Texaco used Chapter 11 to cut a $10.5B verdict to $3B, then merged into Chevron.

In November 1985 a Texas jury ordered Texaco to pay Pennzoil $10.53 billion for interfering with Pennzoil's planned Getty Oil acquisition. Texas rules required Texaco to post a bond covering the judgment to appeal, which it could not do.

On April 12, 1987 Texaco filed for Chapter 11 in one of the largest U.S. bankruptcies of its time. During the case Carl Icahn became the largest shareholder, and in December 1987 Texaco agreed to settle with Pennzoil for $3 billion, about $7.5 billion below the judgment.

The bankruptcy court confirmed the reorganization plan in March 1988 and Texaco emerged on April 7, 1988, resuming its 75-cent quarterly dividend. Twelve years later Chevron agreed to merge with Texaco in a deal valued at about $100 billion, creating one of the world's largest integrated energy companies.

Settled for $3B against a $10.53B judgment, emerged in April 1988, resumed dividends, and merged into Chevron for about $100B in 2000.

Chapter 11 stopped Pennzoil from enforcing the judgment and froze interest on the claim.

The threat of years of litigation pushed Pennzoil to accept $3B instead of risking reversal on appeal.

Equity survived: Icahn and other shareholders kept value that a sale would have destroyed.

A manageable settlement let Texaco resume dividends and fund operations.

Chapter 11 can be a negotiating shield in litigation: it freezes collection, forces a settlement at a fraction of the verdict, and preserves the business.

Texaco sold assets to reduce debt, resumed dividends and remained one of the largest U.S. oil companies until Chevron acquired it in 2001. The case became the classic example of strategic bankruptcy used to reset a catastrophic litigation loss.