Chevron’s Suit Against Pennzoil Is Dismissed : Litigation: A federal judge said its claim that the Houston oil firm illegally bought 9% of its stock was without merit.

SAN FRANCISCO —  A federal judge Wednesday dismissed Chevron Corp.’s lawsuit charging that Pennzoil Co. illegally purchased nearly 9% of Chevron’s stock, a Pennzoil lawyer said Wednesday.

U.S. District Judge Samuel Conti ruled that the suit was without merit after most of the charges had already been dismissed, Pennzoil attorney Stephen Bomse said.

Conti cited sworn declarations by Pennzoil Chairman J. Hugh Liedtke, who said Pennzoil had two priorities for investing the Texaco proceeds: achieving maximum long-term value for Pennzoil’s shareholders and, if possible, a tax deferral on the settlement proceeds.

The Liedtke statement also disclosed that Pennzoil had considered buying smaller oil companies outright but decided that they were either fully priced or unavailable.

He also said Pennzoil considered buying British Petroleum PLC shares but was outbid by BP itself.

Chevron said late Wednesday that it would review the possibility of appealing Conti’s ruling. “We’re disappointed with the outcome,” said Chevron Chairman and Chief Executive Kenneth T. Derr, “and we’re looking at the merits of an appeal.”

Chevron, a San Francisco-based oil company long haunted by takeover rumors, last December filed the lawsuit when Pennzoil, a much smaller rival, disclosed that it had bought about 31.5 million Chevron shares.

William Edlund, Chevron’s lead counsel in the case, said he had not seen the judge’s 23-page ruling but was disappointed that the suit had been dismissed.

“Frankly, speaking as the lawyer but not for the company, I see some errors in it,” Edlund said of the ruling.

Chevron argued that Pennzoil was seeking an active management role but said the company failed to disclose that in its filing with the Securities and Exchange Commission.

Many industry analysts have taken Chevron’s point of view. “A company the size of Pennzoil is not going to take a position in a company the size of Chevron and be passive,” said oil industry analyst Craig Schwerdt at Drake Capital Securities in Santa Monica. “They are in the same business. Pennzoil might try to get a board seat or two. And Chevron would not want somebody looking over its shoulder, especially if it’s a competitor.”

Schwerdt speculated that Pennzoil eventually might try to swap its Chevron stake for company assets, such as oil reserves.