The Taking of Getty Oil

by Coll, Steve;

  The night before opening arguments in Pennzoil v. Texaco, Joe Jamail was holed up in his immense house, writing. Just before sundown, his friends Willie Nelson and Darrell Royal, ex-football coach at the University of Texas, happened by in a white stretch limousine. After a few moments of mad pounding on the door, Jamail let them in. The trio stayed up most of the night, drinking and carrying on. “Now that’s how you get ready for an opening argument,” Jamail said later, grinning broadly. It worked for him as it would work for no one else. Jamail’s considerable intellect was often underestimated by his opponents, as was his capacity for steely-eyed seriousness. But in reflective moments, he acknowledged that he was driven essentially by his instincts, his intuitive perceptions of human strengths and frailties. As he had in countless cases before, Jamail intended to apply those instincts in the trial of Pennzoil v. Texaco. “The way to win,” he kept saying, “is to keep it simple.”

  27

  Promises

  Houston in July feels like a hot compress on the back of one’s neck. Ninety degrees is a cold snap. The eyes sting, breath shortens, and the mind wanders woozily through the day, yearning for cool clarity.

  While the air conditioning cranked along gamely, there was no relief from lethargy in the wooden chambers of the downtown state courthouse during those first days of July 1985. What the jurors remembered later was a sense of slow, creaking anticipation, as if they had been informed that they were six weeks pregnant. It was hard not to feel some excitement, too—the hallways were crowded with the executives and retainers of two of the country’s largest oil companies, and all the warnings from the judge about a protracted trial suggested something important was at stake—but the pace was excruciating. The panel from which the final jurors and alternates would be chosen was one hundred strong the first day, and it included dozens who wanted nothing but to escape the courtroom, to go back to home or office, away from the rambling exhortations of the gray-suited lawyers. It was not a place that anyone would pick to spend the summer.

  The selection of the jury, known as voir dire, was the first signal that the trial of Pennzoil v. Texaco would be extraordinary. It went on for five days; it was the longest voir dire that any attorney involved could remember witnessing. In part, the problem was the projected length of the trial. The judge said that it would take six weeks, an estimation that could be safely doubled. It was hard to find sixteen ordinary Houstonians—twelve jurors and four alternates—able to commit themselves without prior notice to a months-long trial. But mainly, it took so long because Joe Jamail wanted it to. Nothing about the case was more important to him than the jury. It is the advantage of the plaintiff in Texas state court that he may ask the first questions of the jury panel to determine if anyone is prejudiced against him. It was Jamail’s practice to use this opportunity as a kind of first-draft opening argument. When he stepped before the panel that Wednesday morning, July 10, 1985, he was prepared to voice the essential themes of his case again and again, without interruption, until he was confident that he had made an indelible impression on the jurors he would select.

  “There are going to be a lot of issues that you are going to hear, but after you sift through all the issues, only one thing is going to be clear to you,” he declared at the beginning. “And that is, this is a case of promises—and what those promises meant to Pennzoil, what they meant ultimately to Texaco.”

  On and on Jamail went, describing the basic factual outline of Pennzoil’s case, employing again and again words like “morality” and “honor” and “handshake deal.” He pointed to his “friend” Hugh Liedtke, seated in the audience, and told the panel that this case had gone to trial because his friend had been betrayed by “a conspiracy between Texaco and a group of New York investment bankers and New York lawyers,” a conspiracy so rancid it “is going to waken you about that kind of business morality and that kind of business world.” Early on, he read to the panel from a transcript of a local television news interview granted by Dick Miller before the trial. Asked if he thought a handshake deal was a legally binding agreement, Miller had replied, “Yet if they want to say that there is some old tradition in the oil field, huh, Jesus Christ, they were in New York.”

  Jamail went on: “The statement that I just read to you—Mr. Miller as spokesman for Texaco made it—is the position Texaco takes that somehow the promises and the morality of the marketplace are different in New York than they are here.”

