Supreme Court To Hear Pennzoil Appeal
WASHINGTON (AP) _ The Supreme Court today agreed to consider forcing Texaco Inc. to post a potentially ruinous $12 billion bond while appealing a multibillion-dolla r judgment won in Texas by Pennzoil Co.
The court voted to review a ruling that Texaco need only put $1 billion in security, a requirement the corporation satisfied by pledging stock in its Canadian subsidiary.
The court’s decision is not expected until sometime in 1987.
A state court jury in Texas last year found that Texaco improperly interfered with Pennzoil’s planned acquisition of an interest in Getty Oil Co. The jury awarded Pennzoil $11.1 billion against Texaco.
Texas, like most states, requires the losing side in such cases to post bond to protect the winning side. Texas law requires a bond posted equal to the judgment before the losing side may appeal.
But lawyers for Texaco succeeded in having U.S. District Judge Charles Brient in White Plains, N.Y., enjoin the $12 billion bond. Brient ruled that such a high bond effectively denied Texaco the right to appeal.
The 2nd U.S. Circuit Court of Appeals upheld the injunction, ruling last February that the bond required under Texas law ″lacks any rational basis, since it would destroy Texaco and render its right of appeal in Texas an exercise in futility.″
In seeking Supreme Court review, lawyers for Pennzoil said the case represents ″an unprecedented intrusion by a federal court into ongoing court proceedings.″
They added: ″The logic that generated this federal intervention admits no limiting principles and can be contained only by the most arbitrary of parameters.″
Lawyers for Texaco urged the justices to reject the appeal, arguing that ″such a narrow and unusual case″ should not win Supreme Court review.
″The posting of a mandatory $12 billion bond was impossible not just for Texaco but for any judgment debtor,″ Texaco’s lawyers said.
Interest on the jury award continues to grow - at about $3 million a day. Many observers expect the two companies to reach an out-of-court settlement before the state court appeals are completed.
Texaco lawyers have accused Pennzoil of wanting to keep the Texas bond requirement in force as leverage for settlement.
They said Texaco would face the possibility of having to file for reorganization under federal bankruptcy law if forced to post a $12 billion bond.
Texaco is based in White Plains, N.Y.; Pennzoil is based in Houston.
In response to the court’s decision, Pennzoil’s attorney, Joe Jamail, said: ″Of course, we’re pleased. We felt all along we were going to win that point. We’re grateful that the court did grant the application.″
Jamail said he expects the high court to hear the case next fall when it reconvenes.
John O’Mahoney, a Texaco spokesman, said his company was confident it would prevail in the Supreme Court and that it also would succeed in reversing the damage judgment through appeals in the Texas courts.
Arguments are scheduled for July 31 in Houston on Texaco’s appeal of the jury’s finding that it improperly interferred in the Pennzoil-Getty agreement.
In a statement released at its headquarters, Texaco also said that while the matter is before the Supreme Court, the lower court’s order will remain in effect to prevent Pennzoil from seizing its assets.
″The Supreme Court’s decision simply means that it will hear further arguments as to the propriety of that preliminary injunction,″ Texaco said.