Supreme Court Raises Questions About Texaco’s Appeal

Texaco and Pennzoil took their highly publicized legal battle over Getty Oil to the U.S. Supreme Court on Monday, where Texaco’s case for pursuing the fight without first posting a $12-billion bond came under animated and skeptical questioning.

At issue in the hourlong hearing was an abstruse legal question: Did a lower federal court in New York have the jurisdictional right to rule last year that Texaco could proceed with its appeal of a 1985 Texas court ruling by putting up a $1-billion bond instead of the $12-billion bond required by Texas law?

But under the relentless quizzing of Justice Thurgood Marshall, Monday’s arguments took on the tenor of a classic battle between haves and have-nots.

“There is no statute that says a fat cat wins and a small cat loses,” Marshall chided David Boies, the New York lawyer who argued the case for Texaco, the nation’s 12th-largest corporation. “Do you really think 1983 (a key civil rights statute that forms the basis of much of Texaco’s bond case) was passed to protect multibillion-dollar corporations?”

Marshall and Chief Justice William H. Rehnquist repeatedly quizzed Boies about Texaco’s failure to pursue its bond case in Texas state courts--where the merits of the case are being litigated on Pennzoil’s home turf--before finding a sympathetic federal judge in White Plains, N.Y., Texaco’s headquarters.

Marshall was particularly skeptical of Texaco’s motives, asking why the company “went shopping” for a judge in White Plains, N.Y., instead of in Anchorage or Hawaii.

Boies, echoing Texaco’s consistent argument that it would be forced into bankruptcy if it had to post a $12-billion bond, replied that Texaco chose New York because that is Texaco’s headquarters and the place where Texaco would file for bankruptcy if necessary.

Pennzoil--whose case was argued by Laurence H. Tribe, a professor of constitutional law at Harvard--countered that the federal court’s ruling threatens the U.S. legal system because it “sideswiped state proceedings.”

It also flashes a signal, Tribe said, that large corporations can “get the laws twisted” to accommodate them.

“If you are rich enough and big enough to project your fears on the stock exchange display board, then you get a better deal,” Tribe said.

The court isn’t expected to rule until June or July at the earliest. And regardless of the outcome, the dispute over which oil giant is the rightful owner of Getty Oil may be back in the Supreme Court’s hands later this year.

A Texas appellate court is expected to rule on the merits of the case any day now, a decision that almost certainly will be appealed first to the Texas Supreme Court and then to the U.S. Supreme Court.

If Texaco loses the bond issue, the injunction prohibiting Pennzoil from securing its court judgment by placing liens on various Texaco assets will be lifted.

But in what Texaco Chairman Alfred DeCrane called a departure from the smaller oil company’s earlier stand, Tribe told the court that Pennzoil would be willing to discuss a “flexible security arrangement” that wouldn’t require Texaco to post the full bond.

“We want to get paid, but we do not want the world crashing down” on Texaco by forcing it into bankruptcy, he said.

After the hearing, DeCrane said the “modification” of Pennzoil’s position “showed our strength before the court.” But several lawyers who are partial to neither side gave this round to Pennzoil, whose own lawyers and executives were elated after the hearing, pronouncing it a “vindication” of the earlier federal court rulings.