Map of ChevronTexaco's Ecuador operations, Chevron counsel Randy Mastro (top), and plaintiff's attorney Steven Donziger
Map of ChevronTexaco’s Ecuador operations, Chevron counsel Randy Mastro (top), and plaintiff’s attorney Steven Donziger ()

This story originally appeared in sister publication The Am Law Litigation Daily.

In a remarkable capitulation to claims that it backed a fraudulent lawsuit against Chevron Corporation, Patton Boggs agreed Wednesday to pay the oil giant $15 million and to give up its stake in a $9.5 billion environmental judgment. Patton Boggs’ erstwhile co-counsel, Steven Donziger, quickly lashed out at the deal, calling it a betrayal of the Ecuadorean villagers they jointly represented.

Patton Boggs disclosed the $15 million payment to Chevron in a 22-page settlement agreement [ PDF], which will be filed with the federal judge in Manhattan overseeing Chevron’s fraud case against the firm. As part of the agreement, Patton Boggs will withdraw from representing the plaintiffs who won the Ecuadorean mega-judgment. Patton Boggs also assigned to Chevron any money the firm would be entitled to from that representation, which could in theory reach $475 million. And the firm agreed to assist Chevron with discovery and to make two of its partners, James Tyrrell Jr. and Eric Westenberger, available for depositions.

“We are pleased that Patton Boggs is ending its association with the fraudulent and extortionate Ecuador litigation scheme,” Chevron general counsel Hewitt Pate said in a statement. Chevron’s lead outside counsel is Randy Mastro of Gibson, Dunn & Crutcher.

A judge in Ecuador issued the massive judgment in 2011, finding that Chevron is liable for environmental damage in the Ecuadorean Amazon. Donziger, a U.S. lawyer based in New York, spearheaded the case on behalf of Ecuadoreans from that country’s Lago Agrio region.

Because Chevron no longer has assets in Ecuador, the plaintiffs have sought to enforce the judgment in countries such as Canada and Brazil. Beginning in 2010, Patton Boggs advised the plaintiffs on those enforcement proceedings, as well as on larger strategic decisions. The firm revealed in Wednesday’s settlement agreement that its contingency fee arrangement entitled it to up to five percent of the $9.5 billion judgment if a foreign court ever forces Chevron to pay up.

Chevron sued Donziger in 2011, claiming he obtained the judgment through bribery and collusion in Ecuador. Chevron also brought fraud claims against Patton Boggs in May 2013, alleging the firm knew about Donziger’s alleged fraud and tried to cover it up. Patton Boggs tapped famed criminal defense attorney Elkan Abramowitz of Morvillo Abramowitz Grand Iason & Anello to fight Chevron’s fraud claims.

U.S. District Judge Lewis Kaplan sided forcefully with Chevron in its racketeering case against Donziger on March 4, ruling that the Lago Agrio case was fatally tainted by fraud. In a statement released on Wednesday, Patton Boggs said that Kaplan’s ruling was the main factor in its decision to settle with Chevron. That decision “included 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,” the firm stated.

“Based on the court’s findings, Patton Boggs regrets its involvement in this matter,” the firm said.

Patton Boggs is just the latest Chevron adversary to put up a white flag. The litigation funder Burford Capital, which initially funded Patton Boggs’ work on the Lago Agrio litigation, renounced its involvement in April 2013. That same month, an environmental consulting firm said it “deeply regretted” its involvement in the case and admitted to helping Donziger ghostwrite a supposedly independent report by a court-appointed expert.

Amid slumping revenue and lateral defections, Patton Boggs has been in merger talks with Squire Sanders and other firms. By resolving its liability to Chevron, Patton Boggs may have helped to clear the way for a potential union. Our affiliate The National Law Journal has more on the settlement’s impact on Patton Boggs’ merger prospects here.

In a statement, Donziger said that Patton Boggs’ “decision to surrender to Chevron’s pressure campaign is a violation of its ethical duty to its client.” Donziger also said his clients are exploring legal remedies against Patton Boggs, such as moving for an injunction that would “block Patton Boggs from turning over any privileged materials to Chevron, including the details of current enforcement actions targeting the company’s assets.”