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DICK v. KOSKI PROF. GROUP

Cite as 307 Neb. 599

Robert Dick, appellee and cross-appellant, v. 

Koski Professional Group, P.C., third-party 

plaintiff, appellant and cross-appellee, and 

Bland & Associates, P.C., third-party 

defendant, appellee and 

cross-appellant.

___ N.W.2d ___

Filed October 30, 2020. No. S-19-132.

1. Judgments: Jury Trials: Pretrial Procedure: Appeal and Error. The 

allocation of peremptory challenges in a multi-party civil suit is left 

to the discretion of the trial court and will be reviewed for an abuse 

of discretion.

2. Judgments: Words and Phrases. A judicial abuse of discretion exists 

when a judge, within the effective limits of authorized judicial power, 

elects to act or refrain from acting, but the selected option results in a 

decision which is untenable and unfairly deprives a litigant of a substantial right or a just result in matters submitted for disposition through a 

judicial system.

3. Jury Instructions: Proof: Appeal and Error. To establish reversible 

error from a court’s failure to give a requested jury instruction, an appellant has the burden to show that (1) the tendered instruction is a correct 

statement of the law, (2) the tendered instruction was warranted by the 

evidence, and (3) the appellant was prejudiced by the court’s failure to 

give the requested instruction.

4. Jury Instructions: Pleadings: Appeal and Error. A party may not 

complain of the failure of the trial court to instruct on issues that are 

outside the scope of the pleadings.

5. Jury Instructions. Jury instructions must be read together; they must be 

read conjunctively, rather than separately in isolation.

6. Jury Instructions: Appeal and Error. If the jury instructions given, 

which are taken as a whole, correctly state the law, are not misleading, 

Nebraska Supreme Court Online Library

www.nebraska.gov/apps-courts-epub/

01/22/2021 12:09 AM CST
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and adequately cover the issues submissible to a jury, there is no prejudicial error concerning the instructions and necessitating a reversal.

7. Directed Verdict: Appeal and Error. When a motion for directed verdict made at the close of all the evidence is overruled by the trial court, 

appellate review is controlled by the rule that a directed verdict is proper 

only where reasonable minds cannot differ and can draw but one conclusion from the evidence, and where the issues should be decided as a 

matter of law.

8. Pleadings: Appeal and Error. Permission to amend a pleading is 

addressed to the discretion of the trial court, and an appellate court will 

not disturb the trial court’s decision absent an abuse of discretion.

9. Juries. In Nebraska, the number of peremptory challenges allowable in 

civil actions is governed by case law and unwritten rules of court.

10. Juries: Parties. A party can exercise the peremptory challenge to 

remove a potential juror on the basis of that party’s belief that the juror’s 

status as a member of some cognizable group will prejudice his or her 

attitude toward that party’s case.

11. ____: ____. Where there are multiple parties on the same side of a 

lawsuit, each side of the lawsuit is entitled to a total of three peremptory challenges, unless the multiple parties’ interests are adverse to 

each other.

12. ____: ____. Multiple parties on the same side of a civil lawsuit are 

adverse to each other when a good-faith controversy exists between 

them over an issue of fact that the jury will decide.

13. Parties. The fact that one party may have to defend against a theory of 

recovery not asserted against the other does not in itself mean that the 

two parties’ interests are adverse.

14. ____. Relevant circumstances to determine whether the defendants’ 

interests are adverse to each other include but are not limited to (1) 

whether separate acts of misconduct were alleged against the separate 

defendants, (2) whether comparative negligence principles applied to 

the case, (3) the type of relationship among the defendants, (4) whether 

cross-claims or third-party complaints had been filed and the positions 

taken therein, (5) information disclosed on pretrial discovery, and (6) 

representations made by the parties.

15. Juries: Parties: Appeal and Error. One who does not exercise all his 

or her peremptory challenges cannot assign as error the court’s refusal 

to allow a greater number or a lesser number to the opposing parties.

16. Contracts: Shareholder Agreements. Shareholder agreements are construed according to the principles of the law of contracts.

17. Actions: Breach of Contract: Damages. A suit for damages arising 

from breach of a contract presents an action at law.
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18. Contracts: Shareholder Agreements. The meaning of an unambiguous 

shareholder agreement, like any contract, is a question of law.

19. Contracts. Matters seeking avoidance of a valid contract are affirmative defenses.

20. Contracts: Words and Phrases. A condition precedent is a condition 

that must be performed before the parties’ agreement becomes a binding 

contract or a condition which must be fulfilled before a duty to perform 

an existing contract arises.

21. Contracts: Breach of Contract: Damages. A condition precedent is 

in contrast to a promise in a contract, the nonfulfillment of which is a 

breach, i.e., the failure to perform that which was required by a legal 

duty, and the remedy lies in an action for damages.

22. Contracts: Intent: Words and Phrases. Whether language in a contract is a condition precedent depends on the parties’ intent as gathered 

from the language of the contract.

23. ____: ____: ____. Where contracting parties’ intent is not clear, the language is generally interpreted as promissory rather than conditional.

24. Contracts: Liability: Tender. In a simultaneous exchange, entailing 

mutual conditions precedent, liability under the contract by the first 

party is triggered by an offer of tender by the second party, which is 

conditional upon contemporaneous performance of the first.

25. Contracts: Words and Phrases. Tender is an offer to perform a condition or obligation, coupled with the present ability of immediate 

performance, so that, were it not for the refusal of cooperation by the 

party to whom tendered, the condition or obligation would be immediately satisfied.

26. Tender: Waiver. Tender before suit is filed is waived where the party 

entitled to payment, by conduct or declaration, proclaims that if a tender 

should be made, acceptance would be refused.

27. Contracts: Tender: Proof. Acts which, in themselves, are insufficient 

to make a complete tender may constitute proof of readiness to perform, 

so as to protect the rights of a party under a contract, where a proper 

tender is rendered impossible by circumstances not due to the fault of 

the tenderer.

28. Actions: Contracts: Pleadings. To constitute a defense to an action 

based on contract, the matters must generally be germane to the cause 

of action pleaded, in addition to presenting a legal reason why plaintiff 

will not recover.

29. Claims: Contracts: Torts. A claim of defense arising out of tort concepts is not generally available where the claim of the plaintiff is premised upon contract.

30. Contracts. Fiduciary duties arise from the relationship and not from the 

terms of the agreement.
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Cite as 307 Neb. 599

31. Contracts: Parties. The implied covenant of good faith and fair dealing 

exists in every contract and requires that none of the parties to the contract do anything which will injure the right of another party to receive 

the benefit of the contract.

32. Contracts. The scope of conduct prohibited by the covenant of good 

faith is circumscribed by the purposes and express terms of the contract.

33. ____. The covenant of good faith and fair dealing cannot give rise to 

new obligations not otherwise contained in a contract’s express terms.

34. Contracts: Breach of Contract. The “prior material breach” doctrine 

applies when a contract contemplates an exchange of performances 

between the parties, and the doctrine holds that one party’s failure to 

perform allows the other party to cease its own performance.

35. ____: ____. A duty under a separate contract is not affected by the 

doctrine of prior material breach, nor is a duty under the same contract 

affected if it was not one to render a performance to be exchanged under 

an exchange of promises; further, only duties to render performance 

are affected.

36. Actions: Breach of Contract. A prior material breach by the other contracting party is an affirmative defense that applies only when the breaching party breaches the same contract on which he or she is suing.

37. Shareholder Agreements: Corporations. Shareholder agreements may 

be freestanding of corporate bylaws.

38. Claims: Juries: Verdicts. Factual issues necessarily determined by a 

jury’s verdict on one claim in a case are also deemed resolved with 

respect to other claims in the same case.

39. Judgments. The existence of a fiduciary duty and scope of that duty are 

questions of law for the court to decide.

40. Corporations: Trusts. The law of trusts forms the basis for fiduciary 

duties. Fiduciaries in a corporation are not trustees in the strict sense 

because they do not have title to the estate; they are instead fiduciaries 

to the extent that they control the corporation’s property.

41. Equity: Courts. The scope of fiduciary duties is flexible, reflecting the 

historical approach of the courts of equity.

42. Corporations. Minority shareholders do not owe a fiduciary duty to 

each other or to the corporation.

43. ____. An officer of a corporation occupies a fiduciary relationship 

toward the corporation and its stockholders.

44. ____. The existence of a fiduciary duty of an officer in a closely held 

corporation depends on the ability to exercise the status that creates it, 

and nominal corporate officers with no management authority generally 

do not owe fiduciary duties to the corporation.

45. Actions: Damages: Proof. The plaintiff in an action for breach of 

fiduciary duty has the burden to prove that (1) the defendant owed the 
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Cite as 307 Neb. 599

plaintiff a fiduciary duty, (2) the defendant breached the duty, (3) the 

defendant’s breach was the cause of the injury to the plaintiff, and (4) 

the plaintiff was damaged.

46. Actions: Corporations: Proof. In an action for breach of fiduciary duty 

toward a corporation, the plaintiff must establish a prima facie case of 

both the existence of a fiduciary duty and its breach before the burden 

shifts to the defendant to prove the defendant acted in an open, fair, and 

honest manner such that no breach of fiduciary duty occurred.

47. Corporations: Proof. Negotiating to leave one’s fiduciary position with 

a closely held corporation and to enter into competing employment elsewhere is not a transaction that shifts the burden to the fiduciary to prove 

the negotiation’s fairness.

48. Employer and Employee. An employer’s right to demand and receive 

loyalty must be tempered by society’s legitimate interest in encouraging competition.

49. Employer and Employee: Trade Secrets. An employee who plans to 

compete with his or her employer may not (1) appropriate the employer’s trade secrets, (2) solicit the employer’s customers while still working for the employer, (3) solicit the departure of other employees while 

still working for the employer, or (4) carry away confidential information, such as customer lists.

50. Trial: Evidence: Appeal and Error. Error may not be predicated upon 

a ruling of a trial court excluding testimony of a witness unless the substance of the evidence to be offered by the testimony was made known 

to the trial judge by offer or was apparent from the context within which 

the questions were asked.

51. Corporations: Contracts. Customers without exclusive contractual 

arrangements with corporations or with whom a corporation has to 

annually renew contracts are not corporate business opportunities.

52. Equity: Unjust Enrichment: Principal and Agent. Equitable clawback 

is a restitutionary remedy based on principles of unjust enrichment and 

the faithless servant doctrine. It establishes a mandate that an agent who 

engages in activities that breach the agent’s fiduciary duties to the principal is not entitled to and must forfeit any compensation for services 

rendered during the period of the breach.

53. Jury Instructions: Appeal and Error. Any jury instruction is subject to 

the harmless error rule, which requires a reversal only if error adversely 

affects the substantial rights of the complaining party.

54. Torts: Intent: Proof. To succeed on a claim for tortious interference 

with a business relationship or expectancy, a plaintiff must prove (1) the 

existence of a valid business relationship or expectancy, (2) knowledge 

by the interferer of the relationship or expectancy, (3) an unjustified 

intentional act of interference on the part of the interferer, (4) proof that 
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the interference caused the harm sustained, and (5) damage to the party 

whose relationship or expectancy was disrupted.

55. Torts: Employer and Employee. Factors to consider in determining whether interference with a business relationship was unjustified 

include: (1) the nature of the actor’s conduct, (2) the actor’s motive, (3) 

the interests of the other with which the actor’s conduct interferes, (4) 

the interests sought to be advanced by the actor, (5) the social interests 

in protecting the freedom of action of the actor and the contractual interests of the other, (6) the proximity or remoteness of the actor’s conduct 

to the interference, and (7) the relations between the parties. The issue is 

whether, upon a consideration of the relative significance of the factors 

involved, the conduct should be permitted without liability, despite its 

effect of harm to another.

56. Contracts. An individual’s interest in prospective economic advantage 

receives less protection than his or her enforceable contract rights.

57. Torts: Proof. The party alleging tortious interference has the burden of 

proving that the conduct did not fall within the competitor’s privilege.

58. Torts: Intent. One is privileged purposely to cause a third person not to 

enter into or continue a business relation with a competitor of the actor 

if (1) the relation concerns a matter involved in the competition between 

the actor and the competitor, (2) the actor does not employ improper 

means, (3) the actor does not intend thereby to create or continue an 

illegal restraint of competition, and (4) the actor’s purpose is at least in 

part to advance his or her interest in the competition with the other.

59. Torts. Improper means of competition has been described as physical 

violence, fraud, civil suits, and criminal prosecutions—though even 

these means may not be forbidden, depending upon the relation between 

the actor and the person induced, and the object sought to be accomplished by the actor.

60. Evidence: Appeal and Error. In a civil case, the admission or exclusion of evidence is not reversible error unless it unfairly prejudiced a 

substantial right of the complaining party.

Appeal from the District Court for Douglas County: J 

Russell Derr, Judge. Affirmed.

Robert M. Slovek and Dwyer Arce, of Kutak Rock, L.L.P., 

for appellant.

Aaron A. Clark, Ruth A. Horvatich, and Cody E. 

Brookhouser-Sisney, of McGrath, North, Mullin & Kratz, P.C., 

L.L.O., for appellee Robert Dick.
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DICK v. KOSKI PROF. GROUP

Cite as 307 Neb. 599

Ryan M. Kunhart and Jeffrey J. Blumel, of Dvorak Law 

Group, L.L.C., for appellee Bland & Associates, P.C.

Heavican, C.J., Cassel, Stacy, Funke, Papik, and 

Freudenberg, JJ.

Freudenberg, J.

I. NATURE OF CASE

An accountant left one firm in order to join another. Several 

clients followed the accountant to his new firm. The account

ant, who was a shareholder and officer at his former firm, sued 

the former firm for failing to perform a mandatory provision in 

the shareholder agreement to buy out a departing shareholder’s 

corporate shares at a price that accounted for any lost billings 

by virtue of clients’ following a departing shareholder. The 

firm made numerous allegations in defense of the account

ant’s claim and brought counterclaims against the account

ant, including breach of fiduciary duty and misappropriation 

of confidential information. The accountant’s prior firm also 

brought third-party claims against the accountant’s new firm, 

which included tortious interference with business expectations 

and a malicious prosecution claim in relation to a complaint 

made by the new firm to the Nebraska State Board of Public 

Accountancy (NSBPA). All claims presented to the jury were 

determined in favor of the accountant and his new firm. The 

accountant’s former firm appeals, presenting 15 assignments 

of error challenging the allocation of peremptory strikes, the 

denial of its motion for directed verdict, the exclusion of certain evidence, and several of the jury instructions. We affirm 

the judgment.

II. BACKGROUND

The underlying action was commenced by Robert Dick, an 

accountant, against Koski Professional Group, P.C. (KPG), 

a closely held professional corporation providing accounting 

services. Dick worked at KPG as an accountant for 22 years 

and eventually held the corporate office of vice president. 
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DICK v. KOSKI PROF. GROUP

Cite as 307 Neb. 599

In 2015, Dick moved his practice to Bland & Associates, 

P.C. (Bland). Bland agreed to pay Dick a base salary plus a 

percentage commission on his clients’ billings. Although not 

solicited to do so prior to his departure, many of Dick’s clients 

transferred their business to Bland after Dick began working 

there. There was no noncompete agreement between Dick 

and KPG.

Dick had purchased 30 percent of KPG shares during his 

tenure at KPG, at a total purchase price of approximately 

$257,000. Some of the funds for the stock purchase were 

obtained through a loan by Randall Koski (Koski), president of 

KPG, to Dick. The loan was secured by a promissory note and 

set forth a payment plan and interest. At the time of his departure, Dick still owed approximately $63,000 on the loan. Dick 

continued the scheduled payments and paid off the balance in 

full before trial.

When Dick left KPG, he communicated to Koski that 

he wished for KPG to purchase his shares pursuant to the 

terms of the controlling shareholder agreement (Shareholder 

Agreement). The Shareholder Agreement described voluntary 

termination as an operative event requiring the shareholder to 

sell and the corporation to purchase all of the disposing shareholder’s stock. The Shareholder Agreement set forth the purchase price for an operative event such as a shareholder’s voluntary departure as 80 percent of the adjusted book value. The 

adjusted book value in such circumstances was based in part 

on “[r]etained [a]nnual [b]illings,” described as the difference 

between KPG’s total professional fees during the most recently 

completed fiscal year and all professional fees billed to clients 

who are no longer clients of KPG and were being served by 

the departing shareholder 1 year subsequent to departure. The 

repurchase under the Shareholder Agreement was to occur 

within 60 days of termination. The agreement further specified that KPG was to issue a promissory note to purchase the 

stock in 120 equal monthly installments with 5 percent per 

annum interest.
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DICK v. KOSKI PROF. GROUP

Cite as 307 Neb. 599

Koski disavowed a buyout obligation at the price set forth 

under the Shareholder Agreement. Koski believed that Dick’s 

actions in relation to procuring his new employment had 

breached his fiduciary duties to KPG and the corporate bylaws 

and, further, that because of the promissory note, Dick had 

failed to offer the stock free of all liens. KPG never valued the 

shares or set a closing date for a repurchase. Dick sued.

1. Amended Complaint

Dick alleged breach of contract. Dick also asked for an order 

granting specific performance of the Shareholder Agreement 

compelling KPG to calculate the adjusted book value per share, 

deliver a promissory note secured by the pledge of stock, and 

pay in full all installment payments to repurchase the stock 

plus prejudgment interest and other interest provided under 

the Shareholder Agreement. He asked for an accounting or 

such other relief necessary to determine the value of his stock. 

Alternatively, Dick asked for an order accelerating the payment of all amounts due to purchase his stock and the entry 

of a monetary judgment representing the full adjusted book 

value owed by reason of KPG’s repudiation and default. Dick 

also alleged violations of the Nebraska Wage Payment and 

Collection Act, 1 but dismissed that claim after trial.

2. Amended Answer

KPG generally denied the allegations set forth in Dick’s 

amended complaint and alleged several affirmative defenses, 

including prior material breach and failure to satisfy a condition precedent. KPG alleged that Dick’s breach of contract 

claim was barred by his own prior material breach of the 

Shareholder Agreement and bylaws, thereby excusing KPG’s 

duty to perform. KPG alleged that Dick failed to satisfy a condition precedent of the applicable stockholder agreement by 

1 See Neb. Rev. Stat. §§ 48-1228 to 48-1234 (Reissue 2010, Cum. Supp. 

2018 & Supp. 2019).
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Cite as 307 Neb. 599

failing to return his stock to KPG free and clear of any security 

interests or encumbrances.

KPG did not allege a prior breach of fiduciary duty or good 

faith and fair dealing as affirmative defenses to Dick’s breach 

of contract claim.

3. Counterclaims

KPG then set forth seven counterclaims against Dick, some 

of which mirrored the alleged affirmative defenses.

