Strohmyer v. Papillion Family Medicine
296 Neb. 884
| Neb. | 2017Background
- Three physicians (Strohmyer, Naegele, Mantler) formed Papillion Family Medicine, P.C. (PFM) in 2000; disputes arose after Strohmyer gave notice (Dec. 31, 2013) that he would depart effective March 31, 2014.
- A set of unsigned/signed bylaws (October 16, 2000) contained a "Buy Out" provision describing postdeparture payments; parties disputed which bylaws governed and PFM’s corporate form.
- After notice of departure, PFM withheld buyout payments, placed and later refunded a $90,000 escrow, spent practice funds on office improvements, and distributed $30,000 each to Naegele and Mantler.
- Strohmyer sued claiming breach of the bylaws, violation of the Nebraska Wage Payment and Collection Act (seeking unpaid wages and fees), breach of fiduciary duty, and sought valuation/buyout of his shares; PFM counterclaimed for breach (failure to work 4 days/week, accepting Medicaid patients, unjust enrichment).
- The district court found PFM was not a Nebraska professional corporation, fixed Strohmyer’s stock value at roughly $104,720, awarded him $9,389.27 for unpaid compensation, denied employee-status under the Wage Act, found no goodwill, and awarded PFM $30,673 for breach related to Medicaid patients.
- On appeal the Nebraska Supreme Court affirmed most rulings but reversed the Medicaid-related damages award, holding PFM ratified Strohmyer’s treatment of Medicaid patients and remanded for proceedings consistent with the opinion.
Issues
| Issue | Plaintiff's Argument (Strohmyer) | Defendant's Argument (PFM/Drs.) | Held |
|---|---|---|---|
| Proper valuation of Strohmyer’s shares | Trial court miscalculated; should use exhibit differences to increase award | Court relied on expert exhibits and adjusted fixed-asset values downward (eBay values) | Court’s valuation largely upheld; minor calculation errors not reversible; final value effectively ~$104,720 affirmed |
| Existence/value of goodwill/intangible assets | Medical practice had intangible value (~$165,000) separate from physician | Any goodwill depended on Strohmyer’s personal practice; patients/staff left with him so no marketable goodwill | No compensable goodwill; court did not err |
| Replacement cost valuation for equipment | Use appraiser’s fair-market values (~$79,545) | Use actual replacement/used-market (eBay/Craigslist) prices (~$19,755) | Trial court permissibly credited defendants’ evidence; relying on eBay/Craigslist values was acceptable |
| Employee status under Nebraska Wage Payment & Collection Act | Physicians were employees entitled to wages, fees, and attorney fees under the Act | Physicians were not employees (set own schedules, no employment contracts, paid not as W-2/1099) | Physicians not employees under the Act; no wage-act recovery; award of $9,389.27 limited to unpaid compensation for March 2014 upheld |
| Fiduciary breach for treating Medicaid patients | No breach — defendants knew/consented; any restriction wasn’t enforced | Breach: Strohmyer continued treating Medicaid patients after an alleged decision to stop; caused damages | Court erred: PFM ratified Strohmyer’s conduct by long inaction (2006–2014); damages award to PFM vacated |
| Fiduciary duty to work 4 days/week | Strohmyer breached an oral obligation to work 4 days/week | Oral agreement existed and was breached; sought recovery on cross-claim | No enforceable fiduciary duty found to require 4 days/week; cross-appeal denied |
Key Cases Cited
- Rauscher v. City of Lincoln, 269 Neb. 267 (discussing de novo review in equity appeals)
- Trieweiler v. Sears, 268 Neb. 952 (officers/directors occupy fiduciary relations to corporation)
- Taylor v. Taylor, 222 Neb. 721 (goodwill must be marketable and independent of individual to be distributable)
- Detter v. Miracle Hills Animal Hosp., 269 Neb. 164 (existence/value of professional goodwill is a question of fact)
- D & J Hatchery, Inc. v. Feeders Elevator, Inc., 202 Neb. 69 (ratification of officer’s unauthorized acts can be inferred from silence/inaction)
- First Baptist Church v. State, 178 Neb. 831 (competency of lay opinion evidence on property value; market-value proof need not be exhaustive)
- Bellino v. McGrath North, 274 Neb. 130 (comparative work production and fiduciary-duty context)