Texaco Vows to Continue Its Battle With Pennzoil
Investors didn’t like Texaco Inc.’s latest setback in its multibillion-dollar legal battle with Pennzoil Co., but Texaco vowed last week to continue seeking vindication in the courts, while saying its remains willing to negotiate a settlement.
In Houston, however, a Pennzoil official questioned how serious Texaco was about wanting to resolve the issue out of court.
The comments came after a Texas appeals court upheld a jury’s $7.5-billion damage award to Pennzoil, which had charged Texaco with wrongfully interfering with a merger agreement between Pennzoil and Getty Oil Co.
Texaco executives and financial analysts said the ruling should not hurt the oil company’s operations, at least in the short run. But Texaco securities took a beating on Wall Street.
‘Erroneous Matter’
Texaco stock dropped $3 a share to $35.50 on the New York Stock Exchange on Friday, while Pennzoil soared $10.125 to $81.125. On the bond market, Texaco issues slumped by as much $42.25 for each $1,000 of face value.
“We will go forward in order to have this erroneous matter corrected,” Texaco Chairman Alfred C. DeCrane Jr. said at a news conference called to discuss the latest ruling from the Texas courts.
In its ruling Thursday, a three-judge panel of the 1st Texas Court of Appeals rejected 89 claims of error in the November, 1985, state district court trial of Pennzoil’s suit.
The only point raised by Texaco that was accepted by the appeals court was that the $3 billion in punitive damages awarded by the jury was excessive. The court cut that to $1 billion but upheld $7.53 billion in compensatory damages.
As of the weekend, the reduced judgment amounted to about $10.2 billion, down from $12.4 billion, including interest, said Texaco spokeswoman Lois Johnston.
Even with the reduction, the judgment remains the largest in U.S. history.
‘Gross Errors’
“I think it represents a threat to business in general and to anyone who has a major stake in the continuation of interstate commerce,” DeCrane said, claiming that the Texas courts failed to give proper attention to relevant out-of-state laws.
DeCrane said the reduction of punitive damages “can’t in any way correct the trial judge’s gross accumulation of errors and the abdication of responsibility on the part of the appellate system there.”
He said Texaco would pursue its appeal in the courts, while remaining ready to negotiate a resolution outside the legal system.
“We’ve said repeatedly that we’re prepared to seek a just and economic settlement of the matter,” DeCrane said. “We haven’t had any proposals from the other side. And you can’t do this alone.”