(a) Breach of Fiduciary Duty

First, KPG alleged a counterclaim for breach of fiduciary 

duty. KPG asserted that Dick breached his fiduciary duties 

of loyalty and care, imposed by virtue of his being an officer and shareholder of a close corporation, by (1) disclosing 

KPG’s confidential business techniques and commercial data 

to Bland; (2) failing to send out engagement letters on behalf 

of KPG to two different KPG clients in order to take those 

clients to Bland; (3) “‘shopp[ing]’” KPG’s long-term clients 

to other accounting firms to find the one that would offer him 

the largest fees for taking those clients to them; (4) engaging 

with Bland, while still working for KPG, in an agreement in 

which he would receive a 10-percent commission on all clients 

he brought to Bland from KPG, in violation of the rules of professional conduct of the NSBPA; (5) concealing from KPG his 

efforts to transition to a rival accounting firm; (6) breaking his 

specific promise to KPG that he would not contact KPG clients during that period of time; (7) mishandling and providing 

negligent accounting services to KPG clients; and (8) violating 

KPG’s bylaws by sending KPG’s confidential business techniques and commercial data to Bland.

While the underlying facts of this stated claim were the same 

as those referred to in the affirmative defense of unclean hands, 

KPG sought damages as a result of the alleged breaches, as 

well as a return of compensation paid to Dick during the period 

of his breach—under the “equitable claw back” doctrine.
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DICK v. KOSKI PROF. GROUP

Cite as 307 Neb. 599

(b) Breach of Shareholder Agreement

Second, KPG asserted that Dick breached the explicit terms 

of the Shareholder Agreement, as well as implied covenants of 

good faith and fair dealing, by demanding that KPG repurchase 

his stocks and by initiating litigation to compel the same, when 

Dick was allegedly unable to return his stock unencumbered. 

Like in its affirmative defense of prior material breach and 

failure to satisfy a condition precedent based on similar allegations, KPG asserted that it was excused from performing 

any further obligation under the Shareholder Agreement. KPG 

asked for damages as a result of Dick’s breach.

(c) Breach of KPG’s Bylaws

Third, and again repeating one of the allegations stated 

under breach of fiduciary duty, KPG alleged that Dick breached 

bylaws providing that officers and employees of KPG maintain 

and preserve confidentiality as to all business techniques, commercial data, formulas, goodwill, operational methods, product 

identifications, service marks, trademarks, trade names, and 

trade secrets, by disclosing confidential information to Bland 

in order to undercut KPG pricing for its clients. KPG alleged it 

suffered monetary damages as a result of the breach.

(d) Misappropriation of Trade Secrets

Fourth, KPG alleged that Dick violated Nebraska’s Trade 

Secrets Act, Neb. Rev. Stat. § 87-501 et seq. (Reissue 2014), 

by utilizing KPG’s trade secrets for his own benefit in the 

course of his employment with Bland. KPG asked for damages due to actual losses and unjust enrichment, as provided 

by § 87-504.

(e) Tortious Interference With Contact or 

Business Relationship or Expectancy

KPG’s fifth counterclaim was based in part on the same 

allegations as those set forth in KPG’s counterclaim alleging 

breach of fiduciary duties and in part on the additional alleged 

facts that (1) Dick had encouraged clients who switched from 
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KPG to Bland not to pay their outstanding balances with KPG 

and (2) Dick maliciously assisted Bland in filing a false complaint against KPG with the NSBPA. KPG sought damages.

(f) Civil Conspiracy

Sixth, repeating allegations made under its breach of fiduciary duty and tortious interference claims concerning Dick’s 

breach of KPG’s bylaws by sending confidential information to 

Bland, KPG alleged that Dick conspired with Bland to “wrongfully co-opt KPG’s niche practice, all while taking concerted 

steps to prevent KPG from discovering Dick’s wrongful conduct.” KPG sought damages for this alleged civil conspiracy.

(g) Unjust Enrichment

Seventh, KPG asked for the return of certain amounts paid 

to Dick or on his behalf under the theory of unjust enrichment. Specifically, KPG sought reimbursement of a $16,000 

discretionary bonus paid to Dick on the condition that he stay 

through an orderly transition process, which Dick allegedly did 

not do. KPG also sought reimbursement for $3,587.13 paid to 

cover Dick’s health insurance premium for the fourth quarter of 

2015, during which Dick no longer worked for KPG.

4. Third-Party Complaint

KPG brought a third-party complaint against Bland stating six claims for which KPG sought monetary damages: 

(1) tortious interference with an existing contract or business 

relationship or expectancy; (2) aiding and abetting a breach 

of fiduciary duty; (3) malicious prosecution based on Bland’s 

commencement of NSBPA proceedings against KPG, allegedly 

without probable cause and with malice, “in an effort to bully 

and intimidate” KPG; (4) misappropriation of trade secrets 

as defined by KPG’s bylaws and § 87-502(4); (5) civil conspiracy to willfully and maliciously interfere with KPG’s business operations, customer relationships, and corporate opportunities; and (6) unjust enrichment through the receipt and 
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continued use of KPG’s confidential business techniques and 

commercial data.

5. Pretrial Order Regarding 

10-Percent Commission

KPG moved for partial summary judgment against Bland on 

its allegation that Bland’s payment of a 10-percent commission 

to Dick for prior KPG clients violated the rules of professional 

conduct of the NSBPA and that this accordingly constituted 

tortious interference with its business relationships or expectations. Bland responded by filing a cross-motion for partial 

summary judgment against KPG, alleging that as a matter of 

law, the commission did not create a conflict of interest or violate the NSBPA’s regulations, because it was paid directly by 

Bland to Dick and did not affect the amounts paid by a client 

or the outcome of an engagement between Bland and a client. 

Dick filed a separate motion for partial summary judgment for 

the same reasons as set forth in Bland’s motion.

Following a hearing, the court overruled KPG’s motion for 

partial summary judgment and granted Bland’s motion for partial summary judgment on the issue of whether the commission 

violated NSBPA regulations. The court found as a matter of 

law that Bland was not violating NSBPA regulations by paying 

Dick a 10-percent commission on fees paid to Bland for work 

performed for clients Dick brought to Bland. The NSBPA rule 

in question, the court explained, prohibited commissions that 

would create a potential conflict of interest, such as a licensee’s 

receiving a commission from an outside service provider for 

referring that provider’s service to that licensee’s client. The 

court did not rule on whether there was any other basis for 

concluding that Bland engaged in an unjustified intentional act 

of interference against KPG.

6. Peremptory Challenges

Prior to jury selection, the court issued a written order 

finding that the interests of Dick and Bland were sufficiently adverse such that each should have three peremptory 
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challenges. The jury selection process is not otherwise reflected 

in the appellate record.

7. Evidence Presented at Trial

The jury trial was held from October 1 through 12, 2018. 

The following evidence was adduced.

(a) Dick Employed by 

Randall K. Koski, P.C.

Dick testified that he was hired at Randall K. Koski, P.C., in 

1993. At that time, the firm was Koski’s sole practice, established in 1986. Koski had as a client a nursing home chain and 

was looking for someone with health care experience. Dick had 

experience working with Medicare.

Dick testified that at Randall K. Koski, P.C., he specialized 

in cost reports and other accounting services for long-term 

health care facilities. He brought in his first client in 1995, at 

which time there were only three nursing homes being served 

by KPG. By the time Dick resigned, KPG served around 45 

nursing homes.

Dick testified that since 1995, he had personally brought 

in every long-term health care client that Randall K. Koski, 

P.C., and KPG had served. A shareholder, Michelle Thornburg, 

described that while “Dick may have been the face of that 

networking,” KPG resources assisted him in that effort significantly. Koski also generally disagreed with Dick’s perspective 

that he was the driving force of KPG’s growth in that area. 

According to Koski, long-term health care clients have always 

been between one-third and one-half of KPG’s client base.

(b) Shareholder Agreements, Stock 

Purchases, and Promissory Notes

In 1997, Koski filed with the Secretary of State an amendment to the articles of incorporation of Randall K. Koski, P.C., 

to change the corporation’s name to that of KPG. The amendment, adopted by Koski as the sole shareholder, provided that 

“all other terms and conditions of the articles of incorporation 
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filed January 14, 1991 were reconfirmed and deemed to be in 

full force and effect.”

In 1997, the first KPG shareholder agreement was signed 

by Koski, Dick, and Thornburg. Shareholder agreements were 

again signed by all relevant parties in 2005 and 2011. The relevant provisions were the same in each of these subsequently 

executed shareholder agreements.

In addition to the “mandatory sales and purchases” provisions that took into account any clients that leave with a voluntarily departing shareholder, the agreements provided for shareholder indebtedness to the corporation or a third-party secured 

creditor to be offset against the buyout price. The shareholder 

agreements further had a provision that stated:

This Agreement contains the entire understanding among 

the parties and supersedes any prior understanding among 

the parties and agreements between them respecting 

the within subject matter. There are no representations, 

agreements, arrangements or understandings, oral or written, between or among the parties hereto relating to the 

subject matter of this Agreement which are not fully 

expressed herein.

There was no reference in the KPG shareholder agreements 

to corporate bylaws. At the time of the corporation’s formation, there were three shareholders, a few employees, and gross 

revenues of close to $500,000. When Dick resigned in 2014, 

there were four shareholders, over a dozen employees, and 

$1.8 million in gross revenue. The fourth shareholder, Adrian 

Lape-Brinkman, joined in 2010, after purchasing a 15-percent 

interest in KPG for $186,493.08.

Dick originally purchased 12.5 shares in KPG from KPG for 

$52,260.25. In 2000, Dick purchased additional shares in KPG 

from KPG for $40,356.

In 2005, Dick purchased 11.8 shares in KPG from Koski 

for $90,000, giving Dick a 24-percent ownership interest and 

reducing Koski’s interest to 52 percent. The 2005 purchase 

was memorialized by a stock purchase agreement between 
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Dick and Koski and was financed by Koski on a 10-year 

repayment term with interest, delineated in a security agreement between Dick and Koski. In 2010, Dick again purchased 

shares in KPG from Koski for $74,597.23, at which point 

Dick owned 30 percent of KPG. Dick and Koski refinanced 

the remaining $41,000 unpaid balance of the 2005 loan into a 

new loan for the 2010 purchase, for a total loan of $115,000 

plus interest.

Under the promissory note, Dick promised to pay $1,199.67 

per month from January 1, 2010, through December 31, 2019. 

The evidence was uncontroverted that Dick never defaulted on 

any of the loan payments.

It was undisputed that after the underlying lawsuit was 

filed, Dick continued to make payments and Koski continued 

to accept those payments until Dick paid off the remaining 

balance in September 2019. The total amount paid by Dick 

for all the KPG shares he purchased was $257,998.74, plus 

$40,181.69 in interest under the loan from Koski.

(c) Bylaws

KPG entered into evidence the bylaws of Randall K. Koski, 

P.C., adopted in 1990 when Koski was the sole owner and 

shareholder. The bylaws provided that “[a]ll officers, agents, 

and employees of [KPG] shall be required . . . to maintain 

and preserve confidentiality as to all business techniques, 

commercial data, formulas, good will, operational methods, 

product identifications, [etc.]” Koski testified that the Randall 

K. Koski, P.C., bylaws became the bylaws of KPG when the 

articles of incorporation for KPG were filed, since “[t]he only 

change in the corporation was the name . . . .”

(d) Shareholder Disagreements

Dick testified that in 2014, he became concerned that 

KPG’s resources were not sufficient to meet the continuing 

growth of the long-term health care client base. Dick suggested hiring more staff or merging with another accounting 
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firm. Koski and Thornburg, however, were not interested in 

expanding in that way.

Also, Dick and Lape-Brinkman began to feel that it was 

inequitable that the shareholders’ salaries were not in any manner tied to the number of clients they brought to KPG or to the 

amount of work they did. All shareholders were paid the same 

base salary no matter how many shares they owned. The shareholders were then each given a yearly distribution of KPG’s 

profits based on their percentage of shareholder interest and 

without regard to the amount of revenue they brought to the 

firm or the amount of work performed.

Dick estimated that he oversaw approximately $600,000 

of work, while the other shareholders oversaw approximately 

$400,000 of work each, some of whom were getting paid the 

same as Dick for doing less work. According to Dick, none 

of the other shareholders practiced in his specialty. Koski 

asserted that any extra hours worked by Dick were due to time 

spent correcting an error that Koski believed Dick’s negligence 

had created, while Dick and his client testified that the error 

had occurred previously when the client was doing his own 

accounting work.

One idea that Dick and Lape-Brinkman suggested to the 

other shareholders was that shareholders be given a commission or bonus for clients they bring to the firm. Dick described 

this as a “standard practice.” At a shareholder meeting in 

November 2014, Koski and Thornburg rejected such ideas, but 

suggested a formal proposal.

Soon after the November 2014 meeting, Koski sent an email 

to the other shareholders stating his belief that “much damage has been done to [the] ‘partnership’” as a result of the 

disagreement about compensation. Koski expressed that he did 

not believe an agreement could be reached that would make 

everyone happy. Koski concluded:

The great irony here is that if I had always kept owner 

compensation confidential and none of you knew what 
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the other was making, everyone would be tickled with 

this year’s compensation.

I have a plan to finalize 2014 compensation. It is predicated on the idea that we will remain together as a firm at 

least for most of 2015. If anyone does not feel that they 

can remain with the firm for most of 2015, allowing us 

time for an orderly sale, merger or liquidation, if necessary, please be honest with me and tell me that, for I do 

not wish to make a discretionary allocation to anyone 

who will not remain here through an orderly process. You 

might be thinking that we all lose if we liquidate, and you 

would be correct. Substantially.

I have decided that my salary for 2014 will be $160,000 

. . . .

At the moment, following are my plans for a discretionary reduction in my compensation. I originally planned to 

allocate this to [Dick], [Thornburg,] and [Lape-Brinkman], 

as I have made known to you previously. [Thornburg] 

has very unselfishly asked me to allocate from her share 

$4,000 to Kelli and $2,000 to Annette and none to herself. 

The remainder of approximately $30,000 plus would go 

to [Dick] and [Lape-Brinkman] in whatever proportion 

you may agree upon. . . .

. . . .

For the record, I have enjoyed the camaraderie, whether 

it was real or imagined, and I hope it may continue into 

the future.

Dick thus received a $16,000 distribution. Dick testified that 

there was never any discussion of liquidating the firm, either 

prior to the email or afterward. The firm was never dissolved, 

and Dick stayed with KPG for the first 9 months of 2015.

In January 2015, a formal proposal was submitted, which the 

majority of the shareholders rejected. At some point after Dick 

left, the remaining shareholders were able to reach an agreement to change their compensation structure.
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(e) Employment Negotiations With 

Bland and Resignation

Dick submitted his resignation on September 30, 2015, 

effective immediately. Dick testified that he made sure all 

his pending work was completed prior to his departure. Dick 

did not give KPG notice that he was considering moving his 

practice elsewhere. Dick explained that he was worried KPG 

would fire him immediately if it found out he was considering 

other employment.

Dick described that he had originally begun communication with Bland about the possibility of a merger. But when 

it became clear that neither KPG nor Bland was interested in 

a merger, on May 28, 2015, Dick began discussing the possibility of moving his practice to Bland. Dick communicated 

with Bland through his wife’s email account, which Dick testified was the email account he often utilized for his personal 

email communications.

(f) Dick’s “Book of Business”

During these negotiations, Bland requested that Dick send 

information relating to Dick’s “book of business.” Dick sent 

to Bland (from his wife’s email account) a spreadsheet containing information about the volume, general location, price, 

and type of work Dick performed. It was understood that clients were free to go where they wished and that Dick’s book 

of business was developed in his employment at KPG, where 

the clients might choose to remain. Nevertheless, the managing shareholder at Bland testified that Dick’s book of business was relevant to putting together a compensation package 

for Dick.

The spreadsheet was entered into evidence at trial. It demonstrated chunks of hours and the total billings for each chunk 

(such as 34 hours for a $3,200 fee), with a description of the 

general type of work (such as “[t]ax” or “Medicaid”). The 

spreadsheet often indicated the time of year the work was 

due and sometimes indicated the state in which the work was 

performed. Clients were identified, if at all, by designations 
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such as “Owner A.” The document summarized total billings in 

various categories such as “[a]udit,” “[t]ax,” “Medicaid,” and 

“[r]etirement [p]lan” and then summarized total billings into 

date categories of “January - June,” “July - September,” and 

“October - December.”

Dick testified that some of the information in the spreadsheet came from Dick’s estimation of fees and hours, while 

other parts of the information came from the KPG computer 

database. According to Thornburg, only shareholders and two 

paraprofessionals who did billing had access to such fees-andhours data in their computer system. Dick acknowledged that 

the database was password protected, but testified that the feesand-hours information was public information.

Thornburg acknowledged that a range of KPG pricing information was given to potential clients and that clients were 

obviously aware of what they were being billed. Clients were 

not asked to keep that information confidential. Koski testified 

that KPG would share its billing rates with anyone, “because it 

tells them nothing,” and that pricing information was given to 

each customer.

Both Bland and KPG provided potential clients with cost 

estimates, which the potential clients were free to share with 

others. KPG did so through its engagement letters, and LapeBrinkman testified that there was nothing in the engagement 

letters that restricted a potential, current, or past client from 

disclosing to Bland or other firms what KPG charged for the 

described services. The managing shareholder at Bland testified that he always asked potential clients what fees they were 

currently paying before putting together a proposal, which the 

clients ordinarily freely disclosed. He generally sought that 

information in order to understand whether it would be worthwhile to make an offer, since Bland did not “want to undercut” 

and “take a losing job.”

It was undisputed that long-term health care facilities generally must publicly disclose Medicaid cost reports, which 

include accounting fees. But Koski pointed out that those 
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fees could be a sum of multiple firms’ work. KPG’s website 

described the types of tax work KPG performed for its clients. 

It also listed the states in which it performed services.

During his testimony, Koski explained that he primarily 

took issue with Dick’s sharing with Bland the historical information about services provided to KPG clients, KPG client 

locations, and number of hours spent servicing KPG clients. 

Koski stated, “Standard hourly billing rates are one thing, but 

what you actually realized on a client engagement is something 

else . . . .” Koski testified that the latter information was not 

publicly available. Koski described that such information could 

be used by a competitor to organize staff and other resources 

required to serve that client.

At no point did Dick relay to Bland any client names. At no 

point did Dick or anyone at Bland utilize the information in the 

spreadsheet or any other information to undercut KPG’s rates 

or solicit new clients. The managing shareholder at Bland testified that he did not attempt to identify KPG clients from the 

information conveyed in the spreadsheet. The managing shareholder stated that Bland has never utilized the spreadsheet to 

solicit KPG clients or for any other competitive purpose. Dick 

testified that after sending the spreadsheet to Bland, he never 

looked at the information again.

(g) Job Offer and 10-Percent Commission

By August 2015, Bland had offered Dick a job. At Bland, 

all accountants receive an extra payment of 10 percent of 

the billings on the first year of collections for all clients they 

personally bring to the firm. This has been Bland’s policy for 

quite some time. In 2015, approximately 50 Bland employees 

received such a commission. Dick’s position as an accountant 

at Bland meant he also would receive such a commission. The 

court excluded expert testimony proffered by KPG that Bland’s 

10-percent commission system violated the rules of professional conduct of the NSBPA.
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(h) KPG Clients That Left

Dick testified that he did not talk to any clients before 

resigning from KPG about his move to Bland, and there was 

no evidence contradicting this testimony. After his resignation, 

Dick did send out emails to some former clients informing 

them of his new place of employment and stating that he would 

appreciate having the opportunity to continue providing them 

services. Ultimately, 23 clients chose to follow Dick to Bland, 

while 37 clients stayed with KPG.

