O'Connor v. Kadrmas

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18-P-177 Appeals Court
18-P-178
DANIEL J. O'CONNOR & another 1 vs. EDDIE F. KADRMAS.
DANIEL J. O'CONNOR vs. KADRMAS EYE CARE NEW ENGLAND, P.C., &
another. 2
Nos. 18-P-177 & 18-P-178.
Plymouth. December 5, 2018. - October 18, 2019.
Present: Green, C.J., Wolohojian, & Wendlandt, JJ.
Corporation, Close corporation, Stockholder, Officers and
agents. Contract, Implied covenant of good faith and fair
dealing. Damages, Breach of fiduciary
duty. Fiduciary. Waiver. Massachusetts Wage
Act. Practice, Civil, Summary judgment.
Civil actions commenced in the Superior Court Department on
September 20, 2013, and January 11, 2016.
The cases were heard by Angel Kelley Brown, J., on motions
for summary judgment.
Timothy J. Perry for Eddie F. Kadrmas.
Russell J. Fleming for Kadrmas Eye Care New England, P.C.
1 Opthalmic Consultants of Boston, Inc.
2 Eddie F. Kadrmas.
2
Brian H. Lamkin for Daniel J. O'Connor & another.
WOLOHOJIAN, J. These two cases arise out of the unhappy
breakup of an ophthalmology practice. 3 Only two issues are
before us. The first is whether, in no. 18-P-177 (which we
shall call the common law case), summary judgment was properly
entered against Eddie F. Kadrmas on his counterclaims for breach
of fiduciary duty and breach of contract against Daniel J.
O'Connor. The second is whether, in no. 18-P-178 (which we
shall call the Wage Act case), summary judgment was properly
entered in favor of O'Connor on his Wage Act and breach of
contract claims. 4 In the common law case, we reverse the ruling
on Kadrmas's breach of fiduciary duty claim because there are
genuine issues of material fact sufficient to go to a jury, and
affirm the dismissal of Kadrmas's contract claim because he has
not shown damages. In the Wage Act case, we conclude that
compensation due under paragraph V(a) of the stock agreement
does not constitute "wages" within the meaning of G. L. c. 149,
§ 148 (Wage Act), and therefore reverse summary judgment in
3 The cases are not consolidated but share common facts and
were disposed of together below.
4 Both cases raised other claims, defenses, and
counterclaims, and involved additional parties. However, none
of those are at issue here, either because they were disposed of
below, including by stipulation of dismissal, or because no
argument is raised concerning them on appeal.
3
O'Connor's favor on his Wage Act claim. Also in the Wage Act
case, we affirm the entry of summary judgment in O'Connor's
favor on his contract claim because Kadrmas failed to raise any
genuine issue of disputed fact.
Factual background. On August 8, 2005, Charles T. Post,
Kadrmas, and O'Connor entered into a stock agreement whereby
Kadrmas, at O'Connor's and Post's invitation, joined them in
their ophthalmology practice in Plymouth, which was renamed
Post, O'Connor & Kadrmas Eye Centers, P.C. (POK). 5 The stated
objectives of the stock agreement were to "provide for the
continuity and maintenance of the proficient management, control
and operation of the business of the [c]orporation," and to
"restrict the transfer of the shares of the [c]orporation and
. . . the disposition of the shares of a deceased or retiring
[s]hareholder." Consistent with this, most of the agreement
deals with matters of corporate governance and share ownership,
transfer, and disposition.
However, one paragraph of the stock agreement (paragraph V)
concerns the shareholders' professional responsibilities to POK,
and the compensation they were to receive as shareholders. In
broad summary, paragraph V provides (1) that each shareholder
5 Kadrmas paid approximately $195,000 in exchange for a one-
third interest in the practice.
4
"agrees to devote his full time and attention . . . to
performing medical services on behalf" of POK, (2) that POK
agrees to provide all necessary office, administrative, medical,
and other supplies and support, and (3) a formula for
calculating each shareholder's entitlement to the net profit of
POK. That formula calculated each shareholder's entitlement to
POK's net profit based on his percentage contribution to the
entire "net collections" of the three shareholders. 6 Thus, to
6
Paragraph V of the stock agreement provides as
follows:
"Shareholder agrees to devote his full time and
attention in the practice of medicine to performing
medical services on behalf of the Corporation to the
best of his ability. It is expressly understood and
agreed that any services rendered by any Shareholder
to patients who express a wish to engage him
personally shall nevertheless in fact be rendered to
such patient by Shareholder as an employee of the
Corporation; that all statements rendered for such
services shall be by the Corporation; and that all
fees or other remuneration received by the
Corporation.
"(a) Each Shareholder shall be compensated for
his services to the Corporation based on his 'net
collections' after payment of all overhead costs
and direct expenses as defined further in
paragraph (b) below. 'Net Collections' shall
mean all amounts collected by the Corporation
related to services provided by the Shareholder.
