Seismic Gear Maker Wins Critical Lawsuit : Supplier Ordered to Pay $48.3 Million in Damages
Geophysical Systems Corp., a Pasadena seismic survey equipment maker that has not been profitable since 1982 when a supplier’s allegedly faulty equipment plunged Geophysical into financial trouble, was awarded $48.3 million in damages Thursday in connection with the dispute.
A six-member jury in U.S. District Court in Los Angeles agreed that Seismograph Service Corp., a Tulsa, Okla.-based competitor, should pay damages to Geophysical because it failed to supply the Pasadena firm with $15 million worth of computer equipment and software. The equipment would have allowed Geophysical to quickly furnish raw seismic data so that its energy company clients could draw “maps” of potential oil drilling sites.
Geophysical had contended that its seismic survey equipment, which used a recording system that provided a more detailed picture of the Earth than previous systems, was a state-of-the-art process that would have produced tens of millions of dollars in profits had it been operating properly in the early 1980s.
About that time, the price of oil soared beyond $30 a barrel. As a result, energy companies stepped up petroleum and gas exploration efforts.
Lawyers for Geophysical said the $48.3-million award was not unusually high for the oil industry, where companies commit huge sums to find oil and gas.
“Numbers in the oil industry are inherently large,” said Geophysical’s counsel Douglas W. Stern, a lawyer with Pepper, Hamilton & Scheetz. “You’re talking about a lot of money in terms of potential earnings and expenses. We are pleased with the result.”
Officials of neither Seismograph Service Corp. nor of Raytheon, Seismograph’s parent company, could be reached for comment Thursday. Seismograph’s lawyers also could not be reached.
If upheld, the award will make a significant financial contribution to Geophysical, which was founded in 1981, said Samuel J. Allen, company chairman.
Geophysical, which now has about 150 employees, has not been profitable since 1982, when the dispute over the seismic equipment began. The company has been operating under Chapter 11 of the federal bankruptcy law since it filed for reorganization in 1983, Allen said.
Geophysical was still able to carry on business by collecting seismic data but “we had to subcontract the rest of the process to other data processing companies. We will be able to delve back into that operation now,” Allen said. However, he said the lawsuit has slowed Geophysical’s lead in the seismic survey field, which is dominated by some two dozen other companies: “We’ve lost a good five- or six-year lead on the rest of the industry . . . the market is very depressed for oil exploration out there right now.”
In recent months, however, the company’s financial outlook has brightened even as oil exploration has slowed in the wake of low oil prices.
For the first four months of 1988, the company reported earnings of $261,188 on revenue of $2 million.
