Effort Fizzles in Texas Legislature to Trim Texaco’s $10-Billion Bond

Texaco’s last-ditch effort to reduce the $10-billion bond it must post in order to pursue its legal battle with Pennzoil failed Friday when the sponsors of a bill in the Texas Legislature gave up their efforts to win its passage.

Texas state Sen. Carl Parker and state Rep. Charles Evans said that while a majority of lawmakers in the two houses favored a bill limiting to $1 billion the size of the bond required to appeal a court judgment, they didn’t have the necessary two-thirds vote required to get the measure to the floor for a vote.

Pennzoil hailed the decision as a major victory. And Texaco, clearly frustrated that the measure had died because of a procedural matter, accused Pennzoil of using “obstructive and delaying tactics” to keep Texaco in bankruptcy.

The nation’s second-largest oil company filed for protection under Chapter 11 of the U.S. bankruptcy law last month, blaming Pennzoil’s refusal to settle a $10.3-billion judgment it won from Texaco in 1985. The filing also cited a Texas law requiring the losing party in a lawsuit to post the full amount of judgment, plus interest, as security before it can pursue an appeal.

After it failed to convince courts to drop that requirement, Texaco took its fight to the Texas Legislature.

Parker, the Texas senator, blamed the bill’s failure on Pennzoil’s “obstructive lobbying.” He was referring to Pennzoil’s hiring of about 22 lobbyists to oppose the measure, compared to 12 lobbyists who fought on Texaco’s side.

Kenneth Klee, Pennzoil’s bankruptcy lawyer, said Pennzoil had fought so hard against the measure because “it was bad for the people of Texas.” A law putting a $1-billion cap on appeal bond requirements, he argued, would have inspired “a lot of frivolous lawsuits and much higher credit costs.”