Mid-Continent Anesthesiology, Chartered v. Bassell

Citation61 Kan.App.2d 411,504 P.3d 1069
Decision Date17 December 2021
Docket Number122,277
Parties MID-CONTINENT ANESTHESIOLOGY, CHARTERED, Appellee, v. Gerard M. BASSELL and Robert S. McKay, Appellants.
CourtCourt of Appeals of Kansas

Jay F. Fowler, Amy S. Lemley, and Jeremy E. Koehler, of Foulston Siefkin LLP, of Wichita, for appellant Gerard M. Bassell.

John H. Gibson and G. Andrew Marino, of Gibson Watson Marino LLC, of Wichita, for appellant Robert S. McKay.

Randall K. Rathbun and Jack Scott McInteer, of Depew Gillen Rathbun & McInteer LC, of Wichita, for appellee.

Before Schroeder, P.J., Warner and Isherwood, JJ.

Schroeder, J.

In March 2018, Mid-Continent Anesthesiology, Chartered (MCAC) filed suit against two of its former stockholder physicians—Dr. Gerard M. Bassell and Dr. Robert S. McKay—alleging conversion, fraud, breach of fiduciary duty, and civil conspiracy. Dr. Bassell and Dr. McKay each filed motions for summary judgment, which the district court ultimately denied, and the case proceeded to trial. Both doctors now appeal the jury verdict against them and the district court's denial of their motions for summary judgment based on the statute of limitations.

Based on our extensive review of the record and for reasons we detail below, we find the district court did not err in denying Dr. Bassell's and Dr. McKay's motions for summary judgment. However, we find the district court erred by not submitting a fact question to the jury. Thus, we must reverse and remand with directions for a new trial.

FACTS

MCAC is a corporation owned by its member physicians, all of whom are shareholders. Each shareholder has an equal number of shares in the company and is entitled to equal votes with respect to the corporation's affairs. MCAC was founded in 1984 and functions as a medical group practicing primarily in the area of obstetric anesthesia

through contracts with hospitals in the Wichita area. Dr. Bassell was a founding shareholder and served as MCAC's first president, a role he held until his retirement on December 31, 2015. Dr. McKay joined MCAC a few years after its founding and served in various roles, including as president after Dr. Bassell retired, until he was fired by the board of directors of MCAC in August 2017.

During the timeframe relevant to the issues on appeal (March 2008 through August 2017), MCAC's shareholders were Dr. Bassell (prior to January 1, 2016); Dr. McKay (prior to August 22, 2017); and Drs. Greg George, Kimberly Babiash, James Castrisos, Jon Cremin, Dong Dai, Jim Manry, and Doug Cleveland.

MCAC had frequent meetings of its physician shareholders, albeit without the formalities typically associated with corporate meetings. Generally, there were no formal votes; rather, the group made decisions by consensus. MCAC's business manager, Carolyn Holdeman, attended the meetings and observed that all shareholders had an equal opportunity to participate. Likewise, Dr. Manry noted he did not observe any difference between the shareholders and directors; all shareholders functioned fairly equally. But MCAC did have a board of directors. However, MCAC's bylaws did not require the board hold a formal meeting to take a vote on corporate actions; rather, any action could be taken without a meeting if all board members consented to it in writing.

At the time of its founding in 1984, MCAC held a joint meeting of shareholders and directors, delegating authority to Dr. Bassell, as president, to set physician salaries and bonuses. This authority was never rescinded by the board of directors. Dr. Bassell used his authority to set compensation, salaries, and bonuses for the physicians for more than 30 years. Dr. Dai testified he was aware Dr. Bassell had the authority to set the physicians' salaries. Dr. Manry also testified he knew Dr. Bassell set the physicians' salaries, and he believed the other shareholders were all aware of it. After Dr. Bassell retired, Dr. McKay used his authority as MCAC's new president to set the physicians' salaries.

Although all shareholders had an equal stake in the company, their compensation differed. Before Dr. Babiash joined MCAC in August 2010, Drs. Bassell and McKay told her she would be an equal partner in the group but there would be differences in the physicians' pay based on their administrative duties. Dr. Manry was also aware the physicians did not receive equal bonuses; he was told this many times, and it was something Dr. Bassell made clear. Dr. Manry did not recall Dr. Bassell ever telling the other physicians they were all paid equally. Dr. Manry also believed Dr. McKay, after he became president, explained salaries would vary based on administrative duties.

When Dr. Bassell began contemplating retirement, he identified Dr. Babiash as someone with good business acumen who would be well positioned to run MCAC going forward. Dr. Babiash received her bachelor's degree in business administration then enrolled in a dual degree program from which she received her medical degree and a master's degree in business administration. In 2014, Dr. Bassell started having Holdeman send MCAC's daily disbursement reports to Dr. Babiash so she could get a picture of MCAC's finances.

These were the same daily reports that were sent to Drs. Bassell and McKay.

