Kademian v. Marger , 2012 Ohio 962 ( 2012 )

[Cite as Kademian v. Marger, 2012-Ohio-962.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
MONTGOMERY COUNTY
MICHAEL T. KADEMIAN, M.D., :
: Appellate Case No. 24256
Plaintiff-Appellant :
: Trial Court Case No. 2002-CV-2576
v. :
:
DONALD MARGER, M.D., et al. : (Civil Appeal from
: (Common Pleas Court)
Defendant-Appellee :
:
...........
OPINION
Rendered on the 9th day of March, 2012.
...........
JAMES M. HILL, Atty. Reg. #0030633, James M. Hill Co., L.P.A., 2365 Lakeview Drive,
Suite A, Beavercreek, Ohio 45431-3696
Attorney for Plaintiff-Appellant
FELIX J. GORA, Atty. Reg. #0009970, Rendigs, Fry, Kiely & Dennis, LLP, One West Fourth
Street, Suite 900, Cincinnati, Ohio 45202-3688
Attorney for Defendant-Appellee
.............
PER CURIAM:
I. Introduction
{¶ 1} Plaintiff-appellant Michael Kademian, M.D., appeals from a judgment rendered
in favor of Defendant-appellee Donald Marger, M.D., following Marger’s motion for a
directed verdict at the close of Kademian’s case.
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{¶ 2} Kademian contends that the trial court erred in granting the motion for directed
verdict because reasonable minds could differ as to whether Dr. Marger breached his fiduciary
duties to Kademian. Kademian further contends that the trial court erred in rendering
summary judgment in Marger’s favor regarding Kademian’s claim for conversion of his
interest in Marger & Associates. Finally, Kademian maintains that the trial court erred in
rendering summary judgment in Marger’s favor on Kademian’s claim for tortious interference.
{¶ 3} We conclude that the trial court erred in directing a verdict in Marger’s favor,
because reasonable minds could differ on whether Marger’s conduct violated his duty to act
with the utmost candor and good faith, and whether his failure to so act caused injury to
Kademian. We further conclude that the trial court erred in rendering summary judgment in
Marger’s favor on conversion and on Kademian’s claim for tortious interference. There are
genuine issues of material fact regarding whether Marger’s actions in dissolving Marger and
Associates were taken for a wrongful purpose, in order to squeeze Kademian out of the
corporation and prevent him from being able to practice at area hospitals.
{¶ 4} Accordingly, the judgment rendered in Marger’s favor will be Reversed, and
this cause will be Remanded for further proceedings.
II. Facts. “Coincidences” Abound in the Hospital World.
{¶ 5} In ruling on this appeal, we have construed the transcripts of testimony and
documents admitted at the conclusion of Dr. Kademian’s case most strongly in Dr.
Kademian’s favor. The parties to the appeal, Dr. Michael Kademian and Dr. Donald Marger,
were shareholders in a close corporation called Donald Marger M.D. & Associates, Inc.
(M&A). Donald Marger, a radiation oncologist, formed M&A in 1983, for the purpose of
3
practicing medicine. At the time, Marger was the sole shareholder in M&A. In 1983,
Marger also began an association with Good Samaritan Hospital in Dayton, Ohio, and
continued to practice radiation oncology at Good Samaritan until June 30, 2000.
{¶ 6} Michael Kademian was also a radiation oncologist and became employed by
M&A in January 1990. At the time, Marger had been working at St. Elizabeth’s Hospital
(later known as Franciscan Hospital), and at Good Samaritan. After Kademian became
employed, the two doctors each spent one-half day at each hospital, switching locations at
noon.
{¶ 7} The following year, in January 1991, Kademian purchased 49% of the
corporate shares, paying $2,500 as a down payment, and signing a promissory note for the
remainder of the cost. The book value of the shares was derived by subtracting the assets
from the liabilities and multiplying that amount by 0.49. The total price listed in the stock
purchase agreement was $10,851.
{¶ 8} In April 1992, both Marger and Kademian signed Amended and Restated
Employment Agreements with M&A. The agreements are essentially identical, and in
Paragraph 5, prohibit Marger and Kademian from engaging “in the practice of medicine,
specifically therapeutic radiology, except as an Employee of the Employer unless otherwise
authorized by the Board of Directors.” Plaintiff’s Ex. 1, p. 2, and Plaintiff’s Ex. 2, p. 2 .
{¶ 9} Paragraph 9 of the agreements also contains a non-competition clause, which
provides that:
9. Non-Competition. Without the express written consent of the
Employer, the Employee shall not directly or indirectly own, manage, operate,
4
join, control or participate in the ownership, management, operation or control
of or be connected in any manner with the speciality practice of therapeutic
radiology other than pursuant to the terms of this Agreement.
Upon termination of employment, the Employee covenants and agrees
that except for the prior written consent of the Employer, the Employee will not
engage in the practice of the speciality of therapeutic radiology, in any way, in
St. Elizabeth’s Hospital or Good Samaritan Hospital, both of Dayton, Ohio, nor
with any other venture involving any hospital or institutions with which the
Employer is or shall be associated, nor with any independent or free-standing
facility within a geographic radius of ten (10) miles of St. Elizabeth or Good
Samaritan Hospital, Dayton, Ohio. Such restrictions shall continue for a
period of two (2) years from and after the termination of employment or
existence of the Corporation or any successor thereto, including the death or
retirement of the remaining shareholders of Employer, whichever time is
shorter. Id. at pp. 3-4.
{¶ 10} Marger and Kademian continued to practice together for a number of years,
performing radiation oncology services at Good Samaritan and at St. Elizabeth’s Hospital.
Good Samaritan was an “open hospital,” which allows any radiation oncologist to obtain
privileges and treat at the facility, because the hospital does not have an exclusive agreement
with any one person or group. M&A had a strong relationship with Good Samaritan, as
evidenced by the fact that Marger was the medical director of radiation oncology at Good
Samaritan at the time of the events giving rise to the current litigation. Kademian had also
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been the medical director at Good Samaritan.
{¶ 11} Around 1985, Dr. Robert Field was appointed as the medical director of
radiation oncology at Miami Valley Hospital, a third hospital located in Dayton, Ohio. Field
continued as medical director, and his group had an exclusive contract to practice radiation
oncology at Miami Valley, between 1985 and the summer of 2000. This meant that only
doctors in Field’s group could treat patients in the radiation oncology department. Other
doctors could be on staff at Miami Valley, but would not be allowed to treat patients in the
department.
{¶ 12} In 1995, Premier Health Partners was formed, joining Miami Valley and Good
Samaritan in one holding company. Miami Valley was a 60% shareholder and Good
Samaritan was a 40% shareholder in Premier Health. In 1997, Miami Valley and Good
Samaritan hired consultants to evaluate their oncology programs. The consultants
recommended, in late 1997, that Good Samaritan and Miami Valley integrate their radiation
oncology programs. Administrators at both Good Samaritan and Miami Valley encouraged
Field’s group and M&A to merge. Consequently, in early 1998, Marger formed a limited
liability company with Field’s group. This was done over the objections of Kademian, who
was concerned about Field’s abilities as a physician. At least as early as 1994, Miami Valley
also had concerns over Field’s leadership and clinical practice. In 1994, Miami Valley’s chief
operating officer (COO) required Field to prepare a corrective action plan for the business and
clinical practice. Miami Valley did not think much of Field as a clinician, felt Field had a
slipshod approach to medicine, and was continually attempting to get Field to improve.
Kademian was aware of Field’s reputation prior to the merger discussions, and told Marger he
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did not believe Field was a good doctor.
