So, we've all heard theories about how fiduciary duties should run from directors to stakeholders, to employees, or even that these groups should be third-party beneficiaries of these duties.  How about this one:  fiduciary duties to a corporation should run from a plaintiffs lawyer in a derivative suit to the company the lawyer is suing?  This law.com article tries to describe the scenario.  Tenet Healthcare faced three suits; a suit for securities fraud, a derivative suit in federal court for breach of fiduciary duty, and a derivative suit in state court for breach of fiduciary duty.  Tenet was represented at least on the derivative suits by Skadden, Arps.  A judge stayed the state court suit pending action in the federal suit.  The plaintiff's attorneys in the federal suit, Cauley, Bowman, Carney & Williams, say that they diligently worked for two years to obtain a resolution in the federal case.   According to Cauley, Bowman, Tenet determined that the federal plaintiffs' demands were too high, turned to the state plaintiffs, and settled in one day.  This settlement provided the state plaintiffs' attorneys, Faruqi & Faruqi and Robins, Umeda & Fink with $5M in attorney fees.

So, everybody's happy except for Cauley, Bowman, who have lost in the "reverse auction" and receive no attorney fees for its work.  So, Cauley, Bowman is now suing the state plaintiffs' attorneys and Skadden, Arps under the theory that they all breached their duties to the company by settling too low.  If the case has any merit at all, the case must turn not on which plaintiffs attorney deserves the settlement or which firm worked longer or harder.  The case must turn on (1) the nature of the duty that the plaintiffs' attorneys owed to the corporation and (2) whether the settlement was reasonable.  Everything else is just part of the nature of the beast.

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