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Texaco Loses $11.1-Billion Appeal : Texas High Court Refuses to Reverse Award to Pennzoil

November 03, 1987|Associated Press

AUSTIN, Tex. — The Texas Supreme Court on Monday upheld a lower court decision ordering Texaco Inc. to pay $11.1 billion to Pennzoil Co. for interfering in a planned merger of Pennzoil and Getty Oil Co.

The 1985 jury award, which also was upheld by the state's First Court of Appeals in Houston, is the largest in the nation's history.

The justices issued Monday's ruling without comment, saying there was no reversible error in a Houston Court of Appeals decision.

Texaco officials said the company would appeal to the U.S. Supreme Court.

"This refusal to hear our appeal defies both logic and law," said Jim Kinnear, chief executive officer and president of Texaco. "We will promptly ask the U.S. Supreme Court to review this case.

To appeal lower court decisions, Texaco had been ordered to post an appeal bond that forced the company in April to file for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

"We are not surprised that the Supreme Court has decided not to grant further review of Pennzoil's judgment against Texaco," said Pennzoil spokesman Bob Harper. "This decision, we think, is amply supported by the record in the case and by the applicable laws."

Supreme Court decisions usually are made on Mondays, but, almost without exception, not released until Wednesdays.

"We were concerned that rumors sometimes float about cases' possible outcome, and we felt it would be fair to everybody to go ahead" and release the decision, Chief Justice John Hill said about the early release of the Texaco-Pennzoil ruling.

$4.1-Billion Offer

Harper said Pennzoil has remained willing to negotiate an out-of-court settlement.

"Each (court) examination of the facts produced the same result--a finding that Texaco deliberately and with full knowledge broke up a binding written agreement between Pennzoil and the Getty parties," he said. "We think it is unfortunate that Texaco's management has persisted in its all-or-nothing strategy in this case. . . . The last offer we made to Texaco was $4.1 billion prior to today's ruling."

The battle over control of Getty began in December, 1983, when Houston-based Pennzoil offered $100 a share for about 20% of Getty stock. On Jan. 6, 1984, Texaco reached an agreement to acquire Getty for $125 a share, later raised to $128.

Pennzoil, claiming interference, filed a lawsuit seeking $7.53 billion in actual damages and $7.3 billion in punitive damages.

The lawsuit resulted in a four-month trial with the jury agreeing that Texaco had interfered in the Pennzoil-Getty deal. Texaco was ordered to pay Pennzoil $7.53 billion in compensatory damages and $3 billion in punitive damages.

State District Judge Solomon Casseb Jr., upheld the judgment in December, 1985, and added $600 million in interest, for a total of $11.1 billion.

The First Court of Appeals upheld the judgment Feb. 12, but reduced the punitive damages by $2 billion. Even with that reduction, the total award is more than $11 billion because interest continues to accrue.

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