Koski testified that in the 18 months following Dick’s resignation, 83 clients were “lost,” while 37 stayed. Of those 83 clients, according to Koski, 38 originally followed Dick but only 

23 remained with Dick a year after his departure from KPG. 

Koski could not strictly account for where the other longterm health care clients went, but opined that their loss was 

related to the “disruption” and “consternation” surrounding 

Dick’s resignation.

The executives of nine of the clients who followed Dick 

from KPG to Bland testified that Dick did not reach out to 

them or solicit their business following his departure. Rather, 

they discovered Dick’s departure from KPG employees, during a regular bidding process, or by other means. These clients 

then reached out to Dick directly.

In total, the executives of 13 clients who followed Dick 

testified. They all testified Dick never made any disparaging 

comments about KPG or offered to undercut KPG’s pricing. 

Indeed, Dick assured one of those clients that KPG was fully 

equipped to continue to serve its needs. No evidence was 

presented that any former KPG client followed Dick to Bland 

because of better pricing.

According to Koski, Dick’s departure resulted in a decline 

in KPG’s revenue due to the loss of clients as well as the cost 

of the present litigation. KPG’s expert witness testified that due 

to lost clients, KPG had experienced approximately $1.8 million in lost profits over a projected 10-year period and based 

on a 6.04-percent compounding growth in the clients’ billings. 

The 10-year period was based on past longevity of KPG’s 
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long-term health care clients. The expert also testified, over 

Dick’s objection, that KPG had experienced “clawback” damages in the amount of $48,247.

KPG’s expert admitted on cross-examination that he was 

directed which clients to include in the lost-profits calculation, 

and he did not investigate why the clients had left. He did not 

know whether any of those clients were one-time engagements, 

went to firms other than Bland, or were no longer in business. 

Furthermore, he included in his lost-profits calculations clients 

who had remained with KPG but whose billings decreased.

KPG’s expert also testified that he had made no judgment 

in determining clawback damages whether Dick had worked 

diligently on behalf of KPG during the 4-month period he was 

negotiating with Bland prior to resigning.

During the expert’s examination, KPG’s counsel asked the 

court to allow the expert to recalculate the lost profits by 

removing certain clients Dick claimed to have identified during 

cross-examination that should have been excluded. The court 

sustained Dick’s objection to such a late revision of the expert’s 

report, but allowed the expert to testify as to the mathematical 

formula by which such a calculation could be made.

Dick’s expert witness testified that only former clients of 

KPG that followed Dick to Bland should have been included 

in KPG’s expert’s calculations of lost profits. Clients who 

continued to have their work done by KPG and former clients who had contracted with KPG for a onetime project 

should have been excluded from KPG’s expert’s calculations, 

but were not. Dick’s expert witness also opined that using 

6.04 percent as the predicted growth rate was unreasonable. 

And she also took issue with the 10-year projection, noting 

that “to assume that every one of these is going to last ten 

years would be really overstating the life of that client base.” 

Finally, Dick’s expert witness opined that the approximately 

$200,000 for KPG’s legal fees should not have been part of a 

lost-profits analysis.

According to her own analysis, Dick’s expert witness testified that KPG did not suffer any lost profits as a result of 
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Dick’s resignation. Dick’s expert witness testified that the lost 

revenue of clients who went to Bland was less than the amount 

KPG previously had to pay for Dick’s salary.

(i) No Closing Under Shareholder 

Buyout Provision

Dick testified that he had been prepared to proceed under the 

Shareholder Agreement’s buyout provision with a closing date 

of 60 days from the operative event of his resignation, which 

would have been November 29, 2015. According to Dick’s 

calculations under the formulas set forth in the Shareholder 

Agreement, his shares had a total value of $470,312.51 and, 

under the Shareholder Agreement, KPG should have paid him 

approximately $60,000 per year over a 10-year payment plan 

outlined in the Shareholder Agreement, with the first monthly 

payment due on November 29.

Dick’s expert witness confirmed those calculations, while 

KPG’s expert calculated the value of the shares at $302,696. 

Although there was still an outstanding lien under the promissory note to Koski, Dick testified that he had been prepared to 

pay off that balance in connection with closing on the shares.

On October 3, 2015, Dick and Koski had a conversation 

wherein Dick made clear that he wanted his shares to be valued and repurchased. Koski asked Dick what he wanted for 

his shares. Dick responded that he wished for KPG to calculate the purchase price as provided under the terms of the 

Shareholder Agreement—though he might be willing to take 

a lesser amount in a lump sum “just to move on.” According 

to Dick, Koski refused to purchase the shares under the terms 

of the Shareholder Agreement, stating that “there’s too much 

money at stake; we’re going to fight you.” Thornburg testified 

that 2014 was the highest-revenue year in the history of the 

firm, which would result in “a pretty significant payout” for a 

departing shareholder.

According to Koski, he did not say, “We’re going to fight 

you,” but offered to try to work something out. Nevertheless, 

Koski believed that the Shareholder Agreement did not control 
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KPG’s obligations, because Dick had not acted in good faith. 

Thus, any agreed-upon payout amount would not be commensurate to the sum under the formula of the Shareholder 

Agreement. Koski also testified, “[Dick] never offered to pay 

and deliver [the shares] free and clear of liens. He never 

offered it.”

Dick testified that since his resignation, he has received no 

distributions or other income based on his shares and has no 

control over KPG operations, yet he has had to pay yearly taxes 

on KPG income by virtue of his continuing status as a shareholder. Dick testified that he has never had possession of any 

physical shareholder certificate—the shareholder agreements 

being the only documentation of the same. There was no evidence that physical shareholder certificates ever existed.

8. Motion for Directed Verdict Against Dick 

on Claim for Breach of Contract

Near the close of trial, before KPG rested, KPG moved for 

a directed verdict against Dick on its cause of action under the 

Shareholder Agreement. Specifically, KPG argued that Dick 

had failed to rebut, by demonstrating good faith, KPG’s prima 

facie case for its affirmative defense that Dick had breached his 

fiduciary duty toward KPG. The court pronounced that it was 

overruling the motion.

The court observed that KPG’s claim appeared primarily to 

be based on the alleged act of disclosing confidential information through the email disclosing billings. The court considered it to be a question for the jury whether such information 

was confidential. While KPG asserted that additionally, Dick’s 

concealment of his negotiations with Bland was a breach of a 

fiduciary duty of “utmost honesty with his partners,” the court 

did not agree.

The court noted that the case law did not support the 

proposition that an officer or shareholder who merely prepares to compete upon departure breaches a fiduciary duty. 

And the court rejected KPG’s premise that Dick had committed a breach of fiduciary duty by soliciting clients after he 
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resigned at KPG—an act which the court noted was explicitly 

contemplated by the Shareholder Agreement. With regard to 

KPG’s argument that Dick had a postresignation fiduciary duty 

because he was still a shareholder, the court said:

Well, that’s kind of a circular argument here, that you 

won’t buy him back, so he’s still a shareholder. You 

won’t buy him back ’cause you say, Well, I don’t have to 

because he breached his fiduciary duty. That’s the position [KPG’s] taken, so what’s he supposed to do?

The court also found little merit to the contention that Dick 

had “stole[n]” KPG clients, when there was no agreement not 

to compete.

Further, the court believed that postresignation conduct was 

not alleged as part of KPG’s claim for breach of fiduciary duty. 

The court expressed the belief that any breach of fiduciary duty 

or tortious interference could not as a matter of law operate as 

an affirmative defense to Dick’s claim for breach of contract. 

The court stated that there was no shifting of the burden of 

proof without first proving Dick engaged in a breach of fiduciary duty, and KPG had not done so.

The court overruled renewed motions for a directed verdict 

against Dick on his breach of contract claim at the close of 

KPG’s counterclaim and at the close of all the evidence.

9. Suppression of Evidence of Postresignation 

Acts in Alleged Breach of 

Fiduciary Duty

On the ground that the issue was not presented in the pleadings, the court later sustained during trial an objection by Dick 

preventing KPG from offering evidence of Dick’s continuing 

fiduciary duty toward KPG as a shareholder after his resignation from KPG and becoming employed by Bland. The court 

reasoned that the issue was not pleaded. The court noted that 

under the allegation of breach of fiduciary duty, there were 

numerous specific facts pleaded under “[allegations] A through 

F,” all of which described acts before resignation. The court 

explained, “[T]here is no G that includes, By continuing to 
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compete while continuing to be a shareholder, and that’s a 

pretty big allegation.”

The court also found no merit to a claim based on Dick’s 

continuing duty as a shareholder when KPG refused to redeem 

Dick’s shares. Finally, the court noted that there was nothing 

pleaded regarding any alleged failure to tender the shares.

KPG did not make an offer of proof.

10. Motion to Amend Pleadings

The court overruled a related motion to amend the pleadings 

to conform to the evidence. Specifically, the court rejected any 

attempt by KPG to interject at such a late juncture the theory 

that Dick had a continuing fiduciary duty toward KPG by 

virtue of still being a shareholder. The court noted that in the 

amended pleadings filed 2 years after Dick’s resignation and 

consisting of 143 paragraphs with numerous specific allegations of alleged breaches of fiduciary duty, “[n]owhere does it 

talk about breaching, continuing to breach his fiduciary duty by 

virtue of holding on to his shares.”

The court also again observed that Dick had wanted to 

redeem his shares and that KPG “didn’t take the position they’re 

not worth as much,” but, rather, “took the position I don’t have 

to pay him anything.” The court found it to be a “circular argument” that “[w]e won’t buy his shares and he can’t compete 

by virtue he still has fiduciary obligation.” That was “a pretty 

big issue” that “should have been dealt with, if it needed to be 

dealt with, it should have been dealt with before.”

11. Motions for Directed Verdict on KPG’s 

Counterclaim and Cross-Claim

After KPG presented its evidence on its counterclaim and 

third-party claims, KPG moved for a directed verdict on those 

claims. Dick moved for a directed verdict on his claim against 

KPG for breach of the Shareholder Agreement and against 

KPG on its counterclaims. Bland also moved for a directed 

verdict in its favor on KPG’s third-party claims, including its 
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claim for malicious prosecution. The court overruled all the 

motions, and the parties discussed jury instructions.

12. Jury Instructions

At the jury instructions conference, KPG proposed numerous 

instructions and special verdict forms that the court ultimately 

refused to give and which will be set forth in more detail in 

the analysis section. Forty-seven instructions were given by the 

court to the jury.

The jury was instructed in instruction No. 2 regarding the 

theories under which KPG alleged it had not just a defense 

against Dick’s breach of contract claim but counterclaims 

against Dick and third-party claims against Bland for damages. 

It provided in part:

[KPG] alleges that it does not have to repurchase the stock 

because Dick breached his fiduciary duty as an employee 

and shareholder of [KPG] by disclosing alleged confidential information of [KPG] and by discussing employment 

possibilities with Third Party Defendant Bland . . . while 

still an employee and shareholder of [KPG].

[KPG] has asserted claims against Dick for:

•Breach of fiduciary d

•Breach of Shareholder Agreem

•Breach of [KPG’s] Corporate by-l

•Misappropriation of [KPG] trade secr

•Tortious interference with business relationships and/

expectancy

•Civil conspir

•Unjust enrichm

[KPG] has asserted claims against Bland for:

•Tortious interference with business relationships and/

expectancy

•Aiding and abetting Dick’s alleged breach of fiducia

duty to [KPG]

•Malicious prosecut

•Misappropriation of [KPG’s] trade secr
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•Civil conspir

•Unjust enrichm

Further instructions elaborated on the elements of these 

claims. These included instructions describing the elements 

of aiding and abetting a breach of fiduciary duty and malicious prosecution.

Regarding breach of fiduciary duty, instruction No. 5 

informed the jury that because Dick was an officer, director, and shareholder, a fiduciary relationship existed between 

Dick and KPG. This relationship “imposes the responsibility 

to disclose any conflicts between Dick’s interests and KPG’s 

interests that might make him act in his own best interests at 

the expense or the detriment of [KPG].” Furthermore, “[a]s a 

fiduciary, Dick must exercise the utmost good faith in all his 

dealings with the other [KPG] shareholders and must always 

act for the common benefit of all.”

Instruction No. 8 stated that “[s]hareholder employees in a 

close corporation owe one another substantially the same fiduciary duty in the operation of the enterprise that partners owe 

to one another, to act among themselves in the utmost good 

faith and loyalty.” But the instruction described that “[a]n individual’s fiduciary duty ends upon termination of the employment relationship.” “However,” it further explained, while an 

employee has a duty not to compete with his or her employer 

during employment,

employees, including employees with fiduciary duties, 

may plan and prepare for their competing business while 

still employed without breaching the duty of loyalty. 

Employees, including employees with fiduciary duties, 

are allowed to discuss job offers, while still employed, to 

engage in future competition with their employer without 

incurring liability.

While planning and preparing for a competing business 

is permissible, an employee may not act in direct competition with his or her employer while still employed. Factors 

showing that an employee acted in direct competition 
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during his or her employment include the following: 

use of confidential and trade secret information acquired 

from the employer to compete; soliciting customers and 

clients to join the competing business before the end 

of the employment relationship; or committing some 

other fraudulent or unlawful act aimed at destroying the 

employer’s business. To give rise to liability, the alleged 

disloyal acts must substantially hinder the employer in the 

continuation of its business.

Instruction No. 9 informed the jury that KPG asserted that 

Dick breached his fiduciary duty to KPG “in one or more of 

the following ways: . . . Violated [KPG’s] bylaws by disclosing 

[KPG’s] alleged confidential information to Bland; . . . Failed 

to send out an Engagement Letter to [two named entities] in an 

effort to undermine [KPG’s] relationships with clients.”

Instructions Nos. 11 through 15 described claims based 

on misappropriation of “trade secret/confidential information.” 

Instruction No. 12 set forth:

Confidential information and trade secrets are defined 

as information including, but not limited to, a drawing, 

formula, pattern, compilation, program, device, method, 

technique, code, or process that:

(a) derives economic value, actual or potential, from 

not being known to, and not being ascertainable by proper 

means by, other persons who can obtain economic value 

from its disclosure or use; and

(b) is the subject of efforts that are reasonable under 

the circumstances to maintain its secrecy.

Confidential and trade secret information must have 

independent economic value. To be considered confidential and trade secret information, possession of the secret 

information must confer a competitive advantage.

Matters of public knowledge or of general knowledge 

in an industry are not confidential information or trade 

secrets; confidential information or a trade secret is something known to only a few and not susceptible of general 

knowledge. Confidential information and trade secrets 
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must be particular secrets of [KPG] and not the general 

secrets of the trade in which [KPG] is engaged. If information is ascertainable at all by any means that are not 

improper, the information is not confidential information 

or a trade secret.

Instruction No. 13 stated:

If an alleged trade secret or confidential information 

does not have independent economic value, the information is not entitled to confidential information or trade 

secret protection under Nebraska law. To be considered 

confidential and trade secret information, possession of the 

secret information must confer a competitive advantage.

Information disclosed to customers without any confidentiality requirement, including pricing information, is 

not confidential information.

Instruction No. 14 set forth the definition of the term “misappropriation” under Nebraska’s Trade Secrets Act.

In addition to general instructions, the court gave the jury 

the following 11 special verdict forms:

(a) Dick’s Claim for Stock 

Repurchase (Form 1)

The jury was asked in special verdict form 1 to determine 

Dick’s claims against KPG for stock repurchase pursuant to the 

Shareholder Agreement.

(b) KPG’s Claims Against Dick 

(Forms 2 Through 4)

The jury was asked in special verdict forms 2 through 4 to 

determine KPG’s claims against Dick for (1) breach of fiduciary 

duty, (2) tortious interference with a business relationship or 

expectancy, (3) misappropriation of trade secrets or confidential 

information, (4) unjust enrichment, and (5) civil conspiracy.

(c) KPG’s Conspiracy Claim Against 

Dick and Bland (Form 5)

The jury was asked in special verdict form 5 to determine 

KPG’s claim of civil conspiracy against Dick and Bland.
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(d) KPG’s Claims Against Bland 

(Forms 6 Through 9)

The jury was asked in special verdict forms 6 through 9 to 

determine KPG’s claims against Bland for (1) tortious interference with a business relationship or expectancy, (2) misappropriation of trade secrets or confidential information, and (3) 

unjust enrichment.

(e) KPG’s Damages Calculations 

(Forms 10 and 11)

Special verdict forms 10 and 11 were simple damages forms 

with blanks for the jury to fill in the amount of damages in 

the event the jury found for KPG on “any of its claims.” 

Instruction No. 10 referred generally to claims by KPG against 

Dick, while instruction No. 11 referred generally to claims by 

KPG against Bland.

13. Jury Verdict

On October 15, 2018, the jury found against KPG on all 

claims presented by the special verdict forms and in favor 

of Dick on his claim for stock repurchase, awarding Dick 

$470,312.51, which the jury determined to be the repurchase price.

KPG timely filed a notice of appeal following entry of the 

final judgment. Dick and Bland cross-appeal.

III. ASSIGNMENTS OF ERROR

KPG assigns that the district court erred by (1) granting 

Dick and Bland twice as many peremptory strikes as KPG; 

(2) denying KPG’s motion for directed verdict on the ground 

that Dick had breached his fiduciary duty; (3) denying KPG’s 

motion for directed verdict on the ground that Dick failed 

to prove he acted in good faith; (4) excluding evidence of 

Dick’s breach of fiduciary duty after his resignation as a KPG 

officer or, alternatively, refusing to allow KPG to amend its 

pleadings to conform to the evidence; (5) refusing to instruct 

the jury on KPG’s affirmative defense that Dick’s breach of 
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fiduciary duty could constitute a prior material breach of the 

Shareholder Agreement that excused KPG from performance; 

(6) refusing to instruct the jury on KPG’s affirmative defense 

that Dick’s breach of KPG’s bylaws could constitute a prior 

material breach of the Shareholder Agreement that excused 

KPG from performance; (7) refusing to instruct the jury on 

KPG’s affirmative defense that Dick’s breach of the covenant 

of good faith and fair dealing could constitute a prior material 

breach of the Shareholder Agreement that excused KPG from 

performance; (8) refusing to instruct the jury that it must find 

Dick satisfied all conditions precedent in order to find the 

Shareholder Agreement enforceable; (9) refusing to instruct 

the jury on the corporate opportunity doctrine; (10) refusing to 

instruct the jury on equitable clawback damages; (11) instructing the jury that KPG bore the entire burden of proving Dick 

breached his fiduciary duty to KPG; (12) instructing the jury 

on the lower duty of loyalty owed by an employee, instead 

of the fiduciary duty owed by an officer and shareholder in a 

close corporation; (13) instructing the jury that KPG’s claim 

for breach of fiduciary duty was based on two grounds only, 

the violation of KPG’s bylaws and Dick’s failure to send an 

engagement letter to KPG clients before his resignation, when 

KPG pled and offered evidence at trial of Dick’s concealment, 

sharing confidential information with a competitor, and other 

actions demonstrating a failure to exercise the utmost good 

faith; (14) instructing the jury that KPG’s confidential information must satisfy the legal definition of a trade secret to 

be protected; and (15) holding as a matter of law that Bland’s 

payment of the commissions to Dick did not violate the rules 

of professional conduct of the NSBPA and excluding evidence 

of the improper commissions from trial.