  Then, in typical style, Jamail recast his argument in the form of a rhetorical question, superficially phrased to weed out panelists who might be potentially prejudiced against Pennzoil, but at heart designed to reinforce his theme: “My question to you: Is there anybody on this panel who has an opinion at this time or a feeling at this time that is in agreement with the statement that I just read to you that Mr. Miller says is Texaco’s position in this, that a handshake in New York is meaningless? If there is any one of you that has any such opinion, I need to know that.…”

  Predictably, no hands went up. “I take it you do not,” Jamail said.

  Jamail and his partners had decided that they were looking for jurors with stability in their lives, people who looked like they expected commitments to be honored. They did not want cynics or transients on the jury. Following a general rule of plaintiffs’ trial work, they did not want evangelists, either, because, as Irv Terrell put it later, “they like to leave both sides where they are because God will take care of them later, which doesn’t help the plaintiff.” Assessing such fundamental personal qualities on the basis of appearance and the answers to a few rhetorical questions was a deeply intuitive art, and one for which Joe Jamail was justly renowned. Each side had only six “strikes,” or opportunities to remove panelists without proof of prejudice. Any number of panelists could be removed by the judge “for cause” if they revealed a predisposition to favor one side over the other. If Jamail or Miller intuitively disliked a particular panelist, they tried first to persuade the judge to remove the juror for cause. Here Jamail was most clearly in his element. A panelist about whom there was some question would be invited to approach the bench, where he or she could be quietly interviewed by Jamail, Miller, and the judge. Time and again, through gentle and persuasive questioning, Jamail led prospective jurors to admit some hidden prejudice. Unlike Miller, who tended to be argumentative at the bench, Jamail cajoled the panelists—his tone was friendly, understanding, like a priest in confession.

  “He said he would not be a very good juror for us because of the way he feels,” Jamail said at one bench conference, which concerned a juror who had relatives in Texaco’s employ.

  “Yes,” the panelist agreed. “I think I would be a poor risk for your side. That’s my opinion.”

  “Because of the feelings you now have?”

  “Yes, sir.”

  “Closeness to Texaco?”

  “My concern is that I might be swayed by those relationships, yes, sir.”

  “With Texaco?”

  “Yes, sir.”

  “And because of that relationship, we would have to do something to overcome it on behalf of Pennzoil.”

  “Certainly. Certainly.”

  “Yes. And that would reflect in your attitude while you were on the jury, if you were on the jury?”

  “Subconsciously, it might, yeah.”

  “You believe it would, don’t you?”

  “I am concerned about it. Concerned about it.”

  With that, the judge struck the juror from the panel.

  Of the sixteen who were finally chosen, there was only one about whom Jamail had any doubts. She was a nurse named Laura Johnson, and it seemed to Jeffers and Terrell that Jamail’s doubts were residue from his long experience in personal-injury cases; a “sore-back lawyer” never wants a medical professional on his panel. The three lawyers talked back and forth about whether they wanted to use one of their precious strikes against her, and finally Jeffers and Terrell told Jamail that he should make his own decision, tha
t they would stand by it. Jamail went off to the bathroom, thought about it a while, then returned to say that the nurse would be fine. There was a nearly religious intensity about Jamail during the jury selection phase. Each choice seemed a kind of satori for him.

  In the end, it was the kind of jury one would see described in a promotional film about the American justice system: stalwart, working and middle-class, racially and ethnically diverse. There was a forklift salesman, an independent businesswoman, an oil company secretary, a janitor, a retiree, a letter carrier, an employee of the city of Houston. They were, as a group, remarkable for being ordinary. Certainly, none of them had ever come in intimate contact with the class of men on whom they would now be asked to pass judgment.

