CORRECTION: 2/28/14, 12:55 p.m. EST. The original version of this story referred inaccurately to the total revenues earned by Patton Boggs’ Newark office and those revenues specifically tied to the 9/11 captive insurance case handled by the firm. The 24th paragraph of the story has been revised to reflect the correct information. We regret the error.
When litigators and longtime friends James Tyrrell Jr. and John McGahren led a 25-lawyer group from Latham & Watkins to Patton Boggs in 2006, their new firm was effusive in its praise.
“I could not be more delighted to have a core group of accomplished litigators join our firm,” then–Patton Boggs chairman and legendary lobbyist Thomas Hale Boggs Jr. said in a statement at the time. “Jim and John and their colleagues have handled some of the most complex toxic tort and environmental matters in the nation, and their skills and reputations will add to our already substantial national litigation capabilities.”
A lot has changed in eight years.
Patton Boggs confirmed Wednesday that it is exploring the possibility of combining with Squire Sanders, just days after saying it will close the Newark office that McGahren headed before leaving for Morgan, Lewis & Bockius last year. Now Tyrrell—whose most notable current case, the controversial litigation pitting indigenous Ecuadoreans against energy giant Chevron, has complicated Patton Boggs’ search for a merger partner—appears set to head for the exit himself.
Three sources with knowledge of the matter told The Am Law Daily this week that the 66-year-old Tyrrell, a member of Patton Boggs’ executive committee, is likely to leave the firm in the wake of its decision to shutter the Newark office. Tyrrell did not respond to a request for comment about his plans, nor did his son, a Washington, D.C.–based associate at Clark Hill. A Patton Boggs spokesman and the firm’s managing partner, Edward Newberry, also did not respond to requests for comment.
Asked how those who have worked out of Newark—whose biggest engagement was litigation tied to the aftermath of the terrorist attacks on September 11, 2001—fit into Patton Boggs’ plans, the firm’s New York managing partner, John Nonna, says it “certainly makes sense given the winding down of the 9/11 cases to consolidate Newark into New York.” Asked about Tyrrell specifically, Nonna says, “[Jim] would be a welcome addition to the New York office.”
Sibling publication The National Law Journal reported Monday that Patton Boggs’ latest downsizing—the firm endured two rounds of layoffs and an exodus of partners last year as part of a restructuring effort—will see between 10 and 12 of the Newark office’s 26 employees relocate to New York and another five or so move to a new, smaller Garden State outpost in suburban Florham Park.
Tyrrell helped launch both the Newark and New York offices when he and McGahren brought their team aboard from Latham, which closed the remnants of its Newark base in 2012. McGahren served as managing partner of the New Jersey office, while Tyrrell took the reins of the firm’s toxic tort and product liability group.
In that role, Tyrrell, a New Jersey native, Harvard Law School graduate and former lieutenant in the U.S. Navy’s Judge Advocate General’s Corps, led the Patton Boggs team representing New York City in its litigation with firefighters and other rescue worker plaintiffs who claimed their health had suffered as a result of their work at Ground Zero in the wake of 9/11.
By the time the city reached a $625 million settlement with more than 10,000 of those plaintiffs in June 2010, Patton Boggs had reaped more than $120 million in fees for its work on the matter, according to our previous reports. (The settlement—whose value could rise to $712.5 million—was approved in 2011.)
With the 9/11 litigation coming to a close, Tyrrell began looking for another major case. He found it in 2010 when Patton Boggs signed on to represent the Ecuadorian plaintiffs suing Chevron for billions of dollars for the alleged pollution of a section of the country’s rainforest. The case came to Tyrrell through another former Latham litigation partner, Selvyn Seidel, a cofounder of third-party litigation fund Burford Capital.
For Patton Boggs, as for the other parties involved, the stakes in the court battle are high.
An Ecuadorean court issued an initial $19 billion judgment against Chevron, which—though it was whittled to $9.5 billion in November—could bring a windfall to Patton Boggs. Fortune’s Roger Parloff reported last year that the firm stands to collect at least 2.4 percent of a partial contingency fee based on that judgment. That would translate into roughly $200 million in fees.
