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It’s probably best not to think too hard about this one: A group of plaintiff lawyers is being sued in L.A. federal court for breaching their fiduciary duty � to a company whose board they were suing. “Suing the people suing the company for breach of fiduciary duty; I haven’t see that before,” said Steven Williams, a partner at the Burlingame firm Cotchett, Pitre, Simon & McCarthy who represents plaintiffs in securities and derivative suits. The convoluted case � possibly a first, several lawyers said � grows out of long-running securities litigation against Tenet Healthcare, and the competing state and federal derivative suits against the Tenet board of directors that were filed on its heels. Lawyers from the Arkansas plaintiff firm Cauley, Bowman, Carney & Williams filed a derivative suit in federal court around the same time a separate group of plaintiffs filed parallel state court claims. That, Cauley lawyers argue, let Tenet’s board, and its lawyers with Skadden, Arps, Slate, Meagher & Flom, engage in what plaintiff lawyers call a reverse auction: a situation in which a defendant facing competing suits chooses to settle with the plaintiff asking for the smallest recovery, killing the costlier parallel claims. In a complaint filed late last month in L.A. federal court, Cauley partner Joseph (Hank) Bates III says that after spending two years litigating derivative claims in federal court � and even having detailed settlement talks � Tenet decided the federal plaintiff’s demands were too high, and turned to the state plaintiff, who quickly settled the case. That deal jettisoned the federal suit, and resulted in $5 million in attorney’s fees for the plaintiff firms Faruqi & Faruqi and Robbins Umeda & Fink. This left the Cauley lawyers irate. “State derivative lawyer defendants had no substantial investment of involvement in the three-year prosecution of claims on behalf of Tenet,” Bates wrote. “Thus, it comes as no surprise that they were willing to settle in one day,” he continues. “In essence, state derivative counsel received a fee of $5 million for one day of work.” Derivative actions � in which a stockholder sues on behalf of a company to recoup cash from an allegedly corrupt board of directors � often follow securities fraud suits. When successful, they result in monetary or injunctive relief for the company at hand, and the plaintiff lawyers collect fees. Didn’t see that coming There is often stiff competition among plaintiff lawyers in derivative suits, and it’s not terribly uncommon for such a situation to produce a controversial settlement. Indeed, as tasteless as many lawyers feel a reverse auction is, it’s a well-known peril of the competitive plaintiff bar. But plaintiff and defense lawyers said they’ve never seen anyone sue over such a settlement. “There’s always been an issue as to whether you can be sued for settling a case inadequately,” said Jordan Eth, a partner at Morrison & Foerster who represents defendants in securities and derivative suits. Joseph Grundfest, a professor at Stanford Law School who specializes in securities law, said that seems to be an open question. “To the best of my knowledge, this is a first,” he said. In court papers, Cauley lawyers are adamant that they have something to litigate. Cauley attorney Bates wrote that most of the work in the derivative case was performed by the federal lawyers. Indeed, the state case was stayed, and there was little the lawyers with state claims could do, he wrote, though the state lawyers did sit in on some of the depositions in the federal case. Williams, of the Cotchett firm, said the Cauley firm could have a strong claim because once a derivative suit is filed, a plaintiff lawyer automatically takes on the responsibility of looking out for the best interests of the company whose board is being sued. “They certainly are fiduciaries,” Williams said, adding that the Cauley firm’s suit is “a very smart move to make. I’m not sure where it’ll go.” Sour grapes of wrath? Lawyers at the Cauley firm didn’t return repeated phone calls. Nor did attorneys with Robbins Umeda & Fink and Faruqi & Faruqi. A Skadden, Arps spokeswoman said lawyers working on the case weren’t available Tuesday. But a Tenet spokesman had plenty to say on Tuesday. “It’s nothing more than sour grapes by these lawyers who are trying to recover millions of dollars in fees,” said Steven Campanini. But he didn’t deny the essence of the Cauley firm’s contention that Tenet’s board shopped around for the cheapest deal. “We were in discussions to settle the federal action. Those settlement talks broke down,” he said. “We were working with the state counsel, and we settled with them.” Eth, the defense lawyer, said that a plaintiff firm feeling burned by such tactics generally expresses itself in ways other than suing. “There’s a procedure for challenging these things, and it’s called objecting,” Eth said. It’s not clear from the complaint why the Cauley firm didn’t object to the state court case, and whether that will factor into the outcome of its state suit. But Grundfest said one thing is readily evident from the suit. “Maybe Shakespeare got it wrong,” he said. “Maybe hell hath no fury like a plaintiff lawyer scorned.”

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