Texaco v. Pennzoil
Texas Court of Appeals
729 S.W.2d 768 (1987)
Pennzoil (defendant) made a public offer to buy a controlling share of Getty Oil Company (Getty) (plaintiff) stock. In the alternative, Pennzoil entered into an agreement with two primary shareholders of Getty, signing a memorandum of agreement that was subject to the approval of Getty’s board of directors. The memorandum was presented to the board. The board decided that it would not recommend the public tender to the shareholders and also rejected Pennzoil’s agreement with the two primary shareholders. The board made a counter-offer that was rejected by Pennzoil. Getty then began soliciting bids from other companies. At the next board meeting, with no definite bids by other companies, the board made a second counter-offer to Pennzoil. Pennzoil accepted and Getty and Pennzoil both drafted and issued press releases. Pennzoil’s lawyers began drafting the formal agreement. The Wall Street Journal reported on the Getty-Pennzoil agreement, the Pennzoil board met regarding the agreement, and Pennzoil’s lawyers were in contact with Getty regarding the agreement. Meanwhile, Getty continued soliciting bids from other companies. Texaco, having talked with Getty, held in-house meetings, researched Getty, and hired an investment banker to represent it in the possible acquisition of Getty. Texaco’s board voted to make an offer. Texaco met with the two primary shareholders of Getty who both agreed to sell their shares to Texaco. Getty then held a board meeting and voted to withdraw its counteroffer to Pennzoil and accept Texaco’s offer. Texaco issued a press release regarding its agreement with Getty. Pennzoil contacted Getty and demanded that they honor their agreement. Getty entered into an agreement with Texaco. Getty filed suit for declaratory judgment that it was not required to honor the Pennzoil contract. The trial court awarded Pennzoil damages for Texaco’s tortious interference with the contract. Texaco appealed to the Court of Appeals of Texas.
Rule of Law
Holding and Reasoning (Warren, J.)