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 an unsigned October 16, 2000 buyout provision and other documents with inconsistent signatures.
Strohmyer gave notice he would leave PFM effective March 31, 2014, then sued when PFM did not pay him under its buyout provisions and contested stock/asset valuation; PFM counterclaimed for breaches (e.g., failure to work agreed hours, treating Medicaid patients).
The district court concluded PFM was not a valid Nebraska professional corporation, treated it as a business corporation, found Strohmyer’s stock value about $104,720, awarded him $9,389.27 in unpaid compensation, and awarded PFM $30,673 for alleged fiduciary breaches related to Medicaid patients.
On valuation, the court relied on expert exhibits but adjusted fixed-asset values down based on defendants’ eBay/Craigslist-based valuations; the court rejected any goodwill because many patients/staff followed Strohmyer.
The district court held physicians were not employees under the Nebraska Wage Payment and Collection Act and determined Strohmyer breached a fiduciary duty by continuing to treat Medicaid patients.
On appeal, the Nebraska Supreme Court affirmed most rulings (valuation, no goodwill, equipment valuation method, Act inapplicability, no director fees), but reversed the award for Medicaid-related fiduciary breach as ratified by defendants’ long acquiescence and remanded for further proceedings.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Proper valuation of Strohmyer’s shares	Court miscalculated and improperly averaged competing valuations; plaintiff sought higher award	Court should give weight to defendants’ lower fixed-asset valuations (eBay-based) and trial judge credibility findings	Court affirmed valuation (~$104,720); found lower-court arithmetic/logic flaws but no reversible error
Compensable goodwill/intangibles	Practice had intangible value ($165,000 per expert) independent of physician	No marketable goodwill; most patients/staff left with Strohmyer so goodwill tied to individual	Court affirmed: no distributable goodwill because value depended on Strohmyer’s continued presence
Wage/employee status under Nebraska Wage Payment & Collection Act	Strohmyer entitled to wages, director fees, and attorney fees under Act	Physicians were independent, set their own schedules, lacked employment agreements, so not employees	Court affirmed: physicians not employees under the Act; no Act-based fees awarded
Fiduciary breach for treating Medicaid patients	PFM alleged breach and sought damages for lost revenue	Strohmyer argued defendants knew of and acquiesced to his Medicaid practice	Reversed: defendants ratified Strohmyer’s conduct by long silence/inaction; award to PFM vacated

Key Cases Cited

Taylor v. Taylor, 222 Neb. 721, 386 N.W.2d 851 (1986) (goodwill is distributable only if it is a marketable business asset independent of a particular individual's presence)
Detter v. Miracle Hills Animal Hosp., 269 Neb. 164, 691 N.W.2d 107 (2005) (existence and value of professional goodwill is a question of fact in corporate dissolution)
Thomas v. Marvin E. Jewell & Co., 232 Neb. 261, 440 N.W.2d 437 (1989) (upon dissolution, parties typically retain clients and attendant goodwill follows client files)
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 or inaction once the corporation has full knowledge)
Rauscher v. City of Lincoln, 269 Neb. 267, 691 N.W.2d 844 (2005) (standard for de novo review in equitable appeals)
In re Estate of Stuchlik, 289 Neb. 673, 857 N.W.2d 57 (2014) (existence/scope of fiduciary duties are questions of law for the court)
Bellino v. McGrath North, 274 Neb. 130, 738 N.W.2d 434 (2007) (partners and professionals must exercise utmost good faith to the firm and co-members)
First Baptist Church v. State, 178 Neb. 831, 135 N.W.2d 756 (1965) (market value opinion admissible if witness has adequate knowledge and means to form an intelligent opinion)
W & W Livestock Enterprises, Inc. v. Dennler, 179 N.W.2d 484 (Iowa 1970) (sale price at bona fide sale is competent evidence of value)