Court Opinion

ID: 2795165
Source: CourtListenerOpinion
Date Created: 2015-04-20 21:04:08.645857+00
Date Added: 2024-06-11T11:29:13.217591
License: Public Domain

This opinion will be unpublished and
                         may not be cited except as provided by
                         Minn. Stat. § 480A.08, subd. 3 (2014).

                              STATE OF MINNESOTA
                              IN COURT OF APPEALS
                                    A14-0681

                                Scott R. McKee, M. D.,
                                       Appellant,

                                           vs.

                            St. Paul Eye Clinic, P. A., et al.,
                                      Respondents.

                                 Filed April 20, 2015
                                      Affirmed
                                     Kirk, Judge

                             Ramsey County District Court
                               File No. 62-CV-12-8028

Sam Hanson, John M. Degnan, Neal T. Buethe, Scott M. Flaherty, Briggs and Morgan,
P.A., Minneapolis, Minnesota (for appellant)

William M. Hart, Bradley J. Lindeman, Laura C. Sands, Julia J. Nierengarten, Meagher
& Geer, P.L.L.P., Minneapolis, Minnesota (for respondents)

      Considered and decided by Ross, Presiding Judge; Kirk, Judge; and Reilly, Judge.

                       UNPUBLISHED OPINION

KIRK, Judge

      Appellant-physician, a former shareholder and employee of three closely held

corporations, appeals the district court’s grant of summary judgment, arguing that there

are genuine issues of material fact concerning whether respondent-shareholders
(1) violated common-law fiduciary duties owed to him as a shareholder-employee,

(2) violated the peer-review statute, and (3) proffered a reason for terminating his

employment that was a pretext for age discrimination. We affirm.

                                        FACTS

        Appellant Scott R. McKee, M.D., an ophthalmologist and surgeon, was a 30-year

employee of respondents St. Paul Eye Clinic, P.A. and Eye Surgery Associates, Inc. St.

Paul Eye Clinic and Eye Surgery Associates are closely held corporations that employ

physicians for its clinics and Midwest Surgery Center (MSC), its outpatient surgical

facility.   Dr. McKee was a shareholder of St. Paul Eye Clinic and Eye Surgery

Associates, which were organized under the Minnesota Business Corporation Act

(MBCA) Minn. Stat. §§ 302A.001-.92 (2014).1 Respondents in this action also include

12 physicians who are shareholders of St. Paul Eye Clinic and Eye Surgery Associates

and one hospital administrator who is a shareholder of Eye Surgery Associates.

        In 2008, Dr. McKee signed an at-will employment agreement with St. Paul Eye

Clinic that included a provision stating that his employment could be terminated with or

without cause.     Dr. McKee also signed a stock-sale-and-redemption agreement

acknowledging that he did not have any reasonable expectation under Minn. Stat.

§ 302A.751 of the MBCA that the ownership of the shares entitled him to rights as an

employee or officer of the company that would not exist if he was not a shareholder.

1
 Dr. McKee was also a member of respondent Northway Resource Development, LLC,
which is a limited-liability company owned by the shareholders of St. Paul Eye Clinic.

                                            2
       This case arose from two instances of alleged patient abuse by Dr. McKee during

routine cataract surgery. On August 16, 2010, Dr. McKee was performing a cataract

surgery at MSC on a male patient with Parkinson’s disease. Three nurses who assisted

during the surgery testified that they witnessed Dr. McKee physically assault the patient.

One of the nurses, who had 21 years of experience and participated in more than 20,000

eye surgeries, testified that when the patient failed to follow Dr. McKee’s verbal

commands during surgery, Dr. McKee delivered several closed-fisted blows to the

patient’s head. The nurses’ supervisor testified that she observed two of the nurses

obviously distressed and in tears immediately after the surgery.

