sure, the verdict may be eventually overturned on appeal, but its importance is likely to linger.

“If Joe Jamail had been (Texaco’s) attorney, he would have lost,” says Shannon, a public relations man for the city of Houston and one of the most outspoken jurors. “Look at the evidence. It’s inescapable. They just had a bad case.”

But the personalities of Lipton and other Getty strategists did play a major role in turning the jurors against Texaco.

Disliked 2 Witnesses

They have made no secret, for example, of their dislike for two other witnesses, Geoffrey Boisi, a Goldman Sachs merger specialist who was Getty Oil’s investment banker, and Barton Winokur, outside counsel for Getty. Both witnesses struck the jurors as arrogant and deceitful. And Winokur, particularly, got low marks from the jury because they say he never looked at them during his entire time on the witness stand. Winokur says he was specificially instructed by Texaco lawyers not to look at the jury.

But it was their tactics--and remarks in the courtroom about those tactics--during a Getty board meeting on Nov. 11, 1983, that particularly galled the jury.

At that meeting, the two advised the Getty directors to intervene in a lawsuit seeking a co-trustee with Gordon Getty of Getty Oil’s largest shareholder, the Sarah C. Getty Trust. But it was the fact that they entered the board room through a back door just after Gordon Getty was escorted out through another after being told that the board wanted to discuss a truce with him that struck the jurors as shameless.

“That killed their credibility with the jurors all right,” a Texaco lawyer conceded.

Winokur, saying he is upset with descriptions of his role in the case, now saysthe account of the meeting offered in court is inaccurate. There was no attempt to deceive Gordon Getty and everything was done above board, he says.

Texaco knew that would be damaging evidence. And it argued strenuously to the original judge, Anthony J. P. Farris, that the incident, which occurred some six weeks before the takeover wars at Getty began, wasn’t germane to the case.

Didn’t Buy Argument

But as the trial record shows was almost always the case, Farris didn’t buy Texaco’s argument. In this case, he favored Pennzoil’s argument that the incident was important for establishing the pair’s bias against Gordon Getty and their character and helped set the scene for Pennzoil’s subsequent entry onto the scene.

Winokur’s credibility was further damaged in the jurors’ eyes when he not only admitted his role in the lawsuit recommendation, but seemed proud of it.

“My own view was intervention was in fact the best alternative,” Texaco’s lead witness said upon cross examination by Pennzoil lawyer G. Irvin Terrell. “I was hopeful (the lawsuit) would be filed.”

Since the lawsuit was in fact filed three days later, Terrell demanded, why keep Gordon Getty out of the board room when it was discussed? Why keep it from him?

The company had been “a major force in . . . bringing forth a beneficiary” of the Sarah C. Getty Trust to file the lawsuit in the first place, Winokur testified. “And we knew that Gordon Getty would be upset by that.”

Score one more for Pennzoil, whose lawyers throughout the trial had portrayed the son of J. Paul Getty as a well-meaning, considerate man who was treated shabbily by Getty Oil operatives and who, in the end, had no choice but to sell out to Texaco. Winokur’s comments made the jury all the more suspicious of the men who helped deliver Getty Oil into Texaco’s hands.

Aroused Animosity

Boisi, meanwhile, aroused considerable jury animosity for his aggressive shopping around for other bidders--even after Pennzoil had what the jury decided was a binding contract. Then, he dug himself into a deeper hole by insisting that he wasn’t shopping at all, but merely making “courtesy calls,” a remark that the jurors would later say offended their intelligence.

The jurors also were outraged by what they saw as his motive for this shopping spree: money. The Pennzoil lawyers pointed out that Boisi, on whom they stuck the moniker “The $18-Million Man,” was paid $18 million for his role in swinging the Texaco acquisition. The Pennzoil deal would have earned him only $9 million.

A Goldman Sachs lawyer, speaking on behalf of Boisi, said the firm is “very disappointed” by reaction to Boisi’s testimony. “We are very surprised. Geoff usually makes a good impression on everybody,” the lawyer said.

Lipton, too, seemed to have no sense for what would offend a jury--and especially the largely blue-collar one that heard this case.

Not long after Jamail had cleverly drawn him into making the distinction between what Jamail called “ordinary people” deals and big corporate ones, Lipton went out of his way to put himself in hot water again. When Jamail mistakenly referred to Patricia Vlahakis--the lawyer in Lipton’s firm who had been assigned to the Pennzoil case--as Lipton’s partner, he insisted on setting the record straight.

“You said Ms. Vlahakis was my partner. She’s my associate,” Lipton advised.

“He had just reinstated the caste system,” said an offended Shannon in recalling the remark.

Cashed-In on Remark

Jamail had a field day with that one, finding ways to work the remark into at least two other questions.

The Houston lawyer, who accepted the case as a personal favor to his friend J. Hugh Liedtke, Pennzoil’s chairman, even found a way to make Lipton’s meticulous attention to detail--one reason he is so highly regarded as a lawyer--seem ridiculous.

In one exchange, Lipton repeatedly corrected Jamail’s use of the term “the Pennzoil proposal,” even though Jamail was reading directly from the minutes of the Getty Oil board meeting at which the Pennzoil merger offer was considered.

The minutes aside, the board certainly wasn’t considering any proposal, Lipton insisted. It was only considering whether to “approve going forward with discussions and negotiations.”

“Was Mr. Copley (Ralph Copley was Getty Oil’s corporate secretary) sober when he was taking these notes?” Jamail demanded, drawing the response, “I don’t know what you mean, Pennzoil proposal.”

Lipton also made a point of noting that he had insisted on changing the heading over Pennzoil’s proposal to the Getty Oil board “memorandum of agreement” from just “agreement,” because he insisted, that would make it clear to everyone that this was not an agreement, but rather an agreement to consider an agreement--another statement that caused eyes to roll in the jury box.

