O'Brien and Ryan, LLP - Attorneys at Law

Defense Verdict in Fraud and Breach of Fiduciary Duty Action in Chester County

Paul E. Peel and Brett M. Littman obtained a defense verdict in a bench trial at the Chester County Court of Common Pleas in a corporate liability action, which included allegations of fraud and breach of fiduciary duty. Mr. Peel and Mr. Littman represented the president of an emergency medicine practice who was being sued by a former officer of the group.

In 2003, several emergency physicians at a local hospital made the decision to form an independent group who would share equally in profits obtained from their practice and have autonomy over the day-to-day operations of their practice. During the same time period, this group was approached by an existing group who operated at another hospital with a plan to combine the two practices, which would afford them certain benefits, including a discount from vendors and an increase in reimbursements from insurance companies for medical services rendered.

After initial discussions, the groups sought legal counsel and determined that the only way to obtain these benefits would be for the existing group to have a 100% ownership interest in the new group. All involved in the fledgling group agreed that the benefits of being owned greatly outweighed the need for complete autonomy, particularly when they would still control the day-to-day functioning of the practice. The members of the group voted, by a four-to-one count, to go forward with the plan. The dissenting voter nonetheless acquiesced to the plan, and the new group signed a contract to provide emergency services.

This dissenting voter became increasingly dissatisfied with the operation of the business and was demoted from his position as a corporate officer and co-owner of the new practice. He was ultimately terminated, and he brought a lawsuit against the president of the new group, the group itself, the group that held the ownership interest, and the group's attorney. Plaintiff's claims included allegations that the president of his group defrauded him and breached a fiduciary duty by concealing the fact that the new group would be owned by the existing practice, to his detriment.

By introducing corporate minutes, corporate start-up documentation, and the testimony of all involved, the defense presented extensive evidence that all parties were aware of the ownership structure before it went into effect, and that all members of the new group knew that they were to be owned by another group. After hearing the evidence and argument of the parties, the Honorable Edward Griffith rendered a defense verdict.

In the same action, Mr. Peel and Mr. Littman also represented the group's healthcare attorney, as the plaintiff alleged that the attorney placed the interests of the group ahead of his personal interests, which represented a legal conflict and constituted legal malpractice. This action was dismissed pursuant to successful preliminary objections prior to trial.

Mr. Peel and Mr. Littman also represented the fledgling group and the group that held the ownership interest. Claims against these parties were also dismissed pursuant to successful preliminary objections prior to trial.

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