Strohmyer v. Papillion Family Medicine, 296 Neb. 884

Background

Three physicians (Strohmyer, Naegele, Mantler) formed Papillion Family Medicine, P.C. (PFM) in 2000; disputes arose after Strohmyer gave notice in December 2013 that he would leave effective March 31, 2014.
Strohmyer sued PFM and the other doctors claiming the bylaws’ buyout provisions were violated, unpaid compensation/director fees were withheld, and fiduciary breaches occurred (including diversion of funds for capital improvements).
The district court found PFM did not meet Nebraska Professional Corporation Act formalities, deemed the buyout clause ambiguous, treated PFM as a business corporation, and ordered defendants to elect whether to purchase Strohmyer’s shares under statutory procedures.
After evidentiary hearings the court fixed Strohmyer’s share value (~$104,720), awarded him $9,389.27 for unpaid March 2014 compensation, denied wages/attorney fees under the Nebraska Wage Payment and Collection Act (finding no employment relationship), found no goodwill, and awarded PFM $30,673 for alleged fiduciary breaches related to Medicaid patients.
On appeal the Nebraska Supreme Court affirmed the share valuation, rejection of goodwill, acceptance of the defendants’ equipment valuation methodology, and denial of Act-based wage/fee recovery; but it reversed the fiduciary-breach judgment against Strohmyer regarding Medicaid patients (finding ratification by PFM) and vacated the $30,673 award.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Valuation of Strohmyer’s shares and fixed assets	Trial court undervalued assets; should use plaintiff’s expert figures and not average duplicative exhibits	Court relied on combination of exhibits and defendants’ eBay-based replacement-cost evidence	Court affirmed valuation (minor calculation issues found but not materially reversible); used exhibit 113 with adjustments yielding ~$104,720 value
Goodwill / intangible value of the practice	Plaintiff sought ~$55,000+ for intangible assets/goodwill	Defendants argued goodwill was personal to Strohmyer and not a marketable corporate asset	Court held no compensable goodwill because patient base and staff followed the departing physician; affirmed trial court
Wage claims and attorney fees under Nebraska Wage Payment and Collection Act	Strohmyer claimed he was an employee entitled to unpaid wages, director fees, and fees under the Act	Defendants argued physicians were independent, set their own schedules, and lacked employment agreements or W-2/1099 treatment	Court held physicians were not employees under the Act and denied wage/fee recovery; affirmed trial court
Fiduciary breach for treating Medicaid patients	Strohmyer argued he had implied or authorized ability to treat Medicaid patients; any alleged breach was ratified by PFM’s long silence	Defendants argued an agreement existed to stop Medicaid patients and Strohmyer violated corporate duties, causing damages	Court held PFM had effectively ratified Strohmyer’s conduct by inaction; reversed the $30,673 award and vacated the fiduciary-breach finding regarding Medicaid patients

Key Cases Cited

Rauscher v. City of Lincoln, 269 Neb. 267, 691 N.W.2d 844 (Neb. 2005) (appellate review of factual questions in equity actions de novo but with deference to trial court credibility determinations)
In re Estate of Stuchlik, 289 Neb. 673, 857 N.W.2d 57 (Neb. 2014) (existence and scope of fiduciary duties are questions of law)
Taylor v. Taylor, 222 Neb. 721, 386 N.W.2d 851 (Neb. 1986) (distinguishing marketable business goodwill from goodwill dependent on an individual's personal practice)
Detter v. Miracle Hills Animal Hosp., 269 Neb. 164, 691 N.W.2d 107 (Neb. 2005) (existence and valuation of professional goodwill is a question of fact)
Trieweiler v. Sears, 268 Neb. 952, 689 N.W.2d 807 (Neb. 2004) (corporate officers and directors occupy fiduciary relations to the corporation)
D & J Hatchery, Inc. v. Feeders Elevator, Inc., 202 Neb. 69, 274 N.W.2d 138 (Neb. 1979) (unauthorized acts of officers may be ratified by the corporation through silence and inaction)
Thomas v. Marvin E. Jewell & Co., 232 Neb. 261, 440 N.W.2d 437 (Neb. 1989) (addressing client files, movement of clients, and allocation of goodwill on partner departures)
First Baptist Church v. State, 178 Neb. 831, 135 N.W.2d 756 (Neb. 1965) (market value evidence need not be exact and may rest on a witness’s adequate knowledge)
Bellino v. McGrath North, 274 Neb. 130, 738 N.W.2d 434 (Neb. 2007) (directors/officers owe duties and must refrain from acts inconsistent with corporate duties)