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Lawyers Argue Multi-Billion-Dollar Texaco vs. Pennzoil Case With PM-Scotus Rdp, Bjt

January 13, 1987

WASHINGTON (AP) _ The Supreme Court is considering whether exempting Texaco Inc. from posting a potentially ruinous $12 billion bond in its court battle with Pennzoil Co. would be special treatment for a ″fat cat.″

Texaco is seeking ″a Fortune 500 exception for federalism,″ said Harvard University law professor Laurence Tribe, Pennzoil’s lawyer. ″If you’re rich enough and big enough to project your fear onto the stock exchange display board, you get a better deal,″ he said.

″We are arguing that this kind of Dow Jones due process is untenable,″ Tribe continued. If Texaco prevails, he added, the case will be remembered not for the ″dollar figures″ but because ″fundamental principles of federalism will be bent and twisted.″

During 60 minutes of arguments Monday, Tribe seemed to have found some sympathetic ears.

Justice Thurgood Marshall engaged in several pointed exchanges with Tribe’s adversary, David Boies, who represented Texaco.

Marshall questioned whether Texaco sought to block enforcement of the $12 billion bond because of its size. There is no law ″that says a fat cat wins and a small cat loses″ in such cases, Marshall said.

″The size of the company doesn’t determine the rule of law,″ Boies agreed.

The court is expected to announce by July whether Texaco must post the huge bond while appealing a multbillion-dollar jugment won by Pennzoil in a Texas state court.

Federal courts ruled that Texaco need only put $1 billion in security while the case is pending.

Tribe said Texaco went to federal court in White Plains, N.Y., where the oil company is based, in an end run to overcome the Texas state court ruling. Pennzoil is based in Houston.

Boies denied the company had just ″jumped into federal court″ in White Plains to get a better deal.

That would be the court in which the company would file for bankruptcy if that becomes necessary, Boies said.

He also argued that Texaco’s federal court case rested on a federal civil rights law.

″Where you have a federal right, you have a right to have it adjudicated in federal court,″ he said.

It was apparent Monday’s argument session was watched closely by both sides for hints of which way the justices might be leaning. There was speculation the company that feels itself the underdog might be more willing to offer a settlement of the big-stakes, three-year legal battle.

The case attracted batteries of high-priced legal talent to the stately courtroom, with numerous chauffered limousines in attendance outside the building awaiting the attorneys’ departure.

A state court jury in Texas found in 1985 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 requires a bond roughly equal to the judgment before the losing side is permitted to appeal.

Texaco persuaded U.S. District Judge Charles Brient in White Plains, N.Y., to enjoin the $12 billion bond ordered by a Texas judge. Brient ruled that such a high bond could drive Texaco out of business, effectively denying it the right to appeal.

The 2nd U.S. Circuit Court of Appeals in New York City upheld Brient.

Meanwhile, interest on the jury award continues to grow at about $3 million a day.

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