{¶ 13} Another issue with Field was that in 1997, the Ohio Department of Health had
established a requirement that medical directors of radiation oncology must be certified by the
American Board of Radiology (ABR). Field was not certified by ABR. Kademian had been
board-certified by ABR for many years, and was appointed medical director of radiation
oncology at Good Samaritan in May 1997. Kademian notified Good Samaritan (which at that
time was part of Premier Health), about Field’s lack of appropriate certification, but Field
remained director at Miami Valley. The issue of Field’s lack of board certification resurfaced
during the merger discussions.
{¶ 14} During 1998, Kademian received courtesy staff privileges at Miami Valley and
began investigating Field’s certification status. After Kademian called the president of
Premier Health about Field’s lack of ABR certification, Field was removed as medical director
and was replaced by his associate, Dr. Duncan.
{¶ 15} Also in 1998, ill will began to develop between Marger and Kademian as a
result of the proposed merger and Marger’s sale of Western Ohio stock that was owned by
M&A. Marger received the entire distribution from the sale, rather than allocating 49% of
the proceeds, approximately $60,000, to Kademian. At one point, Marger stated that he
wanted to “get rid” of Kademian. In addition, Kademian testified that he had learned during
discovery of a prediction Marger had made in July 1998, to M&A’s corporate attorney. The
prediction was that Kademian was going to be removed as medical director at Good
Samaritan. This “prediction” came true. In early September 1998, Kademian was removed
as medical director over an incident involving a hearing aid that a nurse had misplaced at
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work. Kademian contended that the matter was trivial and was not grounds for removal.
{¶ 16} Marger was appointed as medical director of radiation oncology at Good
Samaritan about a week after Kademian was removed. Between October and December
1998, Kademian and Marger discussed the possibility of Kademian leaving M&A, due to
these issues, but nothing ever came of the discussions.
{¶ 17} M&A had previously added Dr. Greg Rasp, another radiation oncologist, as an
employee. Rasp was given a preliminary contract similar to the contract that Kademian
originally had, and was supposed to be considered for partnership within a few years after his
employment. When Rasp was considered for partnership, Marger wanted to retain his 51%
share in M&A and require Kademian to give or sell one-half of his shares to Rasp. Kademian
refused to divest himself of his interest, and this issue was never resolved prior to the
dissolution of M&A.
{¶ 18} In January 1999, Rasp entered into a “restated” employment contract with
M&A. This agreement provides that Rasp’s employment would continue until terminated as
provided in Section 10 of the agreement. Plaintiff’s Ex. 198, p. 1. Under the agreement,
Rasp was to maintain staff privileges at Franciscan Medical Center – Dayton Campus
(formerly known as St. Elizabeth’s) and such other hospitals at which he practiced. Id. at p.
5. The agreement also contains a restrictive covenant, which provides as follows:
11. Restrictive Covenant. Employee acknowledges (a) that the Employer has
a large investment of time, effort and money in obtaining its relationship with
the hospitals at which the Employer’s employees practice medicine
(“Hospitals”), with each such relationship hereafter referred to as a
8
“Relationship,” (b) that the Employer’s success depends upon its developing
and maintaining such Relationships, (c) that each Relationship constitutes an
asset and property of the Employer, (d) that the recruitment and orientation of
employees to staff the Employer’s needs represents a substantial investment by
Employer, and (e) that Employee’s performing services for the Employer
constitutes a position of trust by the Employee which may result in a
relationship whereby Employee could influence future actions of a Hospital or
others relative to a Relationship.
Therefore, if a Relationship is terminated because the Employee
solicited or agreed to perform (directly or indirectly) in the future similar
services as were provided by the Employer’s employees at a Hospital, then the
Employer would be damaged and such interference, solicitation and/or
agreement by the Employee would constitute a breach of trust and a breach of
[sic] and the Employee’s fiduciary duty to the Employer.
Accordingly, the Employee shall not breach the Employee’s fiduciary
duty to and position of trust with the Employer, and the Employee shall not,
individually or in concert with any other person or entity, do anything to
adversely influence or interfere with a Relationship. In addition, the Employee
agrees that for a period of 12 months after the Employee’s termination of
employment with the Employer without cause, or the Employer’s termination
of the Employee’s employment for cause, the Employee shall not, directly or
indirectly, at a Hospital, whether alone, or as a shareholder, partner or member,
9
or as an officer, director, manager, employee, contractor or otherwise, perform
services similar to those provided by the Employee during the Term.
Provided, however, if the Employer loses, breaches, surrenders or
terminates its contract at Franciscan Medical Center – Dayton Campus or in
any way curtails, limits or decreases the services it provides at Franciscan
Medical Center – Dayton Campus, then the provisions of this Section shall be
null and void and the Employee shall not be subject to the restrictive covenant
provisions set forth in this Section.
The Employee represents and warrants that the enforcement of these
covenants shall not preclude the Employee from earning a living in the practice
of medicine. The Employee further recognizes that any violation of these
covenants could result in immediate and irreparably injury to the Employer that
may be enjoined. The Employer’s remedies for breach of these covenants
shall be cumulative, and the seeking or obtaining of injunctive relief shall not
preclude a claim for damages or other relief. Id. at pp. 11-13.
{¶ 19} During 1999, merger discussions with Field’s group continued, despite the fact
that Kademian wanted to end the discussions. In December 1999, Marger ended the
discussions due to Field’s failure to disclose financial information. At the time, no one knew
that Field’s group had been sold to U. S. Oncology, a for-profit cancer treatment national
corporation.
{¶ 20} During the early part of 2000, M&A was beginning to have more of a physical
presence at Miami Valley, and its doctors had been given limited privileges to treat patients,
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despite the fact that Field’s group had an exclusive contract. M&A’s ability to practice was
due to the issues with Field and the fact that Field had sold another party a free-standing
radiation center that Miami Valley wanted to buy.
{¶ 21} In January 2000, a patient described at trial as Patient X was referred to
Kademian for a decision on whether he should have radiation treatment for a possible
reoccurrence of cancer in his prostate gland. Patient X had been previously treated at Miami
Valley by Field.
{¶ 22} While taking Patient X’s history, Kademian learned that Patient X had suffered
severe radiation burns on his legs in 1999, after being treated by Field for skin cancer on his
legs. Patient X was apprehensive about having more radiation treatments because he thought
he might be overly sensitive to radiation. After obtaining the records for Patient X,
Kademian discovered that the patient had been exposed to excessive amounts of radiation, and
had been exposed in areas where radiation should not have been given. In addition to the
severe burns that were caused, the treatment created a risk of future problems, like radiation
necrosis or tissue death, which did, in fact, later occur with Patient X.
{¶ 23} In early February 2000, Kademian wrote a letter to Miami Valley’s radiation
safety officer, reporting the over-exposure and alleged substandard treatment, which
Kademian contended should have been reported to the Ohio Department of Health.
Kademian asked the hospital to address the issue, so he would know what to tell Patient X
when they discussed radiation treatment for his prostate cancer. Kademian copied the letter
to the chairman of the radiation safety committee, and to Gary Marshall, who was Premier
Health’s vice-president of Oncology Services for both Good Samaritan and Miami Valley.
11
{¶ 24} Kademian did not receive a response to this letter, so he sent another letter in
early March to Marshall, indicating that he would have no choice but to report the
over-radiation if the hospital did not report it. Kademian also requested a meeting with
Marshall and Premier Health’s general counsel, Dale Creech. In addition, Kademian copied
Miami Valley’s COO with the letter. Marshall replied, stating that nothing had occurred that
needed to be reported, and that he would arrange a date for a meeting. Marshall also stated
that it would be “unfortunate” if Kademian implicated the hospital in discussions he had with
anyone, particularly since Miami Valley had not completed its investigation.
