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Wednesday, June 14, 2006

Litigation About Litigation, Part II

It seemed the "litigation about litigation" trend that I thought I spotted and posted about last summer had run out of steam ... but wait!  What's this?  Justin Scheck of the The Recorder writes in this article that "a group of plaintiffs lawyers is being sued in L.A. federal court for breaching their fiduciary duty -- to a company whose board they were suing."

The article notes that the new case

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 plaintiffs 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 fees for the plaintiffs firms Faruqi & Faruqi and Robbins Umeda & Fink.

This left the Cauley lawyers irate.

And these "irate" Cauley lawyers reportedly then sued the plaintiffs' lawyers that settled the state case.  So add this case to the pile of "litigation about litigation" cases we started collecting last summer.

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