Pennzoil Co. v. Texaco Inc.

481 U. S. 1

April 6, 1987

A jury in a Texas court ordered Texaco to pay Pennzoil the utterly appalling penalty of eleven billion dollars. Worse yet, Texas law said that Pennzoil could collect on that money before Texas appeals courts even had an opportunity to review the verdict. Texaco panicked, and sought an emergency injunction from a District Court in New York (where Texaco is headquartered). The District Court granted the injunction against collection of the 11 billion. Pennzoil claimed that the District Court had no right to interfere in the operation of the Texas Court system.

The Supreme Court, not quite knowing what to do, unanimously declared that the injunction should not have issued, but came up with a bewildering array of reasons why. Powell was able to cobble together a 5-4 majority to simply say that the District Court should have declined to get involved due to the Younger abstention doctrine. In Younger, the Court held that federal courts must not interfere with criminal proceedings in state courts as a matter of federalism. A state’s interest in seeing its civil judgments enforced, Powell wrote, is of enough importance that the Younger doctrine reached this case as well. He also pointed out that Texas law had an “open courts” provision in its constitution, which meant that Texaco could have found redress for its problem without going to federal court.

The four more liberal justices all came up with different reasons for holding that Texaco lost. Brennan, joined by Marshall, wrote that the interests of Texas in the suit were slight, and that Younger deference shouldn’t have applied, especially since Texaco was filing a section 1983 claim. Nonetheless, he felt that the injunction wasn’t necessary since Texaco could still appeal to Texas courts, even if they might be temporarily bankrupted before getting the verdict overturned. Marshall wrote that the District Court simply lacked jurisdiction to have even taken the case. Federal courts could not review pure state judgments under the Rooker-Feldman doctrine, and Marshall felt that there was no way the penalty collection process could be isolated from the state judgment in this case. He also felt that the New York District Court was an improper venue.

Blackmun thought that the District Court should have abstained under Pullman deference, which called for abstention when a state court had the opportunity to settle a disputed Constitutional point. Despite this, Blackmun was actually perturbed by Brennan’s contention that bankruptcy would be no big deal for Texaco, and hinted that absent Pullman deference an injunction might have been appropriate. Stevens, joined by Marshall, had no problem with the District Court taking the case, but found that an injunction should not issue because there was quite simply no Constitutional right to have an execution of financial judgment stayed during an appeals process. To top it off, Scalia wrote a concurrence joined by O’Connor to state his view that the Rooker-Feldman doctrine should not bar federal jurisdiction in the litigation.

As a mater of civil procedure, I think the Court got it right. Nonetheless, I find the penalty of $11 billion appalling, and emblematic of everything that is wrong in civil litigation. There’s no possible business dispute that can possibly be worth that much. Fortune magazine had this to say back in 1987: “Strange events indeed, and tragic. Not only does America lose, but so do Texaco’s employees, suppliers, and stockholders — at least temporarily. And so do the stockholders of Pennzoil, Texaco’s adversary in the huge lawsuit that created the whole mess. Why must everybody lose? What constructive purpose is served?” This is exactly why the Bible counsels Christians to avoid lawsuits, and resolve disputes quickly.

Justice Marshall, keeping it real: “The District Court did not explain how Texaco’s claims, which challenged a Texas state law bonding provision limiting Texaco’s opportunity to stay execution of a Texas judgment against property located in Texas, could be said to arise in the Southern District of New York.” No joke – I actually thought Marshall had the most persuasive opinion in this case.

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2 thoughts on “Pennzoil Co. v. Texaco Inc.

  1. Pingback: 1986-1987: Conservative Victories | Vintage Bracketology

  2. Pingback: 1986-1987: Mega Colossal Retrospective Bonanza! | Vintage Bracketology

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