"(b) The Corporation agrees to make available to
Shareholder such office, space, furniture,
furnishings, equipment, medical drug and
supplies, secretarial, technical and nursing
assistance as the Corporation deems reasonably
necessary or appropriate to the proper
5
illustrate, if a particular shareholder's practice generated
five percent of the "net collections" of the three shareholders
collectively, then that shareholder would receive five percent
of the net profit of the entire corporation. Had the parties
not arranged matters in this way, the net profit of the
corporation would instead have been distributed in thirds,
consistent with each shareholder's percentage ownership of the
shares in the corporation, which was a Subchapter S corporation
(S corporation). 7
The parties thereafter profitably operated POK under the
stock agreement, with O'Connor acting as president, Post as
treasurer, and Kadrmas as secretary. POK had nine physicians
and optometrists and a number of other employees. POK also had
performance of the Shareholder's professional
services hereunder. The Corporation shall pay
all the reasonable costs associated with the
Shareholder's practice of medicine; however each
Shareholder shall pay 'overhead costs' in a
manner consistent with the historical allocation
of such costs of the Corporation which shall
include such items as rents, electricity,
telephone expenses, general liability insurance,
and other expenses that may be attributed to a
specific Shareholder."
7 "When a small business corporation elects to be
an S corporation, its earnings or income is not taxed at the
corporate entity level but is passed through and taxed to the
individual shareholders on a pro rata basis, determined by each
shareholder's percentage ownership interest in the corporation;
the pass-through occurs whether or not the income is actually
distributed." J.S. v. C.C., 454 Mass. 652, 660 n.10 (2009).
6
a relationship with Plymouth Laser and Surgical Center, P.C.
(PLSC), which was owned by O'Connor and Post (but not Kadrmas).
PLSC provided ophthalmic laser and surgical services, and
granted operating privileges to physicians (including Kadrmas).
PLSC was located in the same building as POK, and the two
entities shared certain costs, although there was no written
agreement to share expenses.
Beginning in 2008, O'Connor, Post, and Kadrmas began
discussing a possible merger of POK with Ophthalmic Consultants
of Boston, Inc. (OCB), an ophthalmology practice that was
interested in expanding into the Plymouth market. By the spring
of 2011, Post and O'Connor favored a deal with OCB, but Kadrmas
did not -- at least in part because OCB refused to hire his
(Kadrmas's) wife as part of the deal. O'Connor and Post decided
(secretly, Kadrmas alleges) to try to move forward without
Kadrmas but, in August 2011, OCB stated it was not interested in
a merger until the three shareholders had resolved their
differences.
On June 20, 2012, Candescent Partners -- an unrelated
entity -- made an offer to acquire both POK and PLSC for $7
million and to employ O'Connor and Kadrmas. Post, who planned
to retire, was in favor of this deal. However, the proposed
compensation for O'Connor and Kadrmas would be less than what
7
they received from POK; thus O'Connor and Kadrmas did not favor
the deal, and POK rejected Candescent's offer.
Not long thereafter, on July 10, 2012, OCB notified
O'Connor, Post, and Kadrmas that its board of directors had
voted to terminate merger discussions. OCB, however, continued
with its plan to enter the Plymouth market and, to that end,
hired Kathleen Murphy, the longtime administrator of POK, who
had close and longstanding ties to O'Connor and Post, to help
set up a Plymouth operation. O'Connor then contacted OCB to
reinitiate discussions about himself alone becoming affiliated
with OCB. OCB agreed to discuss this option, provided O'Connor
remove himself from POK after giving one year's notice as
required under the stock agreement.
On November 16, 2012, O'Connor gave notice of his intent to
terminate his services, sell his shares in accordance with the
stock agreement, and resign as an officer, director, and
shareholder of POK. Not until five months later, however, did
O'Connor disclose that he intended to leave POK in order to go
to OCB. In response to the information that O'Connor intended
to leave for a direct competitor, Kadrmas demanded to know
O'Connor's departure date and stated that "[i]t is not in the
best interests of the practice for us to simply allow you to
plan to go into competition with POK, lay the groundwork for
that competition, keep us guessing at your departure date and
8
then walk out the door when a competing entity is set to go."
He continued:
"I am glad that you finally stated the obvious in your
email, i.e, that it is your 'intent is [sic] to join OCB'
after you depart. Your prior lawyers had denied you were
negotiating with OCB even after it became clear that that
denial was not true. The fact that you are planning to
join our direct competitor is not consistent with
furthering the best interests of POK. Because of this, I
believe it only makes sense that you resign your position
as a shareholder during the pendency of your planned exit
-- i.e. immediately. Otherwise, you have an impermissible
and irresistible conflict of interest." 8
Kadrmas further stated that he would not allow O'Connor to
solicit POK employees or doctors.
