The Taking of Getty Oil

by Coll, Steve;

  By the early 1980s, the estrangement of Dick Miller from his partners at Baker & Botts had grown to the point where it was known to even the firm’s youngest associates. It wasn’t a matter of shouting matches in the hallways or fist-pounding confrontations at the management committee meetings; it was a subtle, powerful tension, the perhaps inevitable alienation of an individualist from the large institution that harbored him. In Miller’s view, the problem was that an institutional, downtown law firm such as Baker & Botts could not accommodate legal superstars like himself once they reached the peak of their powers. Miller wanted to charge hourly fees much higher than those commanded by the firm’s senior partners, but the management committee rebuffed him. Just as important, Miller knew that there was an institutional cycle to a career at Baker & Botts. By the time he reached his late fifties, it was expected that Miller would begin to step aside some and make room for the younger partners such as John Jeffers and Irv Terrell who were ready to take on the firm’s biggest cases. But Dick Miller was not about to allow himself to be eased out to pasture. He felt that his best years as a trial lawyer were still ahead of him. “It was a combination of factors,” he said later, explaining his decision to leave the firm in September 1983. “It became personally unacceptable to me to continue to work for a lot less money than I could achieve somewhere else, and it also became unacceptable to me to be pushed aside, if that’s the right word, or to share. I’m willing to make my own way. I’m not only willing, I’m going to insist on it.”

  From Miller’s desire for stardom and control, the law firm of Miller, Keeton, Bristow & Brown was born. With another defector from Baker & Botts, Daryl Bristow, Miller joined forces with Richard Keeton, himself a refugee from the downtown firm of Vinson & Elkins, and also Robert Brown, who came from a mid-sized Houston firm. Combining Miller’s reputation for outstanding trial work with Keeton’s ability to build lasting relationships with clients, their idea was to establish an elite, expensive, boutique trial firm to handle uniquely complex and difficult lawsuits—the “Bet your company case,” as one of the partners put it soon after the firm was formed. On its face, it was the sort of law firm perfectly suited to handle Texaco’s defense against Pennzoil.

  Actually, Dick Miller accepted the case reluctantly. He was in the midst of a trial in Midland, Texas, when Texaco first contacted the firm about retaining his services. Miller told his partners that he wasn’t interested—he was busy and he wasn’t sure that he wanted to get into a big case against his former partners at Baker & Botts. What was more, Miller was friendly with then-Pennzoil general counsel Perry Barber. But his new partners urged him to reconsider; the Texaco trial would be an enormously lucrative opportunity for their fledgling firm. “You’re not partners with those guys anymore,” they told Miller. “You’re partners with us. If Pennzoil was such a good friend of yours, why didn’t they ask you to try the case for them?” This last point hit home with Miller. He had forfeited a substantial partnership interest in Baker & Botts as a penalty for going into competition with the firm in Houston. Miller decided to take on the case.

  Throughout 1984, during the discovery phase of Pennzoil v. Texaco, Dick Miller was opposed in the lawsuit not primarily by Joe Jamail, who was busy trying a personal-injury suit in Waco, Texas, but by Baker & Botts partners John Jeffers and Irv Terrell, both of whom had worked for Miller during his tenure as head of their firm’s litigation department. Terrell, particularly, regarded Miller as an important figure in his career—not a mentor, exactly, since Miller did not cultivate close relationships with his partners, but a teacher, an example. Important elements of Terrell’s style as a trial lawyer—his aggressiveness, his calculated belligerance toward opposing attorneys, his toughness in settlement negotiations—were drawn from Dick Miller’s example. But Terrell did not embrace Miller’s ascetic life-philosophy, his notions about the “individual warrior” as trial attorney. While rarely accused of sentimentality, Terrell was an open, accessible man, tuned to the shifting emotions of those around him. And while he had learned from Miller, their relationship had been strained. They had worked on a long trial together, back when Terrell was a young associate at the firm, and Terrell had not forgotten the sting of Miller’s personal rebukes or his former boss’s inability to share work and credit for the case with his colleagues. John Jeffers, too, had worked closely with Miller in the past and harbored few fond memories of the experience. He was a different sort of lawyer from Miller and Terrell; intimidation was not his style. Jeffers’ cerebral approach often permitted him to deflect Miller’s attempts at intimidation—he did not allow himself to be ruffled. But Terrell and Miller were cut from the same cloth, and when they found themselves on the opposite sides of depositions as discovery in Pennzoil v. Texaco got under way, the hostility between them was palpable. It seemed to both Jeffers and Terrell that Miller tried to bully his former partners with an intensity and malice even beyond his ordinary methods, as if to prove that his former apprentices could never hope to match his own powers. So implacable did the tensions between them become that Miller once offered to settle the feud with his fists. Terrell rationalized the anger between them by saying that it was his own deliberate strategy to provoke Miller into a fury that might cloud his opponent’s judgment during depositions. But it was clear that at some raw, emotional level, Terrell wanted a piece of Miller, too.

