Chevron Wins Right to Inspect Pennzoil Records

A federal judge on Thursday granted Chevron Corp.’s request for broader access to Pennzoil Co. internal documents to bolster Chevron’s lawsuit charging that Pennzoil lied about its intentions when it bought an 8.8% stake in Chevron last December.

The ruling by U.S. District Judge Thelton Henderson will allow Chevron access to Pennzoil documents detailing the Houston-based company’s deliberations about whether to invest in 30 or 40 other oil companies with $2.1 billion that it obtained in its settlement with Texaco Inc. after the battle for Getty Oil Co.

Pennzoil finally decided to buy stock in Chevron, a purchase that it said was made for investment purposes only as part of a strategy to avoid paying federal taxes on the settlement.

But Chevron filed suit in December accusing Pennzoil of wanting to take over or force a restructuring of the company and asked that Pennzoil divest itself of the Chevron stock.

Thursday’s ruling grants a request made last month and gives new impetus to Chevron’s suit, most of which was dismissed Dec. 12. Chevron believes that the documents will reveal ulterior motives on Pennzoil’s part.

“We’re confident they will tell us about their true intent in acquiring the $2-plus-billion of Chevron stock they bought,” said Chevron’s lawyer, William I. Edlund.

Pennzoil’s lawyer, Stephen V. Bomse, dismissed the ruling as routine. He suggested that Pennzoil in turn may now seek Chevron internal documents relating to a possible Pac-Man defense. Chevron earlier secured a $5-billion line of credit--enough to buy Pennzoil in retaliation for its stake.

Despite winning access, Chevron still must find a “smoking gun” document that belies Pennzoil’s public statements. Few observers believed that Chevron would succeed and saw the legal maneuvers as a holding action.

Geoffrey Miller, professor of law at the University of Chicago law school and a specialist in securities and corporate law, said very few claims of false disclosure ever prevail.

“It’s quite possible for the top management of a company to secretly nurture a plan to engage in an acquisition in the future, but to not provide any paper record of that plan.”

But he added: “By placing Pennzoil in a position of demonstrating its non-intentions of making an acquisition, they are trying to back Pennzoil into a corner to prevent them from changing their minds anytime in the near future.”