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Kelly v. Kurtz

Appellate Court of Connecticut

October 15, 2019

Dorrance T. KELLY
v.
Marshall D. KURTZ et al.

         Argued May 23, 2019

          Appeal from the Superior Court, Truglia J.

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          Dana M. Hrelic, with whom were Wesley W. Horton and, on the brief, Robert Flynn, Hartford, for the appellants-appellees (defendants).

         Kara A. Lynch, pro hac vice, with whom were Nathan J. Buchock, Westport, and, on the brief, Brian E. Spears, Southport, for the appellee-appellant (plaintiff).

         Keller, Moll and Devlin, Js.

          OPINION

         DEVLIN, J.

         [193 Conn.App. 510] In this case arising from the buyout of an oral surgery practice, the plaintiff, Dorrance T. Kelly, DDS, and the defendants, Marshall D. Kurtz, DMD, Marshall D. Kurtz, DMD, PC, and Danbury Oral and Maxillofacial Surgery Associates, LLC (DOMSA), appeal from the judgment of the trial court rendered, following a jury trial, in favor of the plaintiff, in the amount of $2,150,000. To establish the terms of the buyout, the parties executed three documents: a purchase and sale agreement, an

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operating agreement, and a supplementary agreement.[1] On appeal, the defendants claim, in AC 41366, that the trial court erred in denying their motion to set aside the jury’s verdict on the plaintiff’s claims of breach of the supplementary agreement and breach of the implied covenant of good faith and fair dealing in the supplementary agreement on the grounds [193 Conn.App. 511] that (1) the evidence presented at trial was insufficient to sustain the jury’s finding of breach of the supplementary agreement, and (2) the jury’s awards of damages on the plaintiff’s claims of breach of the supplementary agreement and breach of the implied covenant of good faith and fair dealing in the supplementary agreement were inconsistent. The plaintiff claims, in AC 41365, that the trial court erred in (1) granting the defendants’ motion to set aside the jury’s verdict on his claims of invasion of privacy by misappropriation of his name, tortious interference with his business expectancies, violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq., and unjust enrichment; and (2) dismissing his claim of breach of the operating agreement and breach of the implied covenant of good faith and fair dealing in the operating agreement on the ground that he lacked standing to bring those claims. We affirm the judgment of the trial court.

          The following facts, which the jury reasonably could have found, and procedural history are relevant to our disposition of these appeals. The plaintiff and Kurtz are oral surgeons, who began practicing together in 2004. From May, 2004 to July, 2008, Kurtz worked as a salaried employee for the plaintiff, who had been practicing since the early 1970s and had built a successful practice. On or about July 1, 2006, Kurtz entered into a "Purchase and Sale Agreement of Personal Goodwill of Dorrance T. Kelly, DDS and Assets of Dorrance T. Kelly, DDS, Oral Surgery, P.C." The purchase and sale agreement provided that the plaintiff would sell his practice to Kurtz for $1,600,000, to be paid to the plaintiff in two equal installments; the first installment to be paid on July 17, 2006, and the second on June 30, 2009. The agreement further provided that the existing practice would continue to operate through a newly formed limited liability company known as DOMSA.

         [193 Conn.App. 512] Also on July 1, 2006, the parties entered into an "Amended and Restated Operating Agreement of Danbury Oral & Maxillofacial Surgery Associates, LLC" (operating agreement). The operating agreement, which was signed by Dorrance T. Kelly, DDS, Oral Surgery, P.C. and Marshall D. Kurtz, DMD, P.C., provided that each member professional corporation would hold a 50 percent ownership interest in DOMSA, with the plaintiff initially acting as the manager with full authority for day-to-day management and control of the practice. After Kurtz paid the second installment of the purchase price, Kurtz would become the manager of DOMSA and assume full authority for its management, control and direction. The operating agreement further provided: "In instances where a [m]ember is a [p]rofessional [c]orporation, a limited liability company, a [l]imited liability [m]embership or other entity, the term ‘[m]ember’ shall include for all purposes all stockholders, members, [m]embers or other owners thereof, of whatever nature." It required that the hiring of additional staff, including associates, be made by an affirmative vote of all members. The operating agreement also provided that the plaintiff would retire on June 30, 2009, upon his receipt from Kurtz of the second installment of the

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purchase price of the practice, and that upon retirement, he "shall have the right to ... continue [working] as an associate of [DOMSA] until the age of [eighty] at a rate of compensation of fifty [percent] (50%) of his net collections upon such other terms and conditions as the parties hereto shall agree." The operating agreement provided that "[t]he [m]anager shall direct, manage and control the business of [DOMSA] to the best of [his] ability. Except for situations in which the approval of the members is expressly required by this Operating Agreement or by nonwaivable provisions of applicable law, the [m]anager shall have the full and complete authority, power and discretion to manage and control [193 Conn.App. 513] the business, affairs and properties of [DOMSA], to make all decisions regarding those matters and to perform any and all other acts or activities customary or incident to the management of [DOMSA’s] business."

