Pennzoil Co. v. Texaco Inc.

PETITIONER: Pennzoil Co.
LOCATION: Harris County Courthouse

DOCKET NO.: 85-1798
DECIDED BY: Rehnquist Court (1986-1987)
LOWER COURT: United States Court of Appeals for the Second Circuit

CITATION: 481 US 1 (1987)
ARGUED: Jan 12, 1987
DECIDED: Apr 06, 1987

David Boies - on behalf of Appellee
Laurence H. Tribe - on behalf of Appellant

Facts of the case

Pennzoil Co. obtained a jury verdict of $10.53 billion in a Texas state court suit. The suit alleged that Texaco Inc. tortiously induced a third party to breach its contract to sell stock to Pennzoil. Before the court entered a final judgment, Texaco sued in federal district court alleging that the Texas court proceedings violated its rights under the Constitution and several Texas statutes. Pennzoil argued that the district court should abstain from hearing the case under the doctrine of Younger v. Harris. Younger held that a federal court must abstain from hearing challenges to a state court proceeding while that proceeding is still underway. The district court did not abstain and granted a preliminary injunction. The court found that it had jurisdiction over the matter and that Texaco was likely to succeed in its suit. The U.S. Court of Appeals for the Second Circuit affirmed in part, holding that the district court had jurisdiction, but should not have evaluated the claims that were discussed in the state trial. Meanwhile, the state court proceedings continued, and reduced the judgment to $8.53 billion


Did the district court err in issuing an injunction instead of abstaining until the state court proceedings concluded?

Media for Pennzoil Co. v. Texaco Inc.

Audio Transcription for Oral Argument - January 12, 1987 in Pennzoil Co. v. Texaco Inc.

Laurence H. Tribe:

Now, that concept must stop short of private litigants who merely ask the state courts for relief win at trial and then ask that the judgments in their favor be duly recorded, because if the state action concept reached that far then every state court proceeding would automatically become a target for a federal injunction and the 1983 exception would then utterly swallow the anti-injunction rule.

And indeed, quite apart from the impact on the Anti-Injunction Act, if the state action concept engulfed all who invoked judicial process and, with the help of court functionaries, record the judgments that they win, the distinction between private and public action so fundamental to this Court's jurisprudence would be obliterated.

Now, Texaco I think sees the threat here, but it says there's no problem because Pennzoil is not like an ordinary private plaintiff.

Why not?

Well, the reason, you see, is that the state of Texas abdicated to Pennzoil what they call a judicially unsupervised power to control disputed property and to decide whether Texaco will have to post full security to stay the judgment.

That theory about Texas law is a complete fantasy.

It was not even adopted by the Second Circuit, which was content to observe that in order to enforce its judgment Pennzoil would, as a judgment winner must in every state, act together with various functionaries in getting the judgment recorded and in the process of execution.

I want to examine--

Antonin Scalia:

Mr. Tribe, let me ask you where this goes.

If we go along with you and assume that the private party who's reducing the judgment to effect a collection is not a state actor, what about these functionaries who are assisting him?

Are they state actors?

Is the problem here simply that the wrong party was sued and that you could have sued someone else in federal court in Massachusetts and achieved this result?

Laurence H. Tribe:

--No, I think they would have preferred New York.

Antonin Scalia:

Oh, I'm sorry.

Laurence H. Tribe:

Whoever they sued, I think there is a more fundamental problem.

It's not just who you denominate as the actor, it's the concept of state action.

The mere identification of functionaries would not solve the problem, because one could then always sidetrack a state proceeding by identifying the clerk with whom a complaint was filed or some other functionary.

The real question is whether there is any problematic state action that can be adjudicated in this particular lawsuit.

Of course, they didn't sue--

Antonin Scalia:

So you're not saying... your basic argument is not that this is not a state actor, but that there is no state action here?

Laurence H. Tribe:

--Well, in the background of the case, in enacting its laws Texas acted.

But that was true also in Flagg Brothers, and it's always true.

We're saying that no state action is properly challenged in this lawsuit, not that the state of Texas has never acted.

Indeed, the government of Texas acted in a four and a half month trial to adjudicate the liability between these parties, and in doing so it rendered a judgment that is final and claim preclusive under Texas law.

It is that fact, the adjudication of that judgment, which is simply recorded in the form of a lien if the lien statute comes into operation in this case.

They try to present the picture that somehow Pennzoil is the repository of an abdication of state responsibility, that the courts of Texas are somehow not supervising the power Pennzoil is wielding, and that it is for this reason that the 1983 exception suddenly opens the door to a federal flanking maneuver that otherwise would be unavailable.

Indeed, Justice Scalia--

Sandra Day O'Connor:

Well, this is very close, though, to Lugar versus Edmondson Oil, isn't it, in terms of asking what's under color of state law?

I didn't happen to support that judgment, but--

Laurence H. Tribe:

--Justice O'Connor--