Over Kadrmas's protests, O'Connor, Post, and Murphy
continued with their plans to join OCB. Accordingly, on June
28, 2013, O'Connor signed "term sheets" concerning his future
affiliation with OCB. On the same day, O'Connor and Post
executed a term sheet for the sale of some PLSC shares to
certain members of OCB. On August 1, 2013, Post sold twenty
8 Kadrmas continued on a different front: "I have also
recently learned that [Murphy] set up a system where I have been
unknowingly paying a portion of expenses of PLSC of which I do
not have ownership interest. Apparently, under the system that
was set up, PLSC has been paying POK a flat rate of $4500 per
month for its expenses. However, the real expense of PLSC being
fronted by POK is $15104.65 per month. Therefore, there is a
shortfall of $10604.65 in payment to POK each month. For one
year it becomes $127,235.80. Since this expense would have been
fairly shared 3 ways -- the portion I was overcharged is
$42,418.60 per year. Since this has occurred without my
knowledge for the 8 years that I have been a partner at POK, I
am owed $330,348.80 from PLSC."
9
percent of his PLSC shares, and PLSC merged with OCB. Kadrmas's
surgical privileges at PLSC were not renewed, thus leaving him
no convenient venue for performing surgeries.
Relations between the three shareholders, which were
already acrimonious, deteriorated further as O'Connor's and
Post's departures solidified and approached. On October 4,
2013, Post notified O'Connor and Kadrmas that he wished to
retire and gave his one-year notice under the stock agreement;
he asked whether they would buy his shares immediately.
O'Connor was set to depart on or before March 1, 2014. Murphy
began employment with OCB on January 1, 2014, and immediately
began to help with the process of filling positions for OCB's
new office, which was located in the same office complex as POK.
On January 29, 2014, the pictures and biographies of six
POK doctors appeared on OCB's website, where they were seen by a
patient who informed Kadrmas. All six were still employees of
POK. Kadrmas's counsel immediately e-mailed O'Connor's counsel
and demanded that the information be taken off the website and
that O'Connor cease and desist from soliciting POK physicians
and other employees. O'Connor was still the president of POK
when this occurred but took no action to remove the information
from the website. However, the pictures and biographies were
removed the same day.
10
Less than one month before O'Connor's departure date, on
what came to be referred to as "D-day," February 12, 2014,
twelve POK employees (who included some, but not all, of the
doctors who had previously appeared on OCB's website, as
mentioned above) gave written notice of their resignation from
POK, effective at the end of February or early March. This mass
departure was timed to coincide with O'Connor's departure from
POK, which occurred on February 28, 2014. All twelve employees
left to join O'Connor at OCB, 9 and began working at OCB the first
week of March 2014.
In a supplemental response to an interrogatory seeking
disclosure of experts and their opinions, Kadrmas identified
three experts and their expected testimony regarding (1)
Kadrmas's loss of income on and after December 31, 2013, as
caused by the actions of O'Connor and others, and (2) the fair
market value of Kadrmas's one-third interest in POK at different
points in time. In summary, the experts' opinion was that, as a
consequence of the departures of O'Connor and other POK doctors
and staff, Kadrmas lost $1,990,000 in income for 2014 through
2016. Further, the experts opined that POK's fair market value
as of June 19, 2012 (the date of Candescent's offer to purchase
9 Since March 1, 2014, Kadrmas has been the sole officer and
shareholder of POK.
11
POK) was $3,262,000, and Kadrmas's one-third interest was
accordingly valued at $1,087,333.33. As of December 31, 2016,
however, POK had a value of negative $210,000, and Kadrmas's
one-third interest had no value. In reaching this conclusion,
the experts pointed to (among other things): (1) Kadrmas had
received virtually no compensation for three years after
December 31, 2013, despite there being no diminishment in his
collections or workload, (2) there was no market for an
ophthalmology practice operating in this manner, where the
industry expectation was a thirty-five percent return on
billable collections, and (3) there had been no offers to
purchase POK or its stock since the mass departure of O'Connor
and others.
Pertinent procedural background. 10 1. The common law case.
O'Connor and OCB brought the common law case against Kadrmas
asserting a variety of claims in order to resolve various
patient and practice separation issues that the parties could
not resolve among themselves. 11 In response, Kadrmas asserted
numerous counterclaims, only two of which are currently at
10We recite only the procedural background pertaining to
the issues before us, recognizing that we are omitting
information about additional parties, claims, and issues
involved at earlier points in the two litigations.
11The common law case was filed on September 20, 2013,
months before O'Connor's departure from POK.
