Bushi v. Sage Health Care, PLLC

203 P.3d 694, 146 Idaho 764, 2009 Ida. LEXIS 34
CourtIdaho Supreme Court
DecidedMarch 4, 2009
Docket34827
StatusPublished
Cited by30 cases

This text of 203 P.3d 694 (Bushi v. Sage Health Care, PLLC) is published on Counsel Stack Legal Research, covering Idaho Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bushi v. Sage Health Care, PLLC, 203 P.3d 694, 146 Idaho 764, 2009 Ida. LEXIS 34 (Idaho 2009).

Opinions

HORTON, Justice.

This is an appeal from a district court’s grant of summary judgment in favor of Sage Health Care, PLLC (Sage), Charles C. Novak, M.D., David A. Kent, M.D., and Roberto Negron, M.D. (collectively referred to as Respondents). Stephen Bushi, M.D., (Bushi) appeals the district court’s summary judgment ruling that Respondents acted properly in terminating Bushi’s membership in Sage and its award of attorney fees to Respondents. We affirm in part, vacate in part, and remand this case for further proceedings.

I. FACTUAL AND PROCEDURAL BACKGROUND

In 1994, licensed psychiatrists, Charles C. Novak, Stephen T. Bushi, David A. Kent, and Cantril T. Nielsen, formed The Sage Group, LLC, under the Idaho Limited Liability Act-I.C. §§ 53-601 et seq. In 1996, the members changed the limited liability company’s name to Sage Behavioral Health Care, LLC. In 1997, the members again changed the LLC’s name to Sage Health Care, PLLC. Each of the original members contributed $2,000 and held a 25% interest in the LLC. Dr. Nielsen [766]*766subsequently withdrew from Sage, and Dr. Roberto Negron acquired a 25% ownership interest in Sage.

All the members of Sage were signatories to the operating agreement, including amendments. The agreement vested equal management rights in the members. It provided that to amend its terms, consent of all but one of the members was required. It also addressed the grounds for dissociation of its members. Mandatory dissociation would occur if a member withdrew with the consent of the majority of the remaining members or with the death or decree of incompetency of a member. A member could be dissociated by a majority vote of the other members upon the happening of the following: bankruptcy of the member; attachment or levy upon the member’s interest; the member’s loss of professional license; a finding by the member’s professional society that the member is guilty of an ethical violation; the member’s inability to obtain professional liability insurance; or the member’s conviction for a felony. The operating agreement also provided a calculation for determining the value of a member’s interest upon dissociation.

Starting around 2002, Bushi began to date a nurse practitioner employed at Sage. This was not prohibited under the terms of the operating agreement; however, because the other members had concerns about potential liability stemming from the relationship, Sage arranged for Bushi to have no role in supervising the nurse practitioner.

In July 2003, Sage obtained a business line of credit loan from Wells Fargo Bank, which was intended to serve as a source of liquidity for Sage if and when it was needed. Sage never used the line of credit and never approved its use by any member. In October 2005, Respondents received correspondence from Wells Fargo indicating that nearly $45,000 had been borrowed on the line of credit at 15.5% interest. Respondents learned that Bushi had applied for and received funds on Sage’s line of credit based solely on his signature; Respondents had not consented to or known about this extension of credit. The name on the line of credit account was listed as “Sage Health Care, PLLC Stephen Bushi,” and Bushi maintains that he believed that this line of credit was his personal line of credit, not a business line of credit. After Respondents confronted him, Bushi admitted he had borrowed the funds on the line of credit and used them for his personal expenses. Respondents demanded he repay the funds to Wells Fargo.

At a members’ meeting on October 27, 2005, Respondents, according to Bushi, informed him they wanted him out as a member of Sage because he was dating the nurse practitioner. The second item on the agenda for that meeting states “discuss NP.” After this meeting, concerned about his future with Sage, Bushi joined another psychiatry group in November 2005. Bushi thought he was within his rights under the operating agreement to join the competing group. The minutes from a December 8, 2005 members’ meeting reflect that Respondents voted to deny Bushi profit sharing in 2006, and that “one reason for him not being involved with the profit sharing was due to his connection with [Sage’s] competitor.” At this time, Respondents stopped scheduling Bushi to provide services for various Sage contracts in which he had previously been participating.

At that same December 8, 2005 meeting, Respondents also offered to buy out Bushi’s share in Sage for a figure prepared by Sage’s accountant and told Bushi he needed to decide whether to accept the offer by January 2006. Bushi thought the offer was “ridiculous” and told Respondents he would not comment on any amount until he had spoken to his attorney.

At a members’ meeting on January 17, 2006, Respondents presented Bushi with a non-compete agreement that would have prohibited him from participating in any practice competing against them. In return, Bushi would be paid $15,000 for his withdrawal and dissociation from Sage and relinquishment of any and all rights of ownership in Sage. Following this meeting, Bushi’s counsel wrote a letter to Respondents rejecting their offer and explaining that Bushi would continue as a member and retain his rights, including his right to a share in the profits of Sage, until a mutually satisfactory agreement had been reached.

[767]*767On January 24, 2006, Respondents served Bushi notice that a members’ meeting would be held on January 30, 2006. The notice stated that three items were on the agenda: an amendment to the operating agreement; following the amendment, the termination of the membership of a member pursuant to the operating agreement as amended; and continuation of the business. Bushi’s counsel appeared at the meeting by proxy in Bushi’s absence. At the meeting, Respondents voted to amend the operating agreement to require mandatory dissociation of a member upon an affirmative vote by all but one of the members. Following the amendment, Respondents voted — with Bushi dissenting — to dissociate Bushi, effective immediately. Applying the formula in the operating agreement, Sage’s accountant determined that the value of Bushi’s membership interest as of January 30, 2006 was $11,245.

In a letter dated July 11, 2006, Respondents sent two checks to Bushi, one for $11,245 (for his membership interest) and one for $5,138.27 (for his 2006 profit share and for the remainder of his 2005 profit share, the first part of which' Bushi had directed be put towards paying off the Wells Fargo credit line). These were tendered as full payment upon Bushi’s dissociation. By letter dated July 18, 2006, Bushi’s attorney refused tender of the two checks and returned them.

As of June 6, 2006, Bushi had not paid off the Wells Fargo credit line and Sage continued to be liable for that loan. Respondents filed a civil action against Bushi in the Fourth Judicial District. After the suit was filed, Bushi paid all amounts due and owing to Wells Fargo, and Respondents dismissed the lawsuit.

Bushi filed the instant case on October 19, 2006, asserting claims for breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing, unjust enrichment, breach of operating agreement, and seeking declaratory relief and an equitable accounting. Respondents filed an answer and counterclaim, asserting in the first count of the counterclaim that Bushi breached the operating agreement through his use of the Wells Fargo credit line and seeking in the second count declaratory relief related to the validity of their actions in amending the operating agreement.

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Bluebook (online)
203 P.3d 694, 146 Idaho 764, 2009 Ida. LEXIS 34, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bushi-v-sage-health-care-pllc-idaho-2009.