Georgia Dermatologic Surgery Centers, P.C. v. Pharis
339 Ga. App. 764
Ga. Ct. App.2016Background
- David B. Pharis, M.D., and Dr. Mark Baucom were equal shareholders, directors, and officers of Georgia Dermatologic Surgery Centers, P.C. (GDSC); Pharis and Baucom each had identical employment agreements with GDSC.
- Baucom, as GDSC president, purported to terminate Pharis for cause in October 2010 without a board vote; the trial court held Baucom lacked authority to unilaterally terminate Pharis.
- On summary judgment the trial court granted Pharis partial summary judgment on liability for breach of contract; this Court affirmed that ruling in Georgia Dermatologic Surgery Centers, P.C. v. Pharis (GDSC I).
- After remittitur and denial of certiorari, the trial proceeded on damages; a Fulton County jury awarded Pharis $1,300,000. GDSC appealed.
- GDSC raised four principal challenges on appeal: (1) that GDSC could not be liable because Baucom’s termination was ultra vires; (2) exclusion of the shareholders’ agreement; (3) the court’s redaction of an employment-agreement provision; and (4) allowing recovery of start-up expenses paid by Pharis’s professional corporation (PC).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether GDSC could be held liable and have damages tried after summary judgment on liability was affirmed | Pharis argued the court properly decided liability and damages may be tried because GDSC’s breach consisted of preventing Pharis from returning and not paying compensation | GDSC argued Baucom’s ultra vires termination was void and any damages resulted from Baucom, not GDSC, so no breach liability or damages should be tried | Court: Affirmed trial on damages; GDSC could not relitigate liability after adverse summary judgment affirmed (law-of-the-case/issue preclusion principles) |
| Admissibility of shareholders’ agreement (stipulated share value) as evidence of damages | Pharis argued shareholders’ agreement did not set measure of damages for a breach because repurchase price applies only upon valid termination events specified in the employment agreement | GDSC argued shareholders’ agreement and stipulated share value were relevant and measured damages if Pharis left the practice | Court: Exclusion affirmed; shareholders’ agreement not relevant to breach-damages because repurchase triggered only on valid termination events not present here |
| Trial court redaction of employment-agreement provision regarding a pro-rated quarterly distribution on termination | Pharis argued the provision was inapplicable to breach damages and exclusion was proper | GDSC argued tendering the full contract made the clause admissible and that it limited remedies to that distribution | Court: Redaction affirmed; clause addressed pro-rated compensation on termination, not liquidated damages for breach, so not relevant to damages for wrongful breach |
| Recovery of start-up expenses paid by Pharis’s professional corporation (PC) | Pharis argued expenses were reasonably incurred to mitigate damages and thus recoverable | GDSC argued PC is a separate legal entity and its expenditures cannot form damages recoverable by Pharis personally | Court: Reversed in part; jury award for PC start-up costs ($283,321) must be deducted because PC (a non-party separate entity) paid those costs; remainder of judgment affirmed |
Key Cases Cited
- Georgia Dermatologic Surgery Centers, P.C. v. Pharis, 323 Ga. App. 181 (affirming liability ruling that Baucom lacked authority to terminate Pharis)
- Pribeagu v. Gwinnett County, 336 Ga. App. 753 (trial court’s motion in limine proper where evidence would not be admissible)
- Royal Crown Cos. v. McMahon, 183 Ga. App. 543 (severance/pay provision not a liquidated-damages clause)
- Cobra 4 Enterprises v. Powell-Newman, 336 Ga. App. 609 (corporation is a separate legal entity from owner/officer)
- Canton Plaza, Inc. v. Regions Bank, Inc., 315 Ga. App. 303 (elements of a breach of contract claim require damages to the party entitled to complain)
- Summer-Minter & Assoc. v. Giordano, 231 Ga. 601 (party must present full case on summary judgment; cannot raise new defenses later)