Steven Donziger
Steven Donziger ()

Voting has been suspended at Squire Sanders on a proposed merger with Patton Boggs, according to two Squire Sanders partners.

The decision is apparently connected to a filing in the Southern District by the lead plaintiffs’ lawyer in the Lago Agrio environmental damages case intended to scuttle a settlement reached this month between Chevron and Patton Boggs, the Ecuadorian plaintiffs’ former counsel.

Steven Donziger claims Patton Boggs “sold its clients down the river” by settling charges of misconduct brought by Chevron in litigation growing out of enforcement of a $9.5 billion judgment in Ecuador against the oil giant.

Squire Sanders partners said they were informed Wednesday morning about the suspension of a vote that had been scheduled to conclude before Memorial Day weekend. The firm did not return a call requesting comment.

Donziger claims that Patton Boggs, brought on board by the Donziger team in 2010 to provide the legal and lobbying muscle to help enforce the judgment, is guilty of “flagrant ethical violations,” including breaching its duty of loyalty to the Ecuadorian plaintiffs by reaching the settlement with Chevron—a settlement he said was announced in the press with no prior consultations with the clients.

Now, Donziger and Ecuadorians Hugo Gerardo Camacho Naranjo and Javier Piaguaje seek to intervene in the case and ask Southern District Judge Lewis Kaplan to stop the settlement.

On May 7, Southern District Judge Loretta Preska accepted a stipulation of settlement and dismissed the case. Patton Boggs agreed to pay $15 million to Chevron, and the embattled law firm issued a statement saying “Patton Boggs regrets its involvement in the matter.”

Those “regrets,” Patton Boggs said in its May 7 statement, were based on factual findings Kaplan made in a March decision where he found the $9.5 billion award against Chevron in Ecuador was procured by fraud and that Donziger and others had worked to corrupt the Ecuadorian judiciary and had engaged in a pattern of racketeering activity (NYLJ, March 5). Kaplan’s decision is being appealed.

Donziger decried the Chevron-Patton Boggs settlement in his motion to intervene Wednesday, “No court should put its imprimatur on such a rotten deal.”

Of Patton Boggs, he said, “Faced with the threat of scorched-earth litigation fueled by the oil giant’s bottomless war chest, this once-proud American law firm has sold its clients down the river.”

Patton Boggs began representing the Ecuadorian plaintiffs in 2010 as Chevron was in the middle of a multi-jurisdiction attack on the $9.5 billion award against it over pollution by a predecessor oil company in the Lago Agrio region of Ecuador.

Patton Boggs and lead counsel James Tyrrell authored the “Invictus Memo,” which detailed a global strategy to enforce the judgment in courts around the world by seeking to attach Chevron assets. The memo was one piece of evidence out of many that helped persuade Kaplan to issue a series of decisions against Donziger.

Patton Boggs initially sued Chevron, led by Randy Mastro, a partner with Gibson Dunn & Crutcher, in New Jersey alleging malicious prosecution and unjust enrichment and seeking attorney fees and a $21.8 million bond for attacks Chevron made against the firm.

The case was subsequently transferred to the Southern District, where in March, Kaplan allowed Chevron to bring counterclaims accusing Patton Boggs of fraud, violations of New York’s Judiciary Law and malicious prosecution (NYLJ, April 1).

The judge’s ruling set the stage for settlement in the lawsuit of Patton Boggs LLP v. Chevron Corp., 12-cv-9176 (NYLJ, May 8).

Donziger said in his papers Wednesday, “There’s no way to sugarcoat it: Patton Boggs has put its own interests above those of the people it was supposed to represent, switched sides in the middle of a hotly contested legal dispute, unceremoniously abandoned the clients without so much as notifying them, and publicly expressed regret at having taken on their representation in the first place. And it has even agreed to cooperate with Chevron in discovery, so that Chevron may use what it finds against the firm’s former clients.”

In response to Donziger’s motion, Elkan Abramowitz, a partner of Morvillo Abramowitz Grand Iason & Anello who represents Patton Boggs, filed a letter with Kaplan Thursday saying there was no need for the requested intervention because the settlement agreement “already has established procedures to provide the proposed intervenors the discovery procedures they purport to seek.”

Abramowitz said the rest of the motion should be summarily denied as facially defective, and “it seems clear that the objective of the motion is simply to generate publicity and cast a cloud over Patton Boggs.”

Absent a denial of the motion, Abramowitz requested a quick briefing schedule.

The motion comes at a sensitive time for the Patton Boggs-Squire Sanders merger. Partners at Patton Boggs began voting on Tuesday, according to affiliate publication The National Law Journal, with voting expected to last for several days, according to a source with knowledge of the process.

If Kaplan should allow Donziger and the two Lago Agrio plaintiffs to intervene, the spectre of litigation over Patton Boggs’ actions with respect to its former clients could pose a substantial financial liability on the firm and a possible merger partner.

“Absent the unethical settlement agreement submitted for approval to this Court, Patton Boggs (and its proposed merger partner) would face years of uncompensated litigation costs fending off Chevron’s attacks,” Donziger wrote his 12-page motion.

The settlement had wiped away an issue that had earlier poisoned merger discussions between Patton Boggs and at least one other firm, Locke Lord. Now the issue has been reopened in the final sprint towards a merger with Squire Sanders.

Patton Boggs has faced more than a year of struggles after shedding lawyers—some through cuts, others who left on their own—and has staved off rumors of bankruptcy for months.

Patton Boggs is also being represented in its settlement with Chevron by New York’s Leader & Berkon. The lead counsel, James Leader, did not respond to a phone inquiry by press time. Chevron has looked to Stern & Kilcullen in Florham Park, N.J. Mastro and Chevron declined comment.