The Taking of Getty Oil

by Coll, Steve;

  One of Lawler’s first actions was to ask the judge for permission to go home. He and some of the other jurors had the impression that they were expected to continue their deliberations right through the weekend, if necessary, until they reached a verdict. Lawler thought that what he and the jury really needed was rest, a chance to sort through their thoughts and feelings about the case. Then they could come back on Monday and discuss the issues in a more rational manner. The outpouring of emotion, the questions about race, the mood of confused impasse—all of it would be behind them. Lawler and the others were surprised when Casseb readily granted his request. Shortly after 4 P.M., the jurors went home.

  Lawler himself spent the weekend with a friend, digging for crabs along the shores of the Gulf of Mexico, south of Houston. It was an ideal environment in which to sort through his feelings about the case. There was no question in his mind that Pennzoil was right, that Texaco and its Wall Street lawyers and bankers had arrogantly stolen Getty Oil from Hugh Liedtke. But he wanted to sort through his intuitive reactions. He wanted to develop a rationale that he could articulate to the other jurors and to the world at large; he understood that the jury’s decision, whatever it was, would be closely scrutinized when the case was over. What bothered Lawler above all was the indemnities granted by Texaco to the museum, Gordon, and the Getty Oil board of directors. It seemed to him that Texaco knew that it was doing something wrong, but that its executives had decided that the prize of Getty Oil’s rich assets was worth any risk of future legal exposure, and so they had agreed to the indemnities. This assessment was bolstered by the fact that the indemnities had first been proposed by Marty Lipton, the master merger lawyer, whom Lawler regarded as the least credible witness in the case. He felt that Lipton was a nearly sinister force behind the deal between Texaco and Getty Oil. On the contract issue, Lawler thought that the documentary evidence was overwhelming—the “Memo of Agreement,” the press release, and the Copley notes all added up to a firm deal, in his view. It was not as if Lawler was naïve about business affairs. He entered into commercial contracts all the time, selling forklifts and other heavy industrial equipment. Perhaps, as he put it later, he was not “at the heights” of American finance, but “in my industry I could not deal that way very long.” Texaco’s three key Wall Street witnesses—Winokur, Boisi, and Lipton—had impressed him as people who cared little, if at all, about the moral implications of their work. Lawler felt that in their enthusiasm for merger-making, they perpetuated a harmful practice that emphasized money and assets over people.

  With both Lawler and Jim Shannon, who had participated actively in the frenzied deliberations on Friday, Miller’s attack on Hugh Liedtke, apparently intended to suggest a moral culpability at least equal to that of his own Wall Street witnesses, was entirely unsuccessful. Shannon and Lawler both recognized that Liedtke was hardly the innocent oilman whom Pennzoil’s attorney sometimes tried to portray. Lawler saw in Liedtke the familiar characteristics of a Texas “hard-nosed businessman,” one who “knew how to make a dollar, knew how to hold on to a dollar, and knew which direction he was going—a man of purpose.” Shannon had an even stronger view that Liedtke was “a Russell Long type or an LBJ type.… Hugh Liedtke makes J. R. Ewing and Blake Carrington pale by comparison.” But simply because they recognized that Liedtke was a savvy, well-connected, perhaps even ruthless oilman, it did not follow that they held him personally responsible for Pennzoil’s opportunistic entrance into the contest for control of Getty Oil, in the way they held McKinley responsible for the actions of Winokur, Boisi, and Lipton. Neither did the jurors hold a particularly sympathetic opinion of Gordon Getty. Lawler said later that if he owned an oil company, he would rather have Sid Petersen in charge, “more than Gordon Getty, who really became a weak point as far as Pennzoil’s story was concerned. Anyone with any sense would have realized that Gordon would have become a figurehead in the organization and the true men running it would have been Hugh Liedtke and Baine Kerr.” But as it was presented at trial, the whole issue of Gordon Getty’s combative relations with Getty Oil management seemed to Lawler “a nice sidebar issue, but it had very little to do with why we were there.”

