Patton Boggs – the Washington DC law firm currently in merger discussions with Squire Sanders – has agreed to pay Chevron $15m (£8.8m) to settle a fraudulent misconduct claim.

Chevron had alleged lawyers at Patton Boggs committed fraud during a long-running dispute over the company's legacy drilling activitities in Ecuador.

In an unusual move, the firm, which also engages in political lobbying, admitted regret for its involvement in the case, though it made no admission of liability.

Under the terms of the settlement, Patton Boggs agreed to withdraw from all Ecuador-related litigation against Chevron, and pay the company any fees it had received during its representation of Ecuadorian plaintiffs.

In return, Chevron agreed to drop its counter-claims against the firm.

The litigation dates back to a long-running claim from a group of Ecuadorian citizens that the drilling activities of Texaco – now owned by Chevron – had caused massive environmental and social damage.

An Ecuadorian judge ordered Chevron to pay $18bn (£10.6bn) in 2011, later reduced to $9.5bn (£5.6bn).

A Patton Boggs team led by partner James Tyrrell joined the suit in 2010, in a bid to help obtain expert testimony and enforce the judgement against Chevron around the world.

On Wednesday (7 May), Patton Boggs said: "Today's resolution of our firm's disputes with Chevron ends our involvement in the Lago Agrio matter.

"The recent opinion of the United States District Court for the Southern District of New York in the Chevron v. Donziger case includes a number of factual findings about matters which would have materially affected our firm's decision to become involved and stay involved as counsel here.

"Based on the Court's findings, Patton Boggs regrets its involvement in this matter."

The firm and "any prospective merger partner or successor firm to Patton Boggs" must also "refrain from making any other public statement" on the Chevron saga.

However, the Ecuador plaintiffs' lead lawyer Steven Donziger said Patton Boggs was the "latest victim of Chevron's campaign of intimidation" against his clients and their lawyers.

In a statement on behalf of the Ecuadorian communities, Donziger said: "We wish to thank the many dedicated attorneys at Patton Boggs who fought long and hard against Chevron on behalf of the company's many victims.

"We also wish to thank our friends inside Patton Boggs who internally opposed this settlement agreement and fought against this sad and unethical betrayal of their clients."

He said the communities would also seek an injunction to block Patton Boggs from passing on "privileged materials" to Chevron, which was also agreed in this week's settlement.

Donziger has himself been accused by Chevron of using "corrupt means" to help secure the court verdict against the oil company, a claim that was upheld by a US court in March.

For the dispute with Patton Boggs, Chevron instructed long-time counsel Randy Mastro of Gibson Dunn & Crutcher, who has also advised the company throughout the Ecuador litigation.

The $15m settlement is equivalent to around 5% of Patton Boggs' annual revenue, which stood at $278m (£164m) in 2013. It also closes a difficult chapter which overshadowed the firm's proposed merger with Squire Sanders, news of which was confirmed in February.

If the tie-up goes ahead, it will create a 1700-lawyer firm with 45 offices across 22 countries and combined revenues of more than $1bn (£600m).

However, last month Dentons chief executive Elliott Portnoy told Legal Week his firm had made "a serious overture" to Patton Boggs, which has suffered a number of partner departures in recent months.

Earlier this year, Patton Boggs also announced the closure of its New Jersey base and a 12% drop in revenue for 2013, amid rapidly contracting lawyer numbers.