       In his deposition, Dr. McKee denied assaulting the patient and testified that the

patient experienced two rare and simultaneous complications during surgery: an

oculogyric crisis where the eye suddenly jerked to the right and remained fixed in that

position, and an expulsive hemorrhage, which can cause permanent blindness if not

immediately treated. Dr. McKee claimed that to save the patient’s eye, he performed a

series of medical techniques, which included tapping the side of the patient’s head with

his fingers. Dr. McKee admitted during his deposition that while he was tapping the

patient’s head, “from one direction, [my hand] look[ed] like a fist.” Dr. McKee requested

the assistance of another physician during surgery, and the patient ultimately experienced

no complications. Dr. McKee’s surgical notes do not mention either complication or that

he tapped the patient’s head with his fingers during the surgery.

       After the surgery, two of the assisting nurses drafted an incident report outlining

their observations of patient abuse and delivered it to their supervisor within the week.

                                             3
The contents of the incident report were shared with members of MSC’s administrative

committee, and it was referred to MSC’s executive committee.           MSC’s executive

committee convened the peer-review committee, which conducted a peer-level review of

the August 2010 incident. At the conclusion of the review, the peer-review committee

requested that Dr. McKee attend anger-management counseling.            The peer-review

committee approved Dr. McKee’s request to attend private counseling sessions, but he

never attended a session.

      On February 28, 2011, Dr. McKee performed a routine cataract extraction on an

elderly patient at the HealthEast surgery center.      An interpreter was present in the

operating room because the patient did not speak English. Two nurses who assisted Dr.

McKee during the surgery testified that Dr. McKee hit the patient in order to gain her

compliance. One nurse testified that she found the incident to be very unusual and

inappropriate because “[t]o swat anybody, especially in healthcare, it’s just not

appropriate.” The surgery was ultimately successful.

      One of the nurses reported the incident of patient abuse to her supervisor, who in

turn relayed the information to several physicians at the St. Paul Eye Clinic. In response

to the second account of patient abuse committed by Dr. McKee, the physicians

convened a special meeting of the board of directors to discuss the issue. Thomas Rice,

M.D., Chief Executive Officer, President, and Treasurer of St. Paul Eye Clinic and Eye

Surgery Associates, sent a confidential third-party-report form to the Minnesota Health

Professional Services Program (HPSP) asking them to investigate Dr. McKee for any

signs of a physical, mental-health, or chemical-dependency issue that would explain his

                                            4
behavior. HPSP is a statutorily authorized agency that assists healthcare professionals to

address illness, chemical-dependency, or mental-health issues while retaining their

licenses.

       At the March 15 board of directors meeting, all of the majority shareholders were

in attendance.   Addressing his colleagues, Dr. McKee denied hitting the patient in

February and explained the medical techniques he used to address the complications that

arose during the August 2010 surgery. The board voted to place Dr. McKee on an

indefinite leave of absence pending the outcome of the HPSP report. Dr. McKee agreed

with the board’s decision. Two weeks later, a report detailing the findings of the HPSP

assessments was issued.     At the direction of HPSP, Dr. McKee had undergone a

psychiatric assessment, a general medical evaluation, and neuropsychological and

neurocognitive assessments, and the examining physicians found no evidence of any

untreated disease.

       At the annual two-day retreat in April 2011, the St. Paul Eye Clinic held another

board meeting, which was attended by all of the physicians. Dr. McKee again addressed

the physicians and demanded that he be allowed to return to active employment. Dr.

Rice testified that Dr. McKee was “very agitated and very aggressive towards other board

members. He pounded the table several times demanding to be reinstated.” The board

made no decision on Dr. McKee’s employment at that meeting.

       Several days later, the board voted unanimously to terminate Dr. McKee’s

employment based on the incidents involving his treatment of patients and his response to

the board’s concerns about his actions. As a result, Dr. McKee brought an action against

                                            5
respondents alleging breach of fiduciary duty and age discrimination.         Respondents

moved for summary judgment. The district court held a lengthy hearing on respondents’

motion during which it repeatedly asked Dr. McKee’s counsel, in light of the extensive

discovery in the case, to state a material fact demonstrating a causal connection between

an alleged breach of fiduciary duty by respondents and Dr. McKee’s claimed damages.

In a thorough and well-reasoned order, the district court granted respondents’ motion for

summary judgment on all claims.

