Jones v. Augé

• Decision Date: 16 September 2014
• Docket Number: 32,178.,No. 34,962.,34,962.
• Citation: 344 P.3d 989
• Parties: Steven JONES, D.O., Brant Bair, M.D. and Sanford David Schulhofer, D.P.M. and The Northern New Mexico Orthopaedic Center, P.C., Plaintiffs/Counter–Defendants/Appellees, v. Wayne K. AUGÉ, II, Individually and as Trustee of the Covalent Global Trust u/t/i dated 12/1/03, Defendant/Counter–Plaintiff/Appellant.
• Court: Court of Appeals of New Mexico

344 P.3d 989

Steven JONES, D.O., Brant Bair, M.D. and Sanford David Schulhofer, D.P.M. and The Northern New Mexico Orthopaedic Center, P.C., Plaintiffs/Counter–Defendants/Appellees

v.Wayne K. AUGÉ, II, Individually and as Trustee of the Covalent Global Trust u/t/i dated 12/1/03, Defendant/Counter–Plaintiff/Appellant.

32,178.

No. 34,962.

Court of Appeals of New Mexico.

Sept. 16, 2014.

Certiorari Denied, Jan. 14, 2015,

Law Office of Jane B. Yohalem, Jane B. Yohalem, Jeffrey R. Brannen, Santa Fe, NM, for Appellees.

Moody & Warner, P.C., Christopher M. Moody, Lorenz Law, Alice T. Lorenz, Albuquerque, NM, for Appellant.

OPINION

BUSTAMANTE, Judge.

{1} Appellees Steven Jones, D.O., Brant Bair, M.D., Sanford David Schulhofer, D.P.M., and the Northern New Mexico Orthopaedic Center, P.C. (NNMOC) brought suit against Wayne K. Augé, II, M.D. (Appellant) for fraud in the inducement, misrepresentation, breach of contract, securities fraud, breach of fiduciary duty to shareholders, breach of fiduciary duty to corporation, and prima facie tort after Jones, Bair, and Schulhofer discovered that, unbeknownst to them, Appellant had included in his shareholder employment agreement a deferred compensation clause that was significantly different from—and more generous than—theirs. In the course of discovery, Appellees also learned that Appellant had caused NNMOC to overcompensate him by over $370,000. After a bench trial, the district court found in favor of Appellees and awarded compensatory and punitive damages. Appellant appeals. We affirm the judgment with the exception of one item of compensatory damages that we remand for reconsideration.¹

PREFATORY MATTERS

{2} The district court entered 234 findings of fact and forty-five conclusions of law. Appellant challenges fifty-nine of the findings of fact. In addition to the arguments in his brief in chief, Appellant makes several new arguments in his reply brief. In reviewing his arguments, we are guided by several principles of appellate review. First, “[o]n appeal, a reviewing court liberally construes findings of fact adopted by the fact finder in support of a judgment[.]” Toynbee v. Mimbres Mem'l Nursing Home, 1992–NMCA–057, ¶ 16, 114 N.M. 23, 833 P.2d 1204. Second, “such findings are sufficient if a fair consideration of all of them taken together supports the judgment entered below.” Id. Third, “[w]e have long held that findings are sufficient where they justify the judgment, though they intermingle matters of fact and conclusions of law.” Watson Land Co. v. Lucero, 1974–NMSC–003, ¶ 5, 85 N.M. 776, 517 P.2d 1302. Fourth, appellate courts generally “do not address issues raised for the first time in a reply brief, [unless] the arguments in [the a]ppellants' reply brief ... are ‘directed only to new arguments or authorities presented in the answer brief.’ ” Mitchell–Carr v. McLendon, 1999–NMSC–025, ¶ 29, 127 N.M. 282, 980 P.2d 65 (quoting Rule 12–213(C) NMRA (1999)). Fifth, “[w]e will not review unclear arguments, or guess at what [an appellant's] arguments might be.” Headley v. Morgan Mgmt. Corp., 2005–NMCA–045, ¶ 15, 137 N.M. 339, 110 P.3d 1076.

{3} Applying these principles, we decline to review Appellant's arguments that “[v]irtually all ‘overpayment’ from 2007 through 2009 resulted from ... adding depreciation to the expenses attributable to each shareholder” and that Appellees failed to prove damages related to securities fraud, because they were first raised in the reply brief. We also decline to address Appellant's contentions that the district court intermingled findings of fact and conclusions of law or other arguments, the resolution of which would have no impact on the judgment.