          On June 30, 2009, the parties, individually, and as members of their respective professional corporations, entered into a "Supplementary Agreement," which modified certain provisions of the purchase and sale agreement and the operating agreement. The supplementary agreement modified the plaintiff’s obligations with respect to working days and on call responsibilities, and provided that he would work a reduced part-time schedule of his choosing. It further modified the requirement that the plaintiff retire on June 30, 2009, and provided that he could retire at a time of his choosing, but maintained that he would retire and "discontinue the practice of dentistry" when he reached the age of eighty, and that the plaintiff would continue to own a one percent interest in DOMSA until Kurtz paid the full purchase price.

          Over time, the plaintiff and Kurtz’s relationship became strained. At some point in the latter part of 2009, the plaintiff threatened to leave DOMSA if Kurtz did not pay him 65 percent of his net collections. Kurtz acquiesced and agreed to pay the plaintiff the 65 percent that he demanded, but reverted to paying him 50 percent in December, 2012, in accordance with the operating agreement.

          In late 2012, and continuing into early 2013, the Department of Social Services conducted an audit of DOMSA’s Medicaid billing records and determined that DOMSA had received overpayments of approximately $212,000 for Medicaid patients who had been treated between 2008 and 2010. To reimburse the Department of Social Services for the overpayment received by DOMSA, Kurtz agreed, without informing the plaintiff, [193 Conn.App. 514] to continue to treat Medicaid patients without compensation until the full amount of the overpayment was satisfied. This agreement, however, did not affect the plaintiff, who continued to treat Medicaid patients and received 50 percent of the amount that he billed for his patients.

          At some point prior to the summer of 2013, the plaintiff and Kurtz discussed hiring an associate. To that end, Kurtz, as the manager of DOMSA, placed an advertisement for that position and began speaking with applicants. Although the operating agreement expressly provided that "an affirmative vote of all [m]embers" was required for the "[h]iring of additional staff inclusive of [a]ssociates," Kurtz and the plaintiff did not discuss the hiring process as it progressed.

          On August 1, 2013, the plaintiff and Kurtz had a meeting, which Kurtz secretly recorded, in the plaintiff’s office. At that meeting, Kurtz told the plaintiff that he had hired a new associate, Daniel Traub, who would begin working at DOMSA on October 1, 2013. The plaintiff expressed his displeasure of Kurtz’ hiring of Traub without the plaintiff’s consent. Kurtz told the

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plaintiff that, by the time Traub started working in October, he would own 100 percent of DOMSA, and could manage it "as he saw fit." He told the plaintiff that he would have "the right to change anything that I want in the contracts ... I can amend anything" and the right to "make the hours be whatever I want ... make the staff do whatever I want, and the office space be whatever I want, and the office open and close." Kurtz told the plaintiff that he wanted him to retire before Traub commenced his employment at DOMSA, and suggested September 15, 2013, as his retirement date. The plaintiff told Kurtz that he did not want to retire and that he had the right to work at DOMSA for as long as he wished until he reached the age of eighty. Later that day, in an [193 Conn.App. 515] unrecorded conversation, Kurtz told the plaintiff that his last day would be September 17, 2013.

          The plaintiff took a medical leave from DOMSA from August 2 to August 20, 2013. On August 15, 2013, Kurtz paid the final installment due under the purchase and sale agreement. When the plaintiff returned from medical leave on August 21, 2013, he instructed the staff not to schedule any new patients for him beyond September 12, 2013. On August 22, 2013, Kurtz’s attorney, Steven Smart, informed the plaintiff’s attorney, Kara Lynch, that the plaintiff had not been terminated or forced to retire, and that he could continue to work at DOMSA as an associate.

          When the plaintiff arrived at the office on September 17, 2013, he was told that he had no patients on his schedule and that Kurtz would direct patients to him as he saw fit. The plaintiff left the office without seeing any patients that day.

          The plaintiff arrived at the office the next day to find that the locks on the doors of the practice had been changed. He confronted Kurtz in the office parking lot, where they argued about the breakdown of their professional and personal relationship. Believing that he had been terminated by Kurtz, the plaintiff did not return to work at DOMSA after this argument.

          On September 21, 2013, Lynch sent an e-mail to Smart indicating that the plaintiff had been terminated by Kurtz. Smart responded that the plaintiff had not been terminated or forced to retire, and that the plaintiff could continue to work at DOMSA and receive his previously agreed upon 50 percent of fees that he generated.

          Believing that he had been terminated by Kurtz, the plaintiff began seeing patients in Norwalk and West Hartford. Despite the plaintiff’s absence from DOMSA, Kurtz ordered a new street sign for DOMSA that [193 Conn.App. 516] included the plaintiff’s name. Kurtz also did not remove the plaintiff’s name from DOMSA’s website or patient referral cards for approximately six months after he left the practice.

         The plaintiff thereafter commenced this action, and by way of a nineteen count revised complaint, alleged the following: four counts of breach of contract (purchase and sale agreement, operating agreement and supplementary agreement); three counts of breach of the implied covenant of good faith and fair dealing; one count of successor liability; one count of violation of the Connecticut Fair Employment Practices Act (CFEPA), General Statutes § 46a-51 et seq.; one count of breach of fiduciary duty; one count of failure to pay wages to an employee in violation of General Statutes § 31-71b; one count of invasion of privacy by misappropriation of name; one count of tortious interference with business expectancies; one count of violation of ...


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