Frier Levitt Secures Complete Victory On Behalf of Anesthesia/Pain Management Practice and its Physician Members, Avoiding $1.4 Million Claim

Frier Levitt Secures Complete Victory On Behalf of Anesthesia/Pain Management Practice and its Physician Members, Avoiding $1.4 Million Claim

Frier Levitt attorney Jonathan E. Levitt, Esq., secured a complete trial victory in Bergen County New Jersey in a month-long bench trial for a prominent New Jersey Medical Practice specializing in anesthesiology and pain management. Following a full trial, the Chancery Judge issued an eighteen page opinion dismissing the Plaintiff’s complaint in its entirety, denying Plaintiff’s right to monetary damages, and denying Plaintiff’s requested relief to be deemed a “Member” (or owner) of the Medical Practice.

Plaintiff, an anesthesiologist who was an employee of the Medical Practice, contended that she was entitled to become, and actually became, a Member pursuant to a poorly-drafted option provision in her written Employment Agreement drafted by another law firm. Additionally, Plaintiff cited to “course of dealing” between the parties evincing her status as a Member.

Following the conclusion of Plaintiff’s one-year employment term, Defendants “welcomed Plaintiff to the family” and made her an offer of Membership. However, a dispute arose between the parties regarding whether Plaintiff was entitled to a full 1/3 membership interest in the Medical Practice (i.e., with full economic, voting and management rights) or whether the Medical Practice retained the discretion as to what membership rights to grant Plaintiff (e.g., whether Plaintiff would have voting/management rights and whether she would share in certain profits).  Defendants offered Plaintiff several membership structures, but Plaintiff rejected each offer. Notwithstanding her rejection of the offers, she continued to work for the practice. During the negotiation period, the Medical Practice, in good faith, paid Plaintiff in the same manner members of an LLC are paid (e.g., distributions of available cash). Notably, the Medical Practice’s accountant, believing that Plaintiff would eventually become a Member, caused a K-1 to be issued to Plaintiff that identified Plaintiff as a Member for 2013.

The parties’ relationship became strained in 2014 when negotiations ended. Shortly thereafter, Plaintiff commenced litigation seeking both to be deemed as a Member of the Medical Practice and damages exceeding $1.4 million dollars. Plaintiff asserted claims against the Medical Practice and its Members to establish her membership interest, including breach of contract, promissory estoppel, and judicial estoppel. The Medical Practice contended that Plaintiff rejected the terms of membership and never became a Member. The case proceeded to trial.

The Court dismissed the Complaint in its entirety, finding that the parties never reached a meeting of the minds as to the terms of the proposed membership. The Employment Agreement, though ambiguous, did not provide Plaintiff an absolute right to membership, and there were no damages sustained by Plaintiff because she could have continued her employment with Defendants as a non-member and earned a significant salary. The Court also dismissed the claims against the Members of the practice. The result is considered an absolute victory by the Medical Practice, which avoids damages claims in excess of $1.4 million dollars and attorneys’ fees.

This result is just one of the reasons why medical and business professionals should seek guidance from qualified healthcare attorneys when entering into employment or other relationships with third parties (including employees, independent contractors, partners, managers, investors, etc.) and when faced with litigation. In the above case, the Plaintiff exploited the ambiguous option provision and the parties’ course of dealing in putting forth her claim. As such, you should consider the following takeaways prior to embarking on a business relationship with a third party:

  1. Identify and eliminate ambiguous (subject to more than one interpretation) or vague (unclear) terms in any agreement you enter into. Think of vague or ambiguous terms as a hidden liability that could one day immerse your business in protracted and costly litigation brought by an opportunistic litigant.
  2. Avoid course of conduct that may lead one to believe or allege that they have legal rights not intended by both parties (e.g., holding one out or treating some as a partner or agent)
  3. Avoid oral agreements, as they can be enforceable, especially if supported by course of conduct

Each of the above-referenced pitfalls could lead to litigation. Careful corporate planning can help you avoid these pitfalls. Frier Levitt has a team of healthcare regulatory, transactional and litigation attorneys with a proven track record of success at various levels of the trial and appeals process. Our attorneys have litigated cases in New York and New Jersey State Courts, as well as in Federal Courts across the country as well as arbitrations. Contact Frier Levitt today to speak to one of our attorneys.

Past experience is no guaranty of future results and each client’s case is different.

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