{¶ 25} Shortly thereafter, Kademian again wrote to Marshall, expressing discomfort
over two other cases that had been handled by Drs. Field and Duncan. Kademian also
pointed out perceived deficiencies in the way treatment, chart rounds, and peer review were
being conducted in Miami Valley’s radiation oncology department. And finally, Kademian
raised issues about appropriate use of HDR therapy at Miami Valley.
{¶ 26} After being told by Marshall that he should approach Duncan about peer
review, Kademian wrote Marshall again a few days later, indicating that his attempts to speak
with Duncan had been rebuffed. Kademian also noted that when he questioned the use of
HDR therapy on a patient, Duncan had told him that HDR was being done to “pay for the
equipment.” Finally, Kademian reported that both Duncan and Field had said the reason to
do HDR therapy was to pay for expensive equipment and keep money in the department.
Kademian expressed concerns that HDR was being used inappropriately and excessively at
Miami Valley.
{¶ 27} Kademian and his attorney subsequently met with Premier Health’s general
12
counsel, Creech, to discuss concerns about the radiation oncology department and the
necessity of reporting the mis-administration overdose. During the meeting, Creech revealed
Miami Valley’s concerns about Field and his clinical qualifications. Creech also expressed
the opinion that the overdose was not reportable, but told Kademian to go ahead and report it
if he felt he should. After the meeting, Kademian then met with Rasp, Marger, M&A’s
attorney, and his own attorney. Rasp and Marger did not say not to report the incident.
Marger asked Kademian not to report it to the Department of Health without telling him first,
and Kademian agreed. Kademian later decided to go ahead and report the matter, however,
because he was concerned and his concerns were increased by Creech’s comments.
Kademian found it troubling that the chief legal officer would say things like that about a
physician (Fields), and still allow the physician to practice at the hospital.
{¶ 28} During the week of April 10, 2000, Kademian and his attorney met with
representatives of the Ohio Department of Health, Bureau of Radiation Protection, which
administers the radiation safety programs for the Department of Health. Kademian reported
the alleged radiation overexposure of a Miami Valley patient. As a result of the meeting, an
inspector arrived at Miami Valley on April 18, 2000, for an inspection. This was the first day
Miami Valley would have become aware of the inspection. The inspector stayed for two
days. Prior to the arrival of the inspectors, Miami Valley had not referred the Patient X
matter to an independent consultant for review. In addition, Kademian had never received
any substantive response from Marshall.
{¶ 29} An “absolute coincidence” occurred the first day of the inspection, according to
Marger. On April 18, 2000, Marger told Rasp and Kademian that he (Marger) was leaving
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M&A. At trial, Marger testified that when he talked about leaving M&A, he had no idea that
the state had come to investigate Miami Valley. Conversely, Kademian testified that Marger
is the one who told him that the Department of Health inspection had started on April 18,
2000. Marger and Kademian discussed whether or not Kademian should have gone to the
Department of Health, and Marger said, “I can’t control you. You are affecting my health,
Mike, you are affecting my blood pressure, you’re affecting me emotionally * * * and you’re
going to be affecting me financially.” Trial Transcript, pp. 119-120. During this
discussion, Marger also told Rasp that he would “take care” of him.
{¶ 30} Miami Valley hired an independent consultant to peer-review the incident, but
did not do so until after the Department of Health began its investigation. On May 16, 2000,
two more inspectors from the Bureau of Radiation Protection came to Miami Valley to
continue the inspection. Shortly thereafter, on May 23, 2000, Marshall, the vice-president of
Oncology for both Miami Valley and Good Samaritan, and Bobbie Martin, the director of
Oncology at Good Samaritan, discussed information that could only have come from Marger
or Rasp.1
{¶ 31} Martin’s notes about the conversation state “confidential Marger, MK will get
notice this Thursday that corporation will be dissolved by next Friday. * * * ” Trial
Transcript, p. 869, and Plaintiff’s Ex. 123. Martin’s notes further indicate that KDD
(referring to Doug Deck, the chief executive officer of Good Samaritan) would sign with the
“new corporation,” and that “MK” would have a period of time so continuity would not be
1
Marger did not deny giving Marshall or Martin this information; he testified that he “could” have discussed this information with
Martin.
14
disrupted. Trial Transcript, p. 870, and Plaintiff’s Ex. 124. Other notes written by Martin
indicate that “Marger needs to let Greg out of exclusive. Dissolve contract. * * * Give Greg
exclusive contract,” and “Appoint Greg as acting medical director. Have Marger let him out
of the exclusive clause. Dissolve corporation. Award Greg exclusive contract.” Trial
Transcript, p. 871, and Plaintiff’s Ex. 269 and 270.2
{¶ 32} On the same day these notes were made, notices were sent out indicating that a
shareholder meeting to dissolve M&A would be held on June 2, 2000. On June 2, 2000,
Marger voted to liquidate M&A, over Kademian’s objection. The liquidation was effective
June 30, 2000, with M&A ceasing active operations on that date. Before the dissolution, the
corporate earnings of M&A were approximately $2,000,000 per year.
{¶ 33} Prior to the meeting on June 2, 2000, M&A’s corporate attorney prepared
Articles of Incorporation for Cancer Consultants of Southwest, Ohio, Inc., at Marger’s request.
Marger signed the articles of incorporation and the appointment of himself as statutory agent
for Cancer Consultants on the same day that he voted to dissolve M&A. The articles of
incorporation for Cancer Consultants were filed with the Ohio Secretary of State, and bear a
date-stamp of June 5, 2000.
{¶ 34} Marger admitted having had discussions with Rasp about continuing a
professional association together. When Marger had these discussions, he knew that Rasp
was under a contractual agreement with M&A and would have to be released from that
agreement. Marger acknowledged that he had also an employment agreement with M&A that
contained a covenant not to compete, and that he knew, based on his discussions with M&A’s
2
Dr. Rasp’s first name is Greg.
15
corporate attorney, that when a corporation is dissolved, all contracts referable to the
corporation are null and void. Marger further admitted that dissolving M&A allowed him to
form Cancer Consultants, and that he and Rasp had a plan to continue practicing full-time, as
50/50 owners of Cancer Consultants, at the same institutions where M&A and its doctors had
practiced. At the time, Kademian was primarily practicing at Good Samaritan; the group as
a whole practiced at Franciscan and Good Samaritan, with some limited practice at Miami
Valley. Rasp knew that Marger was forming an entity so that the two of them could practice
radiation oncology.
{¶ 35} On June 7, 2000, M&A’s corporate attorney sent Marger copies of employment
agreements for both Marger and Rasp with Cancer Consultants, and two copies of a
shareholder’s agreement for Cancer Consultants. On the same date, coincidentally or not,
Medical Billing Services for the New Century (MBI), the billing service for M&A, sent
Kademian a letter, refusing to provide billing services to him. The letter indicated that MBI
had made the decision because of “the potential conflict of providing billing services for
competitors within the same location.” Plaintiff’s Ex. 129. MBI then went on to provide
billing services for Cancer Consultants.
{¶ 36} On June 8, 2000, Marger signed an application for a tax identification number
for Cancer Consultants. Marger did not tell Kademian that he had formed Cancer
Consultants, nor did he tell Kademian of the plans that he and Rasp had to practice together.
During the same time period that he was setting up a new corporation and planning to practice
with Rasp, Marger discussed the possibility of selling his shares in the already-dissolved
M&A to Kademian. The plan did not come to fruition, because Marger wanted to leave open
16
the possibility of contracting with Miami Valley, and wanted Kademian to sign a provision
relieving him of all liability. In addition, Kademian concluded that the corporation lacked the
value that it had before Marger voted to dissolve it, because relationships with hospitals and
corporate assets had been affected.