12
issue: O'Connor breached his fiduciary duty as a shareholder in
a close corporation, and O'Connor breached the terms of the
stock agreement. Kadrmas's breach of fiduciary duty
counterclaim rested on three theories: first, that O'Connor
breached the duties of full disclosure and fidelity with respect
to his dealings with OCB; second, that O'Connor breached the
duty to promote POK's interests and those of his fellow
shareholders over his own self-serving interests; and third,
that O'Connor failed to refrain from self-dealing at the expense
of POK and Kadrmas. Kadrmas's breach of contract counterclaim
did not specifically allege any particular provision of the
stock agreement that had been breached, but in answers to
interrogatories, he stated that numerous provisions of the
agreement had been breached, 12 as well as the implied covenant of
good faith and fair dealing.
O'Connor moved for summary judgment on the counterclaims.
With respect to the fiduciary duty claim, O'Connor argued both
that the record failed to show that he had breached any duty,
and that, in any event, Kadrmas could not prove causation or
damages. The judge ruled that, although there were genuine
issues of material fact as to whether O'Connor breached his
12Specifically, Kadrmas claimed violation of paragraphs I,
II(b), III, V, and VI of the stock agreement.
13
fiduciary duties by secretly negotiating with OCB to the benefit
of PLSC but at POK's expense, and by engaging in an effort to
freeze him out of POK, Kadrmas could not prove damages.
Similarly, the judge concluded that, although genuine issues of
material fact existed as to whether O'Connor improperly
solicited employees to join OCB while he (O'Connor) was still a
shareholder, director, and president of POK, Kadrmas could not
prove that O'Connor's conduct caused him any damages.
As to the breach of contract claim, the judge carefully
assessed each of the numerous individual provisions of the stock
agreement that Kadrmas alleged had been violated, and concluded
that Kadrmas had no prospect of proving any such violations. 13
The judge did not explicitly address the implied covenant of
good faith and fair dealing, which Kadrmas raised only cursorily
in his papers.
2. The Wage Act case. O'Connor filed the Wage Act case on
January 11, 2016, after having earlier filed a nonpayment of
wage complaint with the Attorney General's office and received a
right to sue letter. Of the numerous claims and counterclaims
asserted in the Wage Act case, only two are before us now:
O'Connor's claim under G. L. c. 149, § 148, against Kadrmas and
13Kadrmas does not challenge on appeal the judge's
conclusion with respect to the individual provisions of the
stock agreement.
14
Kadrmas Eye Care New England, P.C., for failure to pay him for
wages owed, and O'Connor's claim that Kadrmas and POK breached
the stock agreement by failing to pay him compensation due under
paragraph V(a). See note 6, supra, for text of paragraph V(a).
The claims were based on the allegation that Kadrmas withheld
O'Connor's December 2013 quarterly payment ($164,762), as well
as subsequent amounts due and calculable under paragraph V(a) of
the stock agreement. On cross motions for summary judgment, the
judge concluded that amounts due under paragraph V(a)
constituted "wages" within the meaning of the Wage Act and thus
granted summary judgment in O'Connor's favor on his Wage Act
claim. The judge also concluded that Kadrmas failed to raise a
disputed issue of material fact with respect to O'Connor's
contract claim and entered judgment in O'Connor's favor on that
claim as well.
Discussion. 1. The common law case. a. Fiduciary duty.
On appeal, Kadrmas argues that the summary judgment record
showed that O'Connor, "while acting as President of POK, aimed
all of his activities for a full year prior to his departure at
benefiting OCB and harming POK in the wake of his departure." 14
14Although Kadrmas also briefly states in his brief that
the judge correctly determined that he had sufficiently showed
that O'Connor breached his fiduciary duty by enlisting the help
of counsel to freeze Kadrmas out of the potential merger with
OCB, he offers no argument concerning the judge's conclusion
that this theory fails because there is no evidence of causation
15
This included, in Kadrmas's view, secretly helping to set up a
competing enterprise (OCB) within a mile of POK, secretly
planning to solicit patients, referral sources, and key
personnel away from POK, secretly planning to withdraw Kadrmas's
surgical privileges at PLSC, and failing to help locate or hire
replacements for the departing (solicited) employees -- all done
while O'Connor was president of POK and Kadrmas's fellow
shareholder in a close corporation.
The summary judgment record, taken in the required light,
sufficiently supports each of these factual contentions.
Although O'Connor stresses that there is no direct evidence that
he solicited employees, direct evidence is not necessary where,
as here, the circumstantial evidence, together with the
reasonable inferences to be drawn from it, suffices.
See Godfrey v. Globe Newspaper Co., 457 Mass. 113, 119 (2010)
("In deciding a motion for summary judgment, the motion judge
must consider all factual allegations, and draw all reasonable
inferences therefrom, in favor of the nonmoving party"). The
timing, sequence, and circumstances surrounding the employees'
mass exodus from POK, especially viewed against the background
or damages flowing from the never-consummated merger. We
accordingly treat this theory of his fiduciary duty claim as
waived. See Sullivan v. Liberty Mut. Ins. Co., 444 Mass. 34, 35
n.1 (2005) (waiver where argument is not made on appeal from
summary judgment).
