When we last checked in on Patton Boggs, the long-suffering law firm was on the brink of a bankruptcy breakthrough. Its partners, and the partners of Squire Sanders, were in the middle of voting on a merger that would save Patton Boggs.

Alas, sadly for Patton Boggs, Squire Sanders has suspended the merger vote. What happened? Did Squire come to its senses get second thoughts about that hideous proposed firm name, Squire Patton Boggs?

Actually, no; the issue is more substantial than that. Here’s a hint: Patton Boggs might have saved itself by June, if it weren’t for those meddling… Ecuadorian villagers!

(The vote is back on. Please note the multiple UPDATES at the end of this post.)

This morning Squire Sanders suspended the merger vote of its partners, which had been scheduled to end before Memorial Day weekend. Apparently Squire Sanders is worried about a filing made last night by the Ecuadorian villagers who were once Patton Boggs’s clients in the epic Chevron litigation, according to Julie Triedman of Am Law Daily:

The decision [to suspend the vote] was apparently connected to a filing Wednesday evening in a case brought by Chevron against former counsel in the massive Lago Agrio toxic torts case. [Last night] plaintiffs in the Lago Agrio case against Chevron Corporation filed a motion in federal district court in Manhattan seeking to block a settlement struck earlier this month between Chevron and Patton Boggs, the Ecuadorian plaintiffs’ former counsel.

That settlement, in which Patton Boggs agreed to pay Chevron $15 million and to cooperate (to a certain extent) with Chevron’s counsel in ongoing efforts to stop the Ecuadorian plaintiffs from collecting on a gigantic judgment, was widely perceived as an effort by Patton Boggs to make itself merger-ready. That didn’t sit well with the villagers, as explained in their press release about their motion:

[Patton Boggs left] the villagers in the lurch after four years of intense representation designed to protect their rights to a clean-up of polluted ancestral lands. The villagers, with the help of Patton Boggs, won a $9.5 billion judgment against Chevron in Ecuador in 2011 but were not notified in advance of the firm’s negotiations with the oil giant to abandon the case.

According to the motion: “There is 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.

“No court should place its imprimatur on such a rotten deal,” asserted the motion, which was filed by two residents of the rainforest, Javier Piaguaje and Hugo Camacho, and New York attorney Steven R. Donziger.

One of the plaintiffs’ other lawyers, Pablo Fajardo, added that Patton Boggs “withdrew to gain an economic benefit for itself in exchange for affirmatively prejudicing its clients on behalf of Chevron. We consider this utterly indefensible.”

Just to be clear, the villagers are not opposed to any deal between Patton Boggs and Chevron; they just don’t like this particular deal:

The court filing does not seek to stop any settlement between Patton Boggs and Chevron; it simply asks the court to reject the agreement until it conforms to the ethical rules that govern the practice of law. If the villagers succeed, Patton Boggs and Chevron likely would have go back to the drawing board and redo the agreement, or face protracted litigation that could affect the firm’s merger plans.

In terms of specifics, the villagers want PB to cover their legal fees for hiring new counsel, and they also want the firm to strike particular settlement provisions that they say violate legal ethics, such as the firm’s public statement of “regret” for getting involved in the case. As one might say of Lago Agrio, what a mess.

The specter of the Chevron litigation not being over isn’t the only concern people have with the merger. Here’s what one tipster told us:

[Patton Boggs managing partner] Ed Newberry, whose tour of duty coincides closely with the beginning of Patton Boggs’s problems, negotiated himself in as the one of two new Global Managing Partners of the firm. He sprung that on the Patton Boggs partners in meetings over the last few days when it was too late for them to oppose. Some think the firm’s problems are rooted in the fact that Ed took his eye off the ball [due to some personal issues]. Many Patton Boggs employees will be let go because of the mismanagement, but he will continue on as a leader of the newly merged and much larger firm.

Is the vote suspension merely a temporary setback, or does it spell bigger trouble? Is Squire Sanders just being prudent? Or is it trying to find a way to get even better terms for itself — or perhaps to exit gracefully from a possible transaction? If you have information to share, feel free to email us or text us (646-820-8477). Thanks.

UPDATE (5/23/2014, 9:15 a.m.): According to Am Law Daily, Squire Sanders said the merger vote resumed last night and is set to conclude today.

UPDATE (5/23/2014, 12:30 p.m.): Perhaps the resumption of the vote was helped along by the forceful letter that Patton Boggs sent to Judge Lewis Kaplan yesterday. In the letter — sent by Patton Boggs’s high-powered conunsel, Elkan Abramowitz of Morvillo Abramowitz — Patton Boggs defended the proposed settlement as consistent with legal ethics and accused the Ecuadorian villagers of simply trying “to generate publicity and cast a cloud over Patton Boggs.”

Squire Sanders Suspends Vote on Patton Boggs Merger [American Lawyer]
Ecuador Villagers Seek to Block Patton Boggs Settlement Due to “Flagrant” Ethical Violations [CSR Wire]


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