Court Opinion

ID: 3065183
Source: CourtListenerOpinion
Date Created: 2015-10-14 22:29:34.580847+00
Date Added: 2024-06-11T12:06:06.301990
License: Public Domain

FOR PUBLICATION
 UNITED STATES COURT OF APPEALS
      FOR THE NINTH CIRCUIT

CROCKETT & MYERS, LTD.; J. R.         
CROCKETT, Jr.,
     Plaintiffs-counter-defendants-
                         Appellees,         No. 07-16191
                 v.                          D.C. No.
                                          CV-05-00877-PMP-
NAPIER, FITZGERALD & KIRBY, LLP;                GWF
BRIAN P. FITZGERALD,
    Defendants-counter-claimants-
                        Appellants.
                                      

CROCKETT & MYERS, LTD.; J. R.         
CROCKETT, Jr.,
     Plaintiffs-counter-defendants-         No. 07-16534
                        Appellants,           D.C. No.
                 v.                      CV-05-00877-PMP-
NAPIER, FITZGERALD & KIRBY, LLP;                GWF
BRIAN P. FITZGERALD,                          OPINION
    Defendants-counter-claimants-
                         Appellees.
                                      
       Appeal from the United States District Court
                for the District of Nevada
         Philip M. Pro, District Judge, Presiding

          Argued and Submitted April 16, 2009
          Submission Withdrawn April 27, 2009
               San Francisco, California

                  Filed October 21, 2009

                           14157
14158         CROCKETT & MYERS v. NAPIER
    Before: Dorothy W. Nelson, Marsha S. Berzon and
            Richard R. Clifton, Circuit Judges.

            Opinion by Judge D.W. Nelson
                   CROCKETT & MYERS v. NAPIER                    14161

                             COUNSEL

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

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

                             OPINION

D.W. NELSON, Senior Circuit Judge:

   Napier, Fitzgerald & Kirby, LLP and Brian Fitzgerald (col-
lectively “Fitzgerald”) appeal the district court’s dismissal of
their Second Amended Counterclaim (“SAC”). They also
appeal the district court’s award of quantum meruit compen-
sation 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 recal-
culation.

      FACTUAL AND PROCEDURAL BACKGROUND1
  1
   Because these appeals are from both an order granting dismissal and
a judgment after a bench trial, the factual and procedural background is
14162               CROCKETT & MYERS v. NAPIER
   On or about June 8, 2001, Wendy Nostro retained Brian
Fitzgerald, a New York lawyer known to her family, to inves-
tigate whether the death of her husband in Nevada was due to
potential medical malpractice. Soon after, Fitzgerald con-
tacted 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 “Refer-
ral 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 Agree-
ment”). 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 Agree-
ment 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 possi-
     ble within the professional discretion of ATTOR-
     NEYS 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 dur-

extensive. For issues related to the motion to dismiss, the facts are taken
from Fitzgerald’s SAC and related pleadings. For issues related to the
bench trial, the facts are derived from the evidence adduced during discov-
ery and at trial, to the extent that they are relevant and differ from the
SAC.
                  CROCKETT & MYERS v. NAPIER               14163
    ing the course of said claim will be paid for equally
    by CROCKETT & MYERS and BRIAN FITZGER-
    ALD, 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.” Fitzger-
ald was not included in this conversation. On June 27, 2003,
Nostro discharged Fitzgerald.

   In October 2004, Crockett informed Fitzgerald that a settle-
ment had been reached in Nostro’s suit. Crockett did not for-
ward 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,
14164             CROCKETT & MYERS v. NAPIER
for a total of $4,300 at his rate of $250/hour. His staff contrib-
uted 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 Agree-
ment; according to his testimony, there was “only one agree-
ment.”

   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 contin-
gency 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 reason-
able sum, and awarded Fitzgerald $33,333.33.

  On June 4, 2007, Crockett moved for $90,859.12 in attor-
neys’ 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
                    CROCKETT & MYERS v. NAPIER             14165
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 dis-
cretion. 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

   [1] 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 conversa-
tion 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, 49 P.3d 640,
643 (Nev. 2002) (internal quotation marks omitted). “[T]he
privilege applies not only to communications made during
actual judicial proceedings, but also to ‘communications pre-
liminary to a proposed judicial proceeding.’ ” Id. at 644 (quot-
ing Bull v. McCuskey, 615 P.2d 957, 961 (Nev. 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).

   [2] 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 privi-
lege. We reject Fitzgerald’s argument that Crockett was not
acting within his role as Nostro’s attorney; as her lawyer, he
14166             CROCKETT & MYERS v. NAPIER
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 omit-
ted).