  The resentments that flowed between the former partners were so deep that they sometimes caught the clients in the case by surprise. The deposition of Texaco president Al DeCrane, for example, taken at Texaco’s White Plains headquarters on April 26, 1984, degenerated into a shouting match between Miller and Terrell, much to DeCrane’s consternation. After baiting each other with snide comments through several hours of questioning, Miller and Terrell finally blew up over Miller’s persistent insinuations that Terrell had unfairly tricked him a few days earlier by having a Houston judge sign an order authorizing an accelerated schedule of depositions. Miller also accused Terrell of withholding documents from the witness.

  “This is going to lead us into another discussion of you calling me up and calling me dirty names,” Terrell finally said, referring to a phone call from Miller at the time the Houston judge signed his order.

  “I haven’t called you anything but chickenshit. That’s all I ever called you, and there has never been any evidence to the contrary,” Miller replied angrily. “I am only talking about what you did with reference to that order.”

  “He got beat by the Houston court and he hasn’t gotten over it,” Terrell explained to the others in the room. Then, to Miller: “You can’t get over it and that’s why you keep getting so upset. And you are going to get beat again.”

  “We will see. Do not raise your voice. I do want the record to show that in the hearing that we had, the judge told you to show me that order before—”

  “I have got the transcript and that’s an absolute falsity.”

  “Do you recall me asking him if I was entitled to see the order?”

  “That’s not what you said.”

  “That’s what he said.”

  “No, it wasn’t.”

  “That’s about the most unfair, unethical conduct I am familiar with in this case,” Miller exploded. “What bothered me was that you sneaked over to the courthouse with that order without showing it to me. The court told me that I was entitled to see it and you know it.”

  “That’s not true, but you will get over it,” Terrell answered, provoking Miller further. “Losing is tough, but you will get over it.”

  “I will never get over being treated unfairly.”

  “You will get over it. Do not worry about it.”

  “It’s just like the business of this document here that you stick in your file after you take some little dab at it,” Dick Miller said, waving an exhibit in his hand.

  John Jeffers intervened. “If we keep having all this posturing about fair, I will go on to tell about the time you set the watch back.”

>   “Remember that?” Terrell asked Miller, referring to a long-ago railroad trial in which Miller had allegedly turned back his wristwatch in a courtroom demonstration that was designed to impeach a witness testifying about how long it took for a train to get from one place to another.

  “Let me tell you something,” Miller seethed. “You are my friends, but if you call me a liar, we are going to see who can whip who.”

  “All right,” Terrell said. “That will be fine. I am sure we will get to it in the course of this case. We are getting to everything else.”

  “We will see,” Miller continued, pressing his threat. “As old and decrepit as I am.”

  “If you can’t solve it as a lawyer, you are going to beat me up. Is that what you are saying?” Terrell asked.

  “I am not going to let you or anybody else call me a liar. You can remember that.”

  “I will remember that. And I would not let you ever call me a chickenshit again. Do you understand that?”

  “I already called you one.”

  “So I guess you are even. We will have to fight it out one of these days, right?”

  “I would like for you to finish this deposition and treat this witness fairly,” Miller concluded.

