ONE PROMINENT VICTIM of the Pennzoil-Texaco suit is the Texas judicial system's reputation for fairness and even for competence. The Texas Supreme Court has now refused to hear an appeal of a case that has been flawed from the beginning. Texaco, facing a lethal $10.3 billion judgment from which it has taken refuge in bankruptcy, will now stake its last hope on an appeal to the U.S. Supreme Court. But whether that court will choose to hear the case -- essentially a state case, although a highly peculiar one -- is very far from certain.
Maybe Texaco misbehaved in its struggle to wrench the Getty Oil Co. away from Pennzoil. Maybe Texaco did indeed damage Pennzoil. But the trial record didn't prove it, and the refusal of the Texas appellate courts to review it seriously is disquieting. The jury's award, slightly reduced by an intermediate appeals court, is grossly excessive. But that's hardly the only issue demanding further review.
The Securities and Exchange Commission had filed a brief charging that Pennzoil violated federal law in the competition for Getty. The Texas Supreme Court simply ignored that accusation. It's a rather narrow and technical point, but it required consideration.
New York and Delaware state law applied to some parts of the dispute -- New York's because the negotiations were there, Delaware's because that's where all three companies are incorporated. The attorneys general of both states filed briefs asserting that the trial judge misinterpreted their laws in instructing the jury. The Texas Supreme Court ignored those briefs as well.
Throughout this case there have been constant hints and signals that the Texas courts considered it a choice between a respected local company and a hostile outsider. In Texas the prevailing mythology and mores greatly favor the intrepid independent producers, like Pennzoil, over great, gray, arrogant corporations based in places like New York. Although Pennzoil is a big company, Texaco is much bigger, lending an appealing David-and-Goliath aspect to the affair. There have been repeated reminders along the way that Texas remains one of the few states that elect all judges, up through the supreme court, on partisan ballots. Elected judges have little incentive to take on an enormously complex case in which any change in the lower courts' opinions can only improve the position of the unpopular outsider. The Texas Supreme Court has provided a glimpse of the least attractive side of populism.
Pennzoil may well be entitled to compensation from Texaco. But Pennzoil is not entitled to destroy Texaco in this extraordinary act of judicially condoned vengeance.