   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 grant-
ing “officers of the court the utmost freedom in their efforts
to obtain justice for their clients.” Fink, 49 P.3d at 643 (inter-
nal 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 privi-
lege. 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. Vir-
tual Educ. Software, Inc., ___ P.3d ___, 2009 WL 2414820
(Nev. Aug. 6, 2009) (extending the absolute privilege to
defamatory communications made by nonlawyers in anticipa-
tion of a judicial proceeding). Finally, “[w]here Nevada law
is lacking, its courts have looked to the law of other jurisdic-
tions, particularly California, for guidance.” Mort v. United
States, 86 F.3d 890, 893 (9th Cir. 1997). California law sup-
ports applying the privilege here. See Pac. Gas & Elec. Co.
v. Bear Stearns & Co., 791 P.2d 587, 594-95 (Cal. 1990)
(privilege applies to any action except one for malicious pros-
ecution).

   [3] Because the communication was privileged, we affirm
the dismissal of these claims.
                  CROCKETT & MYERS v. NAPIER                14167
  B.   Breach of the Written Retainer Agreement

  Next, Fitzgerald alleges that Crockett violated the Retainer
Agreement by failing to include Fitzgerald in the discussion
with Nostro regarding costs.

   [4] To determine whether the contract was breached, we
must turn to the language of the Retainer Agreement, which
was incorporated into the SAC. See Sandy Valley Assocs. v.
Sky Ranch Estate Owners Ass’n, 35 P.3d 964, 967 (Nev.
2001) (per curiam), receded from on different grounds by
Horgan v. Felton, 170 P.3d 982, 988 (Nev. 2007) (“When a
contract is clear on its face, it will be construed from the writ-
ten language and enforced as written.”). Although the
Retainer Agreement required the attorneys to jointly “deter-
mine” costs, it did not require that any and all communica-
tions with the client regarding costs include both attorneys.
There is no specific provision requiring joint communications,
nor can the explicit language be interpreted to so require.

   [5] Fitzgerald’s own behavior confirms our reading of the
Retainer Agreement and what the parties understood it to
require. The SAC alleges that Nostro called Crockett because
Fitzgerald had earlier “request[ed] that Mrs. Nostro pay her
share of the costs.” Fitzgerald did not include Crockett on this
earlier call, thus violating Fitzgerald’s own interpretation of
the Retainer Agreement. Accordingly, we affirm the dismissal
of this claim.

  C.   Breach of the Oral Referral Agreement

   Finally, Fitzgerald argues that the district court erred in dis-
missing his claim for breach of the oral Referral Agreement.
In the SAC, Fitzgerald alleged that he and Crockett “entered
into a[n] oral contract” whereby Crockett agreed to give Fitz-
gerald 50% of the attorneys’ fees for referring the case. Fitz-
gerald argues that Crockett breached the agreement by failing
to forward him his share of the fees.
14168             CROCKETT & MYERS v. NAPIER
   Resolution of this claim requires us to examine closely
alternative theories of contractual liability. In his brief, Fitz-
gerald argues that the written Retainer Agreement was consis-
tent with the oral Referral Agreement and that the parol
evidence rule does not bar him from introducing the latter to
explain ambiguities in the former. Although we agree with the
general principle that “parol evidence is admissible in order
to resolve ambiguities in a written instrument,” Lowden Inv.
Co. v. Gen. Elec. Credit Co., 741 P.2d 806, 809 (Nev. 1987),
we disagree with the parties’ contention that the rule is appli-
cable here. Fitzgerald’s reference to the oral Referral Agree-
ment in the SAC was not made to supplement or explain the
written Retainer Agreement. Instead, Fitzgerald alleged that
Crockett breached a separate and independent oral contract.
To the extent that Fitzgerald now claims that the written con-
tract also embodied a provision calling for the equal division
of fees on account of the referral, that argument fails because
he did not allege a breach of the written Retainer Agreement
on those grounds in the SAC; he alleged only a breach of the
oral contract. We therefore need not determine whether the
written Retainer Agreement was, in fact, ambiguous.

   [6] To the extent that Fitzgerald alleges that Crockett
breached a separate and independent oral contract, this claim
must also fail because Fitzgerald has waived it. In his brief,
Fitzgerald conceded that he “saw the Retainer Agreement as
confirming the oral referral fee” and that “the oral referral fee
agreement was embodied in the written Retainer Agreement.”
See Hilao v. Estate of Marcos, 393 F.3d 987, 993 (9th Cir.
2004) (“A party . . . is bound by concessions made in its
brief.”). Fitzgerald himself agrees that the oral agreement was
not a separate contract. Because he now admits that there was
no separate contract, this claim fails on its face.

