Texaco, Pennzoil Set to Return to Texas Legal Arena : 3-Judge Panel to Hear Appeal of Record $11-Billion Judgment

In the eight months since Texaco was ordered to pay Pennzoil the largest court judgment in history, the closely watched corporate battle between Getty Oil’s two suitors has produced good theater as much as legal jousting.

So, it seems fitting that when the case returns to court here Thursday morning, the two sides will argue not in a courtroom but in an auditorium.

The three-judge panel selected to hear Texaco’s appeal of last November’s $11-billion verdict by a Texas state jury is scheduled to listen to three hours of oral arguments in a 756-seat auditorium belonging to a small law school that graduates some of the nation’s most gifted litigators.

Downtown Houston’s South Texas College of Law, which is housed in the same building as the Texas Court of Appeals, volunteered the use of its auditorium after hearing “of the clamoring by the public to get in,” said David R. Hendrick Jr., the assistant dean.

2,000 Requested Seats

Interest in the case is so intense that more than 2,000 lawyers, reporters and others interested asked for reserved seats. The appeals court’s courtroom accommodates only 40 spectators.

The issue at hand is whether the Texas jury was correct in finding Texaco guilty of improperly interfering with Pennzoil’s planned acquisition of Getty in 1984. As retribution for its lost opportunity, Pennzoil was awarded $10.53 billion, plus interest, a sum that is 40-times larger than any previous civil judgment.

Because of the magnitude of the judgment, many immediately dismissed it as a fluke and predicted a quick out-of-court settlement between the two oil companies.

Instead, the outcome of the appeal is in no way certain, and the intensity of the battle has increased in the months since the verdict. Both sides have fortified their teams with dozens of nationally recognized lawyers and aired their cases more in the media than at the bargaining table, where talks broke down months ago.

Texaco will lead off the hearing with a one-hour presentation. Pennzoil will then have 90 minutes to argue its case, and Texaco will close with another 30-minute argument.

The tribunal, made up of appellate Judges James F. Warren, Jack Smith and Sam Bass, can uphold or overturn the lower court verdict, reduce the amount of damages or order a new trial. But their decision is not expected for two to eight months. And the loser is sure to appeal to the Texas Supreme Court.

Different Strategies

Both sides are reluctant, of course, to give away their strategy. But spectators can expect Pennzoil’s presentation to focus on the facts of the case and Texaco’s to concentrate on the law.

“Our fundamental strategy,” said David Boies, Texaco’s lead outside counsel, “is to show where the trial court made errors of law, by identifying them and explaining why they are important errors.”

Given the trial judge’s instructions, Boies maintained, “it was very hard for the jurors not to make the decision they did.”

Texaco charges that the judge “plainly misstates New York and Delaware law” in his charge to the jury and that questions asked in that charge “imply the answers.” Texaco also claims that the trial’s first judge was biased because he had accepted a $10,000 campaign contribution from Joseph D. Jamail Jr., Pennzoil’s lead outside attorney, shortly before the trial and did not disclose it. Finally, Texaco says, the second judge could not have ruled properly because he did not read the trial transcript.

Two judges were needed because the first one became ill and was unable to continue with only three weeks remaining in the 4 1/2-month trial.

Pennzoil’s strategy, conversely, is to “keep the court’s attention on the facts,” Jamail said.

“I’m sure Texaco will try to divert the court’s attention to things not in the record,” he asserted. “So, we plan to spend considerable time correcting their factual misstatements. If not in combination with the facts, the law is meaningless.”

To bolster Texaco’s argument that the verdict should be overturned because, the company claims, trial Judge Solomon Casseb Jr. misstated and misapplied New York law, several states and labor unions have filed friend-of-the-court briefs questioning the decision.

Of particular note are those filed by the attorneys general of New York and Delaware. Both argue in strongly worded briefs that their states’ laws were either misstated or erroneously applied in Casseb’s instructions to the jury.

New York contract law is pertinent to this case because it was in New York where Texaco allegedly improperly wrested control of Getty from Pennzoil. And Delaware fiduciary law applies because Texaco, Pennzoil and Getty are all incorporated in Delaware.

New York Atty. Gen. Robert Abrams calls the judge’s jury instructions “fatally defective.” Not only did they fail to accurately describe pertinent New York law, his brief says, but they “muddled the distinction” between a binding contract and an agreement to agree. And by failing to advise the jury that New York courts heavily weigh usage and custom before deciding whether two parties intended to be bound to a contract, he said, the jury was “marooned.”

Pennzoil Spurned Offers

Delaware Atty. Gen. Charles M. Oberly III claims that by instructing the jury to “ignore the fiduciary obligations” of Getty’s board, the trial judge “removed from the case a potentially controlling issue of Delaware law, and constitutes plain error.”

Pennzoil says that it, too, had offers--about 50 of them--to file so-called amicus curiae briefs but turned them down. “They’re just orchestrated attempts to try to influence the court, and I won’t allow them,” Jamail said.

How animated the hearing will be is difficult to predict since the two orchestrators, Boies and Jamail, have such different styles.

Boies, a partner at the Wall Street law firm of Cravath, Swaine & Moore, is a fit and boyish 45-year-old.

He weighs his words carefully before answering questions, tends toward understatement and has a winning grin and self-effacing manner. “I am always amazed at how many words some people can pronounce,” he said.

The 60-year-old Jamail, who heads his own Houston firm, Jamail & Kolius, is a master of the one-line insult. He dismisses Texaco’s arguments as “warmed over bull” and brands the company’s efforts to sway public opinion in the case “lynch mob” tactics.

The Houston native charms people with his flamboyant and earthy language, pronounced Texas drawl and mischievous good ol’ boy image. In the courtroom, however, he is a dazzling and entertaining performer. He insults the opposition to throw them off stride, has an orator’s sense of timing and delivery and is able to put complex legal issues in everyday language.

By comparison, Boies’ courtroom style can be dull. His effectiveness lies less in his presentation than in his preparation and chess player-like ability to see several moves ahead of the opposition. “When you have lots of facts on your side,” he said, “you can be low-keyed.”

Jamail retorted: “If they want to act like they’re in a funeral parlor, that’s OK with me.”

Both men expressed confidence that the verdict in this case will favor them.

“I’d say Texaco faces an impossible task,” Jamail said. “When you don’t have the facts, you argue the law, and it looks like that’s what their plan is.”

Boies countered: “The substantive points are very, very heavily in Texaco’s favor.”