Strohmyer v. Papillion Family Medicine
296 Neb. 884
| Neb. | 2017Background
- Three physicians (Strohmyer, Naegele, Mantler) formed Papillion Family Medicine, P.C. (PFM) in 2000; disputed bylaws (an unsigned draft with a buyout clause and a signed but different bylaws) and corporate formalities were central to the dispute.
- Strohmyer gave notice he was leaving effective March 31, 2014, and sued when PFM did not effect a buyout and withheld certain compensation and director fees; PFM counterclaimed for breaches (including failure to work agreed days and continued treatment of Medicaid patients).
- The district court concluded PFM was not a valid professional corporation under the Nebraska Professional Corporation Act, valued Strohmyer’s shares at roughly $104,720, awarded Strohmyer ~$9,389 unpaid compensation for March 2014, and awarded PFM $30,673 for damages related to Medicaid patients.
- Key contested issues on appeal: proper valuation of shares and fixed assets (experts disagreed on equipment replacement value), existence/value of goodwill, whether physicians were employees under the Nebraska Wage Payment and Collection Act, and whether Strohmyer breached fiduciary duties (working 4 days/week; treating Medicaid patients).
- The Nebraska Supreme Court affirmed most of the district court’s findings (share valuation, no goodwill, reliance on eBay/Craigslist values for equipment, not an employee under the Wage Act, no liability for failing to work 4 days/week) but reversed the award to PFM for Medicaid-related fiduciary breach, holding PFM had ratified Strohmyer’s conduct by long inaction and therefore vacated the $30,673 award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Valuation of Strohmyer’s shares / fixed assets | Court should adopt plaintiff’s appraisal (higher equipment FMV, include certain intangibles) | Defendants rely on lower replacement values (eBay/Craigslist) and adjusted accounting | Court’s arithmetic had minor errors but ultimate valuation (~$104,720) stands; no reversible error |
| Goodwill / intangible value | Strohmyer: intangible assets/goodwill exist and are worth additional compensation | PFM: goodwill is not a marketable asset independent of physician; patients/staff left with Strohmyer | No compensable goodwill; any goodwill depended on Strohmyer’s personal practice and thus not a distributable corporate asset |
| Wage Payment Act (employee status) | Strohmyer: entitled to wages, director fees, and attorney fees under Act | PFM: physicians were not employees; they set their own schedules and lacked employment contracts | Physicians not employees under Act; no award of Act-based fees |
| Fiduciary breach for treating Medicaid patients | Strohmyer: he was permitted/authorized or PFM acquiesced; no breach or speculative damages | PFM: he breached fiduciary duty by continuing Medicaid patients contrary to board decision | Court reversed district court’s damages: PFM ratified/accepted his conduct by silence/inaction; award vacated |
Key Cases Cited
- Taylor v. Taylor, 222 Neb. 721 (1986) (goodwill must be a business asset independent of an individual to be distributable)
- Detter v. Miracle Hills Animal Hosp., 269 Neb. 164 (2005) (existence and value of professional goodwill is a factual question in corporate/partnership dissolution contexts)
- Thomas v. Marvin E. Jewell & Co., 232 Neb. 261 (1989) (illustrates how client files and client retention affect allocation of goodwill on separation)
- D & J Hatchery, Inc. v. Feeders Elevator, Inc., 202 Neb. 69 (1978) (unauthorized corporate acts by officers may be ratified by the corporation through silence and inaction)
- Trieweiler v. Sears, 268 Neb. 952 (2004) (directors/officers occupy fiduciary relations to corporation and shareholders)