29 Nov NON-SOLO RELATIONSHIP – CASE HISTORIES
This article reveals just a few of the numerous stories concerning dentists practicing together with either inadequate contracts or without any contract at all. We learned of these situations through the many consultations we have conducted with dentists through the years.
If you are contemplating working with another doctor, you owe it to yourself to check your contract carefully to see how well your contract truly protects you. If you have no contract in place at all, then you should be aware that you are exposing yourself to one or more of these same serious problems.
In each of the following Case Histories, we will refer to the current practice owner (or owners) as the “Host,” and the associate or other doctor as “Dr. New.”
CASE HISTORY 1: The Host told Dr. New: “Come on in and practice with me for a while. If we find we like each other and can practice together okay, we’ll work on a contract for you to buy my practice in the future.” Dr. New spent two and one-half years waiting for a contract, but the contract never came. He left to start over again elsewhere. Believe it or not he went into another associateship relationship without a contract!
CASE HISTORY 2: Dr. New worked for three years for the Host without a contract. When the time came to buy an equal ownership in the practice, Dr. New discovered that the cost for purchasing into the practice had been increased substantially because of the gross income Dr. New had added to the practice. When Dr. New confronted the Host with this inequity, Dr. New was told that since the Host owned the entire practice, he was entitled to sell the practice for the practice’s full value, regardless of who was responsible for actually adding the production. Dr. New angrily left to start over. Dr. New took approximately 40% of the practice patients with him. Dr. New also persuaded his assistant and a front office employee to go with him as well.
CASE HISTORY 3: Even though the two had signed an agreement that included a covenant not to compete, the agreement did not address anything concerning an acquisition of the practice by Dr. New. The Host decided he would like to sell the practice to Dr. New so he quoted a purchase price to Dr. New. However, Dr. New was unhappy with the purchase price, so Dr. New left the Host’s practice and set up his own practice down the street. The Host sued Dr. New. The lawsuit lasted over two years, with thousands of dollars in legal and accounting fees. Dr. New finally lost and had to pay the Host damages for violating his covenant not to compete with the Host’s practice.
CASE HISTORY 4: Dr. New terminated a 2-year employment with the Host and moved to another office. The Host told the patients that he asked Dr. New to leave because his work was sub-standard. The Host had all of Dr. New’s patient records. He called in Dr. New’s patients, and after examining them, suggested they call the state board of examiners and file a complaint. Dr. New ended up with thousands of dollars in attorney fees defending his reputation. He won the case but still lost a lot of money.
CASE HISTORY 5: Dr. New signed a contract that allowed him to buy into the Host’s practice in twenty-four months. The Host fired Dr. New twenty-three months after the contract was signed, forcing Dr. New to relocate twelve miles away because of the restrictive covenant portion of the contract. Dr. New had no recourse because the buying was not an obligation of the Host, but rather merely an option for Dr. New!
CASE HISTORY 6: Dr. New was an employee of the Host. Dr. New was fired. Over time, the Host received payments from patients for dental services that had been provided to the patients by Dr. New. The Host did not pay Dr. New the compensation Dr. New would have received were he still employed by the Host even though the dental services had obviously been provided while Dr. New was an employee for the Host. Dr. New sued the Host for the compensation on the dental services that Dr. New provided, but Dr. New lost because Dr. New had no written agreement while he was employed by the Host. Dr. New lost sixteen thousand dollars in compensation plus legal fees for fighting the issue in court, as well as reimbursement of the Host’s legal fees!
CASE HISTORY 7: Dr. New and the Host had both of their names displayed on the same letterhead, the practice entrance door, and the street sign. Dr. New did not own any portion of the Host’s practice. Dr. New was not even the Host’s associate. Dr. New and the Host were merely operating separate practices in a shared office arrangement. One day, in a fit of temper, the Host slapped a staff member. Dr. New was sued by the staff member along with the Host even though the particular staff member was not Dr. New’s employee. The staff member’s attorney claimed that Dr. New was really a partner in the practice (they had no contract to prove different) and was therefore personally liable for the actions of the Host. It was determined by the courts that Dr. New was indeed a partner and therefore just as liable as the Host. The Host’s insurance policy did not name Dr. New as an additional insured, and Dr. New’s own insurance carrier denied coverage. The staff member won the case and was awarded a sizeable judgment against the Host and Dr. New. Dr. New was forced to file for bankruptcy.
NOTE: The existence of a partnership relationship is frequently determined in litigation for “office sharing” or “space sharing” arrangements. If you look and act like a partnership, the courts will usually decide you really are a partnership regardless of what other circumstances may dictate otherwise. Thus, either doctor can and often will be personally liable for the actions of the other doctor even in “office sharing” or “space sharing” arrangements.
CASE HISTORY 8: The Host had contractually agreed to sell his practice to Dr. New in three years. As the sale date approached and passed, the Host said nothing to Dr. New. Several months later Dr. New finally confronted the Host to complete the sale as they had agreed upon. The Host told Dr. New that he had changed his mind and wanted to continue to own the practice. Dr. New sued the Host but the courts determined that Dr. New could not force the Host to sell the practice to Dr. New. The courts had decided that their contract provisions pertaining to the buy-out were not clearly written and were found to be too ambiguous to be enforced. Dr. New lost not only the case, but his job as well.
Poorly written contracts are of no value in these circumstances. No contract at all subjects you to any or all of these problems. Partnerships are not limited to being established or determined through a contractual agreement; but, in litigation, are usually determined by the actions of the parties. In other words, if you look and act like a partnership, then you are a partnership!
Your personal liability resulting from the actions of the other doctor in your office can not possibly be overstated. The importance of the structure of the relationship (i.e. corporate, partnership, office sharing, etc.) and the need for contractual responsibilities and obligations to be absolutely clear also can not possibly be overstated.
The choice is yours. You can take a “roll of the dice” with your entire future on the line or you can call PARAGON to protect your future and achieve your professional objectives. You decide!