16
of the shareholders' acrimonious relationship and dealings
leading up to it, are sufficient to permit a reasonable
inference that O'Connor had a hand in the employees' departure
even while he was still an officer and shareholder of POK.
In a close corporation, such as POK, shareholders owe "each
other a fiduciary duty of the 'utmost good faith and
loyalty.'" O'Brien v. Pearson, 449 Mass. 377, 383 (2007),
quoting Donahue v. Rodd Electrotype Co. of New England, Inc.,
367 Mass. 578, 593 (1975). "[A]s in a partnership, 'the
relationship among the stockholders [of a close corporation]
must be one of trust, confidence and absolute loyalty if the
enterprise is to succeed.'" Selmark Assocs., Inc. v. Ehrlich,
467 Mass. 525, 536 (2014), quoting Donahue, supra at 587.
Although O'Connor was certainly free to leave POK for a
competitor provided he complied with the terms of the stock
agreement, as long as he remained a shareholder and officer of
POK, his fiduciary duties were to POK and his fellow
shareholders. See Chelsea Indus., Inc. v. Gaffney, 389 Mass. 1,
11-12 (1983). During that time, he had a duty not to frustrate
the reasonable expectations of Kadrmas, whether by soliciting
POK doctors or employees, refusing to hire replacement doctors
while he remained president of POK, or otherwise taking steps
designed to gut POK's and Kadrmas's ability to compete with OCB
or to recover from O'Connor's departure. See Pointer
17
v. Castellani, 455 Mass. 537, 550 (2009) ("A breach of fiduciary
duty through a freeze-out also occurs when the reasonable
expectations of a shareholder are frustrated"). O'Connor was
free to do all of these things after he left POK; the problem
for him here is that the record permits the inference that he
did not wait until his departure.
That leaves us with the question whether the judge was
correct when she concluded that Kadrmas could not prove
causation or damage resulting from O'Connor's breaches of
fiduciary duty, despite the opinion of Kadrmas's experts. She
reached this conclusion because there was no reduction in the
number of patients Kadrmas saw or billed after O'Connor's
departure. But POK was never a one-physician shop; Kadrmas's
expectations were not based on a solo practice, nor was his
compensation based solely on his own gross billings. The
question of Kadrmas's loss is not limited to whether he was able
to see as many patients and bill them as much as before O'Connor
left. Instead, the pertinent question is whether O'Connor's
alleged breaches of fiduciary duty caused Kadrmas damage and, if
so, in what amount. See Augat, Inc. v. Aegis, Inc., 417 Mass.
484, 488 (1994) (plaintiff must show what portion of losses are
attributable to defendant's misconduct). The proper remedy for
breach of fiduciary duty is to "restore to the minority
shareholder those benefits which she reasonably expected, but
18
has not received because of the fiduciary breach." Brodie
v. Jordan, 447 Mass. 866, 870-871 (2006).
This inquiry requires not only an assessment of Kadrmas's
billings, but also of his compensation -- which, as provided in
paragraph V(a) of the stock agreement depended on the net
profits of the corporation. All this was set out in Kadrmas's
experts' opinion. While acknowledging that "Kadrmas's
contribution to the [p]ractice in terms of patients seen and
patient billings was not impacted by the departure of Dr.
O'Connor, the two doctors and twelve staff members," the experts
concluded that "the value of the [p]ractice and compensation to
Dr. Kadrmas has greatly declined due to the loss of revenue and
other business issues created by the mass exodus that followed
Dr. O'Connor to OCB." More specifically, Kadrmas's aggregate
annual compensation in the two years before O'Connor's departure
was $866,212 (in 2012) and $754,891 (in 2013). 15 But in 2014,
his aggregate compensation dropped to $110,000 and in 2015 it
fell to $91,099. The practice's 2016 revenues were more than
thirty percent less than 2012, and Kadrmas was required to lend
the practice $100,000 in each of 2014 and 2015.
15O'Connor's aggregate compensation from POK was $1,107,736
in 2012 and $981,596 in 2013.
19
The experts' opinion, together with the facts underlying
it, was sufficient to put the question of damages to the jury
with respect to the breach of fiduciary duty theory Kadrmas has
argued on appeal, which we identified in the first paragraph of
this section of our opinion. See Herbert A. Sullivan, Inc.
v. Utica Mut. Ins. Co., 439 Mass. 387, 414 (2003) ("It is the
function of the jury to assess and weigh the soundness and
credibility of an expert opinion").
b. Breach of the implied covenant of good faith and fair
dealing. Kadrmas argues that the judge erred when she dismissed
his contract counterclaim without considering his argument that
O'Connor, together with Post and Murphy, and with the help of
counsel, violated the covenant of good faith and fair dealing by
engaging in a freeze-out scheme when they pursued negotiations
in 2012 to sell PLSC (in which Kadrmas had no stake) at a
premium to OCB, and to decrease the value of POK (in which
Kadrmas had a stake). Among other things, O'Connor argues that
Kadrmas's argument is waived. We thus turn first to the origins
and evolution of Kadrmas's argument as he articulates it now on
appeal.
