Pennzoil Co. v. Texaco Inc.

481 U.S. 1, 107 S. Ct. 1519, 95 L. Ed. 2d 1, 1987 U.S. LEXIS 1515, 55 U.S.L.W. 4457
CourtSupreme Court of the United States
DecidedApril 6, 1987
Docket85-1798
StatusPublished
Cited by1,796 cases

This text of 481 U.S. 1 (Pennzoil Co. v. Texaco Inc.) is published on Counsel Stack Legal Research, covering Supreme Court of the United States primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pennzoil Co. v. Texaco Inc., 481 U.S. 1, 107 S. Ct. 1519, 95 L. Ed. 2d 1, 1987 U.S. LEXIS 1515, 55 U.S.L.W. 4457 (1987).

Opinions

Justice Powell

delivered the opinion of the Court.

The principal issue in this case is whether a federal district court lawfully may enjoin a plaintiff who has prevailed in a trial in state court from executing the judgment in its favor pending appeal of that judgment to a state appellate court.

[4]*4I

Getty Oil Co. and appellant Pennzoil Co. negotiated an agreement under which Pennzoil was to purchase about three-sevenths of Getty’s outstanding shares for $110 a share. Appellee Texaco Inc. eventually purchased the shares for $128 a share. On February 8, 1984, Pennzoil filed a complaint against Texaco in the Harris County District Court, a state court located in Houston, Texas, the site of Pennzoil’s corporate headquarters. The complaint alleged that Texaco tortiously had induced Getty to breach a contract to sell its shares to Pennzoil; Pennzoil sought actual damages of $7.53 billion and punitive damages in the same amount. On November 19, 1985, a jury returned a verdict in favor of Pennzoil, finding actual damages of $7.53 billion and punitive damages of $3 billion. The parties anticipated that the judgment, including prejudgment interest, would exceed $11 billion.

Although the parties disagree about the details, it was clear that the expected judgment would give Pennzoil significant rights under Texas law. By recording an abstract of a judgment in the real property records of any of the 254 counties in Texas, a judgment creditor can secure a lien on all of a judgment debtor’s real property located in that county. See Tex. Prop. Code Ann. §§52.001-52.006 (1984). If a judgment creditor wishes to have the judgment enforced by state officials so that it can take possession of any of the debtor’s assets, it may secure a writ of execution from the clerk of the court that issued the judgment. See Tex. Rule Civ. Proc. 627.1 Rule 627 provides that such a writ usually can be obtained “after the expiration of thirty days from the time a [5]*5final judgment is signed.”2 But the judgment debtor “may-suspend the execution of the judgment by filing a good and sufficient bond to be approved by the clerk.” Rule 364(a). See Rule 368.3 For a money judgment, “the amount of the bond . . . shall be at least the amount of the judgment, interest, and costs.” Rule 364(b).4

Even before the trial court entered judgment, the jury’s verdict cast a serious cloud on Texaco’s financial situation. The amount of the bond required by Rule 364(b) would have been more than $13 billion. It is clear that Texaco would not have been able to post such a bond. Accordingly, “the business and financial community concluded that Pennzoil would be able, under the lien and bond provisions of Texas law, to commence enforcement of any judgment entered on the verdict before Texaco’s appeals had been resolved.” App. to Juris. Statement A87 (District Court’s Supplemental Finding of Fact 40, Jan. 10, 1986). The effects on Texaco were substantial: the price of its stock dropped markedly; it had difficulty obtaining credit; the rating of its bonds was lowered; and its trade creditors refused to sell it crude oil on customary terms. Id., at A90-A98 (District Court’s Supplemental Findings of Fact 49-70).

[6]*6Texaco did not argue to the trial court that the judgment, or execution of the judgment, conflicted with federal law. Rather, on December 10, 1985 — before the Texas court entered judgment5 — Texaco filed this action in the United States District Court for the Southern District of New York in White Plains, New York, the site of Texaco’s corporate headquarters. Texaco alleged that the Texas proceedings violated rights secured to Texaco by the Constitution and various federal statutes.6 It asked the District Court to enjoin Pennzoil from taking any action to enforce the judgment. Pennzoil’s response, and basic position, was that the District Court could not hear the case. First, it argued that the Anti-Injunction Act, 28 U. S. C. § 2283, barred issuance of an injunction. It further contended that the court should ab[7]*7stain under the doctrine of Younger v. Harris, 401 U. S. 37 (1971). Third, it argued that the suit was in effect an appeal from the Texas trial court and that the District Court had no jurisdiction under the principles of Rooker v. Fidelity Trust Co., 263 U. S. 413 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U. S. 462 (1983).

The District Court rejected all of these arguments. 626 F. Supp. 250 (1986). It found the Anti-Injunction Act inapplicable because Texaco’s complaint rested on 42 U. S. C. § 1983. See Mitchum v. Foster, 407 U. S. 225 (1972) (holding that §1983 falls within the exceptions to the Anti-Injunction Act). It found Younger abstention unwarranted because it did not believe issuance of an injunction would “interfere with a state official’s pursuit of a fundamental state interest.” 626 F. Supp., at 260. As to the Rooker-Feldman doctrine, the court noted only that it was not “attempting to sit as a final or intermediate appellate state court as to the merits of the Texas action.. . . Our only intention is to assure Texaco its constitutional right to raise claims that we view as having a good chance of success.” Id., at 254 (citation and footnote omitted).

The District Court justified its decision to grant injunctive relief by evaluating the prospects of Texaco’s succeeding in its appeal in the Texas state courts. It considered the merits of the various challenges Texaco had made before the Texas Court of Appeals and concluded that these challenges “present generally fair grounds for litigation.” Ibid. It then evaluated the constitutionality of the Texas lien and bond requirements by applying the test articulated in Mathews v. Eldridge, 424 U. S. 319 (1976). It concluded that application of the lien and bond provisions effectively would deny Texaco a right to appeal. It thought that the private interests and the State’s interests favored protecting Texaco’s right to appeal. Relying on its view of the merits of the state-court appeal, the court found the risk of erroneous deprivation “quite severe.” 626 F. Supp., at 257. Finally, [8]*8it viewed the administrative burden on the State as “slight.” Ibid. In light of these factors, the District Court concluded that Texaco’s constitutional claims had “a very clear probability of success.” Id., at 258. Accordingly, the court issued a preliminary injunction.7

On appeal, the Court of Appeals for the Second Circuit affirmed. 784 F. 2d 1133 (1986). It first addressed the Rooker-Feldman doctrine and rejected the portion of the District Court’s opinion that evaluated the merits of the state-court judgment. It held, however, that the doctrine did not completely bar the District Court’s jurisdiction.

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Cite This Page — Counsel Stack

Bluebook (online)
481 U.S. 1, 107 S. Ct. 1519, 95 L. Ed. 2d 1, 1987 U.S. LEXIS 1515, 55 U.S.L.W. 4457, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pennzoil-co-v-texaco-inc-scotus-1987.