  They sounded at times like prepubescent schoolyard rivals. It was not unusual for trial attorneys to bait each other at depositions, in the way heavyweights posture for the cameras at a prefight weigh-in, but the vitriol between Terrell and Miller exceeded the bounds of propriety, even as defined by lawyers. Richard Keeton, battling with Joe Jamail at the videotaped deposition of John McKinley in White Plains, called Jamail a “chickenshit” over the manner in which Jamail was questioning his client. But when Jamail retorted by swearing at Keeton and threatening to walk out of the deposition, there was a humorous, collegial undertone to their debate, a sense of two old boys from Houston having fun with each other. McKinley himself had to smile as he listened to the lawyers snipe back and forth—it was a good show. But no such playfulness extended to the exchanges between Miller, Terrell, and Jeffers. There was a venomous animosity between them, an undercurrent of genuine hatred. Miller on the other hand was oddly respectful when he was around Jamail; he said that Jamail was more or less his equal in the warrior-sport of trial-lawyering, and at times Miller seemed reluctant to draw his foe into combat. But it was clear that Texaco’s lead counsel did not feel so magnanimous about Jeffers and Terrell, his former partners and students. He was determined to bully them; in depositions he seemed almost obsessed by their presence.

  And so the pretrial phase of Pennzoil v. Texaco proceeded in the same mood of anger and confrontation that had shaped the takeover events giving rise to the case. Jeffers and Terrell pushed hard to bring the suit to trial; they feared that Pennzoil’s still-active Delaware case against Getty Oil, Gordon Getty’s trust, and the museum might be argued before the Houston jury trial involving Texaco got under way. Miller tried to delay discovery in the Houston case, but he failed to slow things down appreciably. In July 1985, just nineteen months after Texaco’s takeover of Getty Oil, a trial date was set in Houston state court before Judge Anthony Farris.

  In May 1985, Pennzoil president Baine Kerr met in Houston with Texaco vice-chairman James Kinnear to talk about a possible negotiated settlement of Pennzoil v. Texaco. With an expensive trial now just weeks away, it was natural for the two parties to see if they could make a deal. It was equally natural for Kerr and Kinnear to do the talking—they were both easy-going men disinclined to fits of rage or stubbornness when talking about the case. The same could not always be said about their two superiors, Hugh Liedtke and John McKinley. Kerr proposed a simple transaction: Pennzoil would buy from Texaco, at the equivalent of its last offer price of $112.50 per share, three-sevenths of the oil and gas reserves formerly owned by Getty Oil. It was actually a less generous offer than the one made by Hugh Liedtke in Washington, D.C., in the immediate aftermath of the takeover, but Pennzoil was presumably willing to adjust its price if Texaco was interested in negotiation. Informed of Kerr’s offer, however, John McKinley said that the proposal was “impossible.” He would rather take the case to a jury.

  Setting aside the emotional components of a possible settlement, which were significant, McKinley was prepared to go to trial in the early summer of 1985 because of the advice he had received from Dick Miller and Texaco’s other, New York-based attorneys. Miller told the Texaco chairman that while one could never be absolutely certain about what a given jury might do, it was his opinion that the likely worst case in a trial of Pennzoil v. Texaco would be a verdict along the lines of $250 million to $500 million against Texaco—this despite the fact that Pennzoil was asking for $14 billion in damages. Miller said that even if there was a “complete runaway” jury, Texaco would be hit with a verdict no larger than about $2 billion. The largest civil verdict ever was just $1.8 billion, in the 1980 Chicago trial of MCI vs. AT&T, and that award had been drastically reduced on appeal. The pretrial settlement proposed by Baine Kerr would require Texaco to sell oil and gas reserves to Pennzoil worth more than $3 billion at current prices. Simply as a matter of dollars and cents, then, it was easy for McKinley to reject a settlement. In a settlement, there would be the inevitable implication that Texaco had done something wrong, and that made McKinley’s decision even easier. The Texaco chairman adamantly believed that so far as he was aware, no one in Texaco’s employ, including the company’s highest-ranking executives, had done anything illegal or immoral during the taking of Getty Oil. Miller assured him that there were no “smoking guns,” that McKinley knew all the facts. And so the chairman and his directors decided to go to trial.

