The fate of the proposed merger of law firms Patton Boggs and Squire Sanders appeared uncertain on Thursday after Squire Sanders halted voting on approving the tie-up.
The deal was held up because of concerns over the role of Patton Boggs in a legal battle between Chevron Corp (CVX.N) and a group of Ecuadorean villagers, a source close to the deal told Reuters.
On Tuesday, partners from the 300-lawyer Patton Boggs voted on the proposed merger with the 1,300-lawyer Squire Sanders. The source said that Patton Boggs partners had voted to approve it.
The executive board of Squire Sanders voted Friday to approve the merger and that firm's partnership had been expected to vote on it today, the source said.
But Thursday morning, the source said, Squire Sanders decided to hold off on the vote. The decision was prompted by a motion filed by a group of Ecuadorean villagers Wednesday in New York federal court related to Patton Boggs's prior involvement in a legal battle between Chevron and the villagers, the source said.
The motion urged a judge to reconsider his acceptance of a May 7 settlement resolving claims that Patton Boggs tried to enforce a fraudulent $18 billion pollution judgment against the oil giant on behalf of the Ecuadoreans.
Patton Boggs agreed to pay $15 million and cooperate with Chevron in discovery related to the case, and it expressed regret for its involvement.
On Wednesday, Steven Donziger, who represents the Ecuadoreans, asked U.S. District Judge Lewis Kaplan, who accepted the settlement, to issue an order blocking the deal.
In March, Kaplan ruled that Donziger had used "corrupt means" to secure the 2011 judgment. Donziger is appealing.
Donziger said in Wednesday's motion that Patton Boggs had abandoned its clients and violated ethics to facilitate the merger.
On Thursday, Patton Boggs countered that the motion was a publicity stunt.
"It seems clear that the objective of the motion is simply to generate publicity and cast a cloud over Patton Boggs," the firm wrote in a letter to Kaplan, asking the judge to dismiss the motion.
According to the source, the merger between Patton Boggs and Squire Sanders was conditional on the resolution of the case between Chevron and Patton Boggs. Squire Sanders felt that the Donziger filing meant that condition had not been met, the source said.
It was not clear Thursday whether the vote would be resumed soon or put off indefinitely. Another source close to the matter said he believed Squire Sanders had decided to resume voting after concluding the Donziger motion was unlikely to succeed.
Patton Boggs has been in discussions with Squire Sanders since at least February, after seeing revenue wane and partners defect in 2013.
Neither Patton Boggs managing partner Edward Newberry, who would be co-managing partner of the new firm, nor James Maiwurm, chairman of Squire Sanders, responded to requests for comment.
The American Lawyer first reported the stalled Squire Sanders vote.
(Additional Reporting by Nicholas Brown; Editing by Eric Effron, Noeleen Walder, Grant McCool and Eric Walsh)