Durkin

In this second of two related cases 1 arising out of the failure of Imperial Savings Association, we must decide whether a court-approved settlement of a shareholder derivative suit precludes a subsequent action for legal malpractice.

I

The law firm of Shea & Gould interlocutor-ily appeals the district court’s order denying summary judgment in an action brought by Ronald L. Durkin alleging that the law firm breached a fiduciary duty and demonstrated negligence in its representation of Imperial Corporation of America (“ICA”), the parent corporation of failed savings and loan Imperial Savings Association (“ISA”). As representative of the ICA bankruptcy estate, 2 Durkin alleges that Shea & Gould, ICA’s attorneys, committed legal malpractice in settling a class action shareholder derivative suit, Shields v. Thygerson, 3 on the same day that federal regulators ordered the seizure of ISA. The district court concluded that the Shields settlement did not preclude Durkin’s action.

The Shields settlement resolved consolidated shareholder derivative and federal securities class actions involving ICA’s investments in junk bonds and consumer loans. These investments arose from transactions…