Dick and Bland asserted cross-appeals in their briefs. Dick 

assigned in his brief on cross-appeal that the district court 

erred by overruling his motion for directed verdict against 

KPG on its counterclaims against him, because KPG failed to 

prove that any alleged misconduct by Dick proximately caused 

KPG damages and also because KPG had failed to establish 
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damages with reasonable certainty. Bland similarly assigned 

on cross-appeal in its brief that the district court erred by overruling its motion for directed verdict against KPG on its thirdparty claims against it, because KPG failed to prove that any 

alleged misconduct by Bland proximately caused damages and 

failed to establish any damages with reasonable certainty.

IV. STANDARD OF REVIEW

[1] The allocation of peremptory challenges in a multiparty 

civil suit is left to the discretion of the trial court and will be 

reviewed for an abuse of discretion. 2

[2] A judicial abuse of discretion exists when a judge, within 

the effective limits of authorized judicial power, elects to act or 

refrain from acting, but the selected option results in a decision 

which is untenable and unfairly deprives a litigant of a substantial right or a just result in matters submitted for disposition 

through a judicial system. 3

[3] To establish reversible error from a court’s failure to 

give a requested jury instruction, an appellant has the burden 

to show that (1) the tendered instruction is a correct statement 

of the law, (2) the tendered instruction was warranted by the 

evidence, and (3) the appellant was prejudiced by the court’s 

failure to give the requested instruction. 4

[4] A party may not complain of the failure of the trial 

court to instruct on issues that are outside the scope of the 

pleadings. 5

2 See, Tidemann v. Nadler Golf Car Sales, Inc., 224 F.3d 719 (7th Cir. 

2000); Blount v. Plovidba, 567 F.2d 583 (3d Cir. 1977); Globe Indemnity 

Co. v. Stringer, 190 F.2d 1017 (5th Cir. 1951); Sommerkamp v. Linton, 114 

S.W.3d 811 (Ky. 2003); Premier Therapy, LLC v. Childs, 75 N.E.3d 692 

(Ohio App. 2016); Gallegos v. Southwest Com. Health Services, 117 N.M. 

481, 872 P.2d 899 (N.M. App. 1994).

3 Krejci v. Krejci, 304 Neb. 302, 934 N.W.2d 179 (2019).

4 Foundation One Bank v. Svoboda, 303 Neb. 624, 931 N.W.2d 431 (2019).

5 Deck v. Sherlock, 162 Neb. 86, 75 N.W.2d 99 (1956).
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[5] Jury instructions must be read together; they must be 

read conjunctively, rather than separately in isolation. 6

[6] If the jury instructions given, which are taken as a whole, 

correctly state the law, are not misleading, and adequately cover 

the issues submissible to a jury, there is no prejudicial error 

concerning the instructions and necessitating a reversal. 7

[7] When a motion for directed verdict made at the close of 

all the evidence is overruled by the trial court, appellate review 

is controlled by the rule that a directed verdict is proper only 

where reasonable minds cannot differ and can draw but one 

conclusion from the evidence, and where the issues should be 

decided as a matter of law. 8

[8] Permission to amend a pleading is addressed to the discretion of the trial court, and an appellate court will not disturb 

the trial court’s decision absent an abuse of discretion. 9

V. ANALYSIS

KPG argues that the jury’s verdict in Dick’s breach of contract claim should be reversed because KPG was deprived of 

a fair trial by virtue of the district court’s allocation of three 

peremptory strikes each to Dick and Bland, rather than three 

shared peremptory strikes. In the event we are unpersuaded 

that the allocation of peremptory challenges requires a new 

trial, KPG asserts that a new trial on Dick’s breach of contract 

claim is necessary because KPG was prejudiced by the district 

court’s failure to instruct the jury that prior material breaches 

by Dick of his fiduciary duty, corporate bylaws, or his obligations of good faith and fair dealing would excuse KPG’s 

performance under the Shareholder Agreement and that there 

6 Malone v. American Bus. Info., 264 Neb. 127, 647 N.W.2d 569 (2002).

7 InterCall, Inc. v. Egenera, Inc., 284 Neb. 801, 824 N.W.2d 12 (2012).

8 See United Gen. Title Ins. Co. v. Malone, 289 Neb. 1006, 858 N.W.2d 196 

(2015).

9 Id.
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can be no breach of a promise until all conditions precedent 

have been performed.

KPG argues that the judgments against it on its counterclaims 

for breach of fiduciary duty and for breach of corporate bylaws 

should also be reversed. On KPG’s counterclaim for breach of 

fiduciary duty, KPG asserts that the court should have granted 

its motion for a directed verdict. Alternatively, KPG asserts 

that a new trial is required on its counterclaim for breach of 

fiduciary duty because the court (1) instructed that Dick’s fiduciary duty ended upon his resignation and excluded evidence 

of Dick’s postresignation conduct; (2) failed to instruct that 

Dick’s conduct presumptively breached his fiduciary duty and 

that therefore, the burden shifted to Dick to prove his actions 

were in good faith; (3) failed to instruct on the corporate opportunity doctrine; and (4) failed to instruct on equitable clawback 

damages. On KPG’s counterclaim for breach of the corporate 

bylaws, KPG argues that it was prejudiced by jury instructions 

that defined a trade secret and confidential information the 

same way.

Lastly, KPG argues that we should reverse the judgment 

against it on its cross-claim against Bland for tortious interference. KPG argues it was prejudiced by the court’s exclusion of 

expert testimony that the 10-percent commission paid to Dick 

by Bland on all new clients was unethical under the NSBPA.

1. Peremptory Challenges 

(Assignment of Error No. 1)

We first address KPG’s assertion that the judgment in favor 

of Dick on his breach of contract claim must be reversed and 

that the cause must be remanded for a new trial due to the 

unwarranted allowance of peremptory challenges. KPG argues 

that Dick and Bland were on the “same side” of the lawsuit, 

that their interests were not adverse to each other, and that 

thus, both error and prejudice must be presumed by their sixto-three advantage in peremptory challenges.
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[9-11] In Nebraska, the number of peremptory challenges allowable in civil actions is governed by case law and 

“‘“unwritten rules of court.”’” 10 A party can exercise the 

peremptory challenge to remove a potential juror on the basis 

of that party’s belief that the juror’s status as a member of 

some cognizable group will prejudice his or her attitude toward 

that party’s case. 11 We have said that under these rules, where 

there are multiple parties on the same side of a lawsuit, each 

side of the lawsuit is entitled to a total of three peremptory 

challenges, unless the multiple parties’ interests are adverse to 

each other. 12

[12,13] In Gestring v. Mary Lanning Memorial Hosp.,

 13 we 

reversed the judgment obtained after the trial court granted 

three peremptory challenges to the plaintiff, who was a 

deceased patient’s personal representative, while also granting three peremptory challenges each to multiple defendants 

involved in the deceased’s care. We explained that additional 

peremptory challenges should be granted to multiple parties 

on the same side of a civil lawsuit only after the trial court has 

considered all of the circumstances of the case and determined 

that the interests of those multiple parties are adverse to each 

other. We elaborated that multiple parties on the same side of 

a civil lawsuit are adverse to each other when a good-faith 

controversy exists between them over an issue of fact that the 

jury will decide. 14 The fact that one party may have to defend 

against a theory of recovery not asserted against the other does 

not in itself mean that the two parties’ interests are adverse. 15

10 Gestring v. Mary Lanning Memorial Hosp., 259 Neb. 905, 912, 613 

N.W.2d 440, 448 (2000).

11 See Swain v. Alabama, 380 U.S. 202, 85 S. Ct. 824, 13 L. Ed. 2d 759 

(1965).

12 Gestring v. Mary Lanning Memorial Hosp., supra note 10.

13 See id.

14 See id.

15 See id.
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[14] Focusing on multiple defendants who are on the same 

side of a civil lawsuit, we held in Gestring that relevant circumstances to determine whether the defendants’ interests are 

adverse to each other include but are not limited to (1) whether 

separate acts of misconduct were alleged against the separate defendants, (2) whether comparative negligence principles 

applied to the case, (3) the type of relationship among the 

defendants, (4) whether cross-claims or third-party complaints 

had been filed and the positions taken therein, (5) information disclosed on pretrial discovery, and (6) representations 

made by the parties. 16 Other jurisdictions allow additional 

peremptory challenges to multiple parties whose interests are 

“‘diverse,’” considering similar factors and including whether 

the parties’ interests are antagonistic as one of the factors to 

be considered. 17

We have never directly addressed a circumstance such as that 

presented here where the parties that were each granted three 

peremptory strikes are a plaintiff and a third-party defendant 

who are on the “same side” of the defendant’s counterclaims 

and third-party claims. The lawsuit was brought by Dick 

against KPG, alleging breach of contract and violations of the 

Nebraska Wage Payment and Collection Act (a claim that was 

later dismissed). Bland had no interest in those claims and was 

brought into the action by KPG, which asserted jointly against 

Bland and Dick tortious interference, conspiracy to commit 

tortious interference, misappropriation of trade secrets, and 

unjust enrichment. KPG also asserted a claim for tortious interference against Dick and asserted a claim against Bland for 

aiding and abetting that breach. But KPG asserted third-party 

claims of malicious prosecution and unlawful commissions 

against Bland, which KPG did not assert against Dick. Further, 

KPG asserted counterclaims of breach of the Shareholder 

16 See id.

17 See Carraro v. Wells Fargo Mortg. & Equity, 106 N.M. 442, 443, 744 P.2d 

915, 916 (N.M. App. 1987).
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Agreement and breach of corporate bylaws, which were not 

asserted against Bland. To summarize, separate acts of misconduct were alleged against Dick and Bland.

Nevertheless, in support of its assertion that the court erred 

in its allocation of peremptory challenges, KPG points out 

that Dick and Bland had a joint defense agreement whereby 

the attorneys could share information. This is not disputed. At 

issue is its import in an inquiry regarding allocation of peremptory challenges.

We do not decide that question here, however, because KPG 

has failed to preserve in the record evidence that it exhausted 

all its peremptory challenges, thereby leaving the record insufficient to support its assignment of error even if we found 

merit to KPG’s legal premise. In Steele v. Encore Mfg. Co.,

 18

the Nebraska Court of Appeals held that because there was no 

record concerning the number of peremptory challenges that 

the plaintiff had actually utilized, it could not address the plaintiff’s allegation that the trial court erred by refusing his request 

to give him the same number of peremptory strikes as each of 

the codefendants. Similarly, in Petsch & McDonald v. Hines,

 19

we held that we could not address a defendant’s argument that 

the trial court erred by failing to grant it and its codefendant 

each the full number of three peremptory challenges, because 

the record did not demonstrate the extent to which either 

defendant exercised the peremptory challenges allotted.

It is true that in Gestring, we held that prejudice was presumed when the court granted the codefendants three peremptory strikes each despite their not adverse interests. 20 We 

reasoned that when no good-faith controversy exists between 

multiparty defendants and they are awarded extra peremptory 

challenges, the defendants can pool their challenges against the 

plaintiff, affording them undue influence over the composition 

18 Steele v. Encore Mfg. Co., 7 Neb. App. 1, 579 N.W.2d 563 (1998).

19 Petsch & McDonald v. Hines, 110 Neb. 1, 192 N.W. 963 (1923).

20 Gestring v. Mary Lanning Memorial Hosp., supra note 10.
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of the jury and placing the single-party plaintiff at a distinct 

tactical disadvantage that implicates the plaintiff’s right to a 

fair trial. 21 And when additional challenges are granted to a 

party absent a showing that his or her interests are adverse 

to other parties on the same side of a civil lawsuit, prejudice 

will be presumed and the judgment must be reversed. 22 We 

explained that the proper allocation of peremptory challenges 

is a substantial right pervading the trial process and that it 

would be impossible for a complaining litigant to prove prejudice by reconstructing what might have been had the jury been 

properly constituted. 23

[15] But we did not discuss in Gestring whether the record 

reflected if the plaintiff actually utilized all the peremptory strikes allocated. To the contrary, our opinion appears 

to reflect an understanding that the parties utilized all their 

peremptory challenges. We do not read Gestring as calling 

into question the longstanding rule in Nebraska that a party 

raising on appeal a denial of due process based on a disparate 

number of peremptory challenges must demonstrate through 

the record that the objecting party utilized the allotted peremptory challenges. This rule is supported by other jurisdictions 

that hold that in order to establish reversible error in the 

allocation of peremptory challenges, a “minimal showing” of 

prejudice must be made by demonstrating on the record that 

the appellant exercised the peremptory challenges allotted. 24 It 

is well established in the case law that one who does not exercise all of his or her peremptory challenges cannot assign as 

error the court’s refusal to allow a greater number or a lesser 

number to the opposing parties. 25 The assignment of error is 

21 See id.

22 See id.

23 See id.

24 See Goldstein v. Kelleher, 728 F.2d 32, 37 (1st Cir. 1984). Accord State v. 

Greer, 39 Ohio St. 3d 236, 530 N.E.2d 382 (1988).

25 See, Conn. Mut. Life Ins. Co. v. Hillmon, 188 U.S. 208, 23 S. Ct. 294, 47 

L. Ed. 446 (1903); Kloss v. United States, 77 F.2d 462 (8th Cir. 1935).
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based on the inequality of the challenges, but if the appellant 

has failed to exhaust the challenges allotted, then the inequality was the appellant’s choice.

We find no merit to KPG’s contention that the allocation of 

peremptory challenges requires a new trial.

2. Dick’s Breach of Contract Claim 

(Assignments of Error Nos. 5 Through 8)

We turn next to KPG’s arguments that we should reverse 

the judgment in favor of Dick on his breach of contract claim 

due to the court’s refusal to give KPG’s requested jury instructions on prior material breach and failure to satisfy a condition 

precedent. KPG argues that it was prejudiced by the court’s 

refusal to instruct the jury on KPG’s affirmative defenses of 

prior material breach based on either Dick’s prior breach of 

fiduciary duty, Dick’s prior breach of KPG’s bylaws, or Dick’s 

prior breach of the covenant of good faith and fair dealing. 

Further, based on Dick’s failure to deliver written shares free 

and clear of all liens, KPG asserts that the district court erred 

by refusing to instruct the jury that it must find that Dick satisfied all conditions precedent in order to find the Shareholder 

Agreement enforceable.

To establish reversible error from a court’s failure to give 

a requested jury instruction, an appellant has the burden to 

show that (1) the tendered instruction is a correct statement 

of the law, (2) the tendered instruction was warranted by the 

evidence, and (3) the appellant was prejudiced by the court’s 

failure to give the requested instruction. 26 Furthermore, a party 

may not complain of the failure of the trial court to instruct on 

issues that are outside the scope of the pleadings. 27 On appellate review, jury instructions must be read together; they must 

be read conjunctively, rather than separately in isolation. 28 If 

the instructions given, which are taken as a whole, correctly 

26 Foundation One Bank v. Svoboda, supra note 4.

27 Deck v. Sherlock, supra note 5.

28 Malone v. American Bus. Info., supra note 6.
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state the law, are not misleading, and adequately cover the 

issues submissible to a jury, there is no prejudicial error concerning the instructions and necessitating a reversal. 29

[16-19] Shareholder agreements are construed according to 

the principles of the law of contracts. 30 A suit for damages arising from breach of a contract presents an action at law. 31 The 

meaning of an unambiguous shareholder agreement, like any 

contract, is a question of law. 32 Matters seeking avoidance of a 

valid contract are affirmative defenses. 33

(a) Failure to Satisfy All 

Conditions Precedent

The alleged condition precedent KPG wished the jury to consider was Dick’s obligation under the Shareholder Agreement 

to deliver, in exchange for payment of the purchase price, the 

certificates of any shares of the stock purchased, free and clear 

of all liens, claims, security interests, and encumbrances, duly 

endorsed. KPG tendered the following instruction:

To recover for breach of contract, . . . Dick must prove 

that KPG made a promise, breached the promise, and 

caused him damage and that any conditions precedent 

were satisfied. Generally[,] there can be no breach of a 

promise until all the conditions qualifying it have happened or been performed.

Further, KPG tendered a special verdict form for the jury to 

state whether Dick had met his burden to show by a greater 

weight of the evidence that he had satisfied a condition precedent to enforcement of the Shareholder Agreement. We agree 

29 InterCall, Inc. v. Egenera, Inc., supra note 7.

30 18A Am. Jur. 2d Corporations § 567 (2015).

31 Goes v. Vogler, 304 Neb. 848, 937 N.W.2d 190 (2020).

32 See, Brozek v. Brozek, 292 Neb. 681, 874 N.W.2d 17 (2016); Davenport 

Ltd. Partnership v. 75th & Dodge I, L.P., 279 Neb. 615, 780 N.W.2d 416 

(2010); Pennfield Oil Co. v. Winstrom, 272 Neb. 219, 720 N.W.2d 886 

(2006).

33 17B C.J.S. Contracts § 891 (2011).
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with the district court that KPG’s tendered instruction on 

failure to satisfy conditions precedent was not warranted by 

the evidence.

Dick’s claim against KPG was based on the provision of 

the Shareholder Agreement entitled “Mandatory Sales and 

Purchases,” found in article III. Under that provision, read 

together with the definition of “Operative Event” in article I 

and that of “Determination of Purchase Price on Account of 

Other Operative Events” in article V, “[u]pon the occurrence 

of” the “Operative Event” of “termination of a Shareholder’s 

status as an employee of [KPG] occurring by reason of . . . 

such Shareholder’s voluntary act,” the shareholder “shall be 

required to sell and [KPG] shall be required to purchase all 

of the Disposing Shareholder’s Stock of [KPG]” at “80% of 

the adjusted book value per share of Stock as of the end of 

[KPG’s] most recently completed fiscal year.”

“Adjusted Book Value” was defined as the sum of the 

book value per share of stock of [KPG], computed exclusive 

of goodwill, and the difference, divided by the number of 

outstanding shares, between the retained annual billings and 

deferred tax liability.

“Retained Annual Billings” were defined as “the total professional fees billed by [KPG] during [its] most recently completed fiscal year less all professional fees billed to clients 

who are no longer clients of [KPG] and are now being served 

by the Disposing Shareholder one year subsequent to the 

Operative Event.”

Under article V of the Shareholder Agreement,

the estimated purchase price shall be paid by the delivery 

of a promissory note, in negotiable form, to the order of 

the Disposing Shareholder, in which [KPG] engages to 

pay the balance of such purchase price in one hundred 

twenty (120) equal monthly installments, with interest on 

the unpaid balance at the rate of five percent (5%) per 

annum as of the closing date.

Further under article V, “The promissory note shall be 

secured by the pledge of stock purchased thereby, with [KPG] 
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agreeing to execute security instruments covering such pledged 

stock, unless such pledge arrangement is waived by the disposing shareholder.”

