Strohmyer v. Papillion Family Medicine
296 Neb. 884
Neb.2017Background
- Three physicians (Strohmyer, Naegele, Mantler) formed Papillion Family Medicine, P.C. (PFM) in 2000; bylaws contained a "Buy Out" provision (October 16, 2000 draft) but signatures/adoption were disputed. Articles of incorporation contained director liability and share-disposition language.
- Strohmyer gave notice on December 31, 2013, that he would leave effective March 31, 2014, to start a new practice. Disputes arose over post-departure buyout payments, director fees, and allocation/value of assets and goodwill.
- Parties litigated valuation of PFM stock, treatment of director fees/escrow, replacement cost for fixed medical equipment (experts differed widely), and whether physicians were "employees" under the Nebraska Wage Payment and Collection Act.
- District court found PFM did not comply with Nebraska Professional Corporation Act, treated PFM as a business corporation, fixed Strohmyer’s stock value at about $104,720, awarded him $9,389.27 unpaid compensation, denied Act-based wage recovery, found no goodwill, and awarded PFM $30,673 for alleged fiduciary breach (Medicaid patients).
- On appeal, the Nebraska Supreme Court affirmed most holdings (valuation, no goodwill, equipment valuation, Act inapplicability, denial of director fees), but reversed the fiduciary-breach award for continuing to treat Medicaid patients as ratified by PFM and vacated the $30,673 damages, remanding for proceedings consistent with opinion.
Issues
| Issue | Plaintiff's Argument (Strohmyer) | Defendant's Argument (PFM/Naegele/Mantler) | Held |
|---|---|---|---|
| Proper valuation of Strohmyer’s PFM shares (net equity and fixed assets) | Trial court misapplied/extrapolated experts’ valuations and improperly averaged inconsistent exhibits; stock value should be higher | Court should adopt adjusted exhibit values and eBay-based fixed-asset replacement costs as used by defendants’ witness | Court’s numeric calculation had minor mistakes but net result (~$104,720) was not materially erroneous; affirmed valuation (no reversible error) |
| Whether the practice had compensable goodwill/intangible value | Strohmyer’s expert assigned significant intangible value (assembled workforce, records, systems) | Defendants: goodwill depends on physician presence; patients and staff left with Strohmyer, so no marketable goodwill remains | Court affirmed: no distributable goodwill because goodwill depended on Strohmyer’s personal practice; no compensable goodwill |
| Whether physicians were employees under Nebraska Wage Payment and Collection Act (entitling to wages/fees/attorney fees) | Physicians (esp. Strohmyer) were employees and entitled to wages/attorney fees under the Act | Defendants: physicians were independent, set their own schedules, no employment contracts, not W-2/1099 employees | Court held physicians were not employees under the Act (free from control/direction); Act inapplicable; no wage-based recovery |
| Whether Strohmyer breached fiduciary duties by treating Medicaid patients and whether PFM ratified conduct | Strohmyer contends he was permitted/ acquiesced to treat Medicaid patients; no breach or damages | Defendants argue physicians agreed to cease Medicaid, so continuing to treat Medicaid patients breached fiduciary duty and caused damages | Court held earlier communications and long inaction by Naegele/Mantler amounted to ratification; vacated award to PFM for Medicaid-based fiduciary breach (damage award reversed) |
Key Cases Cited
- Taylor v. Taylor, 222 Neb. 721 (analysis of professional goodwill and when it is a marketable business asset)
- Detter v. Miracle Hills Animal Hosp., 269 Neb. 164 (professional-corporation goodwill is a question of fact in dissolution contexts)
- Trieweiler v. Sears, 268 Neb. 952 (directors/officers occupy fiduciary relation to corporation and shareholders)
- D & J Hatchery, Inc. v. Feeders Elevator, Inc., 202 Neb. 69 (unauthorized corporate officer acts may be ratified by silence/inaction)
- First Baptist Church v. State, 178 Neb. 831 (permissible bases for witness opinion on market value)
- Thomas v. Marvin E. Jewell & Co., 232 Neb. 261 (allocation of clients and goodwill after partner departures)