  Pennzoil’s affirmative case, which lasted nine weeks, depended primarily on the live courtroom testimony of three witnesses: Baine Kerr, Arthur Liman, and Hugh Liedtke. All three of them recounted, in extended narratives, the tale of Pennzoil’s attempt to take control of Getty Oil during the first days of January 1984. Kerr testified for seven days, Liman four, Liedtke for eight. They talked about why Getty Oil was such an important target, describing its rich oil, gas, and mineral assets scattered around the globe. They talked about the divided ownership of the company, the relative stock positions of Gordon Getty, the museum, and the public. They said that they didn’t know too much about the internal disputes and problems at Getty Oil following the death of Lansing Hays in May 1982. But their impression was, they testified, that the cause of all the trouble, and the reason Getty Oil was put into play, lay with chairman Sid Petersen. The Pennzoil witnesses, particularly Liedtke, wrapped Gordon Getty in the legends of Texas oil culture—Gordon was only trying to take his daddy’s place at the head of the family company, he said. Hugh Liedtke was going to help Gordon overcome the entrenched, morally bankrupt management led by Petersen and protected by his coterie of Eastern-dominated bankers and lawyers. But Pennzoil was foiled in this noble attempt by the lawyers’ tricks and deceits, he said.

  Setting aside its relationship to reality, Pennzoil’s tale was a powerful and compelling one, mythological in scope and appeal. Its details were vivid and neatly in place, reinforced by the oft-repeated themes of betrayal and honor drawled by Jamail from his first moment before the jury. With the witness examinations divided evenly between them, each of the three Pennzoil attorneys played a critical role. Jamail set the tone, speaking always about morality—not as a kind of Christian abstraction, but as it related to social class and culture in Texas and New York. Terrell was the enforcer, the cynical conscience. At the counsel table, he kept his attention on the jurors, rolling his eyes and shaking his head mockingly whenever Dick Miller or Texaco’s representatives offered a rationale for their entrance into the Getty Oil deal. And Jeffers played the professor, the teacher. Much of the evidence Pennzoil presented during its affirmative case—contract drafts, damage estimates, stock exchange agreements—was excruciatingly complex and dull. Jeffers presented this evidence in a dogged, plodding manner; his style bored some jurors, but it lent an important rational foundation to the emotional aspects of Pennzoil’s presentation.

  The crucial documentary evidence had been available to both sides for more than a year. To prove that it had reached a binding contract with the Getty Oil directors on the evening of January 3 at the Inter-Continental Hotel, Pennzoil offered, in addition to the narrative testimony of Kerr, Liman, and Liedtke, three documents fundamental to the deal: the “Memorandum of Agreement” signed by Gordon, Pennzoil, and the museum after the meeting between Liedtke and Gordon at the Pierre Hotel on New Year’s Day; the so-called “Copley notes” taken by Getty Oil general counsel Dave Copley at the marathon Inter-Continental board meeting, wherein he recorded the conversations and votes of the directors; and the press release issued by Getty Oil on the morning of January 4, which described the basic terms of an “agreement in principle” arrived at the night before between the directors, Gordon, and Pennzoil.

  Several other important, contemporaneous documents pertaining to the contract issue were offered by Pennzoil as well: a January 2, 1984, fee letter from Goldman, Sachs to Sid Petersen, setting out the terms of Goldman’s compensation in a deal with Pennzoil; a handwritten note made by Steadman Garber in Los Angeles during a conversation with Getty Oil executives in New York, in which Garber recorded the words, “board agreed but for Chaunce that deal should be done;” and an affidavit by Gordon Getty’s banker, Marty Siegel, prepared at the request of Gordon’s lawyers shortly after the Inter-Continental meeting, in which Siegel declared that “the Getty Oil board of directors approved a corporate reorganization transaction.…”

  These documents were the heart of Pennzoil’s evidence. They were the same documents that had led the chancellor in the Delaware lawsuit to declare eighteen months earlier that Pennzoil’s contract case seemed likely to be proved in court. And to this base Pennzoil’s lawyers added new evidence, developed during the discovery phase in the spring and summer of 1984, suggestive of Texaco’s “interference” with its contract.