The condition precedent KPG alleged had not been satisfied 

is contained under “Closing Date” in article VI. The provision 

states in full:

Section 6.1. Delivery Of Written Documents; Closing 

Date. Upon the closing of any purchase and sale pursuant 

to this Agreement, the Disposing Shareholder, or his legal 

representative, shall deliver to [KPG] or the Nondisposing 

Shareholders, or both, as the case may be, in exchange 

for payment of the purchase price, the certificate(s) of 

shares of the Stock being purchased, free and clear of all 

liens, claims, security interests and encumbrances, duly 

endorsed for transfer and bearing any necessary documentary stamps, and such assignments, certificates of 

authority, tax releases, consents to transfer by a fiduciary 

or representative of the Disposing Shareholder, and any 

instruments in evidence of the title of the Shareholder 

and of the parties’ compliance with this Agreement, the 

Federal and State securities laws, and any other agreements or regulations, as may be recommended by legal 

counsel for [KPG].

The closing date shall be within sixty (60) days after 

the Operative Event giving rise to the transaction but otherwise to be determined by [KPG] on ten (10) days prior 

written notice to the Disposing Shareholder.

(Emphasis supplied.)

A provision for “General Compliance” under article VII, 

“Shareholder Compliance and Consent,” states:

The parties hereto shall not hinder or interfere with, or 

cause to be interfered with in any manner whatsoever, the 

purchase or sale of the Stock of a deceased or Disposing 

Shareholder pursuant to this Agreement, or the carrying 

out of any of the terms of this Agreement to the prejudice 

of any Disposing Shareholder or his estate as the case 

may be.
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A provision for “Shareholder Indebtedness to be Offset,” 

also under “Shareholder Compliance and Consent,” states:

Notwithstanding anything appearing to the contrary in this 

Agreement, the purchase price payable to the Disposing 

Shareholder may be paid, partly or wholly, at [KPG’s] 

option, by cancellation or offset of all or any portion 

of any then outstanding indebtedness of such Disposing 

Shareholder to [KPG]. Notwithstanding anything appearing to the contrary in this agreement, the purchase price 

payable to the Disposing Shareholder may be paid partly 

or wholly, at [KPG’s] option, by payment to any third 

party secured creditor of all or any portion of any then 

outstanding indebtedness of such Disposing Shareholder 

which is secured by the pledge of stock of [KPG] and any 

payment to the third party secured creditor shall reduce 

the amount of the purchase price herein.

[20,21] Courts have struggled for centuries with differentiating between conditions and promises. 34 A condition precedent 

is a condition that must be performed before the parties’ agreement becomes a binding contract or a condition which must be 

fulfilled before a duty to perform an existing contract arises. 35

This is in contrast to a promise in a contract, the nonfulfillment 

of which is a breach, i.e., the failure to perform that which 

was required by a legal duty, and the remedy lies in an action 

for damages. 36

[22,23] Whether language in a contract is a condition precedent depends on the parties’ intent as gathered from the language of the contract. 37 The words “as a condition for” are 

34 Harmon Cable Communications v. Scope Cable Television, 237 Neb. 871, 

468 N.W.2d 350 (1991).

35 Cimino v. FirsTier Bank, 247 Neb. 797, 530 N.W.2d 606 (1995).

36 See Harmon Cable Communications v. Scope Cable Television, supra 

note 34.

37 Weber v. North Loup River Pub. Power, 288 Neb. 959, 854 N.W.2d 263 

(2014).
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clearly language intended to create a condition precedent. 38

Terms such as “if,” “provided that,” “when,” “after,” “as soon 

as,” “subject to,” “on condition that,” or some similar phrase 

are evidence that performance of a contractual provision is a 

condition; however, an intention to make a duty conditional 

may be manifested by the general nature of an agreement, as 

well as by specific language. 39 Where the parties’ intent is not 

clear, the language is generally interpreted as promissory rather 

than conditional. 40

There is nothing in the Shareholder Agreement suggesting 

that delivery of certificates of shares of KPG stock, free and 

clear of all liens, claims, security interests, and encumbrances, 

was a condition precedent to KPG’s duty to purchase the shares 

of the disposing shareholder, which is the general duty upon 

which Dick’s breach of contract claim rests. Rather, KPG’s 

duty to purchase was expressly triggered under the Shareholder 

Agreement by “any Operative Event,” which expressly included 

a shareholder employee’s voluntary departure.

Focusing on KPG’s more specific obligation to deliver a 

promissory note, described under “Payment,” such obligation 

is “at the closing of such purchase.” And the delivery of written shareholder documents, upon which KPG’s affirmative 

defense of failing to satisfy a condition precedent rests, is triggered under the Shareholder Agreement “[u]pon the closing 

of any purchase and sale pursuant to this Agreement” and “in 

exchange for payment of the purchase price.”

[24,25] This is, at best, a description of a simultaneous 

exchange, entailing mutual conditions precedent. 41 In such 

a situation, liability under the contract by the first party is 

38 Lee Sapp Leasing v. Catholic Archbishop of Omaha, 248 Neb. 829, 540 

N.W.2d 101 (1995). 39 See id.

40 Weber v. North Loup River Pub. Power, supra note 37.

41 13 Richard A. Lord, A Treatise on the Law of Contracts by Samuel 

Williston § 38:8 (4th ed. 2003 & Supp. 2020).
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triggered by an offer of tender by the second party, which is 

conditional upon contemporaneous performance of the first. 42

Tender is an offer to perform a condition or obligation, coupled with the present ability of immediate performance, so 

that, were it not for the refusal of cooperation by the party to 

whom tendered, the condition or obligation would be immediately satisfied. 43

[26,27] Thus we have noted that a formal tender of shares 

is not necessary in order to fix liability on a purchaser for the 

breach of the purchaser’s contract when the contract provides 

that the seller is to hold the stock and deliver it when called 

upon. 44 We have also noted that a formal tender of shares is not 

required when the buyer declares his intention not to perform; 

in such cases, it is sufficient that the seller is ready, willing, 

and able to deliver the stock. 45 Tender before suit is filed is 

waived where the party entitled to payment, by conduct or declaration, proclaims that if a tender should be made, acceptance 

would be refused. 46 Furthermore, acts which, in themselves, 

are insufficient to make a complete tender may constitute proof 

of readiness to perform, so as to protect the rights of a party 

under a contract, where a proper tender is rendered impossible 

by circumstances not due to the fault of the tenderer. 47

The evidence was undisputed that there were no written 

certificates of shares Dick could have tendered. Additionally, 

Koski clearly communicated his opinion that KPG had no 

duty to purchase under the Shareholder Agreement because 

Dick had stolen KPG’s clients—not because Dick had failed 

to satisfy any condition precedent under the Shareholder 

42 See id., §§ 38:8 and 47:1.

43 Caha v. Nelson, 195 Neb. 333, 237 N.W.2d 870 (1976).

44 See Cox v. Cox, 124 Neb. 706, 247 N.W. 898 (1933).

45 See id.

46 See Canaday v. Krueger, 156 Neb. 287, 56 N.W.2d 123 (1952).

47 Cox v. Cox, supra note 44.
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Agreement. Koski’s blanket refusal to acknowledge any duty 

to purchase under the Shareholder Agreement clearly communicated that any tender by Dick would be futile. To the 

extent Koski spoke for KPG, this proclamation was a waiver 

of tender. 48

Regardless, Dick was obligated only to make an offer of 

tender that was conditional upon KPG’s contemporaneous performance. Undisputed facts in the record demonstrate that Dick 

made such an offer of tender to Koski as a representative of 

KPG, but KPG never performed. Dick manifested that he was 

ready and willing to perform his obligations under the buyout 

provisions of the Shareholder Agreement. At that time, some 

of Dick’s shares were encumbered by a debt to Koski, but 

there is no evidence that Dick was unable to pay the remainder 

owed on the loan. Further, until KPG communicated whether 

KPG would be reducing the purchase price by offsetting Dick’s 

indebtedness to Koski under the provision for “Shareholder 

Indebtedness to be Offset,” Dick could not know whether he 

was required to pay the balance of the loan directly to Koski 

before closing.

There was no basis under these facts to instruct the jury 

on the affirmative defense of failure to satisfy a condition 

precedent.

(b) Prior Material Breaches of Covenant of 

Good Faith and Fair Dealing 

and Fiduciary Duty

We also find no reversible error based on the court’s refusal 

to instruct the jury on affirmative defenses of prior material 

breaches of fiduciary duty or breaches of the covenant of good 

faith and fair dealing.

First, KPG did not allege that a prior breach of fiduciary 

duty or good faith and fair dealing operated as an affirmative 

defense to Dick’s breach of contract claim. And a party may 

not complain of the failure of the trial court to instruct on 

48 See Canaday v. Krueger, supra note 46.
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issues that are outside the scope of the pleadings. 49 The court’s 

refusal to instruct on these matters can be affirmed for that 

reason alone.

[28,29] We also note that the instructions were not warranted. To constitute a defense to an action based on contract, 

the matters must generally be germane to the cause of action 

pleaded, in addition to presenting a legal reason why the plaintiff will not recover. 50 A claim of defense arising out of tort 

concepts is not generally available where the claim of plaintiff 

is premised upon contract. 51

As the district court noted in denying instructions on prior 

material breach of fiduciary duty or good faith and fair dealing, 

“the object of the agreement is what has [been] breached” in 

the case law excusing performance. Here, there was no relation between the duties set forth in the Shareholder Agreement 

regarding the repurchase of stock and the acts KPG alleged 

constituted breaches of fiduciary duty and good faith and 

fair dealing.

[30] Fiduciary duties arise from the relationship and not from 

the terms of the agreement. 52 Thus, while a breach of fiduciary 

duty may form the basis of a counterclaim, it is not ordinarily 

an affirmative defense to a claim for a breach of contract. 53

It is true that breaches of fiduciary duty can, in certain circumstances, be grounds for alleging that a contract is void. 54

For example, a corporate officer’s or director’s right to compensation can be forfeited through a breach of fiduciary duty 

to the corporation, and thus provide a defense to an action by 

49 Deck v. Sherlock, supra note 5.

50 17A C.J.S. Contracts § 859 (2011).

51 See id.

52 See Top of Iowa Co-op. v. Schewe, 149 F. Supp. 2d 709 (N.D. Iowa 2001).

53 See Anderson v. Burton Associates, Ltd., 218 Ill. App. 3d 261, 578 N.E.2d 

199, 161 Ill. Dec. 72 (1991).

54 17B C.J.S., supra note 33.
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the agent against the principal for compensation for services. 55

But we can find no support for the proposition that a breach of 

an officer and shareholder’s general fiduciary duty to a corporation is an affirmative defense to a claim for breach of perform

ance of a buyout provision in a shareholder agreement.

The case of Anderson v. Burton Associates, Ltd.,

 56 is instructive. The plaintiff in Anderson brought suit to have his stock 

redeemed under a shareholder agreement for an accounting 

firm, and the court rejected the alleged affirmative defense of 

breach of fiduciary duty. The court noted that the defendant did 

not challenge the existence of sufficient consideration or assert 

that the plaintiff did not pay for his shares. The court held that 

whether the plaintiff had breached a fiduciary duty to the corporation by soliciting clients would not defeat his right to his 

money under the stock redemption provision of the shareholder 

agreement. 57 The court in the instant case correctly concluded 

that an instruction on the affirmative defense of breach of fiduciary duty was not warranted, because Dick’s acts that KPG 

takes issue with bore no relation to the buyout provisions under 

which Dick brought suit against KPG.

[31,32] As for the implied covenant of good faith and fair 

dealing, KPG is correct that it exists in every contract and 

55 See, e.g., Wadsworth v. Adams, 138 U.S. 380, 11 S. Ct. 303, 34 L. Ed. 984 

(1891); Wilshire Oil Company of Texas v. Riffe, 406 F.2d 1061 (10th Cir. 

1969); Flint River Pecan Co. v. Fry, 29 F.2d 457 (5th Cir. 1928); Backus 

v. Finkelstein, 23 F.2d 357 (D. Minn. 1927); T.A. Pelsue Co. v. Grand 

Enterprises, Inc., 782 F. Supp. 1476 (D. Colo. 1991); Kassab v. Ragnar 

Benson, Inc., 254 F. Supp. 830 (W.D. Pa. 1966); Chelsea Industries, Inc. 

v. Gaffney, 389 Mass. 1, 449 N.E.2d 320 (1983); Toy v. Lapeer Farmers 

Mut. Fire Ins. Ass’n, 297 Mich. 188, 297 N.W. 230 (1941); Venie v. 

Harriet State Bank of Minneapolis, 146 Minn. 142, 178 N.W. 170 (1920);

American Timber & Trading Co. v. Niedermeyer, 276 Or. 1135, 558 P.2d 

1211 (1976); Ranch Hand Foods v. Polar Pak Foods, Inc., 690 S.W.2d 

437 (Mo. App. 1985) (applying Kansas law). See, also, 2 Restatement

(Second) of Agency § 469 (1958).

56 Anderson v. Burton Associates, Ltd., supra note 53.

57 See id.
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requires that none of the parties to the contract do anything 

which will injure the right of another party to receive the 

benefit of the contract. 58 However, KPG overlooks the fact 

that the scope of conduct prohibited by the covenant of good 

faith is circumscribed by the purposes and express terms of 

the contract.

[33] “The law does not allow the implied covenant of 

good faith and fair dealing to be an everflowing cornucopia 

of wished-for legal duties; indeed, the covenant cannot give 

rise to new obligations not otherwise contained in a contract’s 

express terms.” 59 Instead, a violation of the covenant of good 

faith and fair dealing occurs only when a party violates, nullifies, or significantly impairs any benefit of the contract. 60

Similarly to the alleged breach of fiduciary duty, KPG failed 

to identify any express terms of the Shareholder Agreement 

tied to the alleged breach of an implied covenant of good faith 

and fair dealing. An instruction on the affirmative defense of 

breach of the implied covenant of good faith and fair dealing 

was not warranted by the evidence.

We find no merit to KPG’s arguments that the trial court erred 

by refusing to instruct on the affirmative defense of breach of 

either a fiduciary duty or the implied covenant of good faith 

and fair dealing.

(c) Prior Material Breach of Bylaws

KPG tendered the instruction that a breach of the bylaws 

in force at the time of purchase of stock in a corporation can 

constitute a material breach excusing the nonbreaching party 

from performance under the Shareholder Agreement. A material breach was defined in the tendered instruction as “something that is so fundamental to a contract that the failure to 

58 Coffey v. Planet Group, 287 Neb. 834, 845 N.W.2d 255 (2014).

59 Comprehensive Care Corp. v. RehabCare, 98 F.3d 1063, 1066 (8th Cir. 

1996).

60 Coffey v. Planet Group, supra note 58.
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perform that obligation defeats the essential purpose of the 

contract or makes it impossible for the other party to perform under the contract.” The tendered instruction directed 

that if the jury found a material breach of the contract, it 

“must find that KPG is excused from performance under the 

Shareholder Agreement.”

Additionally, KPG tendered the following instruction:

The management and internal affairs of a voluntary association are governed by its constitution and bylaws, which 

constitute a contract between the members of the association. The members of a corporation are as a general rule 

conclusively presumed to have knowledge of its bylaws 

and cannot escape a liability arising thereunder, or otherwise avoid their operation, on a plea of ignorance of 

them. This is also true of directors and other officers of 

the corporation. Bylaws ordinarily are binding on the 

shareholders or members whether they expressly consent 

to them or not. Bylaws in force at the time of a purchase of stock in a corporation form part of the contract 

between the corporation and its shareholders. The corporate articles, bylaws, and the shareholder agreement must 

be read together.

KPG then tendered a special verdict form for the jury to 

set forth whether, in regard to Dick’s complaint against KPG, 

KPG had met its burden to show by the greater weight of the 

evidence that Dick “committed a prior material breach of the 

Shareholder Agreement.”

KPG’s theory for these instructions was that Dick had 

breached the provision of the bylaws stating that “[a]ll officers, 

agents, and employees of [KPG] shall be required . . . to maintain and preserve confidentiality as to all business techniques, 

commercial data, formulas, good will, operational methods, 

product identifications, [etc.]” KPG asserted that the disclosure 

of the information on the spreadsheet emailed to Bland violated this provision—though KPG has never made its theory 

entirely clear as to which of the specified items Dick failed 
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to maintain and preserve the confidentiality of. KPG believed 

that such a breach of the bylaws excused its failure to perform 

under the buyout provisions of the Shareholder Agreement.

[34] The “prior material breach” doctrine upon which KPG 

relies applies when a contract contemplates an exchange of 

performances between the parties, and the doctrine holds that 

one party’s failure to perform allows the other party to cease 

its own performance. In order to constitute a possible prior 

material breach, the obligation upon which a plaintiff has sued 

in the breach of contract claim must have been dependent upon 

the other thing that the plaintiff was to do and failed to do. 61 In 

other words, prior material breach is

based on the principle that where performances are to be 

exchanged under an exchange of promises, each party is 

entitled to the assurance that he will not be called upon 

to perform his remaining duties . . . if there has already 

been an uncured material failure of performance by the 

other party. 62

[35,36] “A duty under a separate contract is not 

affected . . . , nor is a duty under the same contract affected if 

it was not one to render a performance to be exchanged under 

an exchange of promises . . . . Furthermore, only duties to render performance are affected.” 63 And the contention that a party 

to a contract is excused from performance because of a prior 

material breach by the other contracting party is an affirmative 

defense that applies only when the breaching party breaches 

the same contract on which he or she is suing. 64

KPG provides law in support of the idea that corporate 

bylaws constitute a contract between the shareholders. We 

agree that, broadly speaking, bylaws are also shareholders’ 

61 Eager v. Berke, 11 Ill. 2d 50, 142 N.E.2d 36 (1957). 62 2 Restatement (Second) of Contracts § 237 comment b. at 217 (1981).

63 See id., comment e. at 221.

64 Blackstone Medical v. Phoenix Surgicals, 470 S.W.3d 636 (Tex. App. 

2015).
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agreements. 65 And we agree with KPG that the Randall K. 

Koski, P.C., bylaws appear to be the bylaws of KPG, as the 

amendment to the articles of incorporation effected a name 

change for the corporation. We thus deny as moot KPG’s 

motion for this court to take judicial notice of allegations made 

by Dick in a separate suit, in which Dick allegedly acknowledged that the Randall K. Koski, P.C., bylaws governed KPG.

KPG fails, though, to support its assertion that the Randall 

K. Koski, P.C., bylaws are part of the Shareholder Agreement 

under which Dick brought his breach of contract claim. We 

disagree with KPG’s claim that the bylaws and Shareholder 

Agreement should be read together for purposes of determining 

the applicability of the doctrine of prior material breach.

[37] Shareholder agreements may be freestanding of corporate bylaws. 66 The Randall K. Koski, P.C., bylaws did not 

purport to incorporate the Shareholder Agreement. Nor did the 

Shareholder Agreement incorporate the Randall K. Koski, P.C., 

bylaws. To the contrary, the Shareholder Agreement provided 

that it “contains the entire understanding among the parties 

and supersedes any prior understanding among the parties and 

agreements between them respecting the within subject matter.” The Shareholder Agreement stated further that there were 

“no representations, agreements, arrangements or understandings, oral or written, between or among the parties hereto relating to the subject matter of this Agreement which are not fully 

expressed herein.”