{4} Rule 12–213(A)(3) requires appellants to provide “a summary of the facts relevant to the issues presented for review.” New Mexico case law is clear that this requirement compels appellants to set out a full summary of the pertinent evidence admitted at trial, including the facts supporting the district court's findings and conclusions, and that this Court may decline review for failure to do so. See, e.g., Chavez v. S.E.D. Labs., 2000–NMCA–034, ¶ 26, 128 N.M. 768, 999 P.2d 412 (“[W]e review substantial evidence claims only if the appellant apprises the Court of all evidence bearing upon the issue, both that which is favorable and that which is contrary to appellant's position. Failure to do so may result in our deeming the issue waived.” (citations omitted)), aff'd in part, rev'd in part, 2000–NMSC–034, 129 N.M. 794, 14 P.3d 532 ; see also Gish v. Hart, 1966–NMSC–028, ¶ 10, 75 N.M. 765, 411 P.2d 349. Rule 12–213(A)(3) reflects the standard of review we apply to challenges to factual findings where “it is the supporting evidence, not that adverse to the finding, that ordinarily determines the issue.” Gish, 1966–NMSC–028, ¶ 10, 75 N.M. 765, 411 P.2d 349. Here, Appellant's summary of the evidence comes perilously close to being too one-sided for review. We conclude that Appellant complied with the rule sufficiently to allow review. See State v. Martinez, 1996–NMCA–109, ¶ 13, 122 N.M. 476, 927 P.2d 31 (stating that noncompliance with Rule 12–213(A)(3) “does not require this Court to disregard an issue when an appellant fails to comply with its provisions”). But we again urge all counsel appearing before us to abide by the spirit and letter of the rule.

BACKGROUND

The Parties

{5} The NNMOC is a professional corporation of orthopaedic surgeons founded by Appellant in 1998. Dr. Wise was an NNMOC shareholder from 1998 to 2008. Drs. Jones, Bair, and Schulhofer joined NNMOC as shareholders in 2007, 2008, and 2009, respectively. The shareholders each owned the same amount of stock in NNMOC.

Shareholder Agreements

{6} Jones, Bair, Schulhofer, and Appellant each signed a shareholder employment agreement, a shareholder agreement, and a subscription agreement that collectively set out their rights and obligations as shareholders of NNMOC. Because the terms of the shareholder employment agreements are most at issue, we provide a summary of their critical terms. Details about the other agreements are provided as needed in our discussion.

{7} The shareholder employment agreement governs the shareholders' compensation, deferred compensation, and termination. Compensation for each shareholder is based on each physician's “direct physician gross revenue,” which is defined as “all revenues collected by NNMOC on account of medical services provided by Physician to NNMOC patients net of New Mexico gross receipts taxes.” The compensation clause goes on to state that:

Physician shall be entitled to receive as compensation for all services rendered by Physician under this Agreement during the term hereof (“Physician's Compensation”) an amount equal to:

the sum of:

(i) Direct Physician Gross Revenues, plus

(ii) a percentage of revenues collected by NNMOC on account of Ancillary Services equal to the percentage of the total common stock of NNMOC owned by Physician,

less:

the amount of NNMOC's overhead attributable to Physician.

{8} “Ancillary services” are defined as “x-rays, physical, occupational and other therapy services, physician assistant services, soft goods, medications, cast supplies, medical supplies, and other products or services not provided directly by Physician[.]”

{9} Under the compensation clause, each shareholder is paid a salary based on the “anticipated amount of Physician's Compensation.” In addition, “[a]t the end of each quarter, if Physician's Compensation exceeds the amount of Physician's [s]alary during such quarter, the difference will be paid to Physician as additional salary.” The parties referred to this payment as a “bonus.” If, on the other hand, the salary is more than Physician's Compensation for the quarter, each shareholder “will be liable to repay NNMOC the difference between [the s]alary and Physician's Compensation.” The compensation clause is the same for all shareholders.

{10} contrast to the compensation clause, Appellant's deferred compensation clause differs from that in Appellees' shareholder employment agreements. The deferred compensation clause in Appellees' shareholder employment agreement provides for payment of sixty percent of direct physician gross revenues for six months after termination in compliance with the termination clause. Appellant's deferred compensation clause provides for eighty percent of direct physician gross revenues for six months and twenty percent of ancillary services revenue for three years after termination. This difference and, more importantly, how it came about, forms the basis for Appellees' fraud claims, as well as a portion of their breach of fiduciary duty claims.

Procedural Background

{11} Appellees sued Appellant for fraud, misrepresentation, breach of contract, securities fraud, breach of fiduciary duty to shareholders, breach of fiduciary duty to corporation, and prima facie tort. They also sought declaratory judgment that the deferred compensation clause in Appellant's shareholder employment agreement is void to the extent it differs from that in Appellees' shareholder employment agreements. Appellant denied all claims and counterclaimed, alleging breach of contract, minority shareholder oppression, breach of fiduciary duty, and tortious interference with contract. He also requested “an accounting of the assets and liabilities of NNMOC.”

{12} Just before trial, the district court granted Appellees' motions for summary judgment both with regard to the proper methodology for calculating the value of NNMOC shares when a shareholder's employment is terminated and the exclusion of non-shareholder physician employee revenues from ancillary services revenue. It denied summary judgment as to when Appellant had ceased being a shareholder and whether Appellant's deferred compensation clause violated 42 U.S.C. § 1395nn (2012), which “prohibit[s] physicians from making referrals to, and prohibit[s] laboratories from billing Medicare for, services ordered by...