Dick v. Koski Prof'l Grp., P.C.
| Citation | 307 Neb. 599,950 N.W.2d 321 |
| Decision Date | 30 October 2020 |
| Docket Number | No. S-19-132.,S-19-132. |
| Parties | Robert DICK, appellee and cross-appellant, v. KOSKI PROFESSIONAL GROUP, P.C., third-party plaintiff, appellant and cross-appellee, and Bland & Associates, P.C., third-party defendant, appellee and cross-appellant. |
| Court | Supreme Court of Nebraska |
Robert M. Slovek and Dwyer Arce, of Kutak Rock, L.L.P., Omaha, for appellant.
Aaron A. Clark, Ruth A. Horvatich, and Cody E. Brookhouser-Sisney, of McGrath, North, Mullin & Kratz, P.C., L.L.O., Omaha, for appellee Robert Dick.
Ryan M. Kunhart and Jeffrey J. Blumel, of Dvorak Law Group, L.L.C., for appellee Bland & Associates, P.C.
An accountant left one firm in order to join another. Several clients followed the accountant to his new firm. The accountant, who was a shareholder and officer at his former firm, sued the former firm for failing to perform a mandatory provision in the shareholder agreement to buy out a departing shareholder's corporate shares at a price that accounted for any lost billings by virtue of clients’ following a departing shareholder. The firm made numerous allegations in defense of the accountant's claim and brought counterclaims against the accountant, including breach of fiduciary duty and misappropriation of confidential information. The accountant's prior firm also brought third-party claims against the accountant's new firm, which included tortious interference with business expectations and a malicious prosecution claim in relation to a complaint made by the new firm to the Nebraska State Board of Public Accountancy (NSBPA). All claims presented to the jury were determined in favor of the accountant and his new firm. The accountant's former firm appeals, presenting 15 assignments of error challenging the allocation of peremptory strikes, the denial of its motion for directed verdict, the exclusion of certain evidence, and several of the jury instructions. We affirm the judgment.
The underlying action was commenced by Robert Dick, an accountant, against Koski Professional Group, P.C. (KPG), a closely held professional corporation providing accounting services. Dick worked at KPG as an accountant for 22 years and eventually held the corporate office of vice president.
In 2015, Dick moved his practice to Bland & Associates, P.C. (Bland). Bland agreed to pay Dick a base salary plus a percentage commission on his clients’ billings. Although not solicited to do so prior to his departure, many of Dick's clients transferred their business to Bland after Dick began working there. There was no noncompete agreement between Dick and KPG.
Dick had purchased 30 percent of KPG shares during his tenure at KPG, at a total purchase price of approximately $257,000. Some of the funds for the stock purchase were obtained through a loan by Randall Koski (Koski), president of KPG, to Dick. The loan was secured by a promissory note and set forth a payment plan and interest. At the time of his departure, Dick still owed approximately $63,000 on the loan. Dick continued the scheduled payments and paid off the balance in full before trial.
When Dick left KPG, he communicated to Koski that he wished for KPG to purchase his shares pursuant to the terms of the controlling shareholder agreement (Shareholder Agreement). The Shareholder Agreement described voluntary termination as an operative event requiring the shareholder to sell and the corporation to purchase all of the disposing shareholder's stock. The Shareholder Agreement set forth the purchase price for an operative event such as a shareholder's voluntary departure as 80 percent of the adjusted book value. The adjusted book value in such circumstances was based in part on "[r]etained [a]nnual [b]illings," described as the difference between KPG's total professional fees during the most recently completed fiscal year and all professional fees billed to clients who are no longer clients of KPG and were being served by the departing shareholder 1 year subsequent to departure. The repurchase under the Shareholder Agreement was to occur within 60 days of termination. The agreement further specified that KPG was to issue a promissory note to purchase the stock in 120 equal monthly installments with 5 percent per annum interest.
Koski disavowed a buyout obligation at the price set forth under the Shareholder Agreement. Koski believed that Dick's actions in relation to procuring his new employment had breached his fiduciary duties to KPG and the corporate bylaws and, further, that because of the promissory note, Dick had failed to offer the stock free of all liens. KPG never valued the shares or set a closing date for a repurchase. Dick sued.