Kadrmas's contract counterclaim made no mention of the
implied covenant of good faith and fair dealing. However, in a
supplemental response to an interrogatory seeking to know the
bases for his contract claim, Kadrmas stated (among other
20
things) that the claim was based on breach of the covenant of
good faith and fair dealing implicit in the stock agreement. In
his supplemental response to interrogatory no. 3, Kadrmas
further stated that "the actions that constitute a breach of the
implied covenant are set forth in [i]nterrogatory No. 2, above,
and are the same that constitute the breaches of fiduciary duty
set forth below in Response to [i]nterrogatory 5." 16 When it
came time to oppose O'Connor's motion for summary judgment,
Kadrmas took a similarly broad-brush approach, stating only that
"[t]he freeze-out scheme set forth in detail in the [a]dditional
[f]act section of the [c]onsolidated [f]acts submitted herewith
amply sets out a breach of the covenant of good faith and fair
dealing." Whatever else might be said about these contentless
and vague statements, they obviously did not comply with
Kadrmas's responsibility, under Mass. R. Civ. P. 56 (e), 365
Mass. 824 (1974), to provide a "response, by affidavits or as
otherwise provided in this rule, [to] set forth specific facts
showing that there is a genuine issue for trial."
16In other words, Kadrmas's breach of the implied covenant
claim and breach of fiduciary duty claim are duplicative to the
extent that they each rest on his allegations concerning the
2012 freeze-out scheme. As we noted above in note 14, Kadrmas
has waived on appeal any claim that the judge erred when she
concluded that he had failed to present sufficient facts to show
causation or damages with respect to the 2012 freeze-out scheme
as part of his fiduciary duty claim.
21
Even were we to overlook the deficiencies of Kadrmas's
papers below, summary judgment was properly entered on the
implied covenant claim. Although we assume that the summary
judgment record was sufficient to show that O'Connor, in concert
with Post and Murphy, attempted to freeze Kadrmas out by
negotiating a deal with OCB in 2012 that did not include Kadrmas
and would work to his and POK's detriment, it is undisputed that
no transaction resulted from these efforts. And, perhaps more
importantly, Kadrmas's own experts identified no loss to him
from the fruitless 2012 scheme. Indeed, the experts' opinion
made no mention at all of the 2012 freeze-out efforts, pointing
to the bona fide offer from Candescent only for purposes of
establishing fair market value of POK at that time. Without a
showing of compensable loss, Kadrmas is not entitled to maintain
his claim for breach of the implied covenant. See Ayash
v. Dana-Farber Cancer Inst., 443 Mass. 367, 388 (2005) (must
show economic loss resulting from breach of implied covenant of
good faith and fair dealing).
2. The Wage Act case. O'Connor's Wage Act and contract
claims are both based on his contention that Kadrmas, POK, and
Kadrmas Eye Care New England, P.C. (KEC) 17 wrongfully failed to
17Kadrmas created KEC in 2014 to continue the practice
after O'Connor and Post left POK.
22
pay him compensation due under paragraph V(a) of the stock
agreement. O'Connor contends that he did not receive his
December 2013 quarterly distribution, or amounts that were due
him in 2014 and 2015 for patient revenue he generated before his
departure from POK. It is undisputed that these payments were
withheld, although the parties dispute why. 18
O'Connor moved for summary judgment on both claims (Wage
Act and contract). Kadrmas's opposition to that motion was
directed only to the Wage Act claim and offered no specific
argument directed to the contract claim. Indeed, the title of
Kadrmas's opposition memorandum and its opening paragraph stated
that he was opposing O'Connor's motion only with respect to the
Wage Act claim, and the conclusion asked only that the Wage Act
claim be dismissed. Kadrmas also cross moved for summary
judgment on the Wage Act claim.
After argument on the cross motions, Kadrmas filed an
emergency motion to correct what he called a scrivener's error
on the cover page of his summary judgment opposition.
18POK's practice was to cut checks to the three
shareholders for the final quarterly distribution, even though
the figures would not become final until sometime the following
year. The shareholders were then expected to not cash the
checks until the figures were finalized, and they complied with
that expectation. Following this practice, O'Connor received a
check for the December 2013 quarterly distribution, but did not
deposit or cash it. Later, Kadrmas caused the check to be
voided because, in his view, there were no net profits.
