Kloster v. Hancock (In Re Rockhill Pain Specialists, P.A.)

412 P.3d 1008, 55 Kan. App. 2d 161
CourtCourt of Appeals of Kansas
DecidedDecember 22, 2017
Docket115620
StatusPublished
Cited by9 cases

This text of 412 P.3d 1008 (Kloster v. Hancock (In Re Rockhill Pain Specialists, P.A.)) is published on Counsel Stack Legal Research, covering Court of Appeals of Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kloster v. Hancock (In Re Rockhill Pain Specialists, P.A.), 412 P.3d 1008, 55 Kan. App. 2d 161 (kanctapp 2017).

Opinion

Arnold-Burger, C.J.:

*163 *1013 This case represents a tragic story of two highly gifted and respected physicians, Dr. Dan Hancock and Dr. Daniel Kloster, who specialize in pain management care. They maintained a highly successful practice and each made over a half million dollars a year. They were like brothers to each other, until a dispute over money sent their friendship and their practice into a death spiral.

Following a dispute over the proposed distribution of income, Hancock began broadcasting complaints regarding Kloster's patient care to several state agencies, hospitals, and ultimately-when he believed the other entities were not responding quickly enough or in the manner he hoped-to the Kansas City Star. He alleged that Kloster was either killing or hastening the death of his patients. None of the complaints bore fruit. After hundreds of hours defending his reputation Kloster successfully sued Hancock for defamation, breach of fiduciary duty, fraud, and conversion. Hancock appeals that verdict.

On appeal, Hancock argues that the district court misapplied the statutory privilege in K.S.A. 65-4925, which provides that reports and records of state licensing agencies are confidential, by admitting evidence that two state agencies had cleared Kloster of any wrongdoing. Although we find that the district court did not err in admitting evidence that the state licensing agencies cleared Kloster of wrongdoing, it did err in holding that Kloster's submissions to the state licensing agencies were privileged. However, the error was harmless because Hancock had other ways of discovering the information. Hancock also argues that there was insufficient evidence to support the jury's damages awards for Kloster's defamation and nondefamation claims. But, the jury had a sufficient evidentiary basis to support its award of damages on all claims. Finally, Hancock argues that the damages for Kloster's defamation claim should have been capped under K.S.A. 2016 Supp. 60-19a02(b), which provides a statutory cap of $250,000 for noneconomic damages in personal injury cases. However, defamation is not a personal injury action. Additionally, he did not object to the jury's failure to itemize damages, a failure that is fatal to his claim. Accordingly, we affirm.

*164 FACTUAL AND PROCEDURAL HISTORY

Dr. Daniel Kloster and Dr. Dan Hancock are anesthesiologists specializing in pain management. They formed Rockhill Pain Specialists, P.A. (Rockhill) in 2001. Their practice included, among other pain management procedures, the implantation of pain pumps in terminally ill cancer patients for end-of-life pain management. At that time, they were "good friends, like brothers." Rockhill was an S-corporation, and as Kloster and Hancock were the only two shareholders of Rockhill they split all profits evenly. Kloster brought in about two-thirds of the patients while Hancock brought in the other third. Hancock handled Rockhill's business, and served as Rockhill's president, director, and compliance officer.

The doctors' relationship began deteriorating in 2011. The doctors had different ideas about why this occurred. Hancock maintained that he was concerned about Kloster's patient care. Kloster argued that the doctors had a monetary dispute sparked by a job offer he received from a company called Assured Pharmacy.

In 2011, Assured Pharmacy approached Kloster about a potential position as its national medical director. Kloster described the position as a business advisory role. The position entailed about 35 to 40 hours of work per month. Kloster thought he would not be expected to split profits from this position with Hancock because their agreement was only to split money earned in the practice of *1014 medicine. Hancock, however, thought that the position entailed the practice of medicine because the employment contract specified that the employee had to be a licensed physician and anesthesiologist who specialized in pain management. Kloster asked Rockhill's corporate counsel, Randy Schultz, whether he would have to share profits from the Assured Pharmacy position with Hancock. Schultz told him that he would not have to share because the position was unrelated to the practice of medicine.

Kloster and Hancock went out to dinner in December 2011. They continued to disagree over whether Kloster's earnings from Assured Pharmacy should go to Kloster or to Rockhill. Kloster said he would look at Rockhill's books and discuss the issue again with Hancock at a later point in time. Kloster had not looked at Rockhill's books before because that aspect of the business was managed *165 by Hancock. When Kloster looked at Rockhill's books, he realized that he had brought in twice as much business as Hancock had for the previous five years.

The doctors met for another dinner in January 2012. Kloster alleges that Hancock "just went off" and started screaming at him. Kloster said that Hancock accused him of working with Schultz to deprive Rockhill of the Assured Pharmacy money and that Hancock screamed, "Oh, you're going down. Randy [Schultz] is going down." Hancock denied threatening Kloster or Schultz at this meeting, and said that Kloster actually threatened him by saying he would kill Hancock if he did anything to injure Kloster's wife or children.

The parties met again briefly in March or April of 2012. Kloster asked Hancock if he would be open to a different compensation system where, instead of splitting profits evenly, they would split profits based on production. Hancock refused.

Due to the parties' disagreement on compensation, Kloster recommended that they cease receiving any distributions from Rockhill beyond their base pay. Direct deposits of $15,000 per month were given to Kloster during this time period, just like Hancock, but Kloster returned them to the corporation. Hancock continued to take distributions from Rockhill. Schultz instructed Rockhill's bookkeeper to cease making distributions until the doctors could agree on a compensation model. But Hancock emailed the bookkeeper and said that "as president of Rockhill Pain Specialists, I am instructing you to make the monthly distributions for May as you have every month for the past 4-5 years."

On June 14, 2012, Kloster called a special meeting of Rockhill's board of directors. Kloster, Hancock, and Schultz attended. Kloster and Hancock each brought a private attorney as well. Kloster raised the issue of distributions again, but Hancock continued to receive them. The parties also discussed a production-based compensation arrangement, and Kloster's attorney agreed to "prepare a proposed compensation arrangement that was partially based upon a production formula while taking into consideration any special administrative duties being provided by the parties."

After discussing compensation, Hancock raised the issue of *166

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Cite This Page — Counsel Stack

Bluebook (online)
412 P.3d 1008, 55 Kan. App. 2d 161, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kloster-v-hancock-in-re-rockhill-pain-specialists-pa-kanctapp-2017.