J. Hugh Liedtke, 81; Pennzoil Chief Won Suit Against Texaco

J. Hugh Liedtke, the Texas oilman best known for leading his Pennzoil Co. to a $3-billion courtroom victory over Texaco in the 1980s, has died. He was 81.

Liedtke, whose victory against Texaco culminated a four-year battle for control of Getty Oil, died March 28 in Houston after battling a series of illnesses.

Liedtke’s road to riches was a circuitous one. He was born in Tulsa, Okla., and graduated from high school at the age of 16. At the insistence of his father, a lawyer for Gulf Oil Corp., he went to college at Amherst in Massachusetts. He later earned a master’s degree at Harvard before serving in the Navy in the Pacific during World War II. After the war, he and his brother, William, studied law at the University of Texas.

After graduating, the two brothers moved to Midland, Texas, where they opened a law firm. But they devoted most of their time to forming oil and gas partnerships. One of those partners was a young oilfield equipment salesman for Dresser Industries, George H.W. Bush, the future 41st president.

In 1953, the Liedtkes, Bush and a fourth partner raised $1 million from friends in Tulsa and some Eastern investors brought in by Bush. They formed an oil company that they named after the Mexican revolutionary Emiliano Zapata.

“There was a Zapata movie playing at the time starring Marlon Brando,” Liedtke told The Times some years ago. “We needed a name, something that would pique people’s curiosity, and we thought that sounded pretty good.”

The Liedtke-led group funneled $850,000 of the $1-million investment into a single oil field in Coke County, Texas.

“There were six wells there, widely scattered,” Liedtke later told Business Week magazine. “We thought they were connected. Most people didn’t. It turned out they were.”

Zapata Oil drilled 137 wells in what came to be called the Jameson field, all of them producing oil.

Bush parted company amicably with the Liedtkes in the late 1950s to contract out offshore oil rigs. The Liedtkes wanted to concentrate on exploring for oil and gas.

In the early 1960s, Liedtke set his sights on taking over the South Penn Oil Co., which was selling oil in Pennsylvania and West Virginia under the name Pennzoil and not doing very well.

Liedtke gained the support of one of the firm’s largest stockholders, J. Paul Getty, and engineered a friendly takeover. He merged Zapata, South Penn and some smaller companies into Pennzoil.

Several years later, Liedtke engineered a not-so-friendly takeover of United Gas Pipeline Co., a firm several times larger than Pennzoil. The absorption of United Gas Pipeline in 1965 turned Pennzoil into a large, diversified natural-resources company; over the next few years, its sales soared.

By the early 1980s, Liedtke became interested in acquiring the Getty Oil Co. from Getty’s feuding heirs.

In early 1984, Liedtke reached agreement with Gordon Getty to buy three-sevenths of the company’s shares at $112.50 a share. The agreement was approved by the Getty board of directors and announced at a news conference.

Complications arose when Getty representatives continued to entertain other bids at a higher price.

Less than two weeks after the Pennzoil deal was approved, Texaco announced that it had agreed to buy all of Getty’s stock at $128 a share.

Liedtke sued Texaco for interfering with Pennzoil’s contract with Getty. A Texas jury ruled in favor of Pennzoil and declared that Texaco owed the firm about $10.5 billion in real and punitive damages, which at the time was the largest civil damage amount ever awarded.

The ruling was upheld on appeal but the damage award was lowered to $8.5 billion. Texaco tried to settle with Liedtke for $2 billion and threatened bankruptcy if he didn’t accept. He didn’t.

Texaco kept good on its promise and filed for bankruptcy. But it had large cash reserves and by 1987 decided to end the legal wrangling with Liedtke and pay Pennzoil $3 billion.

Liedtke retired from the company as chairman in 1994.

In commenting on his former partner’s death, Bush said that he thought of Liedtke “as a strong and tough business leader of great vision. I was proud to be his business partner.”

Liedtke is survived by two sons, three daughters and 15 grandchildren.