Stevens v. Anesthesiology Consultants of Cheyenne, LLC
415 P.3d 1270 (2018)
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Rule of Law:
A manager of a limited liability company (LLC) owes a fiduciary duty not to appropriate a company opportunity. A company opportunity exists if the company has an actual or expected interest in the opportunity and the financial ability to acquire it, the determination of which often involves questions of fact that may preclude summary judgment.
Facts:
- Anesthesiology Consultants of Cheyenne, LLC (ACC) was an anesthesiology group formed in 1999.
- Dr. Ronald Stevens joined ACC in 2001. His wife, Cassandra Rivers, a certified registered nurse anesthetist (CRNA), often worked for ACC.
- In 2008, the Cheyenne Eye Surgery Center opened and ACC began providing anesthesia services. Due to staffing issues, an oral arrangement was made for Ms. Rivers to exclusively cover the Eye Center, with ACC billing for her services, paying her an hourly wage, and retaining the remaining profit.
- In 2009, Ms. Rivers became an employee of Dr. Stevens' separate company, High Plains Anesthesia, P.C. ACC continued its arrangement, paying High Plains Anesthesia instead of Ms. Rivers directly, and still kept about half the income.
- In late 2013, after discussions about 'carving out' Dr. Stevens' less profitable pain management practice, Dr. Stevens sent an email on December 11, 2013, to the other two managers, Drs. Dorrough and Skolnick.
- The email stated he would carve out his pain practice and also bill directly through his corporation for 'provision of services done by myself or employees elsewhere,' starting January 1, 2014. The other managers did not read the email carefully.
- Beginning January 1, 2014, High Plains Anesthesia began collecting all revenue from Ms. Rivers' work at the Eye Center, and ACC stopped receiving this income.
- In June 2014, Dr. Dorrough discovered the change in revenue. Dr. Stevens referred him to the December 2013 email. Dr. Dorrough then told the other ACC members that Dr. Stevens had diverted the income without notice, leading to Dr. Stevens' expulsion in July 2014.
Procedural Posture:
- Anesthesiology Consultants of Cheyenne, LLC (ACC) filed a lawsuit against Dr. Stevens in the state district court (trial court) for breach of fiduciary duty and other claims.
- Dr. Stevens filed counterclaims against ACC's members, including a defamation claim against Dr. Dorrough individually.
- ACC moved for summary judgment on its claims, and the counterclaim defendants moved for summary judgment on Dr. Stevens' counterclaims.
- The district court granted ACC's motion for summary judgment on liability, finding Dr. Stevens had breached his fiduciary duties. The court also granted summary judgment for the counterclaim defendants, dismissing all of Dr. Stevens' counterclaims.
- The case proceeded to a jury trial solely on the issue of damages owed to ACC.
- The jury returned a verdict in favor of ACC for $320,000.
- The district court denied Dr. Stevens' post-trial motions for judgment as a matter of law.
- Dr. Stevens (Appellant) appealed the summary judgment ruling, the denial of his post-trial motions, and certain evidentiary rulings to this court.
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Issue:
Does a manager of an LLC who diverts a long-standing, profitable client relationship to his own company breach his fiduciary duty as a matter of law, where the LLC had no written contract with the client and the manager sent an ambiguous email to other managers about the change?
Opinions:
Majority - Fenn, District Judge
No, a breach of fiduciary duty cannot be established as a matter of law because there are genuine issues of material fact regarding whether the client relationship constituted a corporate opportunity and whether the manager's actions were ratified. The district court improperly granted summary judgment because a reasonable jury could find that ACC did not have a protectable 'company opportunity' in the Eye Center business. Specifically, there was no written contract, ACC had prior staffing issues covering the Eye Center, and it was unclear if ACC could have retained the business without Ms. Rivers' voluntary participation. Furthermore, there were questions of fact as to whether ACC implicitly ratified Dr. Stevens' conduct through its managers' six-month silence and failure to repudiate after receiving the email and altered invoices, or by its actions after all members learned of the situation in June 2014.
Concurring-in-part-and-dissenting-in-part - Kautz, Justice
Yes, the manager breached his fiduciary duty as a matter of law, and summary judgment on liability was appropriate. There were no genuine issues of material fact because ACC's long-term, ongoing, and profitable arrangement with the Eye Center undisputedly constituted an 'actual interest,' satisfying the corporate opportunity test. By diverting this business to his own company, Dr. Stevens was directly competing with ACC in violation of his statutory duties. The manager's ambiguous email did not constitute the 'full disclosure to all members' required by statute for ratification, so there could be no ratification, at least for the period before all members discovered the diversion in June 2014.
Analysis:
This decision underscores the fact-intensive nature of the corporate opportunity doctrine and the high bar for granting summary judgment in such cases. By reversing the lower court, the opinion emphasizes that the existence of an 'actual or expected interest' is not automatic, even with a long-standing business relationship, if factors like the lack of a formal contract and reliance on a specific individual create doubt. The ruling highlights that questions of implied ratification and failure to repudiate, even based on unread emails, can create triable issues of fact, making it more difficult for companies to win breach of fiduciary duty claims without a full trial.
