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Pennzoil Vs Getty Oil Case

540 Words3 Pages

In 1984, Pennzoil, Co. made an informal, but binding, contract with Getty Oil. The contract detailed that Pennzoil was to purchase a portion of Getty Oil, which would allow Pennzoil access to Getty Oil’s oil deposits. The contract detailed that Pennzoil would be buying 16 million shares of Getty at $100 per share, plus a $5 “stub”. On January 4, 1984, the public relations staff and lawyers of Getty, released a press statement. Pennzoil followed suit and issued an identical press release. The same day, Mr. Boisi, of Getty Oil, continued contacting other companies in hopes of finding a higher bid than Pennzoil offered. Texaco was contacted that day and began coming up with a counter offer. Also on January 4, the Pennzoil lawyers were at work …show more content…

The case started in Texas state court, where Pennzoil stated that Texaco forced Getty into breaking its contract with Pennzoil in order to obtain it for themselves. The Texas state court jury awarded Pennzoil $7.53 billion in compensatory damages and $3 billion in punitive damages. On top of that, according to Texas law, Pennzoil had access to secure a lien on all Texaco property in the state. Texaco could post a bond that covered all costs of the lawsuits to wave the lien. That bond was estimated to be $13 billion. However, before Pennzoil could obtain the lien, Texaco filed a lawsuit in the US District Court for the Southern District of New York. The lawsuit alleged that the Texas preceding violated Texaco’s constitutional rights. The court ruled in favor of Texaco. From there the case went to the US Supreme Court. Pennzoil appealed the federal court case, and the Supreme Court ruled in favor of Pennzoil this time, stating that the New York court had no business interfering with the decision of a state court. After that Texaco also appealed the Texas state court decision. After deliberation, the jury upheld the verdict, but reduced the punitive damages to $1 million, instead of the $3 million. Compensatory damages still stood unchanged at $7.53 billion. After the verdict, Texaco filed for bankruptcy and Pennzoil agreed to settle the case for $3

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