23
Specifically, he asked to replace the first page of his
opposition with one that referred to the contract claim in the
title and the opening paragraph. Kadrmas's motion to correct
scrivener's mistake stated:
"It is Dr. Kadrmas's position that for the same reasons
that the Wage Act claim fails, the contract claim 'as
regards unpaid wages' also fails. Therefore, no additional
argument is needed than that which is set forth in the
brief."
The judge allowed the motion to correct this so-called
scrivener's error, a ruling O'Connor has not appealed.
Notwithstanding the "correction," the judge concluded that
Kadrmas failed to raise a disputed issue of fact concerning the
contract claim, and directed that judgment enter in O'Connor's
favor. She also concluded that amounts due under paragraph V(a)
constitute wages within the meaning of the Wage Act.
a. Wage Act claim. The Wage Act requires that a
terminated employee be paid his "wages" expeditiously after his
or her termination. See G. L. c. 149, § 148. "The statute
applies to wages, to holiday and vacation pay, and, 'so far as
apt, to the payment of commissions when the amount of such
commissions, less allowable or authorized deductions, has been
definitely determined and has become due and payable to such
employee.'" Suominen v. Goodman Indus. Equities Mgmt. Group,
LLC, 78 Mass. App. Ct. 723, 737 (2011), quoting G. L. c. 149,
§ 148. The question here is whether distributions pursuant to
24
paragraph V(a) of the stock agreement are "wages" within the
meaning of the Act. That question cannot be answered without
reference to the stock agreement, the interpretation of which is
a question of law we review de novo. See James B. Nutter & Co.
v. Estate of Barbara A. Murphy, 478 Mass. 664, 667 (2018).
We begin by noting that the stock agreement controlled
Kadrmas's entry into Post's and O'Connor's ophthalmology
practice as a shareholder. Kadrmas paid approximately $195,000
for a one-third interest in the practice, which was renamed POK.
The stated purposes of the stock agreement were (1) "to provide
for the continuity and maintenance of the proficient management,
control and operation of the business of the [c]orporation," and
(2) to "restrict the transfer of the shares of the [c]orporation
and [to] provide for the disposition of the shares of a deceased
or retiring [s]hareholder." Consistent with these stated
objectives, most of the stock agreement's provisions dealt with
the holding, transfer, or other disposition of shares, and with
governance of the corporation. Paragraph V, however, deals with
how each shareholder "shall be compensated for his services to
the [c]orporation" in exchange for devoting "his full time and
attention in the practice of medicine to performing medical
services on behalf of the [c]orporation." As we have set out
above, compensation under paragraph V(a) was to be calculated
using a formula that applied each shareholder's percentage of
25
gross billings to the net profit of the corporation. This
arrangement was designed to avoid having the net profit of the
corporation distributed according to each partner's one-third
ownership interest, which it otherwise would have been as a
pass-through S corporation.
Whatever else might be said about the stock agreement, it
is not an employment agreement as that term is commonly
understood; by its terms, it is an agreement among shareholders
with respect to their dealings with each other and the
corporation. The stock agreement does not refer to O'Connor,
Post, or Kadrmas as employees, but rather as shareholders. 19
Similarly, the stock agreement nowhere states or implies that
the shareholders are employed by the corporation; instead they
are identified as owners and officers of the corporation. Each
individual's relationship to the corporation is defined by
reference to his ownership of stock in the corporation, and the
duration of that relationship is tied to his continued ownership
of that stock.
"Wages" are salary (or more colloquially "pay"), from an
employer to an employee, including holiday and vacation pay, and
19We acknowledge that the stock agreement also contains a
couple of references to the shareholders as employees, but do
not consider those stray and isolated references to be
dispositive, especially given the context in which they appear.
26
certain delineated commissions. G. L. c. 149, § 148. As
reflected in the numerous references in the statute along these
lines, common indicia of salary or pay are that they are of an
amount established ahead of time and paid on a regular schedule,
such as "weekly or bi-weekly." Id. ("Every person having
employees in his service shall pay weekly or bi-weekly each such
employee the wages earned by him" within certain time after
"termination of the pay period during which the wages were
earned"). See Prozinski v. Northeast Real Estate Servs., LLC,
59 Mass. App. Ct. 599, 604 (2003) ("G. L. c. 149, § 148, refers
to 'weekly' or 'biweekly' wages having been earned during a
particular pay period"). Compensation of this sort can be
neither discretionary nor contingent in order to be considered
"wages" within the meaning of the Wage Act. Mui
v. Massachusetts Port Auth., 478 Mass. 710, 713 (2018).
See Weems v. Citigroup Inc., 453 Mass. 147, 153-154 (2009)
(employee bonuses that were discretionary not wages under Wage
Act); Prozinski, supra at 603 (severance pay not wages because
contingent upon severance).