  When the jurors returned to the courthouse at eight-thirty Monday morning, the mood of emotional turmoil which had characterized their discussion on Friday had passed. They were refreshed, calm, and ready to proceed. The vote was retaken on the first issue in the charge, the threshold question that asked, “Do you find from a preponderance of the evidence that at the end of the Getty Oil board meeting of January 3rd, 1984, Pennzoil and each of the Getty entities, to wit: the Getty Oil Company, the Sarah C. Getty Trust and the J. Paul Getty Museum intended to bind themselves to an agreement that included the following items, A, B, and C?” (The alphabetized items were the terms of Pennzoil’s proposed power-sharing arrangement with Gordon Getty). The vote, which had been 8–4 when deliberations recessed on Friday, was now 9–3 in Pennzoil’s favor; Velinda Allen, one of the black women on the jury, had switched sides. Under Texas law, only a 10–2 vote was required in a civil case such as Pennzoil v. Texaco, so the jury was now just one vote from a verdict. The discussion moved quickly and fairly calmly, with Lawler, Shannon, and Shirley Wall arguing most vigorously for Pennzoil. Fairly quickly, Ola Guy, a black woman who worked as a housecleaner, was converted. She had never argued strongly for Texaco’s position; her comments were generally confined to the assertion that “Pennzoil is bad, too.”

  Suddenly, then, the vote was 10–2 in Pennzoil’s favor, on both the contract and interference issues. Lawler, for one, was unsatisfied—he wanted a unanimous verdict before returning to the courtroom. The discussion continued, and for the first time it moved on to the issue of damages. The question of actual damages was easily dispensed with: $7.53 billion, one of the numbers suggested by Pennzoil’s expert witness Thomas Barrow, was quickly agreed upon by the majority. But now Ola Guy, the most recent convert to Pennzoil’s side, wasn’t sure if she wanted to award any damages at all. The Pennzoil supporters reviewed with her the damage testimony presented by Barrow.

  “What other standard can we apply?” they asked logically.

  Guy relented; the vote went 10–2 on actual damages. Still, Susan Fleming, the bookkeeper, and Israel Jackson were holding out, with Fleming doing most of the talking for the opposition. But since 10–2 was sufficient for a verdict, Lawler moved down the list of questions in the charge; next to be considered was the issue of punitive damages. Here the jurors reached another impasse. A vote was taken: seven voted for the full $7.5 billion in punitive damages sought by Pennzoil, the two holdouts voted for nothing, and the rest voted for some number in between. Shannon wrote a question mark on his ballot.

  The debate became heated, although this time the pressure was coming from Pennzoil’s most ardent advocates, Shirley Wall and Laura Johnson, who said that they were unwilling to award anything less than the full amount of punitive damages. The discussion went round and round. One issue was whether Texaco had acted in “wanton disregard,” as the charge put it, of Pennzoil’s rights. There was some question about exactly what that phrase meant, so it was decided that a note should be passed out to the judge asking for clarification.

  When Casseb read the note to the lawyers, who were waiting dutifully in the courtroom, Jamail and his partners were ecstatic. It was a promising sign indeed that the jurors were haggling over punitive damages; they must have already decided the issues of contract and interference. After a brief discussion with Miller and Jamail, Casseb typed up a definition taken from a Texas manual on jury charges, which characterized wanton disregard as “reckless, heedless disregard to the rights of others.” He sent the definition back into the jury room.

  After a break for lunch, the debate over punitive damages continued among the jurors well into the afternoon. Some of the jurors pressed for a compromise formula that could somehow be rationalized—they did not want to decide on an arbitrary number. There was a great deal of discu
ssion about the indemnities and about the role of Winokur, Boisi, and Lipton in the deal. Someone—there were conflicting recollections later about exactly who—proposed that the jury find for $3 billion in punitive damages, $1 billion for each of the three Wall Street witnesses. But again, there was disagreement. Just after 2 P.M., Lawler decided to send out another question to Judge Casseb. “To what extent is Texaco liable for the actions of Lipton, Winokur, and Boisi?” the note inquired.