{¶ 37} Marger testified that he had an “epiphany,” and decided to retire completely
from the practice of medicine. He testified that he therefore aborted his intention to move
forward with Cancer Consultants in mid-June 2000. However, on June 26, 2000, Marger
faxed a health and life insurance application, listing his employer as Cancer Consultants.
{¶ 38} On June 22, 2000, the Good Samaritan medical chief of staff, Dr. Schoulties,
met with Kademain regarding complaints that had been made by staff and patients. Some
complaints were from 1998, and others were from late 1999, and the first half of 2000. None
of the complaints had ever been previously presented to Kademian. Schoulties concluded
that due process had not been served because Kademian was not counseled earlier when these
complaints had occurred. Schoulties did not feel further investigation was warranted, but told
Kademian that if these types of allegations continued, more formal action would be taken.
Kademian was concerned that someone with an agenda was compiling complaints and not
discussing them. During the same time-frame, complaints were also made about Marger’s
demeanor with patients, but Good Samaritan never raised this issue with Marger.
{¶ 39} In late June 2000, Kademian went on vacation. When he returned, he received
a letter from Rasp dated July 4, 2000, written on Cancer Consultants letterhead. The letter
lists the areas of practice as Good Samaritan, Miami Valley, and Franciscan. In the letter,
Rasp states that: “Don told me on Friday (6/30/00) that he filed the documents to dissolve
17
Donald Marger, M.D. and Associates, Inc. Given that, I have formed the above named
corporation.” Plaintiff’s Ex. 200.
{¶ 40} Kademian spoke to Rasp that afternoon, and was told that he should form his
own corporation. Rasp did not, during this conversation, or any other, ask Kademian to join
Cancer Consultants, nor did he suggest that Kademian might be able to join Cancer
Consultants. Rasp also never disclosed to Kademian what had occurred regarding Marger
and the formation of Cancer Consultants. Kademian also discovered that day that all the
patients Marger had been treating, as well as those who were coming up for checkups months
or years after their prior treatment, had been transferred to Rasp. Additionally, he discovered
that Rasp had already had prescription pads printed for Cancer Consultants.
{¶ 41} Furthermore, Kademian called Upper Valley Radiation Center, located north of
Dayton, and learned that Marger was working there full-time, despite having announced his
retirement. At the time of trial, Marger was still working for the same employer, but worked
part-time.
{¶ 42} In late July 2000, the Department of Health sent Gary Marshall, Premier Health
Vice President of Oncology Services, a notice of violations letter and a report of its
investigation of the Patient X situation, based on the findings of three investigators who had
worked on the report. The notice detailed six violations, including lack of documentation to
establish that Miami Valley was following proper procedures for addressing complaints;
deficiencies in Miami Valley’s timely submission of data to the Department of Health,
problems with Miami Valley’s quality assessment and improvement program; and a lack of
documentation that the radiation oncologist set limits of doses to critical structures
18
surrounding the treatment area. The report also concluded that the inadequate quality
assessment and improvement program and inadequate complaint handling process all
contributed to a radiotherapy course that resulted in a “disproportionated output of the
prescribed radiation dose across the treatment field.” Plaintiff’s Ex. 141, p. 2. The
Department of Health ordered Miami Valley to submit various evidence and to develop a
corrective action plan to address the violations within thirty days of receipt of the letter.
{¶ 43} Miami Valley’s response was sent to the Department of Health on August 24,
2000. One of the attachments was a final report from Miami Valley’s independent
consultant, dated June 16, 2000. Consistent with Kademian’s findings, the report concluded
that the quality of care provided to Patient X fell below accepted standards of care.
{¶ 44} In June or July 2000, Kademian learned that Miami Valley was considering
hiring Dr. Ditzel for the position of radiation oncology director. After meeting Ditzel,
Kademian then met with Mary Boosalis, the vice-president and COO for Miami Valley,
during the week of August 7, 2000. At the meeting, Kademian and Boosalis discussed the
selection process for the director’s postiion, Ditzel’s qualifications, the quality of care in the
radiation oncology department, and the Patient X matter. Kademian expressed concern over
the selection process, because the job had not been advertised, and it was his understanding
that the decision had already been made, with only one candidate, Ditzel, having been
considered. On August 13, 2000, Kademian wrote a follow-up letter to Boosalis, opposing
Ditzel’s selection for two reasons. The first reason was that the selection process was flawed,
and the second was that Kademian did not believe Ditzel was the most qualified candidate that
could be found.
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{¶ 45} Boosalis replied on August 17, 2000, stating that the decision of who to hire as
medical director belonged to Miami Valley. Boosalis also told Kademian that he could only
treat patients at Miami Valley until a new exclusive contract was signed with Dr. Ditzel’s
group. According to Miami Valley representatives, Miami Valley had discussed with Rasp
the fact that Ditzel and a colleague, Dr. Paessun, were going to come to Dayton and practice
with Rasp. The question was whether Kademian should continue to practice, and the
consensus was that they would have a new group with Ditzel, Rasp, Paessun, and Kademian.
However, after Kademian made his displeasure about Ditzel known, it was the collective
decision of Boosalis, Bill Thornton, Miami Valley CEO, and Marshall, the vice-president of
Oncology for both Good Samaritan and Miami Valley, that Kademian would not be able to
practice.
{¶ 46} Kademian contended, however, that no one ever told him that they wanted him
to stay at Miami Valley. In fact, Kademian tried to meet with administrators and they would
not meet with him. He also tried to talk with Doug Deck, the president at Good Samaritan
about staying at Good Samaritan; Deck refused to meet with him. In addition, Kademian
testified that Rasp never came to him and said anything about working to try to include him in
Cancer Consultants, nor did Rasp ever say anything to him after June 30, 2000, about working
together. Rasp also never told Kademian that he was being scrutinized by the hospitals in any
way in terms of coming into Cancer Consultants.
{¶ 47} In the fall of 2000, Good Samaritan and Miami Valley signed exclusive
contracts with Cancer Consultants, which meant that Kademian would not be able to treat
patients at either hospital, because he was not employed by Cancer Consultants. In addition,
20
Franciscan was not an option, because it had closed by that time.
{¶ 48} At trial, Kademian presented evidence indicating that he had lost the following
amounts due to the alleged breach of fiduciary duty and civil conspiracy: (1) equity and
goodwill in the amount of $203,651, based on the dissolution of M&A; (2) lost earnings, plus
interest, of approximately $6,386,861 through March 31, 2010, and lost retirement
contributions, plus interest. from 2001 through 2011, of about $350,529. The lost wages
were calculated based on Kademian’s 1999 earnings of approximately $456,000.
{¶ 49} In late September 2000, Kademian filed suit against Marger, M&A, Rasp,
Cancer Consultants, Good Samaritan, Miami Valley, and Premier Health. The complaint was
dismissed without prejudice and was refiled in April 2002, against the same parties. The
complaint included claims of breach of fiduciary duty, breach of contract, and conversion
against Marger; claims of breach of duty of loyalty and good faith, and breach of contract
against Rasp; and claims of tortious interference with contract, tortious interference with
business expectancy, violation of R.C. 4113.52, and civil conspiracy against all defendants.
After motions to dismiss certain claims were sustained, Kademian filed an amended complaint
in August 2003, adding claims of breach of a buy-sell agreement and breach of duty of good
faith and fair dealing against Marger; claims of conversion against Rasp; claims of replevin
against Marger, Rasp, and Cancer Consultants; and claims of constructive trust against Rasp
and Cancer Consultants.