       This appeal follows.

                                     DECISION

       “On appeal from summary judgment, we must review the record to determine

whether there is any genuine issue of material fact and whether the district court erred in

its application of the law.” Dahlin v. Kroening, 796 N.W.2d 503, 504 (Minn. 2011); see

Minn. R. Civ. P. 56.03. “On appeal, the reviewing court must view the evidence in the

light most favorable to the party against whom judgment was granted.”            Fabio v.

Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). No genuine issue for trial exists “[w]here

the record taken as a whole could not lead a rational trier of fact to find for the

nonmoving party.” DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997) (alteration in

original) (quoting Matushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587,

106 S. Ct. 1348, 1356 (1986)) (quotation marks omitted).

                                            6
I.        There are no genuine issues of material fact regarding whether the majority
          shareholders breached a fiduciary duty to Dr. McKee.

          Dr. McKee argues that there are genuine issues of material fact regarding whether

the majority shareholders breached a fiduciary duty owed to him as a minority

shareholder.      In support of his argument, Dr. McKee cites the requirement of

shareholders not to act in an unfairly prejudicial manner toward other shareholders, as

outlined in Minn. Stat. § 302A.751, subd. 1(b)(3), and the common-law fiduciary duty of

shareholders to disclose material facts to one another. See Berreman v. West Publ’g Co.,

615 N.W.2d 362, 370-71 (Minn. App. 2000), review denied (Minn. Sept. 26, 2000).

“[A]n omitted fact is material if there is a substantial likelihood that a reasonable

shareholder would consider it important in deciding how to vote.” Id. at 371 (quoting

Basic Inc. v. Levinson, 485 U.S. 224, 231, 108 S. Ct. 978, 983 (1988)) (quotation marks

omitted). Materiality depends on the specific facts of each case. Id.

          Specifically, Dr. McKee argues that St. Paul Eye Clinic breached its fiduciary duty

to him when it: (1) failed to give him proper notice that it was planning to discuss the

February 2011 incident at the March 15 board meeting; (2) failed to complete a

reasonable and thorough investigation into the incidents before terminating his

employment; (3) submitted an inaccurate third-party report to HPSP; and (4) failed to

consider the findings of the HPSP report clearing him of any medical or psychological

issues.

          The MBCA recognizes the duty of shareholders in closely held corporations to act

in an honest, fair, and reasonable manner. Minn. Stat. § 302A.751, subd. 3a. “Breaches

                                               7
of fiduciary duty are probably unfairly prejudicial within the meaning of section

302A.751, subd. 1(b)(3).” Berreman, 615 N.W.2d at 373. There is also a common-law

fiduciary duty, which is separate and distinct from the remedies provided by the MBCA.

Id. at 369. The common-law fiduciary duty requires shareholders in a close corporation

to deal “openly, honestly and fairly with other shareholders.” Pedro v. Pedro, 489
N.W.2d 798, 801 (Minn. App. 1992) (quotation omitted), review denied (Minn. Oct. 20,

1992).

         This case asks us to decide whether the majority shareholders breached a fiduciary

duty to a minority shareholder by terminating that shareholder’s employment, which

resulted in a forced buy-out of his shares.        The business-judgment rule creates a

“presumption that in making a business decision, the directors of a corporation acted on

an informed basis, in good faith and in the honest belief that the action taken was in the

best interests of the corporation.” In re Xcel Energy, Inc., 222 F.R.D. 603, 606 n.3 (D.

Minn. 2004) (quotation omitted); see Potter v. Pohlad, 560 N.W.2d 389, 392 (Minn.

App. 1997), review denied (Minn. June 11, 1997).

         Summary judgment is only appropriate if no rational factfinder could find that the

majority shareholders breached their fiduciary duty towards Dr. McKee by terminating

his employment. See Gunderson v. Alliance of Computer Prof’ls, Inc., 628 N.W.2d 173,

189 (Minn. App. 2001), review granted (Minn. July 24, 2001) and appeal dismissed

(Minn. Aug. 17, 2001). A shareholder-employee’s expectation of continued employment

is reasonable if it “can fairly be characterized as part of the shareholder’s investment.”

