Kademian v. Marger (Summary)

GROUP PRACTICE RELATIONS/DISRUPTIVE BEHAVIOR

Kademian v. Marger, No. 25917 (Ohio Ct. App. Oct. 3, 2014)

The Court of Appeals of Ohio affirmed a lower court’s verdict denying a radiation oncologist’s motions for directed verdict and/or a new trial in a lawsuit that he brought against his former business partner alleging breach of fiduciary duty. The oncologist had been involved in a business partnership with the defendant for many years, with the oncologist holding a minority, 49 percent share of the partnership and the partner holding the majority, 51 percent share. Over the years, the two began to have difficulties working together. The oncologist claims this was because he reported quality concerns about a new prospective partner to a state board. The partner, on the other hand, claimed that the oncologist had a history of disruptive behavior which contributed to their deteriorating relationship. Eventually, the partner voted to dissolve the partnership. The partner immediately thereafter formed a new corporation which then contracted on an exclusive basis with several local hospitals, leaving the oncologist unable to exercise privileges at those hospitals. The oncologist claimed this constituted a breach of fiduciary duty on the part of the majority share-holding ex-partner.

At trial, the jury held in favor of the partner. Following the jury verdict, the oncologist asked the court to direct a verdict in his favor on the basis that reasonable minds could only conclude that the partner breached his fiduciary duties based on the undisputed facts entered into evidence. The court denied that motion and refused to grant a new trial, noting that there was evidence supporting both parties’ claims and the jury was free to weigh the evidence and conclude that the partner acted in good faith when deciding to dissolve the corporation. Particularly of interest was the court’s finding that “there was ample evidence to support the conclusion that it was [the oncologist’s] behavior that caused the schism between the shareholders and, still further, that given [the oncologist’s] behavior, [the partner’s] decision to dissolve the corporation was for a legitimate business purpose and was not lacking in good faith.”

On appeal, the Court of Appeals of Ohio affirmed the lower court’s decision. The court recited applicable law, noting that in closely held corporations, the majority shareholder has a duty of good faith and loyalty to the minority shareholder and may not use his or her position to advance personal interests at the expense of corporate interests. But, the court ultimately agreed with the lower court’s conclusion that there was sufficient evidence to support both parties’ assertions and it could not conclude, as a matter of law, that no genuine issue existed for trial.