Recently, in Staring Down the Catastrophic Claim, Part One and Part Two, I wrote about the difficult issues presented to a firm when a claim of catastrophic dimensions is asserted or threatened. Those posts identified the characteristics that factor into the ability of a firm to survive such a claim. With strong leadership, a strong culture, a good plan, and a commitment to communicate, a firm can not only create a belief that the adverse claim will be resolved eventually, but can position itself to achieve the ultimate objective of resolving the claim itself.

Just last week, a law firm that faced a large and significant claim resolved it with a noteworthy settlement. As had been in the news for some time, a potentially catastrophic claim threatened Patton Boggs for its involvement on behalf of plaintiffs holding a foreign judgment against Chevron. Chevron was displeased with the tactics employed by the plaintiffs and turned to the courts to assert claims against many of those were involved in obtaining and/or attempting to enforce the judgment, including Patton Boggs.

Having exhausted efforts to obtain dismissal of the Chevron claims through the courts, Patton Boggs chose to settle the Chevron claims rather than let them to proceed to the merits. As reported by many sources, Patton Boggs has agreed to pay Chevron $15 million and provide some measure of cooperation against the remaining targets of Chevron’s assault. In addition, Patton Boggs issued a statement apologizing for its involvement in the matter. By settling, Patton Boggs has not only resolved the Chevron claim but also has addressed favorably, for the most part, the five truths that face a troubled law firm. The settlement addresses Patton Bogg’s:

Vulnerability. A troubled law firm is more vulnerable as long as a potentially catastrophic claim clouds its future. Resolving such a claim reduces a law firm’s vulnerability. Whether the Chevron/Patton Boggs settlement creates other fallout for Patton Boggs is not certain, but by settling with Chevron Patton Boggs has lifted that dark cloud over its future and, for the present, that is a very good thing.

Control. A typical malady for a law firm facing a catastrophic claim is its diminished control over its short and long-term futures. By settling with Chevron, Patton Boggs has much greater control over its future, whether it involves an organic restructure or a major transaction such as a merger.

Time. By settling with Chevron, Patton Boggs has resolved a major claim and at least the claim no longer dictates the firm’s activities. Patton Boggs can direct its focus to matters needing its attention (such as its restructuring plan or potential transaction(s) with other firms) and determine the order and timing of resolution.  The firm’s agenda is no longer subject to temporal issues dictated by Chevron or the courts.

Do-overs. When a law firm faces challenges, generally it does not have the luxury of being able to make mistakes when decisions impacting its future are required. Its decisions must be correct the first time.  While the settlement with Chevron is a positive development and no doubt relieves some pressure, the firm must be sensitive to the importance of making the right decisions as it moves towards normalcy. So while this is not time to think the pressure is off, the settlement shines some light at the end of the tunnel.

The Message. A truth present whenever a law firm is in trouble is that bad news spreads like a forest fire.  Here, the settlement with Chevron should be viewed, at least internally, as good news. Yet now is not the time for Patton Boggs to rest on its laurels. By now, the good news from settling with Chevron has been absorbed by firm personnel. After an initial elation, many at Patton Boggs will ask “what does all this mean long-term?” Responding and showing that the momentum from the settlement will not be squandered is a major step in controlling the message, maintaining credibility and moving forward to a better day.

The settlement with Chevron was a positive development for Patton Boggs.  No longer will it face the risk of a large judgment in favor of Chevron or the distractions that go with mounting a forceful defense. But in instances when law firms settle large claims, are there downsides?