{¶ 50} In 2006, the hospital defendants were dismissed, with prejudice. Ultimately,
the remaining claims were dismissed, other than the breach of fiduciary duty and conspiracy
claims, which proceeded to trial, with Marger and Rasp as the remaining defendants.
21
Kademian settled his claims against Rasp during trial, leaving Marger as the sole defendant.
{¶ 51} At the end of Kademian’s case, Marger moved for a directed verdict, which
was granted by the trial court on the theory that Marger did not take advantage of the alleged
breach of fiduciary duty and conspiracy, because he did not practice further with Good
Samaritan and Miami Valley. Kademian appeals from the judgment rendered in favor of
Marger.
III. Did the Trial Court Err in Granting a Directed Verdict
on Breach of Fiduciary Duty?
{¶ 52} Kademian’s First Assignment of Error is as follows:
{¶ 53} “THE TRIAL COURT ERRED IN GRANTING MARGER’S MOTION FOR
A DIRECTED VERDICT INASMUCH AS REASONABLE MINDS COULD DIFFER AS
TO WHETHER DR. MARGER BREACHED HIS FIDUCIARY DUTIES TO DR.
KADEMIAN.”
{¶ 54} Under this assignment of error, Kademian contends that the trial court erred in
directing a verdict in favor of Marger, because reasonable minds could differ regarding
whether Marger acted in breach of his fiduciary duty by dissolving M&A.
{¶ 55} Civ. R. 50(A)(4) provides that:
When a motion for a directed verdict has been properly made, and the
trial court, after construing the evidence most strongly in favor of the party
against whom the motion is directed, finds that upon any determinative issue
reasonable minds could come to but one conclusion upon the evidence
submitted and that conclusion is adverse to such party, the court shall sustain
22
the motion and direct a verdict for the moving party as to that issue.
{¶ 56} We review the grant or denial of directed verdicts de novo. In conducting the
review, we construe the evidence most strongly in favor of the nonmoving party. A motion
for directed verdict must be denied “where there is substantial evidence upon which
reasonable minds could reach different conclusions on the essential elements of the claim.”
Anousheh v. Planet Ford, Inc., 2d Dist. Montgomery Nos. 21960, 21967, 2007-Ohio-4543, ¶
43. Furthermore, “[i]n deciding a motion for a directed verdict, neither the weight of the
evidence nor the credibility of the witnesses is to be considered.” Cater v. City of Cleveland,
83 Ohio St.3d 24, 33, 1998-Ohio-421,697 N.E.2d 610.
{¶ 57} Claims for breach of fiduciary duty require proof of the following elements:
“(1) the existence of a duty arising from a fiduciary relationship; (2) a failure to observe the
duty; and (3) an injury resulting proximately therefrom.” Harwood v. Pappas & Assoc., Inc.,
8th Dist. Cuyahoga No. 84761, 2005-Ohio-2442, ¶ 26, citing Strock v. Pressnell, 38 Ohio
St.3d 207, 216, 527 N.E.2d 1235 (1988). A “fiduciary duty” is defined as “ ‘[a] duty of
utmost good faith, trust, confidence, and candor owed by a fiduciary * * * to the beneficiary *
* *; a duty to act with the highest degree of honesty and loyalty toward another person and in
the best interests of the other person.’ ” DiPasquale v. Costas, 186 Ohio App.3d 121, 151,
2010-Ohio-832, 926 N.E.2d 682, ¶ 122 (2d Dist.), quoting In re Trust of Bernard, 9th Dist.
Summit No. 24025, 2008-Ohio-4338, ¶ 20, which in turn quotes Black's Law Dictionary 545
(8th Ed.2004).
{¶ 58} In the case before us, a fiduciary duty arose from Marger’s status as the
majority stockholder in M&A. “Generally, majority shareholders have a fiduciary duty to
23
minority shareholders. * * * This duty is similar to the duty that partners owe one another in a
partnership because of the fundamental resemblance between the close corporation and a
partnership.” Crosby v. Beam, 47 Ohio St.3d 105, 108, 548 N.E.2d 217 (1989). Accord
Werthmann v. DONet, Inc., 2d Dist. Montgomery No. 20814, 2005-Ohio-3185, ¶ 42.
“Typically, a close corporation is a corporation with a few shareholders and whose corporate
shares are not generally traded on a securities market.” Crosby, at 107. In this regard, we
have stressed that:
A drawback to the nature of a close corporation is that majority
shareholders can easily abuse their corporate control to the disadvantage of the
minority shareholders. Minority shareholders are particularly vulnerable
because they are small in number and cannot easily protect their financial
interests because there is usually no readily available market for their stock.
Because of the close relationship between majority shareholders and the actual
operation of a close corporation:
“ * * * the form is peculiarly susceptible to a particular form of misuse or abuse
by the majority or controlling shareholders. Commonly known as a
‘squeeze-out’ or ‘freeze-out,’ it refers to manipulative use of corporate control
to eliminate minority shareholders * * * or otherwise unfairly deprive them of
advantages or opportunities to which they are entitled.” Gigax v. Repka, 83
Ohio App.3d 615, 620-621, 615 N.E.2d 644 (2d, Dist. 1992), quoting Estate of
Schroer v. Stamco Supply, 19 Ohio App.3d 34, 37-38, 482 N.E.2d 975 (1st
Dist. 1984).
24
{¶ 59} In the case before us, the trial court concluded that Marger had a right to
dissolve the corporation and that no breach occurred because Marger failed to profit from his
actions. We disagree. The trial court improperly focused on actions that occurred after the
dissolution, and ignored Marger’s prior conduct. After construing the evidence most
favorably to Kademian, we conclude that reasonable minds could differ on whether Marger’s
conduct violated his duty to act with the utmost candor and good faith, and whether his failure
to so act caused injury to Kademian. In reaching this conclusion, we express no opinion on
the ultimate outcome of the litigation.
{¶ 60} As the above recitation of facts indicates, Marger took various actions both
prior to, and at the time of, the corporate dissolution that cast doubt on his motives and
suggest that he was involved in a plan with Rasp, and aided by Premier Health, to prevent
Kademian from being able to practice at Good Samaritan and Miami Valley. Ill will between
Marger and Kademian began in 1998, with their dispute over the sale of Western Ohio stock
and Marger’s formation of a limited-liability corporation with Field. Marger predicted to
M&A’s corporate attorney that Kademian would be replaced as medical director for Good
Samaritan, and that happened shortly thereafter, with Marger being the replacement. Marger
also stated that he wanted to “get rid” of Kademian.
{¶ 61} The dispute over the proposed merger continued into late 1999, when Marger
finally abandoned the project. In April 2000, Marger became upset with Kademian over the
Patient X matter, and indicated he was leaving M&A. However, instead of leaving the
company, Marger planned to dissolve M&A, knowing, from discussions with his attorney, that
when a corporation is dissolved, all covenants referable to the corporation become void.
25
Marger also knew that because of the covenants not to compete, both he and Rasp would
otherwise be precluded from forming an entity so they could practice together at Good
Samaritan and Miami Valley. And, Marger knew that by dissolving M&A, he and Rasp
could practice together at hospitals where M&A had relationships.
{¶ 62} Marger admitted that he and Rasp had a plan to practice together, as 50/50
partners in Cancer Consultants. Marger took steps to accomplish this before he voted to
dissolve M&A, by forming Cancer Consultants. Marger also obtained a tax identification
number, and had the M&A corporate attorney prepare Cancer Consultants stock and
employment agreements for himself and Rasp. Prior to the time M&A was dissolved, Marger
or Rasp, or both, were attempting to obtain an exclusive contract with Good Samaritan, which
would have precluded Kademian from working in the hospital where he had been employed
full-time for approximately ten years. Furthermore, because of the dissolution of M&A,
Kademian would not have been able to enforce the covenants not to compete, even though he
had owned 49% of the corporation.
