Suit Seeks to Absolve Getty Trust of Liability in Sale of Family Business
Three beneficiaries of a $3-billion J. Paul Getty family trust claim in a lawsuit filed Wednesday that the trust’s lawyers and bankers should be held responsible for any damages recovered in lawsuits arising from the sale of the family oil business.
The three granddaughters of Getty Oil founder J. Paul Getty claim the family fortune “could be eliminated” if lawsuits pending in Delaware, Texas and New York succeed.
At stake is the extent to which the family trust is responsible for the $10.5 billion in damages awarded a year ago against Texaco for interfering with Pennzoil Co.’s planned purchase of Getty Oil. Texaco is appealing that judgment.
Jurors in that case found that Pennzoil had signed an agreement to buy Getty Oil only to be outbid by Texaco in secret and unethical negotiations. The award was five times larger than any amount previously awarded by a jury.
Texaco’s acquisition of Getty Oil involved purchases of stock from three sources: the oil company, the Getty Museum in Malibu and the family trust, called the Sarah C. Getty Trust.
‘No Binding Agreement’
Wednesday’s suit, filed in Orange County Superior Court, claims that Kidder, Peabody & Co. and the San Francisco law firm of Lasky, Haas, Cohler & Munter advised the trust that it was “free to sell to Texaco.”
The legal and financial advisers concluded that there was “no binding agreement with Pennzoil which prohibited” the sale to Texaco, according to the lawsuit.
As part of the sale agreement, Texaco agreed to protect the museum and the trust from any liability arising from the transaction. Wednesday’s lawsuit states that the litigation in New York, Delaware and Texas--brought by shareholders and other Texaco investors--seeks to nullify those guarantees.
One of those three lawsuits claims that representatives of Getty Oil, the family trust and the museum “induced” Texaco officials to negotiate the sale.
“The pendency of these lawsuits exposes the trust estate to the risk of potential judgments which could be many times the value of that estate,” the suit filed Wednesday says.
Museum Sued Texaco
Last May, attorneys for the Getty Museum went to court seeking to force Texaco to honor its agreement to protect the museum from liability. They claimed the oil firm repudiated the agreement after the verdict in the Pennzoil case.
The museum suit alleged that 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.”
Richard Haas, of the San Francisco law firm, declined comment Wednesday, saying he had not seen the lawsuit filed Wednesday. A representative of Kidder, Peabody could not be reached for comment.
The three plaintiffs are Anne G. Earhart, Claire E. Getty and Caroline M. Getty.
They allege that the sole trustee of the family trust, Gordon P. Getty, has failed to “prosecute or preserve potential claims” against Kidder, Peabody and the law firm.
In an earlier lawsuit in Los Angeles Superior Court, the three granddaughters accused their uncle, Gordon Getty, a musician, of mismanagement of the trust. They claimed Gordon Getty botched the negotiations with Pennzoil and Texaco, failed to keep beneficiaries informed about the status of the trust was unfit to continue serving as trustee.
As another part of that litigation, some 26 Getty family members agreed last year to split the main family trust into four new independent trusts, each worth $750 million at the time. The split, which resolved a long-running dispute among the family members, has not yet taken effect.
