Crockett & Myers v. Napier, Fitzgerald & Kirby

• Decision Date: 21 October 2009
• Docket Number: No. 07-16191.,No. 07-16534.,07-16191.,07-16534.
• Citation: 583 F.3d 1232
• Parties: CROCKETT & MYERS, LTD.; J.R. Crockett, Jr., Plaintiffs-counter-defendants-Appellees, v. NAPIER, FITZGERALD & KIRBY, LLP; Brian P. Fitzgerald, Defendants-counter-claimants-Appellants. Crockett & Myers, Ltd.; J.R. Crockett, Jr., Plaintiffs-counter-defendants-Appellants, v. Napier, Fitzgerald & Kirby, LLP; Brian P. Fitzgerald, Defendants-counter-claimants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

583 F.3d 1232

CROCKETT & MYERS, LTD.; J.R. Crockett, Jr., Plaintiffs-counter-defendants-Appellees, v. NAPIER, FITZGERALD & KIRBY, LLP; Brian P. Fitzgerald, Defendants-counter-claimants-Appellants.

Crockett & Myers, Ltd.; J.R. Crockett, Jr., Plaintiffs-counter-defendants-Appellants, v. Napier, Fitzgerald & Kirby, LLP; Brian P. Fitzgerald, Defendants-counter-claimants-Appellees.

No. 07-16191.

No. 07-16534.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 16, 2009.

Submission Withdrawn April 27, 2009.

Filed October 21, 2009.

Mark A. Hutchison, Scott A. Flinders and Michael K. Wall (argued), Hutchison & Steffen, LLC, Las Vegas, NV, for the plaintiffs-counter-defendants-appellants-cross-appellees.

Joice B. Bass, Lewis & Roca, LLP and Samuel S. Lionel (argued), Lionel Sawyer & Collins, Las Vegas, NV, for the defendants-counter-claimants-appellees-cross-appellants.

Appeal from the United States District Court for the District of Nevada, Philip M. Pro, District Judge, Presiding. D.C. No. CV-05-00877-PMP-GWF.

Before: D.W. NELSON, MARSHA S. BERZON, and RICHARD R. CLIFTON, Circuit Judges.

D.W. NELSON, Senior Circuit Judge:

Napier, Fitzgerald & Kirby, LLP and Brian Fitzgerald (collectively "Fitzgerald") appeal the district court's dismissal of their Second Amended Counterclaim ("SAC"). They also appeal the district court's award of quantum meruit compensation subsequent to a bench trial. Crockett & Myers, Ltd. and J.R. Crockett, Jr. ("Crockett") cross-appeal the district court's denial of its posttrial motion for attorneys' fees. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we (1) affirm the dismissal of Fitzgerald's SAC; (2) affirm the denial of Crockett's motion for fees; and (3) vacate the district court's award of quantum meruit compensation and remand for recalculation.

FACTUAL AND PROCEDURAL BACKGROUND¹

On or about June 8, 2001, Wendy Nostro retained Brian Fitzgerald, a New York lawyer known to her family, to investigate whether the death of her husband in Nevada was due to potential medical malpractice. Soon after, Fitzgerald contacted a Nevada attorney, J.R. Crockett of Crockett & Myers, Ltd. Crockett and Fitzgerald orally agreed that they would serve as co-counsel to Nostro and that Fitzgerald would receive 50% of the attorneys' fees for his referral (the "Referral Agreement"). Fitzgerald also convinced Crockett to reduce his usual contingency fee from 40% to 33.33%.

Crockett, Fitzgerald, and Nostro subsequently entered into a written Attorney Retainer Agreement (the "Retainer Agreement"). Pursuant to the Retainer Agreement, which was attached to the SAC, the attorneys' fees were to be divided equally between Crockett and Fitzgerald. The Retainer Agreement further provided that:

[a]ll matters of policy, including but not limited to preparation and presentation of this claim, litigation, costs, possible settlement, trial and/or appeal, if the same shall arise, shall be determined jointly by the CLIENT and ATTORNEYS as reasonable as possible within the professional discretion of ATTORNEYS and within the Canons of Ethics[,]

and that:

[t]he CLIENT will be responsible for all costs advanced by the ATTORNEYS in presentation of the aforementioned claim or action. . . . It is further agreed and understood that the costs advanced during the course of said claim will be paid for equally by CROCKETT & MYERS and BRIAN FITZGERALD, ESQ.

Both attorneys continued to represent Nostro. At some point, Fitzgerald contacted Nostro and requested that she pay her share of the court costs. Nostro contacted Crockett, who advised her that "it was their policy not to go after a client for court costs" and that "she could fire Mr. Fitzgerald." Fitzgerald was not included in this conversation. On June 27, 2003, Nostro discharged Fitzgerald.

In October 2004, Crockett informed Fitzgerald that a settlement had been reached in Nostro's suit. Crockett did not forward 50% of the attorneys' fees. After a failed attempt at mediation, Crockett filed for relief in Nevada state court, requesting a judgment that Fitzgerald was only entitled to recovery in quantum meruit. The state action was then removed to federal court on the grounds of diversity of the parties.

