Getty Museum Files Lawsuit Claiming Texaco Reneged on Pact for Legal Protection

Texaco has suddenly repudiated a pivotal agreement it made to protect the J. Paul Getty Museum against lawsuits arising from Texaco’s controversial purchase of Getty Oil in 1984, the museum has alleged in a new lawsuit.

The Malibu museum’s suit, filed in Superior Court in Santa Monica, says Texaco’s new posture signals a “desperate effort” to shift the burden of the $11.1-billion court judgment against Texaco that arose from its Getty purchase.

The agreements to indemnify the museum and its officers against any subsequent lawsuits and legal expenses were a key part of the deal that saw Texaco snatch Los Angeles-based Getty Oil away from a third oil company, Pennzoil, which had been negotiating separately to acquire Getty.

Attorney Frank Barron of New York, who heads up Texaco’s appeal of the Pennzoil judgment, declined comment on the claims by the museum and on Texaco’s apparent change of position on the indemnity question. But he said it would be wrong to conclude that Texaco’s strategy has shifted to spreading the burden of the judgment rather than fighting it in court.

“Texaco has every intention of appealing that judgment,” Barron said.

Last November, Pennzoil persuaded a Texas jury that Texaco had wrongly interfered with a binding agreement between Pennzoil and Getty. Texaco has appealed the jury’s landmark award of $11.1 billion in damages to Pennzoil.

Testimony in the lengthy trial showed that attorneys for the Getty Museum, which owned 11.8% of the oil empire created by the late J. Paul Getty, insisted on the indemnities before agreeing to sell its shares to Texaco--evidence, Pennzoil argued, that the Getty camp knew it was breaking a formal agreement with Pennzoil and would be vulnerable to legal action.

Since the Pennzoil judgment, several shareholder lawsuits have been brought against Texaco as well as the Getty Museum and its president, Harold M. Williams. Until recently, Texaco had reaffirmed the indemnity agreement and paid the museum’s relevant legal costs, according to the suit by the museum.

Now, the suit filed Friday says, Texaco has stopped reimbursing the museum for its ongoing legal expenses. Quoting from a brief the museum said was filed Wednesday by Texaco in a Delaware court, the suit says:

“It is Texaco’s position that the indemnification provisions in the agreements with the museum and (Getty) Trust do not cover liability arising out of the purported ‘agreement’ upon which the judgment in the Pennzoil case rests.”

Texaco’s position presumably also applies to the indemnity it granted to the Sarah C. Getty Trust, the Getty family’s private trust and Getty Oil’s largest shareholder.

The complaint asks the court for a declaratory judgment affirming the indemnity agreement and for unspecified damages from Texaco. Attorney Marshall B. Grossman of Los Angeles, representing the museum, would not comment on the complaint.

The suit said Texaco acted “with the intent of injuring the museum as part of a desperate effort to shift liability for the Pennzoil judgment from Texaco to others, and to fend off claims by Texaco shareholders.”

It was the importance the museum attached to getting indemnity against legal actions, and Texaco’s willingness to grant the indemnity, that helped persuade jurors to award Pennzoil $3 billion in punitive damages on top of the actual damages of more than $7 billion.

While Texaco’s appeal of the jury verdict makes its way through the courts, Texaco and Pennzoil have tried unsuccessfully to reach an out-of-court settlement. Pennzoil has rejected three Texaco offers as inadequate.