{¶ 63} Marger concealed his conduct from Kademain. He first led Kademian to
believe that he was leaving the corporation. Then, during the time he was dissolving the
corporation, he was planning with Rasp to form a competing corporation, and to obtain an
exclusive contract at Good Samaritan. Reasonable minds could also differ regarding whether
Marger’s discussions with Kademian in June 2000, about purchasing M&A, were designed to
mislead Kademian about what was occurring, and to further serve the purpose of letting
Marger obtain a release of liability from Kademian. Notably, even after the time that Marger
said he had aborted plans to proceed with Cancer Consultants (mid-June 2000), he was still
26
classifying himself as an employee of Cancer Consultants. Rasp also concealed his part in
the plan, by pretending in early July 2004, that he was the one who had formed Cancer
Consultants.
{¶ 64} Marger argues that he cannot be held liable, because he stopped practicing in
Dayton and did not ultimately receive financial benefits from the transaction. However, the
appropriate consideration in breach of fiduciary duty is not whether the alleged wrongdoer
benefitted – it is whether an injury proximately resulted from the breach. Harwood,
2005-Ohio-2442, at ¶ 26. As an example, an individual could intentionally ruin another’s
business, simply for motives of ill will or malice, without any desire for personal gain, and no
one would suggest that an injury had not occurred to the person whose business was
destroyed. Likewise, an individual could conspire to injure another’s business for reasons of
personal gain, yet be unable, for various reasons, to realize those gains. The fact that Marger
later chose not to be part of the new corporation, which did receive exclusive contracts to
practice at Good Samaritan and Miami Valley to the detriment of Kademian’s ability to
practice, does not negate Kademian’s injury sustained as a result of Marger’s actions in
dissolving M&A, along with its covenants not to compete, and the transfer of its existing
assets, including goodwill and patients, to another entity. Marger used his majority control to
his advantage at the time he dissolved the corporation, thereby freeing himself and Rasp from
non-compete clauses and allowing the new corporation to be formed. At that time, it is
reasonable to infer that Marger intended to benefit from his actions.
{¶ 65} A direct financial benefit to the breaching party is not required before a breach
of fiduciary duty can be found, and an appropriate remedy fashioned. For example, in Health
27
Alliance of Greater Cincinnati v. Christ Hosp., 1st Dist. Hamilton No. C-070426,
2008-Ohio-4981, several participating hospitals had entered into a joint operating agreement
and had created a health alliance to manage area hospitals as an integrated system. Id. at ¶ 1.
Ultimately, one of the member hospitals desired to withdraw from the alliance, claiming that
the alliance had breached its fiduciary duty. The First District Court of Appeals held that the
alliance had breached its fiduciary duty to the member hospital by using its superior position
to constrain the hospital’s ability to compete, by denying the hospital access to its own
revenue stream, and by using the hospital’s funds to pay for strategic planning on the alliance's
behalf, while refusing to let the hospital engage in its own strategic planning. Id. at ¶ 23.
The trial court had fashioned an equitable remedy, by allowing the hospital to withdraw from
the alliance, and the court of appeals affirmed. Id. at ¶ 24.
{¶ 66} There is no indication in Health Alliance that the alliance had received a
financial benefit from its actions. In fact, the case does not address financial benefit to the
alliance. To the contrary, the focus is on the alleged damage to the injured party and how that
damage might be remedied. Likewise, in the case before us, the focus should be on the
damages sustained by Kademian as a result of Marger’s alleged breach of fiduciary duty.
{¶ 67} We made the same general observations in DiPasquale v. Costas, 186 Ohio
App.3d 121, 2010-Ohio-832, 926 N.E.2d 682 (2d Dist.), when we rejected an argument that
the directors of a non-profit condominium association could not be held liable for breach of
fiduciary duty. After discussing the holding in Health Alliance, we commented that:
Thus, whether an organization is for profit or a nonprofit, the directors or
corporation cannot receive benefits that are denied to a member, nor can they
28
use their position unfairly to harm a member's interests. These principles
recognize that whether or not a corporation is organized for the purpose of
generating a profit for itself, both types of corporation are normally organized
for the purpose of advancing the interests of corporate shareholders or
members, and the requirement of fair dealing has at its heart the notion that
one group of shareholders or members ought not take unfair advantage of
another group, even when using a method to take unfair advantage that would
otherwise be lawful; that is, the act would be lawful but for the relationship of
the parties as co-shareholders or co-members. If only otherwise unlawful acts
were excluded, there would be no need for the doctrine of fair dealing among
partners, shareholders or members because otherwise unlawful acts would be
precluded without resort to that doctrine. (Emphasis added.) Id. at ¶ 134.
{¶ 68} Under the evidence presented at trial, reasonable minds could differ with regard
to whether Marger’s alleged breach of duty caused damages to Kademain. Accordingly, the
trial court erred in granting Marger’s motion for directed verdict.
{¶ 69} Marger argues that he had the right to dissolve the corporation. This is true.
However, we have stressed that even if a particular close corporation or partnership decision
cannot be contested, “the manner in which the decision is made cannot violate the majority's
fiduciary duty.” Schafer v. RMS Realty, 138 Ohio App.3d 244, 274, 741 N.E.2d 155 (2d Dist.
2000). In Schafer, a majority of partners issued a capital call, which was within their right to
do under the partnership agreement. However, their action was taken in an attempt to
squeeze out a minority partner. On appeal, we affirmed a jury verdict rendered in favor of the
29
minority partner, noting that while the minority partner “could not contest the capital call
itself, he could bring an action for breach of fiduciary duty if the defendants acted in bad faith
or in a duplicitous manner by voting for and proceeding with the capital call.” Id.{¶ 70} Marger also contends that Kademian, himself, caused his own damages, by
alienating the hospitals in connection with the hiring of Ditzel. In order to recover damages,
Kademian has the burden of proving that Marger’s breach of fiduciary duty proximately
caused his damages. See, e.g., Anginoli v. Benenson Capital Co., 1st Dist. Hamilton No.
C-980811, 2000 WL 955422, * 5 (Dec. 23, 1999). Proximate cause is ordinarily a question
of fact for the jury. Strother v. Hutchinson, 67 Ohio St.2d 282, 288, 423 N.E.2d 467 (1981).
{¶ 71} The evidence on the issue of whether Kademian caused his own damages is
conflicting. While there is testimony indicating that Miami Valley and Premier Health were
considering allowing Kademian to practice at Miami Valley as late as the summer of 2000,
there is also testimony indicating that no one ever communicated this fact to Kademian. The
lack of communication of this alleged fact casts doubt on its veracity, particularly in light of
evidence of a plan to exclude Kademian from practice at Good Samaritan prior to the time that
M&A was dissolved. One of the individuals involved was the vice-president of oncology for
both Good Samaritan and Miami Valley. A reasonable construction of the evidence is that
this individual, as well as Miami Valley and Premier Health, would not have been pleased by
Kademian’s report of the Patient X matter to the Department of Health, or with the
investigation of Miami Valley that followed the report. In addition, the evidence indicates
that Rasp never communicated an intent to hire Kademian or to involve him in Cancer
Consultants, which ultimately received exclusive contracts for both Good Samaritan and
30
Miami Valley. {¶ 72} Again, reasonable minds could differ on whether Marger’s
alleged breach of fiduciary duty proximately caused the damages claimed by Kademian. At
the least, Kademian presented undisputed evidence that Marger’s dissolution of M&A resulted
in a loss of equity and business goodwill in the amount of approximately $203,651. This
amount does not include the earnings and lost wages of Kademian as a result of having been
foreclosed from practicing at Good Samaritan and Miami Valley, and would not have been
affected by Kademian’s alleged alienating actions concerning Ditzel’s appointment.