Portrayed as Culprit

Part of the blame for the jury’s unfavorable reaction to Lipton has to go to Texaco’s lawyers. Lipton is said to have been quite diplomatic in trying to keep peace among the feuding Getty entities preceding and during the takeover battle, and yet none of that ever came out at the trial. Instead, Texaco let Pennzoil get away with portraying him as the chief culprit in snatching Getty out of Pennzoil’s hands.

Texaco lawyers also committed several other apparent errors. The first may have been its most grievous, for it resulted in the case being tried in Pennzoil’s hometown, Houston.

Immediately after Texaco struck its deal with Getty, Pennzoil sued in Delaware, where Getty was incorporated, to block the deal on grounds that the Getty entities had breached their contract with Pennzoil. By the time an injunction was denied, all of the defendants had filed answers to the suit--except Texaco, which later said it didn’t think it had to. That mistake freed Pennzoil to drop the claim against Texaco in Delaware and refile it in the Texas court.

Once the trial began, the Texaco attorneys asked Texaco Chairman John McKinley to visit the courtroom in an effort to make the huge corporation seem less faceless--something Jamail had succeeded in doing for Pennzoil in his opening remarks to the jury panel when he repeatedly referred to Pennzoil as being not a building but a collection of people and that the alleged wrong hadn’t been committed against a faceless company but against “my friend,” Liedtke. But Texaco’s well-intention request backfired. Pennzoil slapped a subpoena on McKinley and subsequently put him on the witness stand, where he had to withstand the relentless grilling of Jamail.

Risked Offending Judge

Such bad luck seemed to plague Texaco from the start. When the Texaco camp discovered that Jamail had contributed to Judge Farris’ reelection campaign, lead Texaco lawyer Richard B. Miller sought Farris’ removal from the case, a request that was denied. The lawyers saw little risk in offending the judge because in Texas at the time, the judge assigned to a case after it is filed isn’t necessarily the one who tries it.

Miller had just one chance in 25 of drawing Farris as the actual trial judge. But four months before the start of the trial, the system was changed. Texaco was forced to defend the case before a judge it had tried to oust.

Another costly decision was the one not to put any of Texaco’s three damage experts on the witness stand. It is a common tactic by defendants because it leaves the impression that the defense firmly believes it won’t lose.

Texaco lawyers say that was one reason they chose--after considerable discussion with Texaco management--not to rebut Pennzoil’s damages experts. A second reason is that they didn’t want to give the opposing side another chance near the end of the trial to replay its claims.

“It was a glaring error,” maintains Baine P. Kerr, Pennzoil’s former president and its representative during the trial. “That’s a decision you might make in a sore back case but it’s just incredible in something this big.”

Once the jury decided in Pennzoil’s favor, the only numbers it had for basing its award were Pennzoil’s--$7.53 billion in actual damages, which is based on what Pennzoil claims it would cost to replace the 1 billion barrels of oil it lost when it lost Getty.

Bolstered Credibility

It is unclear, however, whether Texaco’s experts could have swayed the jury to any great extent. Many of them considered Pennzoil’s damages expert the best witness Pennzoil put on the stand. He was Thomas Barrow, a former president of both Kennecott and Standard Oil of Ohio, and both his reluctance to take the assignment--it took three visits to persuade him--and his insistence on doing it without pay bolstered his credibility with the jurors.

Barrow testified that both the figure Pennzoil was asking and the method by which it arrived at that amount were realistic.

The Texaco attorneys’ last mistake came during the jury deliberations. At precisely 2:22 p.m. on their second day of deliberations, a Monday, the jurors sent out a note to Judge Solomon Casseb, who by then had taken over the case. To what extent, they wanted to know, was Texaco liable for the actions of Lipton, Boisi and Winokur?

After some discussion, the Texaco lawyers thought they remembered an instruction in the judge’s charge to the jury advising them that Texaco was only responsible for the actions of its own employees and agents. So, they agreed to the judge’s response that the jurors should follow the court’s instructions.

Overnight, the attorneys realized to their horror that the instruction they remembered wasn’t in the charge. So they asked Casseb the next morning to send a belated note to the jury. He refused.

Jury Shifted Votes

The jury, which was lined up 7-5 for Pennzoil on the first vote they took the previous Friday, had narrowed the gap, first to 10-2 and finally 12-0, and set the actual damages at $7.53 billion. With the judge’s information, they then tackled the punitive damages.

By the end of the day, they were at something of an impasse. Six wanted to give Pennzoil the whole ball of wax--another $7.5 billion. Two were in favor of no punitive award at all. And four were undecided.

The following morning, their third and final day of deliberations, Shannon suggested a compromise.

Pennzoil attorney Terrell, in his closing arguments, had urged the jury not only to find in Pennzoil’s favor, but to award punitive damages so as to help put a stop to the practice of indemnifying companies against liability in future lawsuits--which Texaco had done for each of the three Getty entities. Pennzoil had strenuously argued to the jury that these indemnities were a signal that the Getty clan knew it would be sued for double-crossing Pennzoil and wanted some protection. That Texaco agreed to the demands was, Pennzoil charged, a sign that the oil giant knew at that point--if not before--that Pennzoil did indeed have a contract with Getty Oil, but went ahead with its acquisition anyway.

Why not award punitive damages of $3 billion, he asked, one for each of the Getty interests--the company, the museum and the trust.

Shannon admitted later that he also liked the ring of $10 billion--he has since started work on a book, which he plans to call “The $10-Billion Jury.”

“I liked the sound of a straight $10 billion versus, say, $9.5 billion,” he said in an interview. “That sounds sort of non-jurisprudent, I know.”