D.C. No. 2:05-cv-0877-PMP Appeal from the United States District Court for the District of Nevada Philip Pro, District Judge, Presiding
Argued and Submitted October 14, 2011-San Francisco, California
Before: Procter R. Hug, Andrew J. Kleinfeld, and William A. Fletcher, Circuit Judges.
Brian Fitzgerald appeals for a second time the district court's award to him of $33,333 in quantum meruit based on the unjust enrichment he conferred on Appellee Crockett & Myers, Ltd. (Crockett). In his first appeal, Fitzgerald argued to a previous panel of this court*fn1 that the district court's quan-tum meruit award was erroneous because Fitzgerald referred a major client to Crockett but the award did not account for the value of that referral. The panel agreed and remanded with instructions that the district court recalculate Fitzgerald's quantum meruit award to include the value of the client referral apart from the value of any other services Fitzgerald performed for Crockett. On remand, the district court re-entered its original award of $33,333. We are once again asked to consider whether the district court's $33,333 award was proper, and once again we hold that it was not.
The full factual history of this case is well documented in our opinion following Fitzgerald's first appeal, Crockett & Myers, Ltd. v. Napier, Fitzgerald & Kirby, LLP, 583 F.3d 1232 (9th Cir. 2009) (Crockett I), so we do not recite it in great detail here. The case is again before this court because Fitzgerald claims that the district court did not follow the remand instructions in Crockett I. In the Crockett I appeal, Fitzgerald challenged the district court's award to him of $33,333. The district court had awarded Fitzgerald that amount in quantum meruit for his services in a medical malpractice case Crockett had settled on behalf of Wende Nostro, a client Fitzgerald had referred to Crockett. Crockett had ultimately received $500,000 in fees from settling Nostro's case, and Fitzgerald argued that he was entitled to half that amount pursuant to an agreement between him and Crockett. Fitzgerald also pointed out that Crockett had a custom of paying attorneys who refer clients a referral fee equal to one-third of what Crockett recovers, and he argued in the alternative that Crockett was required to pay him that amount in quantum meruit.
After a bench trial, the district court ruled that the agreement was not binding on Crockett and that Fitzgerald was thus not entitled to half of Crockett's recovery, but it concluded that Fitzgerald should be awarded in quantum meruit for his contributions to the Nostro case. Crockett suggested that Fitzgerald's quantum meruit recovery should be no more than the hourly fees associated with Fitzgerald's work on the case, but the district court determined that amount was too low. The district court ultimately arrived at the amount of $33,333 for Fitzgerald's quantum meruit award, believing that figure to be reasonable compensation for Fitzgerald's efforts in the Nostro case.
This court vacated the award. Id. at 1239. While we agreed with the district court that Fitzgerald was not entitled to half of Crockett's $500,000 fee, we held that the district court had "clearly erred" in its calculation of Fitzgerald's quantum meruit award because the $33,333 amount did not reflect the value of Fitzgerald's referral of the Nostro case to Crockett. Id. at 1238-39. The district court had arrived at the $33,333 figure by awarding Fitzgerald a percentage of the money he saved Nostro by negotiating with Crockett to reduce her contingency fee from 40% to 33 1/3%. The district court reasoned that Fitzgerald ultimately saved Nostro $100,000 (the additional amount she would have paid Crockett as part of her settlement under its standard 40% contingency fee) and concluded that 33 1/3% of that amount was a reasonable sum deserved by Fitzgerald as compensation for his services in the Nostro case.
We observed that while the $33,333 figure reflected a reasonable approximation of the value Fitzgerald conferred on Nostro by negotiating the lower contingency fee, it did not account for the value to Crockett of Fitzgerald's referral. Id. at 1239. We accordingly remanded with instructions that the district court recalculate the quantum meruit award to include the value of the client referral "in and of itself" apart from any other benefit Fitzgerald conferred on Crockett. Id. We added as a final note that the district court "may also consider 'established customs' when calculating an award under quantum meruit." Id.
On remand, the district court concluded that its original $33,333 quantum meruit award properly compensated Fitzgerald. To this court's instruction that it include the value of Fitzgerald's client referral as part of the quantum meruit award, the district court responded that the referral had indeed been factored into its original calculation. The district court rejected without explanation Fitzgerald's argument that Crockett's ordinary practice of paying a one-third referral fee was an "established custom" as referenced in Crockett I and that Fitzgerald should thus at minimum be awarded one-third of Crockett's $500,000 fee. Concluding that its original award "encompasses the reasonable value of Fitzgerald's referral of the Nostro ...