  The Pennzoil lawyers could scarcely contain their glee. When he read the note, Casseb said that there was nothing he could tell the jurors, that he would send in a message telling them to be “guided by the instructions in the charge and the evidence, period.” Jamail agreed with the judge’s position.

  “And a request for anything additional, I guess, is denied?” Miller asked.

  “At this time,” Casseb replied.

  “At this time?” Miller repeated.

  “No objections?”

  “No objections to this,” Jamail said.

  “This is fine with us, your honor,” Miller agreed.

  It later became apparent that Miller did not immediately grasp the implications of the jury’s question. Overnight, while the jury was in recess—everything had been decided on a 10–2 vote but the punitive damages—Miller realized, after discussions with his partners and his client, that the jury’s question was dangerous indeed. When court reconvened early Tuesday morning, he pleaded with Casseb to correct the previous day’s answer with a message that read, in part, “The Court now instructs you that a party is only responsible for the actions of its own employees, agents, or representatives acting within the scope of their employment.” Having defended their integrity so vigorously at trial, Miller was now prepared to throw his Wall Street witnesses overboard. It was not Winokur, Boisi, and Lipton who were on trial; it was Texaco.

  “It’s exactly because of the indemnities and the confusion that has been injected into this record that we think this instruction should be given,” Richard Keeton argued. “Because on at least ten occasions in the record it has been stated—if not directly, at least implied—that this is a suit on the indemnities, and therefore, Texaco is liable for anything that any of the Getty entities did by virtue of the indemnities.”

  “What counsel for Texaco wishes now is for this court to argue the case in the jury room,” Jamail replied succinctly. Casseb denied Miller’s request without comment.

  Meanwhile, inside the jury room, the debate was rapidly concluding. Reluctantly, the Pennzoil advocates holding out for the full $7.5 billion in punitive damages agreed to the compromise, $3 billion formula, which would bring the total award to Pennzoil to $10.53 billion, by more than fivefold the largest civil verdict in American history. A final vote on all the questions in the charge was taken, and to the surprise and delight of Lawler, Susan Fleming and Israel Jackson switched their votes—the verdict was now unanimous on every count. Some of the jurors speculated later that the articulate Fleming had merely been playing devil’s advocate all along. In any event, she now expressed no doubts about her final decision.

  At precisely 11 A.M. on Tuesday morning, November 19, 1985, the twelve jurors filed back in to courtroom 151. Lawler, the foreman, was choked with emotion. He had not realized that he would be required to stand and read a portion of the verdict. He kept thinking about Dick Miller, the attorney he liked most of all at the trial. Several of the other jurors had similar, strong feelings; as they returned to the jury box, they could not bring themselves to look at Miller. It was as if they were informing their spouse that they had fallen in love with someone else. Lawler knew that the verdict would be a terrible blow to Miller’s career. He felt sorry for him. He thought that Miller was a terrific lawyer, but that he’d simply drawn a bad case.

  Liedtke and Kerr were there, of course, sitting in the first row behind Jamail, Jeffers, and Terrell. Among Texaco’s top executives, only Jim Kinnear, the vice-chairman and official corporate representative, was in attendance; McKinley and the others were back in White Plains. The courtroom was packed with journalists and sophisticated financial speculators poised to relay word of the verdict to their brokers on Wall Street.

  “Have you all reached a verdict in this case?” Casseb asked.

  “We have, Your Honor,” Lawler answered.

  The judge read out the questions from the charge pertaining to contract and interference, asking whether the jury had found that an agreement had been reached between Pennzoil and the Getty Oil directors, and whether Texaco had “knowingly” interfered with that agreement.

  “We do,” Casseb declared in response to each question, reading the answer Lawler had written on the sheet before him.

  “What sum of money, if any, do you find from a preponderance of the evidence would compensate Pennzoil for its actual damages, if any, suffered as a direct and natural result of Texaco’s knowingly interfering with the agreement between Pennzoil and the Getty entities, if any?”

  “The answer is: $7.53 billion.”

  Casseb asked how many of the jurors had agreed to that figure. All twelve raised their hands. Excited discussion rose from the audience.