Id. at 191 (quotation omitted). But any expectation of continued employment must be

                                              8
balanced against the reasonableness of the employee-shareholder’s expectations and “the

controlling shareholder’s need for flexibility to run the business in a productive manner.”

Id. at 186, 191.

       Viewing the evidence in the light most favorable to Dr. McKee, no rational

factfinder could conclude that he possessed a reasonable expectation of continued

employment based on the provisions of the employment and buy-sell agreement.

Minnesota law presumes that the terms of any written agreement reflect the reasonable

expectations of the parties. Minn. Stat. § 302A.751, subd. 3a; see also Gunderson, 628
N.W.2d at 186 (stating that a shareholder’s expectations “are presumptively reflected in

the buy-sell agreement as to matters covered by the agreement”).            As an at-will

employee, Dr. McKee knew that his employment could be terminated at any time.

Moreover, the buy-sell agreement affirmed Dr. McKee’s reasonable expectation that

under section 302A.751 he had no additional rights as an employee by virtue of his status

as a shareholder.

       The majority shareholders made a rational business judgment to terminate Dr.

McKee’s employment based on their honest belief that he had an anger-management

problem and that his continued employment posed a significant liability to the clinic.

“[N]o breach of fiduciary duty occurs if the controlling group can demonstrate a

legitimate business purpose for its action.” Gunderson, 628 N.W.2d at 191 (quoting

Wilkes v. Springside Nursing Home, Inc., 353 N.E.2d 657, 663 (Mass. 1976)) (quotation

marks omitted). The majority shareholders presented strong, compelling evidence from

several reliable eyewitnesses that on two separate occasions in two different hospital

                                            9
settings, Dr. McKee committed patient abuse by hitting a patient that he considered to be

noncompliant during routine cataract surgery. When Dr. McKee was first confronted

with the evidence of the August 2010 incident, he refused to acknowledge what had

occurred and his behavioral problems persisted.

       At oral argument, Dr. McKee asked this court to conclude that the majority

shareholders’ exercise of the business-judgment rule is eclipsed by their fiduciary duty to

follow “the highest standard of duty implied by law,” which requires them to conduct a

meticulous, thorough investigation into the allegations before terminating his

employment. See D.A.B. v. Brown, 570 N.W.2d 168, 172 (Minn. App. 1997). In support

of his position, Dr. McKee draws from the holding of Appletree Square I, Ltd. v.

Investmark, Inc., 494 N.W.2d 889, 893 (Minn. App. 1993), review denied (Minn. Mar.

16, 1993), arguing that majority shareholders cannot use contracts or make business

judgments that destroy the fiduciary character of the shareholder relationship.

       Contrary to Dr. McKee’s position at oral argument, the business-judgment rule

does apply in situations exactly like this. See Wilkes, 353 N.E.2d at 663.2 Courts do not

“sit as super-personnel departments reviewing the wisdom or fairness of the business

judgments made by employers, except to the extent that those judgments involve

2
  The Wilkes court concluded that there was no legitimate business purpose for the
majority shareholders’ removal of a minority shareholder from the payroll and refusal to
reelect him as a salaried officer and director. 353 N.E.3d at 663. Because “[t]here was
no showing of misconduct on the [minority shareholder’s] part as a director, officer or
employee of the corporation which would lead us to approve the majority action as a
legitimate response to the disruptive nature of an undesirable individual bent on injuring
or destroying the corporation.” Id. at 664. In contrast, respondents were faced with
evidence of several instances where Dr. McKee’s angry outbursts with patients and
colleagues threatened the viability of the business.

                                            10
intentional discrimination.” Vaughn v. Roadway Express, Inc., 164 F.3d 1087, 1091 (8th

Cir. 1998) (quotation omitted). “It is not [the court’s] province to determine whether the

employer’s investigation of alleged employee misconduct reached the correct result, so

long as it truly was the reason for the plaintiff’s termination.” Pulczinski v. Trinity

Structural Towers, Inc., 691 F.3d 996, 1004 (8th Cir. 2012). Employers can make even

hasty business decisions so long as they do not discriminate unlawfully, and there is no

evidence that St. Paul Eye Clinic purposely ignored material information or truncated the

investigation in order to terminate Dr. McKee’s employment due to his advanced age.3

See id. at 1005.