Under the express terms of the Shareholder Agreement, it 

was freestanding. The promise in the bylaws relating to maintaining confidentiality of items such as “commercial data” 

and “good will” was an independent promise that bore no 

relationship to the mutual promises of the buyout provisions 

of the Shareholder Agreement. Thus, the prior material breach 

65 18A Am. Jur. 2d Corporations § 254 (2015).

66 1 F. Hodge O’Neal & Robert B. Thompson, O’Neal’s Close Corporation 

and LLCs: Law and Practice § 4:33 (rev. 3d ed. 2018).
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doctrine, based on Dick’s alleged breach of the confidentiality provision of the bylaws, was inapplicable as an affirmative 

defense to Dick’s claim that KPG breached the buyout provisions of the Shareholder Agreement.

[38] We also note that the jury found against KPG in its 

counterclaim for breach of the bylaws. Factual issues necessarily determined by a jury’s verdict on one claim in a case are 

also deemed resolved with respect to other claims in the same 

case. 67 And, as we will explain, we find no merit to KPG’s 

contention that the jury rejected its breach of bylaws claim 

because it was improperly instructed on the definition of confidential information.

KPG was not prejudiced by the district court’s refusal to 

instruct on prior material breach as an affirmative defense to 

Dick’s breach of contract claim.

3. KPG’s Counterclaim Against Dick for Breach 

of Fiduciary Duty (Assignments of Error 

Nos. 2 Through 4 and 9 Through 15)

We turn next to KPG’s assignments of error relating to the 

jury’s verdict against KPG in its counterclaim for breach of 

fiduciary duty.

KPG asserts that the court erred by failing to grant its 

motion for directed verdict on this counterclaim. KPG asserts 

that the undisputed evidence of Dick’s (1) use of his wife’s 

email to communicate with Bland to avoid KPG’s discovering 

his negotiations with Bland, (2) meeting with Bland without 

informing KPG, (3) sharing with Bland certain billing information, and (4) accepting from Bland a 10-percent commission on new clients brought to Bland by Dick were all transactions that shifted the burden to Dick to demonstrate good 

faith. KPG then asserts that there was no evidence presented 

67 See Lindsay Internat. Sales & Serv. v. Wegener, 301 Neb. 1, 917 N.W.2d 

133 (2018). See, also, e.g., Zakibe v. Ahrens & McCarron, Inc., 28 S.W.3d 

373 (Mo. App. 2000).
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by Dick that he acted in good faith and that thus, as a matter 

of law, before his resignation, Dick breached his fiduciary 

duties as both a vice president and a shareholder of KPG and 

the district court erred in failing to grant KPG’s motion for 

directed verdict.

In the event we disagree with KPG’s contention that the district court should have granted its motion for a directed verdict 

on its counterclaim against Dick for breach of fiduciary duty, 

KPG asserts that we should reverse the decision and remand 

the cause for a new trial because of several alleged trial errors.

First, KPG asserts that the district court erred by failing to 

instruct the jury on the same burden shifting that KPG believes 

justified a directed verdict.

Second, KPG asserts it was prejudiced by the trial court’s 

instructions that the breach of fiduciary duty claim was based 

only on the purported breach of bylaws and Dick’s failure to 

send engagement letters to KPG clients before resigning.

Third, KPG asserts that it was prejudiced by the court’s 

exclusion of Dick’s breach of an allegedly ongoing, postresignation fiduciary duty by virtue of Dick’s continuing status as 

a shareholder, and, relatedly, by instructing that the fiduciary 

duty ends upon the termination of the employment relationship. 

To the extent the court precluded KPG from litigating a claim 

based on postresignation conduct because it was not pleaded, 

KPG argues that the court erred in its reading of the operative 

pleading and, alternatively, that the court abused its discretion 

in denying KPG’s motion to amend.

Finally, KPG argues it was prejudiced by the court’s refusal 

to instruct the jury on the corporate opportunity doctrine and 

equitable clawback damages.

[39-41] The existence of a fiduciary duty and scope of that 

duty are questions of law for the court to decide. 68 The law of 

trusts forms the basis for fiduciary duties. Fiduciaries in 

68 Strohmyer v. Papillion Family Medicine, 296 Neb. 884, 896 N.W.2d 612 

(2017).
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a corporation are not trustees in the strict sense because they 

do not have title to the estate; they are instead fiduciaries to the 

extent that they control the corporation’s property. 69 The scope 

of fiduciary duties is flexible, reflecting the historical approach 

of the courts of equity. 70

[42-44] The traditional rule has been that corporate shareholders do not owe one another a fiduciary duty; rather, 

corporate officers and directors owe shareholders such a 

duty. 71 Exceptions have been found for majority shareholders of closely held corporations. 72 Minority shareholders do 

not generally owe a fiduciary duty to each other or to the 

corporation, 73 but some cases have imposed a fiduciary duty on 

a minority shareholder in a close corporation who has control 

over corporate actions. 74 An officer of a corporation occupies 

a fiduciary relationship toward the corporation and its stockholders. 75 The existence of a fiduciary duty of an officer in a 

closely held corporation depends on the ability to exercise the 

status that creates it, and nominal corporate officers with no 

management authority generally do not owe fiduciary duties 

to the corporation. 76 Dick does not dispute that he was more 

69 See John R. Van Winkle & Gary R. Welsh, Origin, Development, and 

Current Status of Fiduciary Duties in Close Corporations: Has Indiana 

Adopted a Strict Good Faith Standard?, 26 Ind. L. Rev. 1215 (1993).

70 See 2 Robert B. Thompson, O’Neal and Thompson’s Oppression of 

Minority Shareholders and LLC Members § 7:3 (2009 & Supp. 2020).

71 Annot., 39 A.L.R.6th 1 (2008).

72 Id.; 3 William Wilson Cook, Treatise on the Law of Corporations Having 

a Capital Stock § 14:16 (3d ed. 2010 & Supp. 2019).

73 See N.C. Corp. Law and Prac. § 18:27 (West 4th ed. 2019).

74 See 3 Cook, supra note 72.

75 See Rettinger v. Pierpont, 145 Neb. 161, 15 N.W.2d 393 (1944). See, also, 

e.g., 2 Thompson, supra note 70.

76 Aon Consulting v. Midlands Fin. Benefits, 275 Neb. 642, 748 N.W.2d 

626 (2008); Edwin W. Hecker, Jr., Fiduciary Duties in Business Entities 

Revisited, 61 U. Kan. L. Rev. 923 (2013).
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than a nominal corporate officer, though the extent to which he 

controlled KPG was unclear. Dick concedes he owed KPG a 

fiduciary duty prior to his resignation.

(a) Burden Shifting: Directed 

Verdict and Instructions

[45] The plaintiff in an action for breach of fiduciary 

duty has the burden to prove that (1) the defendant owed 

the plaintiff a fiduciary duty, (2) the defendant breached the 

duty, (3) the defendant’s breach was the cause of the injury 

to the plaintiff, and (4) the plaintiff was damaged. 77 In the 

law of trusts, while the beneficiary has the initial burden of 

proving the existence of the fiduciary duty and the trustee’s 

failure to perform it, once the trust beneficiary has established 

a prima facie case by demonstrating the trustee’s breach of 

fiduciary duty, the burden of explanation or justification shifts 

to the fiduciaries. 78

[46] In an action for breach of fiduciary duty toward a corporation, the plaintiff must establish a prima facie case of both 

the existence of a fiduciary duty and its breach before the burden shifts to the defendant to prove the defendant acted in an 

open, fair, and honest manner such that no breach of fiduciary 

duty occurred. 79 Only once a plaintiff demonstrates a breach of 

the duty of care does the burden shift to the fiduciary to prove 

that, notwithstanding the breach, the challenged transaction 

was entirely fair. 80

It has been described that only the burden of production 

shifts, not the burden of proof, otherwise known as the burden 

77 See McFadden Ranch v. McFadden, 19 Neb. App. 366, 807 N.W.2d 785 

(2011).

78 76 Am. Jur. 2d Trusts § 618 (2016 & Supp. 2020).

79 See, e.g., Norlin Corp. v. Rooney, Pace Inc., 744 F.2d 255 (2d Cir. 1984); 

Collier v. Bryant, 216 N.C. App. 419, 719 S.E.2d 70 (2011).

80 Cede & Co. v. Technicolor, Inc., 634 A.2d 345 (Del. 1993).
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of persuasion. 81 In any event, there is with certain transactions, once proved, a presumption that the fiduciary acted in 

self-interest, which shifts the burden to the fiduciary to show 

that he or she did not obtain secret profits and that the transaction was conducted fairly, honestly, and openly. 82 However, 

for the burden to be placed on the fiduciary, the plaintiff must 

prove that the fiduciary engaged in a transaction with the 

principal that gives rise to the presumption of unfairness. 83

Contrary to KPG’s assertion, the mere allegation of such a 

transaction is not enough. 84

KPG points out that we have said the burden of proof is 

upon a party holding a confidential or fiduciary relation to 

establish the perfect fairness, adequacy, and equity of a transaction with the party with whom he holds such relation. 85 Thus, 

for instance, we have held that it is the burden of an officer, 

who sets his or her own salary, to prove that such salary is reasonable. 86 But that is a transaction with the party with whom 

the officer holds a fiduciary relationship. 87 Here, the “transaction” at issue was not with KPG, but with Bland.

Typically, a transaction with a third party that shifts the burden to the fiduciary is one of self-dealing—a factual situation 

in which a corporate fiduciary appears on both sides of a contract or transaction with the fiduciary’s corporation. 88 Because 

81 See Charles M. Yablon, On the Allocation of Burdens of Proof in Corporate 

Law: An Essay on Fairness and Fuzzy Sets, 13 Cardozo L. Rev. 497 

(1991).

82 Simpson v. Spellman, 522 S.W.2d 615 (Mo. App. 1975).

83 Navigant Consulting, Inc. v. Wilkinson, 508 F.3d 277 (5th Cir. 2007).

84 1 Roger J. Magnuson, Shareholder Litigation § 10:20 (2012 & Supp. 

2020).

85 See Evans v. Engelhardt, 246 Neb. 323, 518 N.W.2d 648 (1994). See, also, 

e.g., Rettinger v. Pierpont, supra note 75.

86 Evans v. Engelhardt, supra note 85.

87 See id. See, also, e.g., Rettinger v. Pierpont, supra note 75.

88 See Sinclair Oil Corporation v. Levien, 280 A.2d 717 (Del. 1971).
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the business judgment rule is a rebuttable presumption, it 

places an initial burden on the party challenging a corporate 

decision to demonstrate the decisionmaker’s self-dealing or 

other disabling factor; and if a challenger sustains that initial 

burden, then the presumption of the rule is rebutted, and the 

burden of proof shifts to the defendants to show that the transaction was, in fact, fair to the company. 89

For example, in Anderson v. Clemens Mobile Homes,

 90 the 

plaintiff proved that an officer had realized a personal profit 

on the sale of land and business ventures financed with corporate funds, and we held it was the officer’s burden to prove 

by a preponderance of the evidence that he did so in good 

faith and did not act in such a manner as to cause or contribute to the injury or damage of the corporation, or deprive it 

of business. 91 Likewise, in Sadler v. Jorad, Inc.,

 92 we shifted 

the burden to the defendant majority shareholders to establish 

fairness and reasonableness where the plaintiff had proved that 

they had withdrawn excess salaries and distributions from the 

corporation. In these cases applying burden shifting, which 

were accounting actions, we noted that ordinarily the burden 

would be entirely on the plaintiff, but that it would be unfair to 

impose such a burden when the defendants had control of the 

books and managed the business. 93

[47] As the district court noted, negotiating to leave one’s 

fiduciary position with a closely held corporation and to enter 

into competing employment elsewhere is not a transaction that 

shifts the burden to the fiduciary to prove the negotiation’s 

fairness. It is not, standing alone, a violation of fiduciary 

89 19 Am. Jur. 2d Corporations § 2104 (2015).

90 Anderson v. Clemens Mobile Homes, 214 Neb. 283, 333 N.W.2d 900 

(1983).

91 See, also, e.g., Qualsett v. Abrahams, 23 Neb. App. 958, 879 N.W.2d 392 

(2016).

92 Sadler v. Jorad, Inc., 268 Neb. 60, 680 N.W.2d 165 (2004).

93 See, id.; Anderson v. Clemens Mobile Homes, supra note 90.
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duty. 94 This is true regardless of whether the fiduciary in 

question was a shareholder and officer. 95 Indeed, KPG does 

not challenge the court’s instruction that employees, including 

employees with fiduciary duties, may plan and prepare for their 

competing business while still employed without breaching the 

duty of loyalty and that employees are allowed to discuss job 

offers that would involve engaging in future competition with 

their current employer without incurring liability.

[48] It is well settled that “‘[a]n employer’s right to demand 

and receive loyalty must be tempered by society’s legitimate 

interest in encouraging competition.’” 96 An at-will employee 

with a fiduciary relationship with his or her employer may 

properly plan to go into competition with the employer and 

may take active steps to do so while still employed, and such 

an employee has no general duty to disclose such plans to the 

employer. 97 According to the Restatement (Third) of Agency:

In general, an employee or other agent who plans to 

compete with the principal does not have a duty to disclose this fact to the principal. To be sure, the fact that 

an agent has such a plan is information that a principal 

would find useful, but the agent’s fiduciary duty to the 

principal does not oblige the agent to make such disclosure. . . . In this respect, the social benefits of furthering 

competition outweigh the principal’s interest in full disclosure by its agents. 98

94 2 Restatement (Third) of Agency § 8.04, comment c. (2006).

95 See, e.g., Bancroft-Whitney Co. v. Glen, 64 Cal. 2d 327, 411 P.2d 921, 49 

Cal. Rptr. 825 (1966); 2 Restatement (Third), supra note 94; 3 William 

Meade Fletcher, Fletcher Cyclopedia of the Law of Corporations § 856 

(2008); 8 Illinois Practice Series, Business Organizations § 14:17 (2d 

ed. 2010); Christopher Lyle McIlwain, Backstab: Competing With the 

Departing Employee, 29 Cumb. L. Rev. 615 (1999).

96 Navigant Consulting, Inc. v. Wilkinson, supra note 83, 508 F.3d at 284. 

Accord Augat, Inc. v. Aegis, Inc., 409 Mass. 165, 565 N.E.2d 415 (1991).

97 Id.

98 2 Restatement (Third), supra note 94 at 306.
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Thus, the fact that Dick used his wife’s email to communicate 

with Bland and met with other Bland shareholders without 

telling anyone at KPG was not, as KPG contends, a breach of 

Dick’s fiduciary duty as a matter of law.

KPG relies on statements made in Bode v. Prettyman 99 and 

I. P. Homeowners v. Radtke 100 that partners must not “take 

advantage” of one another “by the slightest concealment or 

misrepresentation of any kind.” 101 This statement is taken 

out of context and ignores that part of the proposition referring to taking advantage of one another. Certainly, there were 

many things that Dick may have “concealed” from KPG but 

which KPG had no right to know. Dick’s intention to leave 

his employment at KPG was one such thing, and Dick did 

not “take advantage” of KPG by concealing those plans. As 

the district court noted in relation to its instructions, “even a 

fiduciary . . . has the right to do certain things. He isn’t blindly 

loyal, and he doesn’t have to disclose everything in the world 

to his partners . . . .”

[49] There are, of course, limitations on the conduct of 

an employee who plans to compete with an employer: The 

employee may not (1) appropriate the employer’s trade secrets, 

(2) solicit the employer’s customers while still working for the 

employer, (3) solicit the departure of other employees while 

still working for the employer, or (4) carry away confidential 

information, such as customer lists. 102 The district court correctly instructed:

While planning and preparing for a competing business 

is permissible, an employee may not act in direct competition with his or her employer while still employed. Factors 

showing that an employee acted in direct competition 

99 Bode v. Prettyman, 149 Neb. 179, 30 N.W.2d 627 (1948), modified 149 

Neb. 469, 31 N.W.2d 429.

100 I. P. Homeowners v. Radtke, 5 Neb. App. 271, 558 N.W.2d 582 (1997).

101Bode v. Prettyman, supra note 99, 149 Neb. at 188, 30 N.W.2d at 632.

102 See Navigant Consulting, Inc. v. Wilkinson, supra note 83.
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during his or her employment include the following: 

use of confidential and trade secret information acquired 

from the employer to compete; soliciting customers and 

clients to join the competing business before the end 

of the employment relationship; or committing some 

other fraudulent or unlawful act aimed at destroying the 

employer’s business. To give rise to liability, the alleged 

disloyal acts must substantially hinder the employer in the 

continuation of its business.

Neither party takes issue with this instruction.

But such improper conduct in the pursuit of new employment is not the kind of “transaction” that results in burden 

shifting. Indeed, in such circumstances, there would be no need 

to shift the burden to show that the “transaction” complied with 

the business judgment rule or was otherwise fair to the corporation. They are acts that, if proved, are inherently against the 

corporation’s interests.

The jury was presented with evidence that Dick shared with 

Bland certain billing information and then profited from that 

by being offered and accepting from Bland employment that 

included a 10-percent commission on new clients. The jury 

could have found that such acts constituted breaches of Dick’s 

fiduciary duty. It ultimately determined that they did not. 

However, these acts did not shift the burden to Dick to show 

they were done fairly.

There is no merit to KPG’s argument that the court should 

have granted KPG’s motion for directed verdict based on 

Dick’s alleged failure to satisfy his alleged burden to prove 

good faith in his (1) use of his wife’s email to communicate with Bland to avoid KPG’s discovering his negotiations 

with Bland, (2) meeting with Bland without informing KPG, 

(3) sharing with Bland certain billing information, and (4) 

accepting from Bland a 10-percent commission on new clients 

brought to Bland by Dick.

Likewise, the jury’s verdict is not called into question 

because the court refused to give KPG’s proposed instruction 
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on burden shifting in relation to these acts. KPG’s proposed 

instruction stated in relevant part:

Once evidence was presented by KPG that certain 

transactions existed that allegedly breached . . . Dick’s 

fiduciary duty, the burden shifted to . . . Dick to prove the 

fairness of the transactions. . . . Dick therefore must prove 

by a preponderance of the evidence that his actions were 

taken in good faith and he did not act in such a manner as 

to cause or contribute to the injury or damage of KPG, or 

deprive it of business.

This instruction was not warranted by the evidence, because 

there was no evidence of a burden-shifting transaction, as 

already discussed.

Furthermore, the proposed instruction is overly broad and 

is misleading. It fails to define what the “certain transactions” 

could be. The prior paragraphs of the instruction do not tie 

directly to the “certain transactions” and are themselves overly 

broad by stating that the fiduciary “must at all times act for the 

common benefit of all” and “must not take advantage of a partner by the slightest concealment or misrepresentation of any 

kind”—again, a point already discussed. Lastly, KPG’s proposed instruction portrays as a foregone conclusion that Dick 

engaged in those “certain transactions” inasmuch as it stated, 

without condition, that Dick “must prove” that his actions were 

taken in good faith.

We find no merit to KPG’s assertion that the district court 

either should have granted its motion for directed verdict on 

its claim for breach of fiduciary duty or should have given its 

proposed instructions on burden shifting.