{¶ 73} In light of the preceding discussion, Kademian’s First Assignment of Error is
sustained. The judgment rendered in Marger’s favor will be Reversed, and this cause will be
Remanded for further hearing.
IV. Did the Trial Court Err in Rendering Summary Judgment
in Marger’s Favor on the Conversion Claim?
{¶ 74} Kademian’s Second Assignment of Error is as follows:
{¶ 75} “THE TRIAL COURT ERRED IN GRANTING DR. MARGER’S MOTION
FOR SUMMARY JUDGMENT AS TO DR. KADEMIAN’S CLAIM FOR CONVERSION
OF HIS INTEREST IN MARGER & ASSOCIATES.”
{¶ 76} Under this assignment of error, Kademian contends that the trial court erred in
rendering summary judgment in Marger’s favor on Kademian’s conversion claim. According
to Kademian, when Marger dissolved the corporation, he converted Kademian’s 49% share of
a lucrative corporation. Kademian also maintains that Marger unilaterally and improperly
distributed one-third of the profits of M&A to Rasp upon dissolution.
{¶ 77} In response, Marger contends that Kademian’s argument is a thinly veiled
31
effort to maintain that Marger did not have the right to dissolve the company. Marger also
argues that Kademian failed to make this claim in his amended complaint.
{¶ 78} “A trial court may grant a moving party summary judgment pursuant to Civ.R.
56 if there are no genuine issues of material fact remaining to be litigated, the moving party is
entitled to judgment as a matter of law, and reasonable minds can come to only one
conclusion, and that conclusion is adverse to the nonmoving party, who is entitled to have the
evidence construed most strongly in his favor.” Smith v. Five Rivers MetroParks, 134 Ohio
App.3d 754, 760, 732 N.E.2d 422 (2d. Dist.1999), citing Harless v. Willis Day Warehousing
Co., 54 Ohio St.2d 64, 375 N.E.2d 46 (1978). “We review summary judgment decisions de
novo, which means that we apply the same standards as the trial court.” GNFH, Inc. v. W.
Am. Ins. Co., 172 Ohio App.3d 127, 2007-Ohio-2722, 873 N.E.2d 345, ¶ 16.
{¶ 79} In rendering summary judgment in Marger’s favor on the conversion claim, the
trial court noted that no dispute existed concerning whether Kademian owned 49% of the
shares of M&A. The court next concluded that Kademian had failed to bring forward specific
facts indicating that Marger converted his 49% interest by a wrongful act. The court rejected
Kademian’s argument that the dissolution of the corporation was a wrongful act or disposition
of his interest. In addition, the court noted that Kademian had not made a demand for return
of the 49% interest, and that a demand would be futile because the corporation was dissolved.
Finally, the court stated that upon dissolution, there was nothing to return to Kademian other
than what he had received.
{¶ 80} “Conversion is a wrongful exercise of dominion over property in exclusion of
the right of the owner, or withholding it from his possession under a claim inconsistent with
32
his rights.” Zacchini v. Scripps-Howard Broadcasting Co., 47 Ohio St.2d 224, 226, 351
N.E.2d 454 (1976). In Schafer, we concluded that the plaintiff was entitled to make a claim
for conversion of his partnership interest, which was an intangible asset. Schafer, 138 Ohio
App.3d at 282-286, 741 N.E.2d 155. The defendants in Schafer had issued a capital call,
which they were entitled to do under the terms of the partnership agreement. However, the
defendants had issued the capital call for a wrongful purpose, in order to reduce the plaintiff’s
partnership interest and squeeze the plaintiff out of the partnership. Id.{¶ 81} In the case before us, although Marger had the right to dissolve the corporation,
there are issues of fact regarding whether his actions were taken for a wrongful purpose, in
order to squeeze Kademian out of the corporation and prevent him from being able to practice
at Good Samaritan and Miami Valley. Thus, arguments that Marger had a “right” to dissolve
the corporation do not absolve him from potential liability. We rejected a similar argument in
Schafer, noting that:
In assignment of error “E,” the individual defendants contend that the
trial court erred in overruling their motion for directed verdict and motion for
judgment notwithstanding the verdict on the conversion claim. The primary
argument defendants make in this context is that the capital call was not
wrongful because it was permitted by the partnership agreement. Based on our
prior discussion of the evidence, we disagree. Substantial, probative evidence
was presented at trial indicating that the capital call was made for the purpose
of depriving Schafer of his partnership interest. Id. at 286.
{¶ 82} Accordingly, Marger could be held liable for conversion, even if he had a right
33
to dissolve the corporation, just as the defendants in Schafer could be held liable for
conversion, even though they had the right to issue a capital call.
{¶ 83} We also note that the trial court’s comments in rejecting the conversion claim
against Marger are inconsistent with his other conclusions in ruling on the summary judgment
motion. The trial court concluded that there were factual issues regarding the breach of
fiduciary duty claim against Marger and the civil conspiracy claims against both Marger and
Rasp. The court noted that Marger had admitted in his deposition that he and Rasp had a plan
to join together in a competing business that did not include Kademian, and that their plan was
to dissolve M&A to avoid the non-compete provisions of the employment contracts that
Marger and Rasp had with M&A. Docket #235, Decision, Order, and Entry Sustaining in
Part and Overruling in Part Defendant’s Motion for Summary Judgment, p. 16.
{¶ 84} “The measure of damages in a conversion action is the value of the converted
property at the time of the conversion.” Brumm v. McDonald & Co. Securities, Inc., 78 Ohio
App.3d 96, 104, 603 N.E.2d 1141 (4th Dist.1992). As we noted in connection with the
breach-of-fiduciary-duty claim, Kademian presented evidence that the value of his lost interest
in M&A at the time of dissolution was approximately $203,651, which included
loss of equity and business goodwill. Again, this figure does not include lost earnings and
wages, nor does it include the value of the client base transferred to Rasp. See Elias v.
Gammel, 8th Dist., Cuyahoga No. 83365, 2004-Ohio-3464, ¶ 17 (concluding that “a dental
practice, an intangible asset, can be converted. A dental practice includes, but is not limited
to, good will, name, location, telephone number, years of practice, client base, and patient
records. Professional practices are bought and sold every day. There is a distinct advantage
34
to buying a professional practice that has already been established. Customers, clients, and
patients routinely patronize the same business that they have always gone to even if it
‘changes hands.’ ”)
{¶ 85} Another component of Kademian’s conversion claim is that he did not receive
his 49% share of the receivables upon dissolution, the receivables having been paid one-third
to Marger, one-third to Kademian, and one-third to Rasp. The evidence suggests that Rasp
was not entitled to be paid for one-third of M&A’s receivables. Under Rasp’s employment
agreement, all fees for professional services rendered belonged to M&A, and the
compensation paid to Rasp under the agreement satisfied in full all of Rasp’s claims upon
M&A for compensation with regard to his employment. Plaintiff’s Ex. 198, pp. 6-7. The
only way in which Rasp would have been entitled to payment of the receivables would have
been if he had become a shareholder. However, Rasp never achieved this status. Id. at pp.
8-9 (allowing for payment of percentage of accounts receivable to employee-shareholder as
deferred compensation after termination of employment.) Thus, once Rasp’s employment
terminated, any receivables attributable to his efforts would have become the property of
M&A and should have been distributed to Marger and Kademian according to their respective
shares in the corporation.
