Strohmyer v. Papillion Family Medicine, 296 Neb. 884

Background

Three physicians (Strohmyer, Naegele, Mantler) formed Papillion Family Medicine, P.C. (PFM) in 2000; internal bylaws contained a “Buy Out” clause (unsigned draft and later signed versions with inconsistencies).
Strohmyer gave notice he would leave PFM effective March 31, 2014, to start his own practice; dispute arose over postdeparture buyout payments, director fees, and access to financials.
The district court concluded PFM did not satisfy Nebraska Professional Corporation Act formalities, treated PFM as a business corporation, found the buyout clause ambiguous, and ordered defendants could elect to purchase Strohmyer’s shares.
Trial evidence included two expert valuations (one with higher fixed-asset values, one based on eBay/Craigslist prices), meeting minutes and memoranda about Medicaid patients and work schedules, and evidence that many patients and staff left with Strohmyer.
The district court set Strohmyer’s share value near $104,720, awarded him $9,389.27 unpaid compensation, denied employee-status relief under the Nebraska Wage Payment and Collection Act, denied goodwill value, and awarded PFM $30,673 for alleged fiduciary breaches.
On appeal, the Nebraska Supreme Court reviewed equity issues de novo and affirmed most holdings but reversed the award to PFM for the Medicaid-related fiduciary breach (finding ratification) and remanded for proceedings consistent with the opinion.

Issues

Issue	Plaintiff's Argument (Strohmyer)	Defendant's Argument (PFM/Naegele/Mantler)	Held
Proper valuation of Strohmyer’s shares	Trial court miscalculated by improperly averaging two overlapping valuations and misstating asset figures; higher valuation owed	Court’s blended adjustment (using lower fixed-asset values) was reasonable	Court found calculation errors but concluded corrected math produces essentially same value (~$104,720); no reversible error
Goodwill / intangible asset entitlement	Medical practice had intangible assets (~$165,000 expert) and goodwill independent of Strohmyer	Any goodwill depended on Strohmyer personally; when he left, clients/staff followed so no marketable goodwill	Court: no compensable goodwill; affirmed lower court
Replacement cost for medical equipment (use of eBay/Craigslist values)	Expert appraiser’s fair-market values were more reliable	Naegele’s eBay/Craigslist-based replacement estimates reflected actual used purchases and were credible	Court accepted district court’s credibility determination favoring Naegele’s estimates; affirmed
Employee status under Nebraska Wage Payment & Collection Act	Strohmyer contends he is an employee entitled to wages/fees/attorney fees under the Act	PFM contends physicians were independent, set own schedules, no employment contracts, no W‑2/1099 treatment	Court: physicians were not employees under Act; no award of Act remedies; affirmed
Alleged fiduciary breach for treating Medicaid patients	Strohmyer argues he was authorized/was ratified to treat Medicaid patients and thus owes no damages	PFM contends he breached fiduciary duty by continuing Medicaid treatment contrary to board’s decision and caused damages	Court found directors’ communications and long inaction by Naegele/Mantler ratified Strohmyer’s conduct; reversed district court’s damages award to PFM and vacated $30,673 judgment
Alleged fiduciary breach for not working 4 days/week	Strohmyer argues there was no enforceable obligation to work 4 days; no fiduciary breach	PFM argues an oral agreement required 4 days/week and breach harmed firm	Court: no enforceable employment/fiduciary duty to work 4 days; no breach; affirmed

Key Cases Cited

Trieweiler v. Sears, 268 Neb. 952 (2004) (directors/officers occupy fiduciary relation to corporation and shareholders)
Taylor v. Taylor, 222 Neb. 721 (1986) (professional goodwill is compensable only if it is a marketable business asset independent of a particular individual)
Detter v. Miracle Hills Animal Hosp., 269 Neb. 164 (2005) (existence and value of professional goodwill are questions of fact)
Thomas v. Marvin E. Jewell & Co., 232 Neb. 261 (1989) (when departing partners take client files/contacts, goodwill may follow clients and not remain as a marketable firm asset)
D & J Hatchery, Inc. v. Feeders Elevator, Inc., 202 Neb. 69 (1978) (corporation may ratify officer's unauthorized acts by silence/inaction after full knowledge)
Bellino v. McGrath North, 274 Neb. 130 (2007) (partners/officers must act for common benefit; fiduciary duties described)
First Baptist Church v. State, 178 Neb. 831 (1965) (market value may be proved by witnesses with adequate knowledge; exactness not required)
Rauscher v. City of Lincoln, 269 Neb. 267 (2005) (appellate review principles in equity cases)