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A recent federal case started off with an intriguing headnote – “Lawyer does not breach of fiduciary duty or contracts by advising termination of co-counsel where advice was privileged and protected by agreements.” From the Ninth Circuit Court of Appeals, no less. In the end, the court tackled the issues on narrow grounds, giving rise to a puzzling result.
In Crockett & Myers, Ltd. v. Napier, Fitzgerald & Kirby, LLP (9th Cir. October 21, 2009), the dispute arose between two lawyers, both of whom represented the same client in a personal injury matter. The decision explains that, in 2001 “Wendi 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.”
The dispute arose after Mr. Fitzgerald (the New York lawyer) was able to locate a J.R. Crockett, a Nevada lawyer who was apparently skilled in personal injury matters. The client and the two attorneys entered into a written retainer agreement. The written retainer agreement with Ms. Nostro expressly provided that “attorneys fees were to be divided equally between Crockett and Fitzgerald.”
At the end of the day, the court refused to enforce this provision, although its rationale is not clear. According to the court, Mr. Fitzgerald, the New York lawyer, requested that plaintiff pay her share of the court costs. This request occurred while the litigation was ongoing. Plaintiff then contacted her Nevada attorney, Mr. Crockett, “who advised her that ‘it was their policy not to go after client for court costs’ and that ‘she could fire Mr. Fitzgerald.’”
That’s what plaintiff did – she terminated the New York lawyer. The underlying case later settled, but the Nevada lawyer did not forward 50% of the attorneys fees to Mr. Fitzgerald. The New York lawyer filed suit against the Nevada lawyer, alleging “breach of an oral referral agreement, breach of the written retainer agreement, breach of the duty of loyalty and as a fiduciary by reason of the joint venture, and breach of fiduciary duties by reason of joint representation.”
Now, that would be an interesting legal issue. Do attorneys owe each other fiduciary duties when two attorneys jointly represent a client on the same issue? Unfortunately, the court sidestepped this interesting issue. Instead, the court held that the claims based on breach of fiduciary duty were barred because, under Nevada law, the communications between the Nevada lawyer and plaintiff were privileged.
Explained the Ninth Circuit, “It is in the public interest attorneys speak freely with their clients, even if attorneys occasionally abuse the privilege . . . Nevada [recognizes a] policy of granting officers of the court the utmost freedom in their efforts to obtain justice for their clients.”
For reasons that are not entirely clear, the court next held that the Nevada lawyer was not liable for breach of the written retainer agreement, specifically, that a breach did not arise out of the failure of the Nevada attorney “to include [the New York lawyer] in the discussion with [plaintiff] regarding [payment of] costs.”
Big question here – why didn’t the New York lawyer set forth a claim based on interference with his contractual expectancy? The opinion does not address this issue, and it does not seem to have been plead as a cause of action.
Finally, the court held that the New York lawyer was entitled to recover damages under a quantum meruit theory based on “the reasonable value of the services.” The appellate court remanded the matter for a determination of such reasonable value, but expressly rejected the New York lawyer’s “argument that he was entitled to 50% of the fees as contemplated by the retainer agreement.”
This seems like an unfair result for the New York lawyer. He helped secure competent local counsel and obtained a written agreement with the client and the other attorney providing for an equal division of attorney’s fees. What more could he do? After the local attorney recommended that the New York attorney be fired, the originating lawyer lost his right to recovery of fees. There must be something missing, because the opinion controverts the contractual expectations of the parties, without good cause.