  The most powerful of these documents were the handwritten notes taken by Al DeCrane at his meeting with First Boston’s Joseph Perella in the early morning hours of January 5. Recording Perella’s comments about how Texaco should proceed in its acquisition, DeCrane had noted that his company might have to “stop the train” and then “take care” of Hugh Liedtke by allowing Pennzoil to exercise an option for 8 million shares.

  Jamail and Terrell also spoke frequently to the jury about the legal indemnities provided by Texaco to the Getty Oil board, the museum, and Gordon Getty, absolving them from liability for their conduct in the deal. Disingenuously, Pennzoil’s lawyers implied that the indemnities were the reason that only Texaco, and not the museum, Gordon, or the Getty Oil directors, had been brought before the Houston jury to answer for the betrayal of Hugh Liedtke—as Jamail put it, Texaco had “bought this lawsuit” when it granted the indemnities. Since Judge Farris ruled that Dick Miller would not be permitted to counter this assertion by informing the jury that Pennzoil was suing Getty Oil, the museum, and Gordon’s trust in Delaware, the impression stuck. (This was one of several key rulings by Farris on the admissibility of testimony and evidence which Texaco claimed were biased and improper.) The indemnities became an important focus of the Pennzoil attorneys’ moral outrage. A kind of syllogism of evil was developed around them: Texaco granted the indemnities; therefore, it knew that it was doing something wrong; therefore, it assumed responsibility for the wrongs of those it chose to protect.

  As the trial slogged onward through July and August, however, it was not so much the details of Pennzoil’s fundamental documentary evidence that seemed to pique the jury’s interest. It was the demeanor of the rich and important witnesses paraded before them. There, too, Jamail and his partners worked to strike a balance between accessible, emotional testimony and declarative, narrative accounts of Pennzoil’s unfortunate experience in Manhattan during the first week of January 1984. Baine Kerr told the colorful story of Pennzoil’s corporate history: its founding by George Bush and the Liedtke brothers in the dusty Texas oil fields (his version tended to downplay the role of family and social connections in the company’s early growth); its rapid ascent into a multibillion-dollar enterprise; and above all, its culture of wildcatting entrepreneurism and its deep roots in the Texas oil patch. Arthur Liman, who was effectively presented as an exception to Jamail’s rule that “New York lawyers” were untrustworthy, testified in vivid, almost novelistic detail about his dealings with Marty Lipton, Gordon, and the Getty Oil directors. Most provocative of all was his description of that moment at the Inter-Continental on the evening of January 3 when the bankers and lawyers burst through the doors of Sutton Room II and one of them—it was Marty Lipton or Marty Siegel, Liman thought—declared, “Congratulations, Arthur, you’ve got a deal.” Liman’s testimony that he subsequently entered Sutton Room II and shook hands with a number of Getty Oil directors accorded
perfectly with Jamail’s earliest thematic speech to the jury about the Texas honor of a handshake deal.

  And finally, among the key live witnesses, there was Hugh Liedtke, the Texas oilman with the face and spirit of a bulldog, a witness so perfectly suited to his role before the jury that he almost seemed to be a caricature drawn from Joe Jamail’s imagination. All of the witnesses, including Liedtke, were thoroughly coached and prepared by their lawyers, but when the Pennzoil chairman was on the stand, he exuded such natural stubbornness and honesty that his testimony seemed utterly spontaneous. Occasionally, Liedtke seemed to surprise even Jamail with his answers—several times he rejected the premise of his own lawyer’s question. The friendship and affinity between witness and examiner was obvious, however; their dialogue was no more forced than a conversation over dominos and beer. In one telling exchange, Jamail asked Liedtke to compare his own managerial methods with those of Texaco’s executives. He wanted Liedtke to comment on the failure of McKinley, DeCrane, and Kinnear to examine the Copley notes before going ahead with their acquisition.

  “Based on your experience, sir, if you were going to negotiate a transaction of this magnitude, would a request by Texaco to see the January second Getty board meeting notes, January second and third, be unreasonable or reasonable?” Jamail asked.