Fitzgerald filed the SAC, alleging, inter alia: (1) breach of the oral Referral Agreement; (2) breach of the written Retainer Agreement; (3) breach of the implied covenant of good faith and fair dealing; (4) breach of the duty of loyalty and as a fiduciary by reason of joint venture; and (5) breach of fiduciary duties by reason of joint representation.

On June 12, 2006, Crockett offered Fitzgerald $35,000 to settle the case. Fitzgerald rejected the offer. Over a month later, in an opinion published at 440 F.Supp.2d 1184 (D.Nev.2006), the district court dismissed with prejudice all of the relevant SAC counterclaims.

In May 2007, the parties proceeded to a bench trial on Crockett's claim that Fitzgerald was only entitled to quantum meruit recovery. At trial, the evidence showed that Fitzgerald contributed 17.2 hours to Nostro's case before his discharge, for a total of $4,300 at his rate of $250/hour. His staff contributed varying numbers of hours at different rates that equated to an additional $2,909. Fitzgerald also admitted that the Referral Agreement was not distinct from the Retainer Agreement; according to his testimony, there was "only one agreement."

On May 22, 2007, the district court awarded Fitzgerald compensation in quantum meruit. Although the district court noted that the majority of Fitzgerald's services were roughly quantifiable, it acknowledged that compensation at an hourly rate did not reasonably represent the value of his services. The court noted that Fitzgerald focused on the importance of securing the proper person to represent Nostro, and that he was successful in convincing Crockett to reduce his contingency fee, resulting in benefit to Nostro of an additional $100,000 of the settlement proceeds. The court concluded that one-third of the $100,000 additional settlement was a reasonable sum, and awarded Fitzgerald $33,333.33.

On June 4, 2007, Crockett moved for $90,859.12 in attorneys' fees and $4,934.21 in costs. The district court entered an order denying Crockett's request for attorneys' fees but granting him costs.

Fitzgerald now appeals the dismissal of his claims on the pleadings as well as the district court's award of quantum meruit compensation. Crockett cross-appeals the district court's denial of attorneys' fees.

STANDARD OF REVIEW

This court reviews de novo a district court's dismissal of claims pursuant to Fed.R.Civ.P. 12(b)(6). Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir.2005). The court must accept all factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmovant. Id. We review a district court's findings of fact following a bench trial for clear error, and its conclusions of law de novo. Jarvis v. K2, Inc., 486 F.3d 526, 529 (9th Cir.2007). A district court's denial of attorneys' fees is reviewed for abuse of discretion. Champion Produce, Inc. v. Ruby Robinson Co., 342 F.3d 1016, 1020 (9th Cir.2003).

DISCUSSION

I. DISMISSAL OF THE SECOND AMENDED COUNTERCLAIM

A. Implied Covenant and Fiduciary Duty Claims

Fitzgerald's claims of breach of the implied covenant of good faith and fair dealing (count four) and fiduciary duty (counts five and seven) are based upon Crockett's conversation with Nostro in which he advised her that she could fire Fitzgerald. Because Nevada recognizes "the long-standing common law rule that communications uttered or published in the course of judicial proceedings are absolutely privileged," Crockett argues that these claims fail because his conversation with Nostro was privileged. See Fink v. Oshins, 118 Nev. 428, 49 P.3d 640, 643 (2002) (internal quotation marks omitted). "[T]he privilege applies not only to communications made during actual judicial proceedings, but also to `communications preliminary to a proposed judicial proceeding.'" Id. at 644 (quoting Bull v. McCuskey, 96 Nev. 706, 615 P.2d 957, 961 (1980)). "The . . . communication need not be strictly relevant to any issue involved in the proposed or pending litigation, it only need be in some way pertinent to the subject of controversy." Id. (internal quotations marks omitted).

Because the conversation consisted of legal advice as to what Nostro could do regarding Fitzgerald's request for costs, we conclude that it falls within the parameters of the privilege. We reject Fitzgerald's argument that Crockett was not acting within his role as Nostro's attorney; as her lawyer, he had a duty to communicate with her, respond to her questions, and inform her of her legal options.

Fitzgerald points out that Nevada has never applied the privilege to bar these types of claims. Because Nevada has not addressed this particular issue, we use our best judgment to predict how the Nevada Supreme Court would resolve it "using intermediate appellate court decisions, decisions from other jurisdictions, statutes, treatises, and restatements as guidance." Strother v. S. Cal. Permanente Med. Group, 79 F.3d 859, 865 (9th Cir.1996) (internal quotation marks omitted).

We are persuaded that the Nevada courts would apply the privilege to the communication at issue. First, privileging Crockett's legal advice advances the Nevada policy of granting "officers of the court the utmost freedom in their efforts to obtain justice for their clients." Fink, 49 P.3d at 643 (internal quotation marks omitted). We agree with the district court that it is in the public interest that attorneys speak freely with their clients, even if attorneys occasionally abuse the privilege. Second, Nevada courts have indicated that the scope of the privilege is "quite broad," and that it should be applied "liberally." Id. at 644; see also Clark County Sch. Dist. v. Virtual Educ. Software, Inc., ___ Nev. ___, ...