"The only contingent compensation recognized expressly in
the act is commissions, which are considered wages when they
'ha[ve] been definitely determined and due and ha[ve] become
payable to [the] employee.'" Mui, 478 Mass. at 713, quoting
G. L. c. 149, § 148. "The term 'commission' is commonly
27
understood to refer to compensation owed to those in the
business of selling goods, services, or real estate, set
typically as a percentage of the sales price." Suominen, 78
Mass. App. Ct. at 738. A payment based on a percentage of the
business's overall profits is not a commission.
With these principles in mind, it is clear that the
distributions under paragraph V(a) of the stock agreement are
not "wages" within the scope of the Wage Act. Most
fundamentally, they are not compensation from an employer to an
employee, but rather profit distributions to shareholders to
which they are entitled because of their ownership interest in
the corporation, not because of their employment. Moreover, we
note the highly contingent nature of the profit distributions,
which depended on a number of variables, including the billings
and revenues generated by other doctors. In sum, the profit
distributions are not salary, pay, or commissions. Accordingly,
O'Connor was not entitled to summary judgment in his favor on
his Wage Act claim, and Kadrmas's cross motion for summary
judgment should have been allowed.
b. Contract claim. Kadrmas argues that the judge erred in
granting summary judgment in O'Connor's favor on his contract
claim. Among other things, O'Connor responds that Kadrmas's
arguments were not preserved below and are waived.
28
Having carefully reviewed the record, we agree that
Kadrmas's appellate arguments were not properly preserved below.
Kadrmas's opposition to O'Connor's motion for summary judgment
-- even after the correction of the so-called scrivener's error
-- did not explain, with reference to law or the record, why
O'Connor was not entitled to judgment on his contract claim.
For example, the argument headings in his opposition make no
mention whatsoever to the contract claim, 20 and the discussions
that follow those headings are likewise silent as to how they
relate to O'Connor's contract claim. And, as we noted above,
the summary judgment opposition's conclusion asked only that the
Wage Act claim be dismissed. While we may affirm on "any
ground apparent on the record that supports the result reached
in the [trial] court," Gabbidon v. King, 414 Mass. 685, 686
(1993), it is another matter to reverse on a ground not
adequately raised below. See Royal Indem. Co. v. Blakely, 372
20The argument headings were: (1) "Count III of the 2016
Action (Wage Violation) Must be Dismissed"; (2) "Agreements to
Share Profits Are Not Wages Under the Act"; (3) "The Preliminary
Profit Reports Were Merely Projections And Did Not Reflect
Commissions That Were Definitely Determined Or Due and Payable";
(4) "The Fact That Checks for the Preliminary Profit
Distribution Were Cut and Voluntarily Withheld By the
Shareholders Shows That These Were Not Wages"; and (5) "The
December 31, 2013 Shareholder Distribution Checks Could Not be
Cashed Because the Estimated Profits Did Not, In Fact, Exist And
the Company's Bank Accounts Had Insufficient Funds to Cash The
Checks."
29
Mass. 86, 87–88 (1977) (need not consider issues not raised at
trial where appellee might be prejudiced by appellant's failure
to have done so).
Even were we to overlook his waiver, Kadrmas has not shown
that the judge erred when she concluded that he had failed to
raise "a genuine issue of material fact with respect to whether
he breached Paragraph V of the [s]tock [a]greement by failing to
make the December 2013 quarterly payment and failing to pay
O'Connor his net collections for 2014." As we noted above,
Kadrmas's opposition to O'Connor's motion for summary judgment
did not discuss the contract claim, either with legal citations
or references to the summary judgment record. 21 The judge
certainly was not required to imagine how Kadrmas's Wage Act
arguments might apply to O'Connor's contract claim, or to
herself fill the lacunae in Kadrmas's opposition. Nor was the
judge required to hunt through the record to determine whether
there were disputed issues of material fact that could preclude
summary judgment in O'Connor's favor. See Mass. R. Civ. P. 56
(e); Sullivan v. Liberty Mut. Ins. Co., 444 Mass. 34, 46 n.18
(2005).
21Except for citations to Kourouvacilis v. General Motors
Corp., 410 Mass. 706, 716 (1991), and Godbout v. Cousens, 396
Mass. 254, 261 (1985), for the summary judgment standard,
Kadrmas's opposition cited only Wage Act cases.
30
Conclusion. For the reasons set out above, in no. 18-P-
177, we reverse so much of the judgment as pertains to Kadrmas's
counterclaim for breach of fiduciary duty on the theory that
O'Connor, while president of POK, acted to benefit OCB and harm
POK in the wake of his departure, which is the only theory of
the claim that survives this appeal, and remand that matter for
further proceedings consistent with this opinion; the judgment
is otherwise affirmed. In no. 18-P-178, we reverse the portion
of the judgment that awarded $1,258,557 in favor of O'Connor on
his Wage Act claim and direct that judgment be entered in
Kadrmas's favor instead; we affirm the judgment in all other
respects, including the award of $419,519 in favor of O'Connor
on his contract claim.
So ordered.