Strohmyer v. Papillion Family Medicine, 296 Neb. 884

Background

Three physicians (Strohmyer, Naegele, Mantler) formed Papillion Family Medicine, P.C. (PFM) in 2000; bylaws included a "Buy Out" provision (unsigned draft dated Oct. 16, 2000) and a signed bylaws document with no buyout procedure.
Strohmyer notified PFM on Dec. 31, 2013 he would depart effective Mar. 31, 2014 to open his own practice; dispute arose over buyout payments, director fees, and valuation of stock/assets/goodwill.
PFM’s president (Naegele) set aside $90,000 as an apparent "buy-out escrow," later distributed $30,000 each to Naegele and Mantler; PFM made capital improvements after notice of departure.
Litigation: Strohmyer sued for unpaid compensation, enforcement of buyout/bylaws, attorney fees under the Nebraska Wage Payment and Collection Act, and declaratory/injunctive relief; PFM counterclaimed for breach of fiduciary duties (including alleged failure to work agreed 4 days/week and continuing to treat Medicaid patients).
The district court held PFM was not a Nebraska professional corporation under the Professional Corporation Act, fixed Strohmyer’s stock value (~$104,720), awarded him unpaid compensation ($9,389.27), found no goodwill, and awarded PFM $30,673 for damages related to Medicaid-patient treatment; appeals followed.

Issues

Issue	Plaintiff's Argument (Strohmyer)	Defendant's Argument (PFM/Naegele/Mantler)	Held
Valuation of stock/net equity	District miscalculated fixed assets and averaged inconsistent exhibits; should award higher value	Court should accept defendants’ lower replacement-cost figures (eBay/Craigslist) and district valuation	Court's valuation affirmed in substance; minor calculation errors noted but not reversible; $104,720 upheld
Goodwill/intangible value	Practice has intangible value (~$165,000) separable from physician	Any goodwill depends on physician's personal relationships and left with Strohmyer, so no marketable goodwill	No compensable goodwill; affirmed
Replacement cost for medical equipment	Expert appraisal (fair market value ~$79,545) should control	Naegele’s eBay/Craigslist-based values (~$19,755) are reliable as items were acquired used	Court reasonably credited Naegele's valuations; affirmed
Wage Payment Act / employee status & attorney fees	Entitled to wages, director fees, and attorney fees under Nebraska Wage Payment and Collection Act	Physicians were not employees (set own schedules, no employment contracts), so Act does not apply	Physicians were not employees under the Act; no wage-act fees awarded; affirmed
Fiduciary duty re: Medicaid patients	No breach—PFM ratified or acquiesced to his seeing Medicaid patients; damages speculative	Strohmyer breached fiduciary duty by continuing to treat Medicaid patients after decision to cease; PFM suffered damages	Court erred: multi-year acquiescence/ratification found; award to PFM vacated and remanded regarding those damages
Fiduciary duty re: 4-day work expectation (cross-appeal)	N/A	Oral agreement required physicians to work 4 days/week; breach harmed PFM	No enforceable fiduciary duty to work 4 days/week; district court did not err; cross-appeal denied

Key Cases Cited

Rauscher v. City of Lincoln, 269 Neb. 267 (discussing de novo review in equitable appeals)
In re Estate of Stuchlik, 289 Neb. 673 (existence/scope of fiduciary duty as question of law)
Trieweiler v. Sears, 268 Neb. 952 (officers/directors occupy fiduciary relation to corporation)
Taylor v. Taylor, 222 Neb. 721 (professional goodwill: marketable business asset vs. individual-dependent goodwill)
Detter v. Miracle Hills Animal Hosp., 269 Neb. 164 (professional goodwill as factual question in dissolution)
D & J Hatchery, Inc. v. Feeders Elevator, Inc., 202 Neb. 69 (ratification of unauthorized corporate acts by silence/inaction)
First Baptist Church v. State, 178 Neb. 831 (market value testimony and admissibility of owner/expert opinion)
Bellino v. McGrath North, 274 Neb. 130 (duties of partners/officers to act for common benefit)