II.   AWARD OF QUANTUM MERUIT COMPENSATION

  Fitzgerald also appeals the district court’s award of quan-
tum meruit compensation. We find that the district court
                  CROCKETT & MYERS v. NAPIER               14169
clearly erred in failing to account for the value of the referral
to Crockett.

   [7] “The basis of recovery on quantum meruit . . . is that
a party has received from another a benefit which is unjust for
him to retain without paying for it.” Thompson v. Herrmann,
530 P.2d 1183, 1186 (Nev. 1975). Accordingly, “the proper
measure of damages under a quantum meruit theory of recov-
ery is the reasonable value of the services.” Flamingo Realty,
Inc. v. Midwest Dev., Inc., 879 P.2d 69, 71 (Nev. 1994) (inter-
nal quotation marks and alteration omitted).

   [8] We reject Fitzgerald’s argument that he was entitled to
50% of the fees as contemplated by the Retainer Agreement.
Although a court may consider the contract price, the origi-
nally agreed upon fee “cannot be held to be the controlling or
dominant consideration” in an action under quantum meruit.
Gordon v. Stewart, 324 P.2d 234, 236 (Nev. 1958). “Quantum
meruit contemplates that the true reasonable value is to be
substituted for the agreed terms.” Id. Because Fitzgerald was
terminated over a year before the case ultimately settled, the
district court properly departed from the original contract
price.

   [9] Although the district court recognized that Nostro bene-
fitted from Fitzgerald’s careful selection of a local attorney
well-versed in Nevada medical malpractice law, it failed to
account for the value, in and of itself, of the referral. Instead,
it focused solely on the value of the reduced contingency fee,
calculating the fee as a percentage of the fee savings. We
agree that the reduction conferred a benefit upon Nostro. The
district court, however, erred in failing to account for the “rea-
sonable value” to Crockett of the referral itself, apart from the
fee reduction. Accordingly, we vacate the lower court’s order
and remand for a recalculation of the award. We further note
that a court may also consider “established customs” when
calculating an award under quantum meruit. See, e.g., Asphalt
14170              CROCKETT & MYERS v. NAPIER
Prods. Corp. v. All Star Ready Mix, Inc., 898 P.2d 699, 701
(Nev. 1995) (per curiam); Flamingo, 879 P.2d at 71.

III.    DENIAL OF CROCKETT’S ATTORNEYS’ FEES

   [10] Under Nevada law, “a defendant shall be awarded rea-
sonable attorneys’ fees incurred from the time of an offer of
judgment if the plaintiff rejects it and fails to receive a more
favorable result.” MRO Commc’ns, Inc. v. Am. Tel. & Tel.
Co., 197 F.3d 1276, 1281 (9th Cir. 1999). Because Fitzgerald
rejected Crockett’s offer of judgment and ultimately recov-
ered less than was offered, Crockett moved for both fees and
costs.

  [11] The quantum meruit award of attorneys’ fees, how-
ever, is discretionary. See Nev. Rev. Stat. § 17.115(4)(d)(3);
Nev. R. Civ. P. 68(f)(2); Chavez v. Sievers, 43 P.3d 1022,
1027 (Nev. 2002). The Nevada Supreme Court has held that:

       In exercising its discretion regarding the allowance
       of fees and costs under NRCP 68, the trial court
       must carefully evaluate the following factors: (1)
       whether the plaintiff’s claim was brought in good
       faith; (2) whether the defendants’ offer of judgment
       was reasonable and in good faith in both its timing
       and amount; (3) whether the plaintiff’s decision to
       reject the offer and proceed to trial was grossly
       unreasonable or in bad faith; and (4) whether the
       fees sought by the offeror are reasonable and justi-
       fied in amount.

Beattie v. Thomas, 668 P.2d 268, 274 (Nev. 1983) (internal
citations omitted).

   [12] Crockett argues that the district court abused its discre-
tion when it denied his request for fees. The record, however,
reflects that the district court considered the four Beattie fac-
tors. Given the complexity of the claims, the novelty of the
                 CROCKETT & MYERS v. NAPIER               14171
legal questions presented, and the amount requested, we are
not left with a “definite and firm conviction that a mistake has
been committed.” SEC v. Rubera, 350 F.3d 1084, 1093 (9th
Cir. 2003) (internal quotation marks omitted).

                        CONCLUSION

   For the foregoing reasons, we AFFIRM (1) the dismissal of
the second amended counterclaim and (2) the district court’s
order denying attorneys’ fees to Crockett. Because we find
that the district court did not properly account for the value
of the referral, we VACATE the award and REMAND for
recalculation. Each party shall bear its own costs on appeal.

  AFFIRMED IN PART; VACATED AND REMANDED
IN PART.