       Here, Dr. McKee alleges that Dr. Rice initially submitted an inaccurate third-party

report to HPSP, which included erroneous information portraying him as reckless and

incompetent. The alleged errors included a misreporting of the date of the February 2011

incident by a few weeks, a reference to a conversation between the HealthEast supervisor

and Dr. McKee where she informed him that his conduct was inappropriate, that Dr.

McKee’s surgical caseload was relatively light on the day of the February 2011 incident,

and that St. Paul Eye Clinic had concerns that Dr. McKee was “exhibiting a pattern of

behavior where he is using inappropriate and excessive force to obtain patient

cooperation.” But even if these errors occurred, they do not create genuine issues of

3
  Dr. McKee argues that he was not treated fairly regarding the majority shareholders’
investigation of the February 2011 incident, citing the HealthEast supervisor’s testimony
that the nurse anesthetist assisting Dr. McKee during the surgery told her that he did not
hit the patient. However, both nurses who were present during the surgery testified under
oath at their depositions that the patient abuse did in fact occur, and Dr. McKee chose not
to depose the nurse anesthetist.

                                            11
material fact because there is no evidence in the record that they ultimately affected the

findings of the HPSP report or led to the termination of his employment.

      Moreover, the HealthEast supervisor and Dr. Rice did not intentionally withhold

information from Dr. McKee concerning the February 2011 incident, as Dr. McKee

claims. Dr. Rice informed Dr. McKee prior to the March 15 meeting that Dr. Rice had

received a report from HealthEast that Dr. McKee had slapped a patient, and Dr. Rice and

the HealthEast supervisor possessed the same information about the incident as Dr.

McKee did. The HPSP report was also not “fraudulently concealed” from the majority

shareholders, as Dr. McKee alleges. Dr. Rice read the report aloud to the shareholders at

the April retreat, and a copy of the report was also distributed among the majority

shareholders.

      The fact that the HPSP report found no evidence of any medical or neurological

impairment was not purposely disregarded by the majority shareholders, as they

acknowledged and discussed the findings at the retreat.          They remained greatly

concerned, however, about allowing Dr. McKee to return to his surgical practice in light

of the fact that there was no identifiable medical cause or organic psychological reason

for his previous display of excessive aggressiveness in the operating room. Dr. McKee

was also not medically cleared to return to his employment duties by the findings of the

HPSP report, as he claims. From an employment perspective, the HPSP report was

purely advisory in nature and a case manager at HPSP informed the majority

shareholders in a separate letter to consider “non-illness related issues” impacting Dr.

McKee’s medical practice.

                                           12
       It was also not possible for the majority shareholders to follow an alternative

course of action that was less harmful to Dr. McKee’s minority shareholder interest, such

as allowing him to remain on staff as a senior physician. See Wilkes, 353 N.E.2d at 663

(stating that “[i]f called on to settle a dispute, our courts must weigh the legitimate

business purpose, if any, against the practicability of a less harmful alternative”). The

record is replete with testimony from several majority shareholders regarding Dr.

McKee’s angry outbursts directed at his work colleagues. One majority shareholder

testified that he had had numerous uncomfortable conversations with Dr. McKee. In one

instance, Dr. McKee had told him that that he wanted to “settl[e] things with a duel.” In

another instance, when a physician who was a longtime friend of Dr. McKee attempted to

talk to him about the August 2010 incident over a beer at a restaurant, Dr. McKee became

so angry and upset that the physician feared for his life because Dr. McKee blamed him

and other physicians for his professional problems. Fearful of a potential confrontation

with Dr. McKee, some St. Paul Eye Clinic physicians acquired conceal-and-carry permits

for a firearm. Many of the physicians felt that they could no longer work with Dr.