  Dick Miller was characteristically confident that he could win his case, which would be tried, by mutual agreement of the parties, under New York law. (The contract Pennzoil alleged was “tortiously interfered” with by Texaco was made in New York.) In Delaware, a sophisticated chancellor had reviewed the facts and said that while the evidence that Pennzoil had made a binding contract with the Getty Oil directors was relatively strong, the evidence that Texaco had knowingly and intentionally interfered with that contract was weak. John Jeffers and Irv Terrell had used the chancellor’s opinion as a guidebook during the pretrial discovery, working to develop the interference side of their case more than the contract side. For them, an unfortunate consequence of the peculiar circumstances which had brought only the case against Texaco to Houston was that Pennzoil now had a doubly difficult standard to meet before the jury. Not only did Pennzoil have to prove that it had reached a binding, valid contract with the Getty Oil board at the conclusion of its wild, marathon meeting at the Inter-Continental Hotel on January 2 and 3, 1984, it had to further demonstrate that Texaco had knowingly, deliberately, and wrongfully interfered with that contract. Dick Miller told his own clients at Texaco headquarters in White Plains that on the contract side of the case, he believed that Pennzoil’s evidence was weak. But Miller emphasized that even if Joe Jamail could somehow convince the jury that a valid contract had existed, he would have a nearly impossible time persuading anyone that Texaco had improperly interfered with that contract. Of course, that was precisely what the Texaco executives themselves believed—it was what they had to believe.

  One event before the commencement of the trial shook the faith of Texaco’s top executives. Dick Miller had said repeatedly that what concerned him about trying Pennzoil v. Texaco against Joe Jamail was not so much his opponent’s ability as a trial lawyer—Jamail was a formidable jury lawyer, to be sure, but Miller considered himself to be Jamail’s equal. Rather, Miller was concerned about Jamail’s deep political connections. Everyone in Houston, it seemed, was a friend of Joe Jamail’s. He had recently represented the locally powerful Cullen family in a much-publicized will contest. He boasted close friendships with politicians of every ideological stripe. Through a long and prosperous career, as a result of both his gregarious personality and his generous campaign contributions, Jamail had managed to befriend hundred
s of judges across the state of Texas. It was Miller’s opinion that Jamail’s impressive trial record stemmed as much from his ability to cultivate a “friendly” atmosphere in court as from anything else. After hearing gossip for months about Jamail’s supposedly close relationship with Judge Anthony Farris, a vetern Republican jurist, Miller discovered shortly before trial that Jamail had contributed ten thousand dollars—an amount Farris described as a “princely sum”—to the judge’s campaign fund. The contribution had been made during the pretrial phase of Pennzoil v. Texaco. Ordinarily, such a contribution would have no bearing on a trial because state court rules made it unlikely that a judge assigned to a case during its discovery phase would also preside at trial. But in the spring of 1985, the rules were changed, and Farris was assigned to the trial of Pennzoil v. Texaco. Miller filed a motion seeking Farris’ removal because of Jamail’s contribution, but an appellate judge turned him down, leaving Texaco’s counsel in an awkward position. Having failed in his effort to throw Farris out, Miller now had to try his case before him. At the least, it was an uncomfortable predicament.

  For his part, Joe Jamail was feeling positively giddy as the trial date neared. He kept telling his friend Hugh Liedtke that he was going to “win this damn thing,” and there was something about Jamail’s enthusiasm that inspired faith. Jeffers and Terrell and the young associates working on the case at Baker & Botts had the details of the case—its thousands of pages of depositions and documents, the videotaped testimony of out-of-state witnesses, the various precedents under New York law concerning the validity of a contract—well in order. Required now was Joe Jamail’s spirit, his magic with the jury. In the spring of 1985, Jamail at last began to meet daily with Jeffers and Terrell to discuss the progress of their discovery work and to prepare a trial strategy. Jamail was clearly in charge, but the three worked easily together, often retiring in the evenings to Jamail’s favorite watering hole out by the Gulf Freeway, where their discussions were fueled by alcohol. The sometimes playful, intoxicated mood of their preparations, contrasted vividly with the late-night work at Miller, Keeton, Bristow, & Brown’s downtown offices, where the sober, determined Miller set a deadly earnest tone.