(b) Instruction That Breach Was 

Based on Two Grounds Only

KPG assigned as error the court’s instruction that KPG’s 

claim for breach of fiduciary duty was based on two grounds 

only, the violation of KPG’s bylaws and Dick’s failure to 

send engagement letters to KPG clients before his resignation. 
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Instruction No. 9 informed the jury that KPG asserted that Dick 

breached his fiduciary duty to KPG “in one or more of the following ways: . . . Violat[ing] [KPG’s] bylaws by disclosing 

[KPG’s] alleged confidential information to Bland; . . . Fail[ing] 

to send out an Engagement Letter to [two named entities] in an 

effort to undermine [KPG’s] relationships with clients.” KPG 

asserts that it was prejudiced by this instruction because it 

had pleaded and offered evidence at trial of Dick’s concealment, sharing confidential information with a competitor, and 

other actions demonstrating a failure to exercise the utmost 

good faith.

KPG did not argue this assignment of error in the argument 

section of its brief. Errors that are assigned but not argued will 

not be addressed by an appellate court. 103

For the sake of completeness, however, we also point out 

that we have concluded that the concealment of negotiations 

for new employment, upon which KPG based its claims, was 

not actionable. And there were many instructions that touched 

upon other aspects of KPG’s claim for breach of fiduciary duty. 

These instructions included that Dick had a duty to “always 

act for the common benefit of all,” “deal fairly and honestly 

with [KPG],” “disclose any conflicts between Dick’s interests 

and [KPG’s] interests that might make him act in his own best 

interests at the expense or [to] the detriment of [KPG],” and 

not “use . . . confidential [or] trade secret information acquired 

from [KPG] to compete” during the employment relationship. 

If the instructions given, which are taken as a whole, correctly 

state the law, are not misleading, and adequately cover the 

issues submissible to a jury, there is no prejudicial error concerning the instructions and necessitating a reversal. 104 KPG 

was not prejudiced by the court’s instruction No. 9.

103 Livingston v. Metropolitan Util. Dist., 269 Neb. 301, 692 N.W.2d 475 

(2005).

104 InterCall, Inc. v. Egenera, Inc., supra note 7.
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(c) Conduct After Departure

Next, KPG asserts that it was prejudiced by the district 

court’s order excluding evidence of Dick’s postresignation 

breach. Relatedly, KPG asserts that the court erred by instructing on what KPG describes as “the lesser duty of loyalty, 

not fiduciary duty,” 105 which was an instruction stating that 

“fiduciary duty ends upon termination of the employment 

relationship.” KPG argues we should remand the cause for a 

new trial wherein it can offer evidence and argument related to 

Dick’s alleged breach of fiduciary duty to KPG through Dick’s 

postresignation conduct. KPG presumes that because KPG did 

not buy back Dick’s shares, Dick never stopped owing KPG a 

fiduciary duty as a shareholder, despite his resignation. KPG 

also asserts that because the “closing date” of a buyout under 

the Shareholder Agreement was 60 days after the operative 

event of Dick’s departure, Dick would owe a postresignation 

fiduciary duty “for up to 60 days after resignation,” even if 

KPG had bought back Dick’s shares. 106 We find no merit to 

KPG’s assignments of error relating to Dick’s postresignation conduct.

The court excluded evidence of Dick’s postresignation conduct on the ground that KPG did not plead such conduct sufficiently to put Dick on notice that it would be the subject of 

litigation. KPG points out that in the “Introduction” section 

of its amended counterclaim, KPG referred to how “immediately after Dick’s departure,” Dick “used KPG’s confidential 

business techniques and commercial data to raid KPG’s client base and take over KPG’s niche practice.” KPG had also 

alleged under the “Background Facts” section of its counterclaim that “Dick has solicited current KPG clients by using 

his knowledge of KPG’s confidential business techniques and 

commercial data to attempt to underbid KPG’s services for 

KPG’s existing clients and co-opt the niche developed by 

105Brief for appellant at 31.

106 Id. at 28.
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KPG.” Finally, KPG further alleged under the “Background 

Facts” section of its amended third-party complaint that Dick 

“instructed former KPG clients not to pay outstanding invoices 

issued by KPG,” after Dick’s departure. But, as the district 

court noted, while KPG carefully set forth in its amended 

counterclaim numerous specific allegations as to how Dick 

had breached his fiduciary duty, KPG did not therein allege 

any postresignation conduct. Under the circumstances, we find 

no error in the court’s conclusion that KPG had not given Dick 

notice that its claim of breach of fiduciary duty was based on 

postresignation conduct.

We also find that the district court did not abuse its discretion in denying KPG’s request for leave to amend the pleadings. KPG did not move to amend until well into trial.

Moreover, the specific allegations of postresignation conduct 

that KPG relies on in its amended counterclaim relate to the 

alleged use of confidential information and tortious interference with a business relationship. And these claims were presented to and rejected by the jury. They are in effect the same 

acts presented to the jury with regard to Dick’s preresignation 

conduct. We cannot conclude that the jury would have viewed 

these allegations differently if presented with the fact that Dick 

continued these acts after his resignation.

[50] To the extent any other acts would have been presented 

to the jury but for the court’s order excluding postresignation 

conduct, the substance of such evidence was not presented 

through an offer of proof and it is not apparent from the context. Neb. Rev. Stat. § 27-103(1) (Reissue 2016) provides in 

relevant part that “[e]rror may not be predicated upon a ruling which admits or excludes evidence unless a substantial 

right of the party is affected,” and that “[i]n case the ruling 

is one excluding evidence, the substance of the evidence was 

made known to the judge by offer or was apparent from the 

context within which questions were asked.” Error may not be 

predicated upon a ruling of a trial court excluding testimony 

of a witness unless the substance of the evidence to be offered 
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by the testimony was made known to the trial judge by offer 

or was apparent from the context within which the questions 

were asked. 107

Having found no merit to the contention that the court erred 

in excluding postresignation conduct, we also conclude that 

the evidence failed to warrant an instruction on postresignation conduct.

Furthermore, we find the jury instruction given by the court 

correctly stated the law and was not misleading, while KPG’s 

proposed instruction would have been misleading. KPG takes 

issue with that portion of instruction No. 8 stating “[a]n individual’s fiduciary duty ends upon termination of the employment relationship.” Instruction No. 8 provided in full:

Shareholder employees in a close corporation owe 

one another substantially the same fiduciary duty in the 

operation of the enterprise that partners owe to one 

another, to act among themselves in the utmost good faith 

and loyalty.

An individual’s fiduciary duty ends upon termination of the employment relationship. Under Nebraska 

law, every employee, including employees with fiduciary duties, owes his or her employer a duty of loyalty 

until the employment relationship is terminated. During 

employment, an employee has a duty not to compete 

with his employer concerning the subject matter of the 

employment. However, employees, including employees 

with fiduciary duties, may plan and prepare for their competing business while still employed without breaching 

the duty of loyalty. Employees, including employees with 

fiduciary duties, are allowed to discuss job offers, while 

still employed, to engage in future competition with their 

employer without incurring liability.

107Anderson/Couvillon v. Nebraska Dept. of Soc. Servs., 253 Neb. 813, 

572 N.W.2d 362 (1998). See, also, Intercall, Inc. v. Egenera, Inc., supra

note 7; Sherman County Bank v. Kallhoff, 205 Neb. 392, 288 N.W.2d 24 

(1980).
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While planning and preparing for a competing business 

is permissible, an employee may not act in direct competition with his or her employer while still employed. 

Factors showing that an employee acted in direct competition during his or her employment include the following: 

use of confidential and trade secret information acquired 

from the employer to compete; soliciting customers and 

clients to join the competing business before the end 

of the employment relationship; or committing some 

other fraudulent or unlawful act aimed at destroying the 

employer’s business. To give rise to liability, the alleged 

disloyal acts must substantially hinder the employer in the 

continuation of its business.

The court refused to give the jury KPG’s proposed instruction, 

which stated:

Generally, a shareholder’s fiduciary duty continues 

after he resigns as an officer, director, or employee of a 

close corporation. Resignation by a shareholder from the 

position of officer and director does not relieve that person of a fiduciary duty to the fellow shareholders because 

the resignation does not change that person’s status as a 

shareholder in the close corporation.

In arguing that it was prejudiced by instruction No. 8 

and the court’s refusal to give its proposed instruction on 

postresignation duty, KPG relies on Neb. Rev. Stat. § 67-424 

(Reissue 2018) of the Uniform Partnership Act of 1998, 108

which sets forth a duty to refrain from competing with the 

partnership until final dissolution. 109 KPG connects this to our 

case law in which we have said that shareholders in a close 

corporation owe one another the same fiduciary duty as that 

owed by one partner to another in a partnership. 110 KPG then 

extrapolates that Dick still owes to this day a fiduciary duty to 

108Neb. Rev. Stat. §§ 67-401 to 67-467 (Reissue 2018).

109 See Bellino v. McGrath North, 274 Neb. 130, 738 N.W.2d 434 (2007).

110 See id. See, also, Anderson v. Bellino, 265 Neb. 577, 658 N.W.2d 645 

(2003).
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KPG by virtue of the facts that Dick is still a shareholder and 

that KPG has not dissolved. Again, the cases upon which KPG 

relies are inapplicable to the facts of the case at bar.

Bellino v. McGrath North 111 was a professional negligence 

action against a law firm based on advice given in connection with the severance of a business relationship. The client 

was the president, director, and 50-percent shareholder in a 

closely held corporation that operated a keno parlor under 

a lottery operation contract with the city. On his counsel’s 

advice, the president tendered his resignation as officer and 

director effective upon termination of the city contract. Then, 

before such termination, and thus before the effective date of 

his resignation, the president formed a new corporation by 

himself, through which he won the contract that had been put 

up for public bidding.

In a separate action, we had affirmed a verdict in favor 

of the closely held corporation for breach of fiduciary duty, 

noting that although there was no noncompete agreement, a 

corporate director may not compete with the corporation if 

the director’s competition causes or contributes to the injury 

or damage of the corporation, or deprives it of business. 112 In 

Bellino v. McGrath North, we subsequently affirmed a judgment in favor of the corporation’s president against the law 

firm on the ground that it was malpractice to advise the former 

president that he could avoid liability for usurping a corporate 

opportunity simply by being up front and honest about it. In 

the course of so concluding, we said that shareholders in a 

close corporation owe one another the same fiduciary duty as 

owed by one partner to another in a partnership and that a partner has a duty to refrain from competing with the partnership 

in the conduct of the partnership business before the dissolution of the partnership. 113

111 Bellino v. McGrath North, supra note 109.

112 See Anderson v. Bellino, supra note 110.

113 See Bellino v. McGrath North, supra note 109.
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In the Seventh Circuit case relied on by KPG, Rexford Rand 

Corp. v. Ancel,

 114 the court held that a minority shareholder 

violated his fiduciary duty to a closely held corporation by 

secretly reserving the corporation’s trade names when they 

became available, after an unintentional administrative dissolution of the corporation and a “freeze out” deprived the 

minority shareholder of his position and the benefit of stock 

ownership. The court reasoned that the minority shareholder 

had taken it upon himself to retaliate, which violated his 

continuing fiduciary duty—as he was technically still a shareholder—to refrain from conduct intended to be detrimental to 

the enterprise. 115 The court found it to be bad policy for frozenout shareholders to attempt to resolve disputes in this manner 

rather than seek a judicial remedy. 116

Finally, KPG relies on a case from the appellate court of 

Illinois, Hagshenas v. Gaylord.

 117 In Hagshenas, a director, 

vice president, and 50-percent shareholder of a closely held 

corporation operating a travel agency resigned as vice president and secretary and, the following day, opened a new travel 

agency and began competing with the corporation, soliciting 

the corporation’s customers, and hiring several travel agents 

who had been working for the corporation. At the same time, 

the former vice president did not give up his 50-percent control 

over the corporation and continued to express an interest as a 

shareholder in its ongoing affairs. When the other shareholders 

and the former vice president could not reach an agreement as 

to the corporation’s ongoing operations, the former vice president sued for dissolution, and the other shareholders counterclaimed for breach of fiduciary duty.

114 See Rexford Rand Corp. v. Ancel, 58 F.3d 1215, 1220 (7th Cir. 1995).

115 See id.

116 See id.

117 Hagshenas v. Gaylord, 199 Ill. App. 3d 60, 557 N.E.2d 316, 145 Ill. Dec. 

546 (1990).
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The court in Hagshenas rejected the former vice president’s 

argument that he had ceased to owe a fiduciary duty after 

his resignation. The court acknowledged that ordinarily an 

officer or director owes no fiduciary duty to the corporation 

after resignation and that a mere owner of stock in a company 

does not owe a fiduciary duty to that company. But the court 

held that 50-percent shareholders owe a fiduciary duty to each 

other similar to that of partners. And the former vice president 

had purposefully maintained his 50-percent shareholder status 

and control. The court explained that if there were problems 

that could not be resolved, then the proper course of action 

would have been to negotiate a sale or buyout of the shares or 

file for dissolution, and that until a final sale or order of dissolution, the former vice president owed a fiduciary duty to 

the corporation. 118

None of these cases involve shareholder agreements with 

buyout provisions in the express event of a shareholder’s 

departure, much less buyout provisions that contemplate a purchase price dependent upon the number of clients who decide 

to continue with the departing shareholder at the new place 

of employment. And none of these cases involve continuing 

shareholder status by virtue of the corporation’s refusal to buy 

out the shares. Unlike the shareholder in Hagshenas, Dick testified that he had no control over KPG’s operations after his 

resignation, and there was no testimony refuting that statement. 

Unlike the shareholder in Rexford Rand Corp., Dick was not 

trying to circumvent legal avenues of relief through retaliatory action. 119 He simply changed his place of employment and 

solicited the clients he had served while at KPG.

We find applicable cases holding that upon termination of 

employment, a shareholder who is subject to a mandatory 

buyout is divested of shareholder status immediately, and 

that any reciprocal fiduciary obligations of the shareholders 

118 Id.

119 See Rexford Rand Corp. v. Ancel, supra note 114.
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no longer exist even if the corporation has not yet redeemed 

the employee’s stock. 120 This is distinct from cases holding in 

the context of the fiduciary duty of the majority shareholders 

toward a terminated employee shareholder that the corporation still owes certain duties to the shareholder during the 

course of an expressly contemplated delay of the buyout or 

when terminating shareholder status would “unfairly strip a 

minority shareholder of all sharehholder rights while he [or 

she] remains the legal owner of the shares.” 121 We can find 

no authority for the proposition that a voluntarily departing 

shareholder is bound by a general fiduciary duty not to compete with a closely held corporation until the closing date of a 

mandatory buyout provision—much less that such shareholder 

is bound by virtue of the corporation’s unjustified refusal to 

perform its buyout obligations until the matter can be resolved 

through litigation.

While it may be true, as KPG points out, that the departing 

shareholder can eventually recover or force specific perform

ance through legal action, it would be against public policy 

to allow the corporation to deprive the departing shareholder 

of competing employment until such legal actions can be 

taken. As stated, even corporate officers and directors, who 

have fiduciary duties to the corporation, are free to resign 

and go into competition as long as they remain loyal prior 

to resigning. 122

We find no reversible error based on either the exclusion of 

postresignation conduct or the court’s refusal to instruct on a 

postresignation fiduciary duty.

120 See, Riesett v. W.B. Doner & Co., 293 F.3d 164 (4th Cir. 2002); Gallagher 

v. Lambert, 74 N.Y.2d 562, 549 N.E.2d 136, 549 N.Y.S.2d 945 (1989). But 

see Jenkins v. Haworth, Inc., 572 F. Supp. 591 (W.D. Mich. 1983).

121 See Drewitz v. Motorwerks, Inc., 706 N.W.2d 773, 785 (Minn. App. 

2005), reversed in part on other grounds 728 N.W.2d 231 (2007). Accord 

Stephenson v. Drever, 16 Cal. 4th 1167, 947 P.2d 1301, 69 Cal. Rptr. 2d 

764 (1997).

122 Stuart C. Irby Co., Inc. v. Tipton, 796 F.3d 918 (8th Cir. 2015).
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(d) Corporate Opportunity Doctrine

Next, KPG argues that it was prejudiced by the district 

court’s refusal to give its proposed instruction on the corporate 

opportunity doctrine. KPG asserts that the clients Dick served 

while at KPG were KPG’s corporate opportunities.

KPG had proposed that the court instruct:

A business opportunity may “belong” to a corporation. 

If a director of the corporation breaches his fiduciary duty 

to the corporation to usurp that opportunity, the corporation is entitled to recover for that loss. The fact that the 

proceeds from the usurpation may have ended up in the 

hands of an innocent party does not defeat the corporation’s right to recover from those whose breaches of fiduciary duty occasioned the loss.

This statement is derived from Trieweiler v. Sears,

 123 in which 

we considered the defendant directors’ formation of a new 

corporation to open a new location for the bar business the 

closely held corporation was in the business of operating and 

which was financed and operated through an intertwining of 

corporate affairs with the closely held corporation the plaintiff 

was a shareholder of. We affirmed the district court’s finding that the newly formed corporation had usurped a corporate opportunity. 124

We described that the doctrine of corporate opportunity prohibits one who occupies a fiduciary relationship to a corporation from acquiring, in opposition to the corporation, property 

in which the corporation has an interest or tangible expectancy 

or which is essential to its existence. 125 The traditional remedy 

imposed by courts upon a finding of a misappropriation of a 

corporate opportunity is the equitable impression of a constructive trust in favor of the corporation upon the property. 

We explained that a party seeking to establish the trust must 

123 Trieweiler v. Sears, 268 Neb. 952, 689 N.W.2d 807 (2004).

124 See id.

125 See id.
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prove by clear and convincing evidence that the individual 

holding the property obtained title to it by fraud, misrepresentation, or an abuse of an influential or confidential relationship 

and that under the circumstances, such individual should not, 

according to the rules of equity and good conscience, hold and 

enjoy the property so obtained. 126 We rejected the argument 

that the percentage of the proceeds of the corporate opportunity distributed to an innocent investor defeated the corporation’s right to recover from those whose breaches of fiduciary 

duty occasioned the loss, holding that

the fact that a director stole valuable assets from a corporation and gave those assets to a presumably innocent 

third party does not change the fact that the assets properly belonged to the corporation in the first place and that 

the corporation should be compensated for the theft by 

the wrongdoer. 127

[51] It was undisputed that Dick did not solicit any clients 

until after his resignation, and we have already addressed that 

such postresignation conduct does not breach a fiduciary duty. 

More specifically to the doctrine of misappropriation of a corporate opportunity with regard to postresignation conduct, at 

least one jurisdiction has explained that whether the opportunity rightfully belonged to the corporation is evaluated under 

an interest or expectancy test. 128 And a past relationship with 

customers alone is insufficient to create a reasonable expect

ancy absent a continuing contractual agreement. 129 Customers 

without exclusive contractual arrangements with corporations 

or with whom a corporation has to annually renew contracts 

are not corporate business opportunities. 130 Like with a law 

126 See id.

127 Id. at 986, 689 N.W.2d at 839.

128 See, In re Pervis, 512 B.R. 348 (N.D. Georgia 2014); Ins. Industry 

Consultants, LLC v. Alford, 294 Ga. App. 747, 669 S.E.2d 724 (2008).

