Blaustein v. Standard Oil

In 1888, the year of the Big Blizzard, German Immigrant Louis Blaustein landed in New York with 50-c- in his pocket, lent it to a needy cousin, headed for Baltimore. From a one-horse wagon he peddled cans of kerosene, soon got a job with John D. Rockefeller's up-&-coming Standard Oil Co. When he quit to go into business himself in 1910, he was rich enough to buy a one-horse tank wagon, and sell gasoline from the rear end while his son Jacob drove.

To millionaire, charitarian Louis Blaustein, death came in 1937, few months after he had filed one of the most potent lawsuits ever brought in New York County's Supreme Court. Main defendants: Standard Oil Co. (Indiana); great Standard Oil Co. (N. J.); its operating subsidiary, Standard Oil Co. of New Jersey. Last week stocky, easygoing Son Jacob was head of the Blaustein family and administrator of its Baltimore charities when Justice Samuel Irving Rosenman (onetime Governor's Counsel to F. D. R.) handed down a decision in the case.

Old Louis Blaustein was a genius in oil. His tank wagon business grew into American Oil Co. (Amoco). By 1922 its stations on the Atlantic seaboard were important competitors of Standard of New Jersey stations. The Blausteins worried about their source of supply, because Amoco was strictly a marketing company, depended chiefly on competing Standard of New Jersey for its gasoline and oil. Smart merchandisers, the Blausteins saw a way out, in 1923 sold half the stock of Amoco to Pan American (then controlled by Edward L. Doheny), congratulated themselves that finally they had an integrated setup. For Pan American, with oil lands in Mexico and the U. S., refineries in Mexico, Louisiana and California, had few marketing outlets, needed Amoco as much as Amoco needed it.

Wealthier grew the Blausteins, fatter grew Pan Am. Pan Am acquired famed Lago Petroleum on Venezuela's Lake Maracaibo, built the great Aruba island refinery in the Dutch West Indies. For 1932, Amoco and subsidiaries turned in a net profit of $4,149,200, up 1,075% from the year the Pan Am deal was made. But meanwhile Louis Blaustein awakened one morning to find his worst fears confirmed: Standard of Indiana, after quietly buying up Pan Am stock, was in control of the production and refining end of his business.

In 1931 Pan Am began to feel the squeeze. First its domestic crude supplies and pipe lines were sold to a Standard of Indiana subsidiary. Next, in 1932, all Pan Am's foreign holdings were sold. The purchaser: Standard of New Jersey, which got the famed Lago properties and the Aruba refinery (now the heart of Standard of New Jersey's foreign production), a fleet of 29 tankers, plus refineries in Mexico, Germany. Amoco became dependent once more on Standard of New Jersey for its oil and gas, was right back where it had started.

Louis Blaustein protested, and there was a compromise. Pan American Petroleum & Transport was reorganized, combined with Amoco. The Blausteins traded their holdings for a 28% interest in Pan Am, and Louis Blaustein became its president. Standard of Indiana, in control with 70%, promised to see to it that Pan Am got new production and refining facilities of its own. But in 1937, Louis Blaustein resigned from Pan Am's presidency, Jacob gave up the chair of executive vice president; they sued as minority stockholders.

The Blaustein claim: that Standard of Indiana, with the connivance of Standard of New Jersey, had prevented development of Pan Am as an integrated com pany, had caused Pan Am to lose millions of dollars.

When the suit went to trial Judge Rosenman looked down on as potent a battery of lawyers as ever appeared in one court: famed Elder Statesman Henry Lewis Stimson for the Blausteins, ex-Presidential Nominee John W. Davis for Standard of New Jersey, Chief Justice Hughes's onetime law partner Ralph Scott Harris for Standard of Indiana, and others. For 70 trial days and 10,361 pages, the testimony rolled in. Then Sam Rosen man sat down to think it out. His decision, wrapped up in 182 pages: Standard of New Jersey was not liable; but Standard of Indiana must account for its profits and Pan Am's losses, to be determined by a referee. The Blausteins' chief attorney, Statesman Stimson, had estimated them at a whacking $40,000,000.

But for Standard of Indiana, now 78% owner of Pan Am, any judgment it may pay (if judgment is not reversed on appeal) will be 78% a case of moving money from one pocket to another.

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