Laurence v. Flashner Medical Partnership

565 N.E.2d 146, 206 Ill. App. 3d 777, 151 Ill. Dec. 875, 1990 Ill. App. LEXIS 1813
CourtAppellate Court of Illinois
DecidedNovember 30, 1990
Docket1—88—3392, 1—88—1147 cons.
StatusPublished
Cited by8 cases

This text of 565 N.E.2d 146 (Laurence v. Flashner Medical Partnership) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Laurence v. Flashner Medical Partnership, 565 N.E.2d 146, 206 Ill. App. 3d 777, 151 Ill. Dec. 875, 1990 Ill. App. LEXIS 1813 (Ill. Ct. App. 1990).

Opinion

PRESIDING JUSTICE DiVITO

delivered the opinion of the court:

Plaintiffs Eileen Laurence, M.D., and James H. Martin, M.D., filed suit against defendants Bruce A. Flashner, M.D., and the Flashner Medical Partnership (FMP) for an accounting, a declaration of partnership rights, breach of fiduciary duty, and fraud in inducing entry into the partnership. The circuit court entered summary judgment against plaintiffs and in favor of defendants as to all counts. Defendants then sought to impose sanctions against plaintiffs, and, in response, plaintiffs sought to impose sanctions against defendants. The circuit court denied both motions for sanctions. Plaintiffs appeal the entry of summary judgment against them and the denial of their motion for sanctions. Defendants cross-appeal the denial of their motion for sanctions. The issues raised on appeal are: (1) whether the circuit court erred in granting defendants’ motion for summary judgment; and (2) whether the circuit court erred in denying both plaintiffs’ and defendants’ motions for sanctions.

On September 1, 1981, Dr. Laurence joined FMP, a medical partnership engaged in the practice of providing medical care. On April 1, 1983, Dr. Martin joined FMP. Thereafter, on April 10, 1985, Dr. Martin was expelled from the partnership, and on September 30, 1985, Dr. Laurence was also expelled. 1

FMP’s articles of partnership governed all partners’ rights and responsibilities. Pursuant to the articles of partnership, all new partners were allocated “units” representing their respective percentage interests in FMP. The articles required that all partners pay into the partnership the book value of units distributed to him. Those articles stipulated that the senior partner, Dr. Flashner, “shall at all times automatically be entitled to *** no less than 51% of the outstanding units of Partnership.” The articles further indicated that the capital investment of FMP was to be divided into 100 units valued at $10,000 per unit, the aggregate amount of the capital investment and the number and dollar amount of each unit being subject to change in the sole discretion of Dr. Flashner: Dr. Flashner “shall consider whether, in the interest of fairness to individual Partners, or in the general interest of the Partnership, the Partnership interest of any of the Partners should be reduced or increased.” Additionally, the articles stipulated that FMP could require a partner’s withdrawal effective upon 90 days’ written notice. On April 10, 1985, the articles were amended to allow for the expulsion of a partner on 90 days notice or “such lessor [sic] time as the Partnership’s Management Group shall determine.”

On October 8, 1985, Drs. Laurence and Martin filed a verified complaint containing four counts. Count I of the complaint sought an accounting from defendants. Plaintiffs averred that Dr. Flashner had “exclusive control over and access to books and records of FMP.” Plaintiffs claimed that they did not receive their just and proportionate shares of the profits of FMP, in contravention of the articles of partnership. Plaintiffs further alleged that their unit interests in FMP were improperly, negligently, or fraudulently revalued, reallocated or reduced to zero. The complaint alleged that despite repeated demands for an accounting, Dr. Flashner refused to allow plaintiffs or their accountants access to the books and records of FMP. For relief, plaintiffs requested a formal accounting and a court appointee to manage and control the assets and affairs of FMP until proper distributions were made to the partners.

In count II, plaintiffs alleged that their unit interests in FMP were substantially devalued and that Dr. Flashner failed to provide a “full and complete accounting for the reallocation and decrease of plaintiffs’ unit interests.” Count II also alleged that Dr. Martin had been improperly expelled from FMP. For relief, plaintiffs again requested an accounting as well as a declaration of the rights, obligations and interests of the partners in FMP.

Count III of the complaint alleged that Dr. Flashner, as the senior and “controlling” partner, breached his fiduciary duty to the partners. Plaintiffs averred that Dr. Flashner convinced them to purchase stock in Doctor’s Officecenters Corporation, which was owned and controlled by FMP, at $9 per share. Plaintiffs alleged that they purchased the stock in reliance upon Dr. Flashner’s representations that the investments were needed to stabilize the price and to present a cohesive and healthy financial picture of the service corporation to the public. Moreover, plaintiffs averred that, in order to expedite the sale of the stock, Dr. Flashner helped them secure loans for the purchase of the stock. Plaintiffs further alleged that Dr. Flashner promised to make them “whole” should the value of the stock decline. According to plaintiffs, the stock value declined to $3 per share, a fact which Dr. Flashner knew would occur due to his “private and secret” negotiations with Humana, the company which later purchased Doctor’s Office-centers Corporation. Plaintiffs alleged that, after the drop in the stock value, Dr. Flashner again assured them that he would make the partners of FMP “whole” with respect to the investment losses. For relief, plaintiffs again requested an accounting in addition to damages resulting from Dr. Flashner’s alleged breach of fiduciary duty.

In count IV, plaintiffs alleged that Dr. Flashner fraudulently induced them to join the partnership by promising greater compensation than was available elsewhere, but that the higher compensation was never forthcoming. Plaintiffs requested compensatory and punitive damages in addition to an accounting. In support of their allegations, plaintiffs attached to their complaint FMP’s original articles of partnership.

Defendants, in their verified answer, admitted that Drs. Laurence and Martin had been partners in FMP at one time and had been expelled from the partnership. However, defendants denied plaintiffs’ allegations that Dr. Flashner had exclusive control over FMP’s books and records and had refused plaintiffs’ requests for access to the financial documents. Furthermore, defendants denied that Dr. Flashner breached his fiduciary duty or fraudulently induced plaintiffs to enter into partnership with FMP. Defendants further denied that Dr. Laurence or Dr. Martin was improperly expelled from the partnership.

On August 4, 1988, defendants filed a motion for summary judgment. In support of their motion, defendants attached the amended articles of partnership and six affidavits. In addition, defendants submitted copies of two opinions involving FMP as a defendant: one from a Federal district court in Illinois and the other from a New York State court.

In the first affidavit, Dr. Flashner stated that though he had sent Dr. Laurence numerous letters during the period that she had been absent from work, he received no responses from her. Dr. Flashner further stated that he had offered Dr. Laurence access to all of FMP’s financial statements and other records in his letters of May 14, 1985, and June 14, 1985. Those letters, in addition to all the other letters and mailgrams which Dr. Flashner sent to Dr. Laurence, were also attached to the motion for summary judgment.

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Bluebook (online)
565 N.E.2d 146, 206 Ill. App. 3d 777, 151 Ill. Dec. 875, 1990 Ill. App. LEXIS 1813, Counsel Stack Legal Research, https://law.counselstack.com/opinion/laurence-v-flashner-medical-partnership-illappct-1990.