  “I want order in the court, please,” Casseb demanded.

  He read the question about punitive damages contained in the charge. “What sum of money, if any, is Pennzoil entitled to receive from Texaco as punitive damages?”

  “Answer: $3 billion.” Again Casseb polled the jury, and again, all twelve silently raised their hands.

  After a brief speech thanking the jurors for their diligent devotion, and after setting a date with the lawyers for a hearing on whether the verdict should be formally entered, Casseb released the jury from its duty. A mob scene ensued. The jurors moved quickly back into the deliberation room to gather up their things and await some protection.

  Jim Kinnear pressed into the hallway to find a pay telephone, from which he called John McKinley’s private office number in White Plains to tell him the bad news. Texaco’s chairman was stoical. After discussing the matter with general counsel William Weitzel, he asked Weitzel to make an announcement over the intercom system at corporate headquarters.

  When the jurors reentered courtroom 151, this time flanked by a phalanx of marshals, they were warmly embraced by Joe Jamail and the other Pennzoil attorneys.

  Dick Miller approached Theresa Ladig and told her that he was obviously shocked by the verdict. “I tried very hard to watch your face to see which way you were swaying,” Miller told her.

  “I know you were. That’s why I tried not to show anything,” she answered.

  Surging, impromptu press conferences were formed in the hallways. Embracing warmly, Liedtke and Jamail were ecstatic. In a brief, calm statement, Kinnear vowed to appeal. Then the Texaco vice-chairman followed Jim Shannon out of the building, listening as the juror spoke to a flock of television and print reporters. He approached Shannon and asked him about the verdict. When Shannon told him that he had by and large liked the Texaco executives who testified, but that he could not abide the actions taken by Winokur, Boisi, and Lipton, Kinnear immediately concluded, as he put it later, that the jurors “didn’t know what they were doing.”

  As they gathered their belongings in the jury room after the verdict was read, the jurors had decided to meet later that day for lunch at a Mexican restaurant far from the courthouse. After pushing through the crowds and shaking the packs of reporters who trailed them for blocks as they walked to their cars, the twelve finally reconvened over enchiladas and margaritas that Tuesday afternoon. It was a warm and happy occasion. The ordeal was behind them. Richard Lawler was presented with a modest gift in appreciation for his efforts as foreman. The idea of a reunion was proposed and endorsed. For all the tedium and tension and challenge, they had come through it together. They had passed judgment on a world that was in some ways far removed from their understanding and experience, but that in other, perhaps more important ways, was very close to home. Texaco lawyers and executives
would later attack the integrity of some of the jurors and complain that all of them lacked the sophistication required to understand the issues in the case. But the jurors themselves never doubted their decision for a moment. They had been asked to decide right and wrong, and they had done it. The doubts expressed in the deliberation room had reflected concern over whether anyone could claim moral superiority from the tangled history presented—“Pennzoil is bad, too,” as Ola Guy had put it—but that serious wrongs had been committed was never in question. So they easily accepted Joe Jamail’s urging that out of this case, a message should be sent to “corporate America.” Someone, the jurors said, had to pay.

  32

  The Fall of the Merger Maniacs

  So devastating was the effect of the $10.53 billion verdict, which began almost immediately to collect interest at the staggering rate of $3 million a day, that Texaco was pushed to the brink of a bankruptcy filing just weeks after the jury delivered its judgment. It was saved only by the friendly intervention of a federal judge in New York, who at Texaco’s request declared unconstitutional a Texas state law requiring defendents, before appealing, to post a bond equal to the amount of the judgment against them. Rather than posting a $12 billion bond, which Texaco executives claimed would force an immediate bankruptcy filing, the judge allowed the White Plains-headquartered giant to put up $1 billion as evidence of its good faith during appeal. As a legal matter, the intervention of a New York federal judge into a Texas civil case was dubious—Pennzoil attorney Larry Tribe later denounced the maneuver before a sympathetic U.S. Supreme Court as a “Fortune 500 exception to federalism”—and as a practical matter it only exacerbated the perception in Texas that Texaco somehow considered itself above the law.