Dick alleged breach of contract. Dick also asked for an order granting specific performance of the Shareholder Agreement compelling KPG to calculate the adjusted book value per share, deliver a promissory note secured by the pledge of stock, and pay in full all installment payments to repurchase the stock plus prejudgment interest and other interest provided under the Shareholder Agreement. He asked for an accounting or such other relief necessary to determine the value of his stock. Alternatively, Dick asked for an order accelerating the payment of all amounts due to purchase his stock and the entry of a monetary judgment representing the full adjusted book value owed by reason of KPG's repudiation and default. Dick also alleged violations of the Nebraska Wage Payment and Collection Act,1 but dismissed that claim after trial.
KPG generally denied the allegations set forth in Dick's amended complaint and alleged several affirmative defenses, including prior material breach and failure to satisfy a condition precedent. KPG alleged that Dick's breach of contract claim was barred by his own prior material breach of the Shareholder Agreement and bylaws, thereby excusing KPG's duty to perform. KPG alleged that Dick failed to satisfy a condition precedent of the applicable stockholder agreement by failing to return his stock to KPG free and clear of any security interests or encumbrances.
KPG did not allege a prior breach of fiduciary duty or good faith and fair dealing as affirmative defenses to Dick's breach of contract claim.
KPG then set forth seven counterclaims against Dick, some of which mirrored the alleged affirmative defenses.
First, KPG alleged a counterclaim for breach of fiduciary duty. KPG asserted that Dick breached his fiduciary duties of loyalty and care, imposed by virtue of his being an officer and shareholder of a close corporation, by (1) disclosing KPG's confidential business techniques and commercial data to Bland; (2) failing to send out engagement letters on behalf of KPG to two different KPG clients in order to take those clients to Bland; (3) " ‘shopp[ing]’ " KPG's long-term clients to other accounting firms to find the one that would offer him the largest fees for taking those clients to them; (4) engaging with Bland, while still working for KPG, in an agreement in which he would receive a 10-percent commission on all clients he brought to Bland from KPG, in violation of the rules of professional conduct of the NSBPA; (5) concealing from KPG his efforts to transition to a rival accounting firm; (6) breaking his specific promise to KPG that he would not contact KPG clients during that period of time; (7) mishandling and providing negligent accounting services to KPG clients; and (8) violating KPG's bylaws by sending KPG's confidential business techniques and commercial data to Bland.
While the underlying facts of this stated claim were the same as those referred to in the affirmative defense of unclean hands, KPG sought damages as a result of the alleged breaches, as well as a return of compensation paid to Dick during the period of his breach—under the "equitable claw back" doctrine.
Second, KPG asserted that Dick breached the explicit terms of the Shareholder Agreement, as well as implied covenants of good faith and fair dealing, by demanding that KPG repurchase his stocks and by initiating litigation to compel the same, when Dick was allegedly unable to return his stock unencumbered. Like in its affirmative defense of prior material breach and failure to satisfy a condition precedent based on similar allegations, KPG asserted that it was excused from performing any further obligation under the Shareholder Agreement. KPG asked for damages as a result of Dick's breach.
Third, and again repeating one of the allegations stated under breach of fiduciary duty, KPG alleged that Dick breached bylaws providing that officers and employees of KPG maintain and preserve confidentiality as to all business techniques, commercial data, formulas, goodwill, operational methods, product identifications, service marks, trademarks, trade names, and trade secrets, by disclosing confidential information to Bland in order to undercut KPG pricing for its clients. KPG alleged it suffered monetary damages as a result of the breach.
Fourth, KPG alleged that Dick violated Nebraska's Trade Secrets Act, Neb. Rev. Stat. § 87-501 et seq. (Reissue 2014), by utilizing KPG's trade secrets for his own benefit in the course of his employment with Bland. KPG asked for damages due to actual losses and unjust enrichment, as provided by § 87-504.
KPG's fifth counterclaim was based in part on the same allegations as those set forth in KPG's counterclaim alleging breach of fiduciary duties and in part on the additional alleged facts that (1) Dick had encouraged clients who switched from KPG to Bland not to pay their outstanding balances with KPG and (2) Dick maliciously assisted Bland in...
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