Dr. Babiash testified she started regularly receiving bank statements and check registers from the company in August 2014. She claimed she could not make out much from the statements because they only showed lump-sum payments to the physicians, which could vary based on deductions for retirement contributions or adjustments for extra shift pay or administrative pay. At trial, Dr. Babiash identified an exhibit containing the type of information she would receive—MCAC's check register from November 14, 2014, showing Dr. Babiash received a bonus check for $33,000 and Dr. Bassell received a check for $71,900. The register also reflected the amounts the other doctors received for bonuses. Dr. Babiash knew these amounts were net payments, with deductions already taken out, because her pay stubs showed such deductions from her own checks.

Another daily register sent to Dr. Babiash on August 20, 2014, showed she received less in biweekly pay ($8,863.20) than Dr. Bassell ($13,412.34) or Dr. McKay ($9,794.04); the register also showed the amounts received by the other doctors. Multiple other transaction records were sent by email from Holdeman to Dr. Babiash between August 2014 and December 2015 and were admitted as exhibits at trial. One of these was a year-end profit and loss statement reflecting MCAC's total expenditures between April 2014 and March 2015, showing the combined total salaries paid to all physicians. Dr. Babiash admitted she could have divided this figure by the number of physicians in the group to calculate the average salary of MCAC's shareholders then determine whose compensation was above or below average.

Dr. Babiash continued to receive transaction records until Dr. McKay was fired in August 2017. Dr. Babiash conceded the relevant information was known to her as an officer of the company and a member of MCAC's board of directors as of February 16, 2016, and Dr. McKay never told her not to share the records she had been provided. Dr. Babiash had been appointed to MCAC's board of directors in 2015. At that time, the other directors were Drs. Bassell, McKay, and Castrisos. Dr. Manry was then appointed to the board to fill the vacancy that would be created by Dr. Bassell's retirement.

On December 12, 2015, Drs. Bassell, McKay, Castrisos, Babiash, and Manry signed a unanimous consent of the board electing new officers—Dr. McKay as president, Dr. Castrisos as vice president, and Dr. Babiash as secretary-treasurer—effective January 1, 2016. Dr. Babiash admitted she signed the unanimous consent as a director of MCAC and was able to read it when she signed. Dr. Castrisos also acknowledged he signed the unanimous consent as a director, and both he and Dr. Babiash were officers and directors of MCAC as of January 1, 2016. Dr. Castrisos further acknowledged he, Dr. Babiash, and Dr. Manry were three of MCAC's four directors following Dr. Bassell's retirement. Dr. Manry was also aware he had been appointed to the board in December 2015, and he acted as a board member in signing the unanimous consent electing new officers. It was known throughout MCAC, including its board of directors, Dr. Bassell would be retiring at the end of 2015.

On February 16, 2016, the physician shareholders held a meeting, with the intent to make all shareholders directors of MCAC. Dr. Babiash wrote the minutes of the meeting, which stated, in part: "MCAC currently has four board members: Drs. McKay, Castrisos, Manry, and Babiash." The minutes further stated: "The current board will reconvene to amend the Bylaws to allow for all MCAC stockholders to be on the Board." MCAC's bylaws were amended by the existing board members that same day. The following day, Drs. McKay, Castrisos, Babiash, and Manry signed a unanimous consent agreement, stating in part: "[T]he number of directors on the Board of Directors shall be increased to seven ...."

On August 12, 2017, the shareholders had a meeting to discuss the state of the business following the loss of MCAC's contract with Surgicare. Dr. George and Dr. McKay had each prepared budgets, but their numbers did not match up. Dr. George said he was going to go to the business office to look at the company's books, and Dr. McKay did not object. The following Monday, August 14, 2017, Drs. George and Cleveland arrived at MCAC's business office, but Holdeman was not aware they were coming. Holdeman contacted Dr. McKay and told him she was uncomfortable because Drs. George and Cleveland were asking a lot of questions and she did not know whether they were allowed to look at the books. Dr. McKay said Dr. George had a right to look at the books because he was a director but was unsure whether Dr. Cleveland did because he was only a shareholder. Dr. McKay...

To continue reading

Request your trial
2 cases
  • Skyline Trucking, Inc. v. Freightliner Truck Ctr. Co.
    • United States
    • U.S. District Court — District of Kansas
    • July 28, 2023
    ...minds in the object or course of action; (4) one or more unlawful overt acts; and (5) damages as the proximate result thereof.'” Mid-Continent Anesthesiology, Chartered v. Bassell, 504 P.3d 1069, 1084 2021) (quoting State ex rel. Mays v. Ridenhour, 811 P.2d 1220, 1226 (Kan. 1991) (quotation......
  • NVLCC, LLC v. NV Lenexa Land Holdings, LLC
    • United States
    • Kansas Court of Appeals
    • November 10, 2022
    ...through their officers, directors, and agents. See Iola State Bank v. Biggs, 233 Kan. 450, 456, 662 P.2d 563 (1983); Mid-Continent Anesthesiology, 61 Kan.App.2d at 428. As a creation of legal fiction, a corporation can act through natural persons. See Dean Operations, Inc. v. One Seventy As......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT