Postuar: 12/05/2014 - 11:05
May 7, 2014 6:20 p.m. ET
12 may 2014 - Patton Boggs LLP has agreed to pay Chevron Corp. $15 million to settle a bitter feud over the law firm's role in a disputed $9.5 billion environmental verdict against the oil giant.
The proposed settlement is a significant reversal for the Washington, D.C., firm, a well-known lobbying powerhouse whose revenue has slid in recent years. Patton Boggs stood to gain nearly half a billion dollars from its share of the judgment, which it was attempting to enforce on behalf of the Ecuadorean plaintiffs. Until this week the firm had stoutly defended its work on the case.
The deal will also give Chevron added leverage in its global fight to undermine the 2011 verdict in which an Ecuadorean judge ruled that the company was liable for decades-old pollution from oil exploration in the Amazon Basin.
Under the settlement announced Wednesday, Patton Boggs issued a statement of regret for its involvement in the case, and it must cease efforts to enforce the judgment and withdraw from related litigation. The law firm has promised to turn over any profits from the case to Chevron, and it has also agreed to cooperate with discovery efforts by the company, which is fighting attempts by the plaintiffs to seize its assets abroad.
In return, Chevron will drop all claims against Patton Boggs, which it had accused of fraud and concealing misconduct by the broader legal team that represented the Ecuadorean plaintiffs.
Patton Boggs is the latest in a string of former adversaries that have settled with Chevron and renounced their participation in the case.
In March, a federal judge ruled in a separate but related civil racketeering case brought by Chevron that the Ecuador verdict had been tainted by coercion, bribery and other misdeeds by the lead attorney for the plaintiffs, New York lawyer Steven Donziger. Mr. Donziger has denied those claims and has appealed the verdict.
Patton Boggs said in a statement on Wednesday that the decision in the racketeering case "includes a number of factual findings about matters which would have materially affected our firm's decision to become involved and stay involved as counsel here. Based on the court's findings, Patton Boggs regrets its involvement in this matter."
Mr. Donziger called the settlement a "betrayal" and said in a joint statement that he and his Ecuadorean clients were exploring legal options to prevent Patton Boggs from turning over privileged documents to Chevron. "The firm's overall decision to surrender to Chevron's pressure campaign is a violation of its ethical duty to its clients," he said, "in this case the vulnerable rainforest communities of Ecuador who have suffered for decades."
Hewitt Pate, Chevron's vice president and general counsel, said in a statement: "We are pleased that Patton Boggs is ending its association with the fraudulent and extortionate Ecuador litigation scheme.... Chevron encourages others to disassociate themselves from this fraud."
The agreement caps an embarrassing episode for the law firm. It also removes a major obstacle in the firm's efforts to cement a merger with a much larger international firm, Squire Sanders. Concerns over liability from the battle with Chevron have been a sticking point in the merger discussions, according to three people familiar with the matter. A spokesman for Squire Sanders declined to comment on the settlement.
Patton Boggs has struggled in recent years amid a tough legal market. In 2013 its revenue fell 12.4% to about $278 million, and the firm laid off dozens of lawyers and staff. Patton Boggs is now working with restructuring advisers on a firm-wide overhaul of its finances and operations.
A merger with Squire Sanders, a firm with Ohio roots that now has about 1,300 lawyers world-wide, would throw Patton Boggs a financial lifeline and give its lawyers an vastly expanded platform.
The larger firm would gain offices in the Middle East and Dallas and significantly enhance its presence in Washington, D.C., where Patton Boggs's chairman, Thomas H. Boggs Jr. , helped pioneer the lucrative law firm/lobby shop model.
Over the past three months, discussions between the two firms have intensified. Leaders could present the case for a merger to their respective partnerships later this month if various conditions are met, according to two people familiar with the matter.