NEW YORK — Top executives of Texaco Inc. said Tuesday that they will ask the U.S. Supreme Court to review a Texas Supreme Court decision not to hear Texaco's appeal of a multi-billion dollar judgment won by Pennzoil Co., calling the Texas decision "incomprehensible" and "incredible."
Texaco will ask the nation's highest court to review a 1985 Texas district court decision ordering Texaco to pay Pennzoil Co. $10.53 billion--the largest jury award in the nation's history--for interfering in a planned merger of Pennzoil and Getty Oil Co. The Texas Supreme Court on Monday refused to review lower court decisions. With interest, the total judgment is about $11.1 billion, and because of its size, Texaco filed for protection under Chapter 11 of federal bankruptcy laws.
"The Texas Supreme Court's decision not to review the Texaco-Pennzoil litigation disregards justice and glosses over the many grave questions of respect for law, due process and elementary principles of judicial conduct," said James W. Kinnear, president and chief executive of Texaco Inc.
Kinnear said Texaco was still open to a settlement with Pennzoil, providing it was "sane, sound, reasonable and economical," but he declined to discuss any terms of a settlement. He called the $4.1-billion settlement that Pennzoil had offered a "kind of ridiculous sum" but said that he was not going to "debate the issue here."
A spokesman for Pennzoil said that it would "probably be beneficial" to both parties to settle out of court.
"But if they want to litigate it, then we are prepared to go all the way with them," said Robert G. Harper, director of media relations for Pennzoil Co.
Harper added that the $4.1-billion offer was no longer on the table for settlement.
Texaco said its appeal will focus on three major questions:
- Whether Pennzoil violated federal securities laws, specifically Securities and Exchange Commission Rule 10b-13, which states that a party cannot make a separate arrangement to buy shares from a group of stockholders after a public tender offer has been announced. Texaco has argued that Pennzoil made a separate deal to buy Getty oil shares from Getty Museum, which held a 12% stake, after Pennzoil had announced a tender offer for Getty. (Pennzoil says Texaco has no grounds to raise the issue.)
- Whether a fair trial was possible when Pennzoil's chief lawyer had contributed and raised sums of money for the trial judge after the case had begun and whether the trial judge's refusal to step aside is consistent with due process.
- Whether a second judge who presided over the closing of the case instructed the jury properly under the laws of New York and Delaware, as the Constitution requires.
"This is a case in which the U.S. Securities and Exchange Commission has taken the extraordinary step of intervening to say, with no equivocation, that Pennzoil 'plainly violated' federal securities law," Kinnear said.
In his statement at a news conference in New York Tuesday, Kinnear noted that the Supreme Court has sustained the SEC's position in all seven of the cases in which the commission has intervened during the past 10 years.
Kinnear and Texaco Chairman of the Board Alfred C. DeCrane Jr. also noted that 20 states, including New York and Delaware, submitted briefs to the Texas Supreme Court saying that the lower court decision dealt a "serious blow" to the Constitution by refusing to apply the laws of sister states.
The Texaco executives said they will file the necessary papers with the Supreme Court--its last avenue of appeal--in time to be heard this term, should the Court decide to hear the case.