Chevron Allowed to Pursue Patton Boggs Fraud Claims

Chevron Corp. won permission from a federal judge in New York to sue law firm Patton Boggs LLP over its involvement in obtaining a $9.5 billion judgment in Ecuador ruled to be a product of fraud.

U.S. District Judge Lewis Kaplan granted Chevron’s request today about a month after issuing findings that a lawyer representing the Ecuadoreans, Steven Donziger, and his associates used bribery and fraud to get the award, even ghostwriting much of the judgment issued by the Ecuadorean court. Donziger has appealed those findings.

Kaplan’s ruling today in Manhattan is a blow to Patton Boggs, a 400-lawyer firm known for its Washington lobbying practice, which has been struggling financially and is in merger talks with Squire Sanders LLP.

The law firm, based in Washington, helped represent Ecuadorean farmers and villagers for a portion of their decades-long legal battle against Chevron over its alleged pollution of their lands. Kaplan still must decide whether he has jurisdiction over the case before it can move forward, Rick Talisman, general counsel for Patton Boggs, said in an e-mail.

“If this case advances beyond these jurisdictional arguments, we look forward to showing the lack of merit in Chevron’s allegations regarding our law firm,” Talisman said. “High-stakes litigation requires the ability to take a punch even when it is below the belt.”

Firings, Departures

Patton Boggs laid off at least 32 lawyers last year in moves managing partner Edward Newberry has described as part of a structural overhaul to make the firm more profitable.

The firm said this month that it would lose close to two dozen partners through firings and lateral departures. Last month, it said it would shut its Newark, New Jersey, office.

In his ruling today, Kaplan granted Chevron’s request to countersue in a case Patton Boggs had filed to protest a court order barring the firm from collecting on the Ecuador judgment. The law firm also sought access to $21.8 million the company had posted as a bond.

In court papers in June, Patton Boggs said Chevron’s effort to file those claims was “a bad-faith, legally futile, and vexatious stratagem designed to divert the resources” of the firm and pressure it to “abandon its clients as a result of unfavorable press.”

Chevron, the world’s third largest oil company by market value, is seeking an unspecified amount of money, including punitive and triple damages and attorneys fees, according to its countersuit.

‘Defraud’ Allegations

The firm has “sought to defraud and mislead numerous courts, as well as federal and state governmental agencies and officials, Chevron’s shareholders, investors, analysts and the media,” the San Ramon, California-based company said in a court filing in May.

In the underlying 20-year-old environmental case, Donziger and other lawyers for people in Ecuador’s Lago Agrio area sought damages for Texaco Inc.’s alleged dumping of toxic drilling wastes from 1964 until about 1992 that polluted about 1,500 square miles (3,885 square kilometers). The lawsuit continued against Chevron after it acquired Texaco in 2001.

Chevron contends that state-owned Petroecuador, a former Texaco partner, is responsible for most of the pollution and that the U.S. company already cleaned up its share of the site under agreements with Ecuador in the 1990s.

Patton Boggs “remains proud of our work on behalf of the indigenous and farming communities residing in the Oriente region of Ecuador,” Talisman said. “We have no doubt that we acted ethically and properly in assisting these communities.”

The case is Patton Boggs v. Chevron Corp., 1:12-cv-09176, U.S. District Court, Southern District of New York (Manhattan).

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