For those of you who haven’t tuned out
Jarndyce v. Jarndyce Chevron Corp. v. Donziger, the never-ending litigation between oil giant Chevron and plaintiffs’ lawyer Steven Donziger, today brings some news. It shouldn’t come as any surprise to those who have been following the case, but Judge Lewis Kaplan (S.D.N.Y.) just ruled in favor of Chevron, enjoining Donziger and his Ecuadorean-villager clients from trying to enforce here in the United States the multi-billion-dollar pollution judgment they secured against Chevron in Ecuador — a judgment that was the result of fraud, according to Judge Kaplan. (Links to coverage and to the parties’ reactions to the ruling appear at the end of this post.)
The Chevron/Ecuador case is one of those matters that’s most interesting to those who are actually involved in it; to the rest of us, it’s a lot of noise. Speaking for myself, I’m interested in only two aspects of it: (1) its impact on the revenue and profit of Gibson Dunn, which has been litigating the case aggressively on behalf of Chevron, and (2) its meaning for the deeply troubled law firm of Patton Boggs, which made the ill-advised decision to align itself with the Ecuadorean village people.
In a media call this afternoon that I joined, Chevron’s general counsel, R. Hewitt Pate, declined to discuss the size of the company’s legal fees in the litigation. So we’ll have to focus on that second item: the bog that is Patton Boggs. Which right now looks like the Lago Agrio oil field, prior to remediation….
Although today’s ruling by Judge Kaplan didn’t hit Patton Boggs directly, it’s still bad news for the firm. As Chevron’s lawyers, GC Hewitt Pate and Randy Mastro of Gibson Dunn, stated in the media call, they plan to amend Chevron’s counterclaims against Patton Boggs to reflect Judge Kaplan’s extensive findings. Oy.
That’s not the only bad news for Patton Boggs from this week. Dewey know the firm’s latest move of desperation? Yes we do, thanks to the Wall Street Journal:
Washington, D.C., law firm Patton Boggs LLP has hired a team of advisers to aid in an overhaul of the firm’s financial structure….
He said the team of advisers had been hired to review issues such as the firm’s capital structure and portions of its compensation system, in light of changes over the past year that include slimming the firm down by about 100 lawyers. “It’s a whole different entity,” [managing partner Ed] Newberry said. “It’s a more profitable entity, it’s a smaller entity.”
…. Mr. Newberry confirmed the advisers included Zolfo Cooper LLC, a turnaround firm that provides financial advice to companies and clients such as creditors in American Airlines Inc.
As readers of Above the Law will recall, dearly departed Dewey & LeBoeuf was a Zolfo Cooper client. Is Patton Boggs trying to “overhaul its capital structure,” or is it preparing itself for an orderly unwinding?
Yes, we know about the supposed Squire Sanders/Patton Boggs merger talks. But we suspect those talks will end up just like the Locke Lord merger talks, namely, dead — due in part to concerns over Patton Boggs’s Chevron exposure. Such talks are often just a chance for the supposed suitor to figure out which parts of a beleaguered law firm it wants to pick up if and when the firm goes under.
The Chevron/Ecuador mess is a problem for Patton Boggs on multiple fronts. First, it could result in financial liability of the firm to Chevron. Second, it has created reputational problems for Patton Boggs. Third, it has given risen to conflicts problems — problems that have affected the ability of some Patton Boggs lawyers to lateral to other firms. Word on the street is that Chevron hasn’t been super-nice about waiving potential conflicts to allow PB lawyers to move laterally.
On the bright side, these conflicts problems could actually help Patton Boggs in one respect, by making it more difficult for lawyers to flee the firm as they did in Dewey’s demise. As Ed Newberry told the Wall Street Journal, more than 90 percent of current Patton Boggs partners have said they’re backing the firm’s attempted restructuring — maybe because they don’t have as many exit options as partners from a less tainted firm.
The bad news: the stench of the Chevron/Ecuador mess may prevent Patton Boggs from finding salvation through merger. If Patton Boggs is to survive, it will probably have to save itself.
UPDATE (3/5/2014, 10:00 a.m.): Yikes. Patton Boggs
just retained is consulting with Al Togut, Dewey’s former bankruptcy lawyer. We’ll probably have more to say about that development later.
Ecuador $9.5 billion ruling against Chevron was corrupt: U.S. judge [Reuters]
Federal Judge Rules for Chevron in Ecuadorean Pollution Case [New York Times]
Patton Boggs Hires Advisers to Aid in Financial Overhaul [Wall Street Journal (sub. req.)]
Will Legendary Law Firm Patton Boggs Be Swallowed or Evaporate? [Businessweek]
Patton Boggs hires financial advisers to review capital structure, compensation system [ABA Journal]
Chevron Corporation Statement on U.S. Federal Court RICO and Fraud Decision [Chevron (press release)]
Chevron’s Flawed RICO Decision in Ecuador Case Violates First Amendment and Will Backfire In International Courts, Defendants Say [CSR Wire (press release)]