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 contain a "Buy Out" provision (October 16, 2000) but adoption/signatures and corporate formalities were disputed.
- Strohmyer gave notice he would leave effective March 31, 2014, then sued PFM and the other physicians claiming breach of the bylaws, unpaid postdeparture compensation/director fees, and violation of the Nebraska Wage Payment and Collection Act; PFM counterclaimed for breaches including failure to work agreed hours and treating Medicaid patients.
- The district court held PFM was not a Nebraska professional corporation for some statutory purposes, fixed Strohmyer’s share value (about $104,720), awarded him $9,389.27 unpaid compensation, denied employee-status relief under the Wage Act, found no goodwill, and awarded PFM $30,673 for Medicaid-related fiduciary breaches.
- On appeal, the Nebraska Supreme Court reviewed valuation calculations, goodwill, replacement-cost valuations for equipment, employee-status under the Wage Act, and fiduciary-duty findings concerning Medicaid patients and alleged 4-day work obligations.
- The Supreme Court affirmed most rulings (valuation, no goodwill, equipment valuation, Wage Act conclusion, no director fees), but reversed the award to PFM for alleged Medicaid-related fiduciary breach because PFM ratified Strohmyer’s conduct by long inaction; remanded for further proceedings consistent with the opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Valuation of shares / fixed assets | Trial court miscalculated and improperly averaged competing valuations; plaintiff entitled to a larger award | Defendants relied on lower fixed-asset values (eBay/Craigslist) and trial court’s credibility findings | Court affirmed valuation (minor arithmetic errors not material); relied on exhibit 113 adjusted to reflect credible fixed-asset values, resulting value ~ $104,720 |
| Goodwill / intangible value | Plaintiff sought ~$55,000 (or more) for intangible assets/goodwill | Defendants: no distributable goodwill because patients and staff left with departing physician | Court held no compensable goodwill: goodwill depended on plaintiff’s personal practice and left with him, so not a marketable corporate asset |
| Replacement cost of medical equipment | Plaintiff’s appraiser valued equipment at fair market value (~$79,545) | Defendants relied on owner’s evidence of replacement cost from eBay/Craigslist (~$19,755) | Court accepted trial court’s credibility choice favoring defendants’ evidence; reliance on eBay/Craigslist valuations was not erroneous |
| Nebraska Wage Payment & Collection Act (employee status) | Plaintiff: entitled to unpaid wages/attorney fees under the Act | Defendants: physicians were not employees; they set their own schedules and lacked employment contracts | Court held physicians were not employees under §48-1229(1)(a); Act did not apply; no Wage Act recovery |
| Fiduciary duty re: Medicaid patients | Plaintiff: did not breach fiduciary duty; treatment of Medicaid patients was allowed/known | Defendants: plaintiff breached duty by continuing to treat Medicaid patients contrary to board decision | Court reversed district court’s award to PFM: evidence showed defendants knew of and acquiesced to plaintiff’s treatment of Medicaid patients (ratification by inaction) so award vacated |
| Cross-appeal: alleged duty to work 4 days/week | N/A (PFM alleged plaintiff breached oral duty) | PFM argued plaintiff had fiduciary duty to work 4 days/week and damaged practice by reducing days | Court affirmed no fiduciary breach: no enforceable employment agreement, other docs did not enforce alleged oral obligation, and plaintiff’s productivity was comparable |
Key Cases Cited
- Taylor v. Taylor, 222 Neb. 721, 386 N.W.2d 851 (1986) (goodwill is a factual inquiry; compensable only if business goodwill is separable from an individual practitioner)
- Detter v. Miracle Hills Animal Hosp., 269 Neb. 164, 691 N.W.2d 107 (2005) (professional goodwill as distributable asset depends on factual showing)
- Trieweiler v. Sears, 268 Neb. 952, 689 N.W.2d 807 (2004) (directors and officers owe fiduciary duties to corporation and shareholders)
- D & J Hatchery, Inc. v. Feeders Elevator, Inc., 202 Neb. 69, 274 N.W.2d 138 (1979) (unauthorized corporate acts may be ratified by silence and inaction)
- Thomas v. Marvin E. Jewell & Co., 232 Neb. 261, 440 N.W.2d 437 (1989) (client files and which faction retains clients affect allocation of goodwill)