Monday, March 21, 2011

Summary 2011 WY 50

Summary of Decision March 21, 2011

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Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court

Case Name: Orthopedics of Jackson Hole, P.C. v. Ford

Citation: 2011 WY 50

Docket Number: S-09-0136


Appeal from the District Court of Fremont County, The Honorable Norman E. Young, Judge

Representing Appellant (Defendant): Gary R. Scott of Hirst Applegate, LLP, Cheyenne, Wyoming

Representing Appellee (Plaintiff): Paul J. Hickey and O’Kelley H. Pearson of Hickey & Evans, LLP, Cheyenne, Wyoming; and Joel M. Vincent of Vincent & Vincent, Riverton, Wyoming. Argument by Mr. Vincent.

Date of Decision: March 21, 2011

Facts: Appellant is a professional organization founded by five orthopedic surgeons in 1998. Appellee is an orthopedic surgeon who joined the organization in 2000, at which time he received one share of stock. In 2005, Appellee left the professional organization. The parties could not agree on the value of the one share of stock, prompting Appellee to commence the instant legal action. Appellee brought a petition for a declaratory judgment as to the value of the stock as well as other causes of action. Appellant counterclaimed that in leaving at the time he did, Appellee breached his fiduciary duty to the organization. Appellant also brought a promissory estoppel counterclaim against, asserting it incurred extra costs based on an alleged promise by Appellee, made in 2004, to continue working for Appellant for five to ten years. After a bench trial, the district court accepted the valuation of the stock as presented by Appellee. The district court also denied all Appellant’s counterclaims.

Issues: 1) Whether the trial court erred when it found that Appellee signed a 1998 shareholder’s agreement, and thus that it was that agreement that was the relevant agreement for purposes of valuing Appellee’s one share of Appellant’s stock; 2) Whether the trial court erred when it then reformed the 1998 shareholder’s agreement and failed to apply the valuation formula contained in that agreement; 3) Whether the trial court erred when it failed to apply the valuation formula agreed to by Appellee in a shareholders’ meeting in August 2003; 4) Whether the trial court erred when it denied Appellant’s Motion in Limine, and allowed Appellee on the eve of trial to change the theory of his case as to the relevant valuation formula; 5) Whether the trial court erred when it found that Appellant failed to prove by a preponderance of the evidence its counterclaims for promissory estoppel and breach of fiduciary duty.

Holdings: The Court reversed the district court’s decision as to the valuation of the stock and remanded for further proceedings on the issue. The district court had reasoned that neither the 2003 Formula nor the 2005 Agreement applied because they were not unanimously adopted, as required by the terms of the original 1998 Agreement. Although legally technically correct, the conclusion was improper because it went beyond the issues presented by the parties, who, in their pleadings and all pretrial proceedings, agreed the language of the 2003 Formula would govern the valuation in the context of this litigation. The Court further found the legal and factual evidence in the record was sufficient to determine the proper value of the stock, which was the amount accepted by the appellee at trial.

As to the Appellant’s counterclaims, the Court affirmed the district court’s denial of the counterclaims. On the issue of promissory estoppel, the Court found that Appellant failed to meet its burden of proving, under the strict standard of proof required, that it acted in reliance on the appellee’s statement. Specifically the Court found no evidence that Appellant, through the actions of its shareholders, entered into a fifteen year lease because of the Appellee’s stated intention to continue practicing five to ten years.

As to the issue of a breach of fiduciary duty, framed as a claim in the context of Wyo. Stat. Ann. § 17-16-830(a), the Court found the statute did not apply to the current situation, had nothing to do with Appellee’s statutory corporate responsibilities because Appellee resigned as an employee, and that Appellee exercised good faith under the circumstances.

In summary, the court reversed the district court’s decision as to the valuation of the stock and remanded for further proceedings on the issue. However, the district court was correct in denying Appellant’s claims for promissory estoppel and breach of fiduciary duty, and that part of the judgment was affirmed.

J. Golden delivered the opinion for the court.

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