Strohmyer v. Papillion Family Medicine
296 Neb. 884
Neb.2017Background
- Three physicians (Strohmyer, Naegele, Mantler) formed Papillion Family Medicine, P.C. (PFM). Strohmyer gave notice he would leave effective March 31, 2014, and later opened his own practice.
- Dispute arose over enforcement/interpretation of an unsigned October 16, 2000 “Buy Out” bylaw, valuation of PFM stock/assets/goodwill, and unpaid compensation/director fees after Strohmyer’s departure.
- District court found PFM was not a compliant Nebraska professional corporation, valued Strohmyer’s 1,000 shares at roughly $104,720, awarded him $9,389.27 in unpaid compensation, and awarded PFM $30,673 on a counterclaim for breach of fiduciary duty (Medicaid patient treatment).
- Court held no compensable goodwill existed because many patients and staff followed Strohmyer; it relied on defendants’ eBay/Craigslist-based equipment valuations over plaintiff’s expert for replacement cost.
- Court ruled the physicians were not employees under the Nebraska Wage Payment and Collection Act, and that Strohmyer was not entitled to director fees because of alleged nonattendance at directors’ meetings.
- On appeal, the Nebraska Supreme Court affirmed most of the district court’s rulings (valuation, goodwill, wage-act exclusion, equipment valuation, denial of director fees), but reversed the award to PFM for Medicaid-related fiduciary breach as ratified by PFM’s inaction and remanded for further proceedings consistent with its opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper valuation of Strohmyer’s shares and fixed assets | Court miscalculated; should rely on plaintiff’s exhibits and award higher value | Court reasonably adjusted expert valuations and relied on defendants’ evidence | Affirmed (minor calculation errors not material); court’s ~$104,720 valuation stands |
| Existence/value of goodwill/intangible assets | Plaintiff sought ~$55,000+ for intangibles/goodwill | Defendants: no marketable goodwill once physician departs and takes patients/staff | Affirmed: no compensable goodwill; goodwill depended on plaintiff’s personal practice |
| Replacement cost valuation for medical equipment | Plaintiff’s expert provided higher FMV estimates | Defendants used eBay/Craigslist costs showing much lower replacement cost | Affirmed: trial court permissibly found defendants’ evidence more persuasive |
| Wage Payment Act coverage (director fees, salary, attorney fees) | Plaintiff entitled to wages/fees under Act | Defendants: physicians were not employees; they had independent control | Affirmed: physicians not employees under Act; no award of Act remedies |
| Fiduciary breach for treating Medicaid patients (counterclaim) | Plaintiff: no breach; any instruction to stop Medicaid patients was not enforced or was ratified | Defendants: plaintiff breached duty by continuing to treat Medicaid patients contrary to board decision | Reversed: court erred—PFM ratified plaintiff’s conduct by long inaction; $30,673 award vacated |
| Cross-appeal: duty to work 4 days/week | Plaintiff: no enforceable duty; no written employment term | Defendants: oral agreement required 4 days/week; breach caused damage | Affirmed for plaintiff: no fiduciary breach for working 3 days; no enforcement absent timely action |
Key Cases Cited
- Taylor v. Taylor, 222 Neb. 721, 386 N.W.2d 851 (Neb. 1986) (goodwill must be a marketable business asset distinct from a professional’s personal reputation)
- Detter v. Miracle Hills Animal Hosp., 269 Neb. 164, 691 N.W.2d 107 (Neb. 2005) (existence/value of professional goodwill is a question of fact in corporate/partnership dissolution contexts)
- Thomas v. Marvin E. Jewell & Co., 232 Neb. 261, 440 N.W.2d 437 (Neb. 1989) (when departing partners take client files and clients, available goodwill follows clients/files)
- Trieweiler v. Sears, 268 Neb. 952, 689 N.W.2d 807 (Neb. 2004) (directors and officers occupy fiduciary relations to corporation and shareholders)
- D & J Hatchery, Inc. v. Feeders Elevator, Inc., 202 Neb. 69, 274 N.W.2d 138 (Neb. 1979) (unauthorized acts by officers may be ratified by the corporation through silence/inaction)