{¶ 86} Marger argues that summary judgment was proper on Kademian’s conversion
claim, because the amended complaint failed to mention the one-third of the receivables that
Marger allegedly gave to Rasp after the dissolution. Civ. R. 9(B) requires that “[i]n all
averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated
with particularity.” The conversion claim is not a fraud claim, and the allegations in the
35
amended complaint are sufficient under notice pleading requirements to alert Marger to the
conversion claim. In addition, the case was pending for several years before trial, during
which time the parties had ample opportunity to learn of the basis for the claims of an
opposing party.
{¶ 87} We do note, however, that Kademian failed to raise the issue of the receivables
when he responded to Marger’s motion for summary judgment. Therefore, Kademian waived
this portion of his argument on appeal, by failing to present it to the trial judge. See State ex
rel. Zollner v. Indus. Comm., 66 Ohio St.3d 276, 278, 1993-Ohio-49, 611 N.E.2d 830.
Accord Care Risk Retention Group v. Martin, 191 Ohio App.3d 797, 2010-Ohio-6091, 947
N.E.2d 1214, ¶ 78 (2d Dist.) (holding that “Failure to raise an issue in the trial court waives
the argument on appeal.”)
{¶ 88} The fact that the receivables argument may have been waived, does not mean
that the trial court was correct in rendering summary judgment on the conversion claim. It
simply means that Kademian failed to raise this argument in responding to summary
judgment, and we may not use it on appeal as a basis for reversing the grant of summary
judgment. As was noted, that is not the reason we are reversing the summary judgment
rendered in favor of Marger on the conversion claim. We express no opinion on the ultimate
resolution of these matters – that is the jury’s role.
{¶ 89} Kademian’s Second Assignment of Error is sustained.
V. Did the Trial Court Err in Rendering Summary Judgment
in Marger’s Favor on Kademian’s Claim for Tortious Interference?
{¶ 90} Kademian’s Third Assignment of Error is as follows:
36
{¶ 91} “THE TRIAL COURT ERRED IN GRANTING DR. MARGER’S MOTION
FOR SUMMARY JUDGMENT AS TO DR. KADEMIAN’S CLAIM FOR TORTIOUS
INTERFERENCE.”
{¶ 92} Under this assignment of error, Kademian contends that the trial court erred in
rendering summary judgment in Marger’s favor on Kademian’s claims for tortious
interference with contacts and tortious interference with a business relationship. The trial
court noted that Marger’s actions could not have interfered with a contract, because M&A did
not have a contract to provide oncology services at Good Samaritan or at Miami Valley. The
court further concluded that any contract Kademian had with M&A dissolved with the
corporation. And finally, “for the same reasons,” and without elaborating further, the trial
court concluded that Marger was entitled to summary judgment on Kademian’s claim for
interference with business relationships.
{¶ 93} “The elements of the tort of tortious interference with contract are (1) the
existence of a contract, (2) the wrongdoer's knowledge of the contract, (3) the wrongdoer's
intentional procurement of the contract's breach, (4) lack of justification, and (5) resulting
damages.” Fred Siegel Co., L.P.A. v. Arter & Hadden, 85 Ohio St.3d 171, 1999-Ohio-260,
707 N.E.2d 853, paragraph one of the syllabus. Similarly, “The elements essential to
recovery for a tortious interference with a business relationship are: (1) a business
relationship; (2) the wrongdoer's knowledge thereof; (3) an intentional interference causing a
breach or termination of the relationship; and (4) damages resulting therefrom.” Wolf v.
McCullough-Hyde Memorial Hosp., 67 Ohio App.3d 349, 355, 586 N.E.2d 1204 (12th
Dist.1990).
37
{¶ 94} “The main distinction between tortious interference with a contractual
relationship and tortious interference with a business relationship is that interference with a
business relationship includes intentional interference with prospective contractual relations,
not yet reduced to a contract.” Diamond Wine & Spirits, Inc. v. Dayton Heidelberg Distrib.
Co., 148 Ohio App.3d 596, 604, 2002-Ohio-3932, 774 N.E.2d 775 (3d Dist.).
{¶ 95} Without repeating the entirety of the previous discussion, the evidence reveals
genuine issues of material fact regarding whether Marger interfered with both existing
contracts, and with existing and prospective business or contractual relationships. Marger
knew that both he and Rasp were bound by non-compete clauses that would have prevented
them from contracting with hospitals where M&A had existing employees and relationships.
Marger took action to dissolve M&A so that he and Rasp could form a corporation that would
directly compete where he and Rasp would otherwise not have been permitted to practice.
Kademian did have an interest in M&A, which had contracts with both these individuals that
would have precluded their competition, and Marger’s actions in dissolving the corporation
for the purpose of voiding those contracts, would have been wrongful, if done for that
purpose. Accordingly, the trial court’s conclusion that Kademian did not have a claim
because the dissolution of the corporation ended the contract misses the point. The fact that
M&A may have been wrongfully dissolved in order to avoid the contracts is the point.
{¶ 96} Furthermore, although Kademian did not have an existing contract with Good
Samaritan or Miami Valley, he did have business relationships with both of them, which had
intertwined officers, like the vice-president of oncology, who served both Good Samaritan and
Miami Valley. There is evidence suggesting that Marger or Rasp, or both, attempted to
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interfere with Kademian’s business relationships by attempting to obtain exclusive contracts
with Good Samaritan and Miami Valley.
In an action for tortious interference with business contracts, a plaintiff
may recover all damages proximately caused by the tortfeasor's misconduct.
Such damages include lost profits (reduced by the expenditures saved by not
having to produce that profit) if both the existence of the loss and the dollar
amount of the loss are proven to a reasonable certainty. Lost profit damages
must be measured by the loss sustained by the plaintiff's business and not by its
effect upon defendant's business. (Citations omitted.) Brookeside
Ambulance, Inc. v. Walker Ambulance Serv., 112 Ohio App.3d 150, 157-158,
678 N.E.2d 248 (6th Dist.1996).
{¶ 97} In the case before us, Kademian’s expert testified as to lost wages and profits,
in the form of wages and earnings. The expert used a somewhat conservative estimate of
$456,000, and compared this to income Kademian was able to earn in the years after M&A
was dissolved.3 No evidence was presented to contradict this, other than evidence which
suggested – consistent with the defense theory – that Kademian, himself, was the architect of
his own demise. As we have noted, this evidence presents factual issues to be resolved by a
jury.
{¶ 98} Accordingly, there are genuine issues of material fact regarding Kademian’s
claims for tortious interference with contract and business relationships. The trial court
3
We use the term “conservative,” because Rasp’s earnings in 2001 and 2002 were $732,061 and $857, 283, respectively. The
other doctors at Cancer Consultants made similar amounts of money. The figure that was used to calculate Marger’s lost income and profit
were based on Marger’s 1999 total income of $456,000, not these larger amounts.
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therefore erred in rendering summary judgment in Marger’s favor on these claims. Again, we
express no opinion on the ultimate resolution of these matters.
{¶ 99} Kademian’s Third Assignment of Error is sustained.
VI. Conclusion.
{¶ 100} Marger moved to strike Kademian’s reply brief on the ground that it
was not timely filed. We have checked the record, and the brief was filed in a timely fashion.
Marger’s motion to strike Kademian’s reply brief is therefore overruled.
{¶ 101} All of Kademian’s assignments of error having been sustained, the
judgment of the trial court is Reversed, and this cause is Remanded for further proceedings.
.............
GRADY, P.J., FAIN, J., and HALL, J., concur.
Copies mailed to:
James M. Hill
Felix J. Gora
Hon. Steven K. Dankof