In order to see any of that sum, however, Patton Boggs and the plaintiffs led by the Amazon Defense Front will have to overcome significant legal hurdles in the sprawling fight to extract damages and seize assets from Chevron. For Patton Boggs, those obstacles include allegations of fraud brought against the firm in a counterclaim filed last year by Chevron.
As previously reported by The Am Law Daily, the potential liabilities Patton Boggs faces related to the Chevron litigation were a key factor in the firm’s scuttled merger talks with Locke Lord late last year. Locke Lord chair Jerry Clements said at the time that “reputational aspects” of the Chevron case were an issue for her firm, and two sources familiar with the matter told The Am Law Daily in December that concerns about the litigation played a significant role in ending the merger talks.
Locke Lord general counsel Michael Comiskey declined to comment Thursday about Patton Boggs and Chevron-related issues. A Squire Sanders spokesman also declined to comment when asked by The Am Law Daily if the firm has retained outside counsel to conduct a risk assessment of Patton Boggs’ role in the case.
If Tyrrell does indeed leave Patton Boggs, the firm cannot simply walk away from the Chevron litigation, unlike others who did so before it was too late.
“Any organization, whether it’s a company, a partnership or a law firm, is vicariously liable for the alleged activities of its constituents, in this case a lawyer,” says Stephen Gillers, a noted legal ethicist and professor at New York University School of Law. “Having that person leave is not a way to eliminate liability.”
One Locke Lord partner, who spoke with The Am Law Daily on the condition of anonymity, says that given how the Chevron matter hung over that firm’s merger talks with Patton Boggs, parting ways with Tyrrell could be a signal to other potential merger partners, such as Squire Sanders.
And yet, Squire Sanders has its own ties to Ecuador. The firm acted as cocounsel to the South American nation in a high-profile international arbitration, and represented the country in unrelated cross-border litigation involving the collapse of Ecuador’s largest bank. Squire Sanders litigation partner Alvin Davis in Miami, a lead lawyer for the firm in the latter case, is the former managing partner of Florida’s Steel Hector & Davis, which merged with Squire Sanders in 2005.
Steel Hector had its own extensive ties to Latin America, and Davis says Squire Sanders continues to represent Ecuador on a number of important matters. When asked how that work might fit with Patton Boggs’ representation of the Ecuadoreans battling Chevron, Davis says he’s been uninvolved in his firm’s merger talks with Patton Boggs and thus unable to comment.
Meanwhile, in addition to complicating Patton Boggs’ merger prospects, taking on the Chevron case also complicated the relationship between Tyrrell and McGahren.
McGahren, an environmental litigator who once represented Chevron, opposed the idea of representing the indigenous Ecuadoreans in the matter. And ultimately the Newark office, whose prowess defending corporate clients in toxic tort and product liability cases was profiled last year by sibling publication New Jersey Law Journal, saw its business wither after Patton Boggs waded into the case.
Patton Boggs’ Newberry told the NLJ this week that at its height, Newark handled $50 million in business for the firm, a sum roughly equal to one-seventh of its $335 million in gross revenue in 2010. Since then, Newberry said, revenue tied to the 9/11 captive insurance case slipped to roughly $20 million, before bottoming out at $1.8 million in 2013. The steep financial falloff contributed to last year’s lawyer and staff cuts.
As reported at the time by The Am Law Daily, Patton Boggs first slashed the Newark office’s head count from 80 to 50 lawyers, then made further cuts in November. Since that second round of layoffs, The Am Law Daily contacted more than a dozen lawyers who lost their jobs to discuss the decline of the Newark office and was told by some that they had signed confidentiality agreements preventing them from speaking publicly about the firm.
In August, McGahren and litigation partner Stephanie Feingold left Patton Boggs for Morgan Lewis. McGahren declined to comment when contacted by The Am Law Daily this week.
Even with the Newark office closing, Patton Boggs will be one of the few Am Law 200 firms with a Garden State presence. The firm’s modest office in Florham Park will be headed by insurance litigation and government investigations partner Mark Sheridan, a 2011 lateral hire from Drinker Biddle & Reath described by one former colleague as a “rising star.”
