Jury Orders Chevron to Pay $30.9 Million

A Los Angeles Superior Court jury Tuesday ordered Chevron U.S.A. Inc. to pay $30.9 million in punitive damages to McFarland Energy Inc., assessing a total $47.3 million judgment against the oil giant, a Chevron Corp. spokesman said.

The punitive damages were in addition to $16.4 million in compensatory damages awarded last Friday to McFarland, which sued Chevron in 1991 over the sale of oil and gas producing properties in the Los Angeles basin.

“We’re very disappointed in the outcome and we will appeal the case,” said Jim Hendon, a Chevron spokesman.

McFarland officials weren’t immediately available for comment on the jury’s decision.

“This will have a huge impact on McFarland, which is a small company that has been fairly conservative,” G. Bryan Dutt, an analyst with Howard, Weil, Labouisse, Friedrichs, said of the initial damage award. “Clearly, from my understanding, Chevron unfortunately made a mistake, and I think McFarland was acting in good faith.

“It was a small property to Chevron and maybe they weren’t paying attention, and the result is what has happened,” he said.

McFarland claimed its contract with Chevron gave it first option to purchase the properties, for which Chevron served as operator.

McFarland’s shares closed up 12.5 cents at $6.125 in Nasdaq trading. Trading volume of 12,300 shares was more than double McFarland’s three-month daily average.

Before a recent restructuring, Chevron U.S.A. was Chevron Corp.’s domestic subsidiary for production, refining and marketing.

San Francisco-based Chevron’s stock closed unchanged at $43 a share on the New York Stock Exchange. News of the punitive damage award came after the close of trading.