129 See id.

130 See id.
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firm, absent a contract stating otherwise, an accountant’s clients have a right to select who will be their accountant; they 

are not the accountancy firm’s property. 131

We agree with this reasoning. The evidence was undisputed that KPG clients had, at most, annually renewable contracts. They were not KPG’s property. Thus, they could not be 

misappropriated.

The facts did not warrant KPG’s requested instruction on the 

corporate opportunity doctrine.

(e) Equitable Clawback

KPG also asserts that it was prejudiced by the district court’s 

refusal to instruct the jury on equitable clawback damages in 

relation to its counterclaim for breach of fiduciary duty. KPG’s 

proposed instruction stated: “If you find KPG has proven that 

. . . Dick breached his fiduciary duty to KPG, you may also 

consider whether KPG is entitled to recover the compensation 

it paid to . . . Dick during any periods of his breach of fiduciary duty.”

KPG derived this instruction from Neece v. Severa.

 132 The 

plaintiff in Neece was a psychiatrist who had worked as an 

independent contractor in the office she later left and sued for 

an accounting, alleging billing failures under their contract. 

The Court of Appeals quoted the “Restatement” rule on depriving an agent of compensation:

“An agent is entitled to no compensation for conduct 

which is disobedient or which is a breach of his duty of 

loyalty; if such conduct constitutes a wilful and deliberate breach of his contract of service, he is not entitled to 

compensation even for properly performed services for 

which no compensation is apportioned.” 133

131 See Karen J. Dilibert, Fifty Ways to Leave Your Law Firm, 89 Ill. B.J. 323 

(2001).

132Neece v. Severa, 5 Neb. App. 556, 560 N.W.2d 868 (1997).

133 Id. at 563, 560 N.W.2d at 873, quoting 2 Restatement (Second) of Agency, 

supra note 55.
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The Court of Appeals did not apply this principle, however, 

because the plaintiff did not allege the office had willfully 

breached its contract with her.

[52] Our appellate courts have not otherwise addressed the 

concept of equitable clawback. Equitable clawback is a restitutionary remedy based on principles of unjust enrichment 

and the faithless servant doctrine. 134 The doctrine establishes 

a mandate that an agent who engages in activities that breach 

the agent’s fiduciary duties to the principal is not entitled 

to and must forfeit any compensation for services rendered 

during the period of the breach. 135 The majority of the jurisdictions adopt a bright-line rule that the agent must forfeit 

all compensation paid or payable over the entire period of 

the agent’s disloyalty, presuming, in effect, that the agent’s 

misconduct tainted or otherwise permeated his or her entire 

relationship with the principal from the original point of the 

breach going forward. 136

Again, the jury was presented with the question of whether 

Dick breached his fiduciary duty, which the court explained he 

could do by:

act[ing] in direct competition with his or her employer 

while still employed. Factors showing that an employee 

acted in direct competition during his or her employment include the following: use of confidential and trade 

secret information acquired from the employer to compete; soliciting customers and clients to join the competing business before the end of the employment relationship; or committing some other fraudulent or unlawful act 

aimed at destroying the employer’s business. To give rise 

to liability, the alleged disloyal acts must substantially 

hinder the employer in the continuation of its business.

134 See Manning Gilbert Warren III, Equitable Clawback: An Essay on 

Restoration of Executive Compensation, 12 U. Pa. J. Bus. L. 1135 (2010).

135 See id.

136 See id.
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KPG has not challenged on appeal this portion of the 

instruction.

While the jury was not specifically instructed on equitable 

clawback damages, KPG’s expert witness testified as to the 

amount of such damages and the jury was given a general verdict form for damages. There was no instruction that negated 

the possibility of equitable clawback damages.

[53] Any jury instruction is subject to the harmless error 

rule, which requires a reversal only if error adversely affects 

the substantial rights of the complaining party. 137 The appellant has the burden of establishing the prejudicial effect. 138 We 

conclude that KPG has failed to establish it was prejudiced 

by the district court’s refusal to instruct the jury on equitable clawback.

4. Breach of Bylaws and Definition 

of Confidential Information

Turning to its claim against Dick for breach of bylaws, 

KPG argues it was prejudiced by the court’s jury instructions 

that conflated “trade secret” with “confidential information.” 

Instruction No. 12 set forth:

Confidential information and trade secrets are defined 

as information including, but not limited to, a drawing, 

formula, pattern, compilation, program, device, method, 

technique, code, or process that:

(a) derives economic value, actual or potential, from 

not being known to, and not being ascertainable by proper 

means by, other persons who can obtain economic value 

from its disclosure or use; and

(b) is the subject of efforts that are reasonable under 

the circumstances to maintain its secrecy. Confidential 

137 See Plambeck v. Union Pacific RR. Co., 232 Neb. 590, 441 N.W.2d 614 

(1989).

138 See id.
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and trade secret information must have independent economic value. To be considered confidential and trade 

secret information, possession of the secret information 

must confer a competitive advantage.

Matters of public knowledge or of general knowledge 

in an industry are not confidential information or trade 

secrets; confidential information or a trade secret is something known to only a few and not susceptible of general 

knowledge. Confidential information and trade secrets 

must be particular secrets of [KPG] and not the general 

secrets of the trade in which [KPG] is engaged. If information is ascertainable at all by any means that are not 

improper, the information is not confidential information 

or a trade secret.

Instruction No. 13 stated:

If an alleged trade secret or confidential information 

does not have independent economic value, the information is not entitled to confidential information or trade 

secret protection under Nebraska law. To be considered 

confidential and trade secret information, possession of the 

secret information must confer a competitive advantage.

Information disclosed to customers without any confidentiality requirement, including pricing information, is 

not confidential information.

KPG fails to delineate what parts of these descriptions of confidential information were inaccurate and misleading. KPG 

merely insists that not all confidential information constitutes 

a trade secret and that the bylaws somehow presented something broader.

The “Bylaws of Randall K. Koski, P.C.” stated that it shall 

be required to “maintain and preserve confidentiality as to all 

business techniques, commercial data, formulas, good will, 

operational methods, product identifications, service marks, 

trademarks, trade names, and trade secrets.” It does not define 

those terms. KPG does not identify how these specific concepts 

relate to its allegations against Dick.
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Most notably, the bylaws do not define “confidential information” or “confidentiality.” They merely state that the “confidentiality” of the items in the list shall be “preserve[d]” and 

“maintain[ed].” Logically, to preserve and maintain confidentiality, the information must have been confidential in the 

first instance. And, on their face, the bylaws do not set forth 

any new, broader definition of “confidential information” or 

confidentiality.

As Dick points out, our case law reflects that we have often 

treated “confidential information” and “trade secrets” interchangeably. 139 There is nothing in the bylaws that convinces us 

that the court should have presented a different definition than 

that set forth in jury instructions Nos. 12 and 13.

No conceivable definition of “confidential information” 

changes the requirement in a breach of contract action that 

the claimant prove both proximate causation and foreseeable 

damages of a “kind which naturally follow a breach.” 140 Dick 

argued at trial that the spreadsheet containing the summary of 

Dick’s billings and fees, the types of services he provided, and 

the states in which he worked was not confidential information 

because it could be obtained through proper means. The jury 

either so found or found that it did not confer a competitive 

advantage or that KPG was not harmed by the disclosure of 

the information.

We find no merit to KPG’s assertion that the verdict in its 

counterclaim for breach of bylaws should be reversed because 

of jury instructions that addressed trade secrets and confidential information interchangeably.

139 See, Gaver v. Schneider’s O.K. Tire Co., 289 Neb. 491, 856 N.W.2d 121 

(2014); Brockley v. Lozier Corp., 241 Neb. 449, 488 N.W.2d 556 (1992); 

Chambers-Dobson, Inc. v. Squier, 238 Neb. 748, 472 N.W.2d 391 (1991); 

Boisen v. Petersen Flying Serv., 222 Neb. 239, 383 N.W.2d 29 (1986); 

Securities Acceptance Corp. v. Brown, 171 Neb. 701, 107 N.W.2d 540 

(1961).

140Birkel v. Hassebrook Farm Serv., 219 Neb. 286, 290, 363 N.W.2d 148, 152 

(1985).
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5. KPG’s Counterclaim Against Bland 

for Tortious Interference

As for its counterclaim against Bland for tortious interference, KPG asserts that the district court erred in holding as a 

matter of law that Bland’s payment of commissions to Dick 

did not violate the rules of professional conduct of the NSBPA 

and thus excluding KPG’s proffered expert opinion that the 

commissions violated the NSBPA. There was no evidence 

submitted that the NSBPA itself has determined Bland’s commission structure violates its rules of professional conduct or 

that Bland is under investigation for the same. The jury was 

presented with the theory that through the 10-percent commission, among other things, Bland had tortiously inferred with 

KPG’s business expectations. Nevertheless, KPG claims it was 

prejudiced by the exclusion of expert testimony on the alleged 

NSBPA violation, because, without such testimony, KPG was 

“required to prove that Dick and Bland committed ‘an unjustified intentional act of interference’ with KPG’s business 

relationships to prove its claim for tortious interference with a 

business relationship.” 141

[54] To succeed on a claim for tortious interference with a 

business relationship or expectancy, a plaintiff must prove (1) 

the existence of a valid business relationship or expectancy, (2) 

knowledge by the interferer of the relationship or expectancy, 

(3) an unjustified intentional act of interference on the part of 

the interferer, (4) proof that the interference caused the harm 

sustained, and (5) damage to the party whose relationship or 

expectancy was disrupted. 142 In order to be actionable, interference with a business relationship must be both intentional 

and unjustified.  143

[55] Factors to consider in determining whether interference 

with a business relationship was unjustified include: (1) the 

141Brief for appellant at 41.

142Aon Consulting v. Midlands Fin. Benefits, supra note 76.

143 See Recio v. Evers, 278 Neb. 405, 771 N.W.2d 121 (2009).
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nature of the actor’s conduct, (2) the actor’s motive, (3) the 

interests of the other with which the actor’s conduct interferes, 

(4) the interests sought to be advanced by the actor, (5) the 

social interests in protecting the freedom of action of the actor 

and the contractual interests of the other, (6) the proximity 

or remoteness of the actor’s conduct to the interference, and 

(7) the relations between the parties. 144 The issue is whether, 

upon a consideration of the relative significance of the factors 

involved, the conduct should be permitted without liability, 

despite its effect of harm to another. 145

[56] This determination depends upon a judgment and 

choice of values in each situation. 146 An individual’s interest 

in prospective economic advantage receives less protection 

than his or her enforceable contract rights. 147 The rationale for 

the distinction is that an individual with a prospective business 

relationship has a mere expectancy of future economic gain, 

whereas a party to a contract has a certain and enforceable 

expectation of receiving the benefits of his contract. 148

Furthermore, in the context of claims of tortious interference with a business relationship or expectancy, we have 

recognized the privilege of a competitor as described in the 

Restatement of Torts. 149 “[V]alid competition,” including 

inducement of third persons to do their business with oneself rather than with a particular competitor, “cannot be the 

144 Id.

145Aon Consulting v. Midlands Fin. Benefits, supra note 76.

146 Id.

147 12 Robert L. Haig, Business and Commercial Litigation in Federal Courts 

§ 121:39 (4th ed. 2016).

148 Lamar Co. v. City of Fremont, 278 Neb. 485, 771 N.W.2d 894 (2009). See, 

also, Miller Chemical Co., Inc. v. Tams, 211 Neb. 837, 320 N.W.2d 759 

(1982), disapproved on other grounds, Matheson v. Stork, 239 Neb. 547, 

477 N.W.2d 156 (1991); Restatement of Torts § 768 (1939).

149Restatement of Torts, supra note 148.
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basis for a tortious interference claim,” because such conduct 

is justified. 150

[57,58] The party alleging tortious interference has the burden of proving that the conduct did not fall within the competitor’s privilege. 151 One is privileged purposely to cause a third 

person not to enter into or continue a business relation with 

a competitor of the actor if (1) the relation concerns a matter 

involved in the competition between the actor and the competitor, (2) the actor does not employ improper means, (3) the 

actor does not intend thereby to create or continue an illegal 

restraint of competition, and (4) the actor’s purpose is at least 

in part to advance his or her interest in the competition with 

the other. 152

[59] KPG argues that offering a commission allegedly in 

violation of the rules of professional conduct of the NSBPA 

constitutes improper means of competition; therefore, Bland’s 

interference was unjustified. Improper means of competition 

has been described as physical violence, fraud, civil suits, and 

criminal prosecutions—though even these means may not be 

forbidden, depending upon the relation between the actor and 

the person induced, and the object sought to be accomplished 

by the actor. 153

KPG’s only support for the contention that a violation of 

the rules of professional conduct of the NSBPA constituted 

improper means is a comment to the Restatement (Second) of 

Torts dealing with intentional interference with a contract or 

prospective contractual relation of another:

Business ethics and customs. Violation of recognized 

ethical codes for a particular area of business activity 

150 Lamar Co. v. City of Fremont, supra note 148, 278 Neb. at 498, 771 

N.W.2d at 906.

151 See Amerinet, Inc. v. Xerox Corp., 972 F.2d 1483 (8th Cir. 1992).

152 Miller Chemical Co., Inc. v. Tams, supra note 148.

153 See, 4 Restatement (Second) of Torts § 767, comment on clause (a) 

(1979); Restatement of Torts, supra note 148, comment on clause (b).
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or of established customs or practices regarding disapproved actions or methods may also be significant in 

evaluating the nature of the actor’s conduct as a factor in 

determining whether his interference with the plaintiff’s 

contractual relations was improper or not. 154

This comment was not directly made in relation to the privilege 

to compete.

We addressed professional ethics in the context of a claim 

for tortious interference with a business expectancy in Macke 

v. Pierce.

 155 We explained that the uncontroverted evidence of 

the defendant’s breach of his physician’s duty of confidentiality 

toward his patient did not, standing alone, establish that such 

unauthorized disclosure of his patient’s medical condition to 

her employer constituted tortious interference with a business 

expectancy. 156 The physician testified that he had breached the 

duty of confidentiality out of concern for the patient’s wellbeing. We said that this testimony was sufficient to support the 

jury’s conclusion that the physician had not tortiously interfered with the plaintiff’s business expectancy. 157

In this case, we agree with the district court that the evidence does not support the possible conclusion that Bland 

violated the rules of professional conduct of the NSBPA by 

offering the 10-percent commission compensation structure to 

its employees. Leaving aside whether the compensation structure at issue constituted a prohibited “commission” under the 

NSBPA rules, their plain language prohibits a certified public 

accountant from “accepting” certain commissions, which Bland 

clearly did not do.

Section 007 of the rules of professional conduct of the 

NSBPA provides:

154 4 Restatement (Second) of Torts, supra note 153 at 32.

155 Macke v. Pierce, 266 Neb. 9, 661 N.W.3d 313 (2003).

156 Id.

157 Id.
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007.01 Acts discreditable. A licensee shall not commit 

an act that reflects adversely on his fitness to engage in 

the practice of public accountancy.

007.02 Commissions and referral fees.

007.02A Prohibited Commissions. A licensee in public 

practice shall not for a commission recommend or refer 

to a client any product or service, or for a commission 

recommend or refer any product or service to be supplied 

by a client, or receive a commission, when the licensee or 

the licensee’s firm also performs for that client:

007.02A1 an audit or review of a financial statement; or

007.02A2 a compilation of a financial statement when 

the licensee expects, or reasonably might expect, that 

a third party will use the financial statement and the 

licensee’s compilation report does not disclose a lack of 

independence; or

007.02A3 an examination of prospective financial 

information.

This prohibition applies during the period in which the 

licensee is engaged to perform any of the services listed 

above and the period covered by any historical financial 

statements involved in such listed services.

007.02B Disclosure of Permitted Commissions. A 

licensee in public practice who is not prohibited by this 

rule from performing services for or receiving a commission and who is paid or expects to be paid a commission 

shall provide written disclosure of that fact and the basis 

for determining such commission to any person or entity 

to whom the licensee recommends or refers a product or 

service to which the commission relates.

007.02C Referral Fees. Any licensee who accepts a 

referral fee for recommending or referring any service 

of a CPA to any person or entity or who pays a referral 

fee to obtain a client shall provide written disclosure of 
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such acceptance or payment and the basis for determining such fee to the client.

007.02D Written Disclosure Statements. Written disclosure statements, as set forth by Attachment 1 to this 

Chapter, are to be executed in duplicate, with a receipt 

acknowledgement signed and dated by the client, and 

maintained by the licensee for a period of five years. 

Licensees are subject to a random audit by the [NSBPA] 

or its designee for compliance with the written disclosure 

provisions of this rule.

007.02E Disclosure Form for commission, contingent fee, or referral fee.

(Emphasis supplied.) The rules do not anywhere define the 

term “commission.”

The rules then set forth a disclosure form which “is required 

by the [NSBPA] for use by duly licensed Certified Public 

Accountants (CPA’s) who intend to accept from any client 

compensation in the form of a commission, a contingent fee 

or a referral fee.” The rules explain that “CPA’s are prohibited 

from accepting a commission or contingent fee as compensation from a client for whom the CPA or the CPA’s firm also 

performs” the specified financial services. Nothing prohibits 

offering a “commission.” The evidence was uncontroverted that 

Bland did not accept a commission; it offered one to Dick.

Also, any wrong committed under the NSBPA rules was 

against the client and concerned an accountant’s potential 

conflict of interest vis-a-vis a client’s interests. And the commission structure at Bland that KPG takes issue with was not 

directed toward KPG; it was the bonus offered to all account

ants for bringing in clients. The object sought was to reward 

accountants for networking efforts that resulted in expanding 

Bland’s client base. It was not dependent upon whether the 

clients were previously being served by another accounting firm. Again, improper means depends upon the relation 
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between the actor and the person induced and upon the object 

sought to be accomplished by the actor. 158

[60] As a matter of law, the excluded evidence would not 

have been sufficient for KPG to satisfy its burden of proving 

that the conduct did not fall within the competitor’s privilege. 

In a civil case, the admission or exclusion of evidence is not 

reversible error unless it unfairly prejudiced a substantial right 

of the complaining party. 159 We find that KPG was not unfairly 

prejudiced by the exclusions of expert opinion that Bland had 

violated the NSBPA rules.

6. Dick’s and Bland’s Cross-Appeals

Dick assigns on cross-appeal that the district court erred 

by denying his motion for a directed verdict against KPG on 

KPG’s counterclaims, because KPG failed to present sufficient 

evidence for the trier of fact either to find damages with reasonable certainty or to find that any damages were proximately 

caused by Dick’s wrongful conduct. Bland makes similar 

assignments of error in its cross-appeal regarding KPG’s thirdparty claims against it. Because we find no merit to KPG’s 

appeal and affirm the judgment for that reason, it is unnecessary to address the cross-claims presenting alternative grounds 

for affirming the judgment.

VI. CONCLUSION

For the foregoing reasons, we affirm the judgment of the 

district court.

Affirmed.

Miller-Lerman, J., not participating.

158 See, Restatement (Second) of Torts, supra note 153, comment on clause 

(a); Restatement of Torts, supra note 148, comment on clause (b).

159O’Brien v. Cessna Aircraft Co., 298 Neb. 109, 903 N.W.2d 432 (2017).