Word: texaco
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When the Texas jury first pronounced the verdict against Texaco, the sum was so enormous that it seemed absurd. The award appeared certain to be reduced drastically on appeal. Almost no one believed that Pennzoil, the 200th largest U.S. industrial corporation (1986 sales: $1.78 billion) and the 20th biggest oil company, would be allowed to topple a titan about 18 times its size. But Texaco soon learned that it was dangerously vulnerable to an unusual provision of Texas law. In this case, it required Texaco to post a bond for roughly the full amount of the judgment while the company...
...avoid an immediate crisis, Texaco's lawyers quickly sought relief in a federal court in White Plains, N.Y. The judge ruled in January 1986 that Texaco's bond must be reduced to a more reasonable $1 billion. That gave the company some breathing space to file appeals, and the scene of battle returned to Houston, where much of the public was rooting for the hometown company against New York-based Texaco. Pennzoil Attorney Joseph Jamail was already becoming a folk hero there for jousting with the giant firm...
Last February a Texas appeals court reduced the penalty against Texaco -- but only to $8.5 billion. By that time the addition of 15 months' worth of interest and court costs to the $8.5 billion meant that Texaco still owed $10.2 billion. Under a court order, Texaco has been paying $2.5 million a day, $104,000 an hour, $1,736 a minute into an escrow account to cover interest on the judgment...
Last week's drama started unfolding early Monday in Washington, where the Supreme Court ruled 9 to 0 that the federal judge had acted improperly in reducing the size of Texaco's bond. The Justices said that the amount of the bond was a matter for the Texas courts to decide. For Texaco, a stable situation had suddenly become a crisis...
...Texaco's DeCrane immediately called a press conference in White Plains to say that unless the company got new legal relief from having to post a $10 billion bond, it might be forced into bankruptcy proceedings. The company's legal team, led by David Boies of Manhattan-based Cravath, Swaine & Moore, obtained a temporary restraining order in Texas that barred Pennzoil from making any moves to seize Texaco's assets. Meanwhile, Kinnear called Pennzoil's Liedtke and asked for a face-to-face meeting in Houston. Liedtke agreed...