Texaco, Pennzoil Square Off Again : Both Sides Optimistic Following 4 1/2-Hour Court Hearing

In front of 940 spectators, some of whom lined up three hours before the scheduled starting time to get a seat, lawyers for Texaco and Pennzoil sparred for nearly 4 1/2 hours Thursday as the biggest corporate battle of the century returned to court.

Alternately attacking and defending the unprecedented $11.1-billion judgment against Texaco that is at stake, the two sides essentially recited for the three-judge appellate panel hearing Texaco’s appeal the same arguments that they have made for months in court appearances, legal briefs and newspaper articles.

But they clashed sharply, often in colorful language and theatrical performances that drew laughter from the crowd, over the interpretation of New York law, which is pertinent in this battle.

‘Serious Errors’ Cited

After David Boies, lead outside counsel for Texaco, had recited a litany of “serious errors” in the trial judge’s application of New York law to show “just how far Pennzoil asks this court to take the law of New York beyond what any other court has ever done,” an eminent opponent on the Pennzoil legal team, 85-year-old New York lawyer Simon H. Rifkind, countered:

“I must confess, I am a stranger to the law as they (Texaco) expressed it.”

Both sides have agreed from the start of this battle over the 1984 acquisition of Getty Oil that New York law governs the case because the alleged injustice occurred in that state. A Texas jury found last November that Texaco had improperly interfered with Pennzoil’s planned acquisition of Getty and set the damages at $10.53 billion. Interest charges have brought the sum to $11.1 billion.

The huge sum was much on the minds of the contestants Thursday.

“Since the marathon effort this morning began, the interest has gone up another $387,000,” Corpus Christi, Tex., lawyer Russell McMains, a Texaco outside counsel, noted as the first oral arguments in the appeal neared an end.

Pennzoil’s lead outside counsel, Joseph D. Jamail Jr., was the first to address the money issue head on.

“Something that I am really worried about,” he said, “is that because of the inordinate amount of attention this award has received, some court just might fall” for Texaco’s assertion that it would be forced into bankruptcy court if the judgment stands up. “They just might play it safe,” Jamail continued, “even if that means making new law or twisting old law.”

By most accounts, both sides did an admirable job of packing the huge case--the trial transcript totaled more than 25,000 pages and there were hundreds of thousands of pages of legal briefs and cited court cases--into easy-to-follow and animated 90-minute presentations. Time devoted to answering the judges’ questions and two 20-minute recesses lengthened the hearing to 4 1/2 hours.

“I thought that they were good appellate arguments, especially considering the differences that are inherent when you have more than one lawyer arguing each side,” observed Houston attorney Richard Miller, who was Texaco’s lead lawyer during the Pennzoil trial.

Crammed into the auditorium were hundreds of lawyers, journalists, law students and other spectators. Security at the hearing was so tight that spectators were subjected to three searches of briefcases and purses before being allowed to enter the auditorium, which was locked while the court was in session.

Not surprisingly, both sides expressed satisfaction with their performances.

“You may as well stick a fork in them, because they’re done,” said the ever-quotable Jamail.

Similarly pleased with the Pennzoil presentation was J. Hugh Liedtke, Pennzoil’s chief executive. Labeling his company’s arguments “very strong,” he said that he was “surprised at the weakness of (Texaco’s) case.”

But Texaco Vice Chairman James W. Kinnear credited his lawyers with “an excellent job”, adding: “Nothing I’ve heard today changes my conviction that everything we have done has been ethical, legal and in the highest standards of business conduct.”

Top Texaco Executives Missing

Kinnear was the ranking Texaco executive at the hearing. Both Chief Executive John K. McKinley and President A. C. Decrane Jr. had “other commitments” that kept them away, said a company spokesman, who added that Kinnear, as head of Texaco’s operations in Texas, is the executive who has followed the case most closely.

After the hearing, both Jamail and Boies were uncharacteristically quiet on their readings of the judges’ questions and reactions to the arguments.

Sources on the Texaco team, however, said they regarded the judges as confused by the major issues and, based on their questions and the looks that they gave various lawyers on both sides, as pro-Pennzoil.

Particularly disturbing, they said, was a comment by Judge James F. (Bud) Warren during Pennzoil’s presentation that he wanted to “eliminate a lot of nagging points” over how the damage figure was determined. Some Texaco lawyers read that as evidence that he agreed with Pennzoil but wanted some clarification for the benefit of others.

The judges are not expected to rule on the appeal for at least two months.