The New Jersey Law Journal reported in January that Sheridan had been retained by Gov. Chris Christie’s campaign committee in connection with the evolving scandal over lane closures last September on the George Washington Bridge. Patton Boggs’ lead cocounsel in that matter is Randy Mastro, a litigation partner with Gibson, Dunn & Crutcher, which has been retained separately by the Christie administration at a discounted rate of $650 per hour, according to our previous reports. (Mastro and Patton Boggs make for strange bedfellows: The firms are adverse to one another in the Chevron case, where Gibson Dunn’s ferocious litigation tactics have made the firm millions.)
Patton Boggs, which has been busy in recent months filing a number of suits against former clients seeking the payment of outstanding fees, also saw revenue from its robust lobbying practice in Washington, D.C., fall 13 percent between 2012 and 2013, according to Roll Call. (As sibling publication The Blog of Legal Times reported last summer, one of the lobbying pacts to fall by the wayside was the firm’s $780,000-a-year contract with Ecuador’s government.)
Overall, Newberry told The Wall Street Journal this week that Patton Boggs’ gross revenue dropped about 12 percent in 2013 to $279 million, while profits per partner also experienced a “modest drop.”
Newberry, who told the NLJ that his firm’s Garden State pruning will save it about $27 million, has also said Patton Boggs is committed to growing in London and California and remains on the hunt for new partners. Nonna, who joined Patton Boggs in 2012 from the now-defunct Dewey & LeBoeuf, told sibling publication New York Law Journal in December that Patton Boggs was seeking to merge with a small firm in Manhattan.
Before news of the Squire Sanders talks emerged Wednesday, Nonna told The Am Law Daily that Patton Boggs was no longer looking at a merger in New York, and was focused instead on making key lateral acquisitions.
So far this year, the firm has added to a five-lawyer public finance group it picked up from Edwards Wildman Palmer last fall by hiring Day Pitney tax of counsel Linda D’Onofrio as a partner in New York, as well as Vinson & Elkins bankruptcy partner Daniel Stewart as of counsel in Dallas. Patton Boggs also recently brought on former Commodity Futures Trading Commission official Richard Shilts as a senior policy adviser in Washington, D.C.
At the same time, the firm has also continued to lose talent. Politico, which first had news of Patton Boggs’ Newark closure, reported this week that senior policy adviser Vincent Frillici will join Mercury Public Affairs as a managing director in Washington, D.C. Patton Boggs’ Beltway base also recently lost government contracts head Robert Tompkins to Holland & Knight, government affairs and public policy partner Darryl Nirenberg to Steptoe & Johnson and banking and financial services partners Andrew Zimmitti and Carol Van Cleef, who headed Patton Boggs’ emerging payments and anti–money laundering compliance practice, to Manatt, Phelps & Phillips.
Corporate and financial regulatory partner Wendy Li also left Patton Boggs in January to join Greenberg Traurig in New York. Another Big Apple denizen, Congressman Michael Grimm, who has had his own troubles of late, owes the firm more than $416,000 in legal fees for its role representing him in a campaign finance probe.
In the event Patton Boggs succeeds in extracting some payment from Chevron, it will be because of Tyrrell. Once a Florham Park–based partner at Day Pitney predecessor Pitney Hardin, he joined Latham in 1997 and took control of its Newark office three years later. In addition to fighting back against Chevron’s fraud claims, Patton Boggs is also on the defensive over its complicated relationship with Burford, which settled with Chevron but claims it was duped by Tyrrell.
Reuters’ Alison Frankel reported last year on Burford’s decision to exit the Chevron case following the departure of Seidel, who founded and chairs rival third-party litigation shop Fulbrook Capital Management. Court documents filed by Burford include a much-publicized declaration that contains the handwritten notes of its CEO and cofounder Christopher Bogart, one of which states the “enormous financial pressure @ PB” that led Patton Boggs and Tyrrell to take up the cause of aggrieved Ecuadoreans.
Those same plaintiffs have hit back at Chevron, filing their own court papers defending Tyrrell and Patton Boggs, some of which cite internal Burford communications stating that while the litigation funder was frustrated with the actions of certain lawyers in the case, it was not “furious with Patton Boggs, which we think has handled itself entirely responsibly here.”
