I only met Leon Hess a few times and then only quickly, but our company has been deeply intertwined with Hess Oil almost since Hess Oil’s inception. Since Leon Hess grew up on the Jersey Shore, he also interacted with my wife’s grandfather (who was the Chairman of the First Merchant Bank of Asbury Park) about the purchase of his first truck. Due to a minor miscommunication, my wife’s grandfather did not get to be Leon Hess’ banker, which was a shame because Leon Hess was fiercely loyal to those who helped him start out.
We all loved doing Hess jobs because nothing is more pleasant than to deal with issues on a fleet that was tightly managed, crispy clean and excellently maintained (occasionally we dealt with problems, but a very large portion of our work was preventative risk management work). Today I found a copy of this ad on a local Facebook history account. Leon Hess’ greatest joys was to run the whole oil enchilada from searching for oil, to delivering it in his spotless gas stations, to promoting his stations with toy trucks at Christmas. This ad shows it and he made it all happen with his unique brand of passion and leadership.
Leon Hess has passed away and this vertical approach is all gone now. Even in Leon Hess’ later days it was apparent that, while personally extremely gratifying, on a commercial level, this was not the most profitable approach. Soon after Leon’s passing most pieces in the Hess puzzle were divested. While Hess toys can still be ordered on the internet, the Hess stations that used to sell them no longer exist.
Because Leon Hess was a hands on leader, there are many Leon Hess stories out there. They often showed streaks of brilliance, also often streaks of impatience, but always they showed true leadership. A leader sets a course, leads by example and keeps his message simple and, most of all, consistent. As near as I can figure Leon’s message was: Do it right first. Work hard, be a little paranoid about the things that can go wrong and fix things before they go wrong. Especially in the oil industry that approach can be extremely valuable. It is unlikely that Hess would have found itself in a Deepwater Horizon situation, but even if they had, you can bet Leon Hess’ leadership would have been very different from BP’s in cleaning up the mess.
Hess Oil’s clean and crisp attitude in their ship operations played out nicely in my early career. A Hess barge had been bareboat chartered out to another oil company. At the time of redelivery the Hess Port Engineer checked out the barge and came up with various conditions in excess of wear and tear. Hess was going to take the barge back into its own service so it would undergo a rather major maintenance repair and coating evolution to bring it back to Hess standards.
The Port Engineer wrote out a list of required off hire repairs and called his boss from the closest pay phone to tell him that the off-hire repairs would run about $300,000 dollars. His boss said: “Why don’t we take $100,000 and we’ll fix it all at the shipyard period”. (I don’t remember the actual numbers, but these amounts are the gist of it.) The Port Engineer wrote the amount in his notebook, and called his counterpart. He said: “I noted there are some problems, why don’t we settle on an amount?” The other port engineer, in no uncertain terms, told him the barge was fine and that they were not going to offer a penny.
And here we have the basis of a dispute. In the eyes of the other oil company’s culture the barge was fine even though they had added quite a number of dents and wrinkles while it was in their service. But Hess lived in a different reality. Hess knew they would spend some extra money getting it back to their standard, but if the other oil company was not going to be reasonable it would have to go to arbitration.
Since it was a relatively small case, the case was assigned to a young associate at Hess’ corporate law firm, and this associate chose me to be his “expert”. It was a great early “expert” assignment, because all I needed to do is to get organized and tell my story, and my story was oh so easy. First of all, the attorney I worked for also suffered from a certain level of OCD and when I came aboard he had already organized all the photos of the barge in chronological order. It went from a beautifully painted absolutely undented and unpatched 10 year or so old barge the day before the on-hire to a seedy, wrinkly scratchy rust streaked barge with a number of quite significant dents.
I added some flavor by going back into the barge’s history where it could be shown that Hess had performed some whole plate repairs on the barge in the past to keep it looking nice, even though the damages as written up by the Port Engineer allowed for partial plate repairs in his $300,000 estimate. I noted that Hess performs deck touch ups underway, while that never happened when the barge was chartered out. I also think I provided some class or USCG directed repair details, and provided further cost estimates, but it really came down to the pictures. When I was only a few minutes into my testimony showing the on-hire pictures the lead arbitrator remarked: “Damn, my house is not this well painted”. Neither was my house.
Anyway, while ordinary and extraordinary wear and tear is not easy to define, it is a little like the Supreme Court’s approach to pornography, you know it when you see it. And if you bareboat charter a barge from Hess you get a nice barge and that should be sufficient indication that you return it in Hess condition too and not to your own standard. If I remember correctly, the award was in well in excess of $300,000 (hire time for repairs).
We only had one strange worry in the presentation of our case. The Port Engineer’s notebook entries were produced. And it showed damage and the steel calcs, it showed $300,000, then some notes on further shipyard work to be done and then it showed $100,000, underlined and kind of by itself.
The opposing party attorneys never asked, but if they would have asked what the $100,000 meant, the Port Engineer would have told them that it was the amount Hess was willing to settle to. That would have changed the story. Today I know how to address that because it is a logical component of reasonable game theory, but in those days we were all a little worried we would have to explain that wrinkle.
I still often think about that note though. I keep notes too, but I am careful.
More importantly, this arbitration taught me that the best way to stay out of trouble is to start with a solid foundation, and when things go wrong to be reasonable. If the other side is not reasonable, your fight is much easier. I learned this because Leon Hess set the stage for me to learn it, and I thank him for it.
I introduced my first grandchild to Hess toys just a few weeks ago. She may be a little young, but you can actually never be too young to learn.