McKee because of his difficult behavior.         In light of this evidence, the majority

shareholders acted within the scope of the business-judgment rule when they terminated

Dr. McKee’s employment.

II.    The majority shareholders did not breach a fiduciary duty under the peer-
       review statute.

       “When the district court grants a summary judgment based on its application of

statutory language to the undisputed facts of a case, . . . its conclusion is one of law and

                                            13
our review is de novo.” Lefto v. Hoggsbreath Enters., Inc., 581 N.W.2d 855, 856 (Minn.

1998).

         Dr. McKee argues that the majority shareholders breached the confidentiality

provision of the peer-review statute by disclosing the contents of the August 2010

incident report to the majority shareholders. Minn. Stat. § 145.64, subd. 1(a) (2014),

states that all data and information discussed by a review organization is confidential and

not subject to either discovery or subpoena.

         Viewing the evidence in the light most favorable to Dr. McKee, we conclude that

the August 2010 incident report was an original source document that was exempt from

the restrictions of the peer-review statute. See Minn. Stat. § 145.64, subd. 1(a) (stating

that documents “otherwise available from original sources shall not be immune from

discovery or use in any civil action merely because they were presented during

proceedings of a review organization”). There is no evidence that the nurses who drafted

the report did so at the direction of a review organization. Rather, as MSC employees,

they were trained to report this type of incident and drafted it without any outside

assistance or direction and well before a peer-review assessment was convened to

investigate Dr. McKee’s conduct. There is also no evidence that MSC’s peer-review

committee ever acquired the incident report.

         Dr. McKee’s argument that the majority shareholders breached their fiduciary

duty to him by violating the peer-review statute is without merit. Dr. McKee failed to

invoke the provider-data exception allowing him to obtain peer-review information

relating to his medical staff privilege, membership, or participation status. Minn. Stat.

                                               14
§ 145.64, subd. 2 (2014).     As a result, there is no evidence in the record before us

relating to what occurred in the peer-review process.

III.   The district court properly dismissed Dr. McKee’s age-discrimination claim.

       The Minnesota Human Rights Act prohibits an employer from discharging an

employee based on age or disability. Minn. Stat. § 363A.08, subd. 2(2) (2014). A

plaintiff may prove discriminatory intent either by direct evidence or by circumstantial

evidence using the burden-shifting method adopted in McDonnell Douglas Corp. v.

Green, 411 U.S. 792, 802, 93 S. Ct. 1817, 1824 (1973). Hoover v. Norwest Private

Mortg. Banking, 632 N.W.2d 534, 542 (Minn. 2001). Under this framework, the plaintiff

must first make out a prima facie case of discrimination, and the employer then must

articulate a legitimate, non-discriminatory reason for terminating the plaintiff’s

employment. Hansen v. Robert Half Int’l, Inc., 813 N.W.2d 906, 918 (Minn. 2012). To

avoid summary judgment on the third prong of the McDonnell Douglas test, the plaintiff

“must put forth sufficient evidence for the trier of fact to infer that the employer’s

proffered legitimate nondiscriminatory reason is not only pretext but that it is pretext for

discrimination.” Hoover, 632 N.W.2d at 546.

       Dr. McKee claims that St. Paul Eye Clinic’s decision to terminate him was

motivated by his age as he was the most senior ophthalmologist and surgeon on staff, and

he points to the fact that the clinic hired an optometrist after his employment was

terminated. The district court found that despite the fact that Dr. McKee satisfied the first

two prongs of the McDonnell Douglas test, there was overwhelming evidence in the

record that his employment was terminated for patient abuse and his failure to

                                             15
acknowledge or address his anger-management issues. And that any argument that his

age impacted the decision is purely speculative.

      Here, Dr. McKee has not demonstrated that a genuine issue of material fact exists

concerning pretext. As discussed in section I, the record is insufficient to permit a

rational factfinder to believe that St. Paul Eye Clinic terminated Dr. McKee’s

employment for anything other than non-discriminatory reasons. The district court’s

grant of summary judgment is supported by the record.

      Affirmed.

                                            16