United States District Court, E.D. Virginia, Alexandria Division
JAMES C. CACHERIS UNITED STATES DISTRICT COURT JUDGE
This matter is before the Court on remand from the Court of Appeals for the Fourth Circuit for a determination of what remedies, if any, Plaintiff Petr Bocek (“Bocek”) shall receive due to Defendants’ breach of their fiduciary duties to him. After remand and reassignment, the Court reopened discovery on the issue of remedies and conducted a one-day, nonjury trial on December 8, 2015. Having carefully considered the evidence presented and parties’ proposed findings of fact and conclusions of law, the Court will award Bocek damages of $156, 000 plus postjudgment interest.
The facts underlying liability in this case are established in prior opinions and presumed known. Those background facts are summarized here only to the extent necessary to frame the present findings as to remedies.
Bocek is a medical doctor specializing in the treatment of allergies. Until being fired on October 21, 2010, Bocek was employed as a full-time physician and medical director at a multi-office medical practice called Allergy Care Centers (“ACC”). After being fired, he entered into a consulting agreement with Defendant JGA Associates, LLC (“JGA”) to investigate the feasibility of opening a new medical practice. Defendant Joseph Amato (“Amato”) is the owner and sole member of JGA.
Five days later, the focus of the parties’ relationship shifted when Bocek raised the possibility of acquiring ACC instead of starting a new practice. Bocek advised Amato that ACC’s prior owner, Charles Valentine (“Valentine”), had passed away in 2008 and Valentine’s estate (“Estate”) could be willing to sell ACC at a discount. Bocek asked Amato to investigate this possibility, but Bocek instructed that his name strictly be left out of any negotiations because his involvement could impair Bocek’s ongoing severance negotiations with ACC.
Defendants began to investigate the possibility of acquiring ACC’s assets. They conducted research on the value of ACC, engaged in many communications with the Estate, and attempted to identify alternate funding structures for acquiring ACC after Bocek disclosed that he did not have sufficient capital to commit to the transaction. These efforts led to JGA agreeing to a nonbinding letter of intent with the Estate, which gave JGA or its assigns an option to purchase ACC’s assets for $1, 000, 000. The Estate approved this agreement on February 8, 2011.
Earlier on February 8, Amato discovered some unsettling facts regarding Bocek’s termination from ACC. Until this time, Amato had accepted Bocek’s explanation that he was fired because his salary was overburdening ACC and limiting the Estate’s ability to sell the practice. On February 8, however, Amato learned from ACC’s practice manager that Bocek was fired amidst allegations that he sexually harassed a nurse, engaged in similar misconduct at a work Christmas party, and wrote himself prescriptions for narcotics on another doctor’s prescription pad. Bocek was also made to sign four no-trespass orders for ACC property and was escorted off ACC grounds by police. After verifying these allegations, Amato sent Bocek a letter on February 17, 2011, terminating the contract between Bocek and JGA. The letter noted “it became apparent . . . that your involvement in any potential transaction would . . . sour the deal. It also became evident that we could not move forward with your participation in any potential transaction without the possibility of serious repercussions thereafter.” (Def.’s Ex. 28.)
Two days before this letter, the Estate submitted a petition to a Pennsylvania court to approve JGA’s acquisition of ACC’s assets for $1, 000, 000. With the sale going forward, Bocek requested the due diligence reports from JGA and warned that JGA acquiring ACC would be a breach of its fiduciary duties to him. Instead of abandoning the ACC acquisition or transferring the opportunity to Bocek, Amato incorporated A2 Medical Group (“A2”) to acquire ACC pending the Pennsylvania court’s approval. On May 13, 2011, JGA assigned its interest in ACC to the newly formed A2 and on June 22, 2011, the Pennsylvania court approved the $1, 000, 000 sale, making A2 the owner of ACC.
After unsuccessfully seeking a preliminary injunction to stop the transfer of ACC’s assets to A2, Bocek filed an amended complaint raising four causes of action, including breach of fiduciary duties. A court in this district granted summary judgment for defendants as to all causes of action. See Bocek v. JGA Assocs., LLC, No. 1:11-cv-546, 2012 WL 1161469, at *5 (E.D. Va. Apr. 5, 2012). The Fourth Circuit reversed and remanded the breach of fiduciary duties claim. See Bocek v. JGA Assocs., LLC, 537 F. App’x 169, 178 (4th Cir. 2013). On remand, the court conducted a nonjury trial and granted judgment to Defendants because Bocek failed to prove the existence of an agency relationship for the acquisition of ACC and because Bocek failed to establish that any alleged breach caused damages. See JGA Assocs., LLC, No. 1:11-cv-546 (E.D. Va. Feb. 11, 2014), ECF No. 211. Bocek appealed this ruling.
On appeal, the Fourth Circuit held “as a matter of law that Bocek proved that the defendants breached their fiduciary obligations to Bocek by appropriating the ACC opportunity for themselves.” See Bocek v. JGA Assocs., LLC, 616 F. App’x 567, 576 (4th Cir. 2015). Additionally, the Fourth Circuit concluded that the district court’s damages findings were clearly erroneous. Id. at 577. Thus, the court remanded the case “for entry of judgment in favor of Bocek on the issue of liability and for a new trial on the issue of what, if any, remedies Bocek is entitled to as a result of the defendants’ breach.” Id. at 578.
After remand, the case was reassigned to this Court. The Court reopened discovery on the issue of remedies and conducted a one-day, nonjury trial on December 8, 2015. Thereafter, the parties submitted their proposed findings of fact and conclusions of law. After careful consideration of the evidence and argument presented at trial and in the parties’ memoranda, the Court issues the following findings of fact and conclusions of law.
II. Legal Standard
As this case comes before the Court on remand, the mandate rule applies. See United States v. Bell, 5 F.3d 64, 66 (4th Cir. 1993). The mandate rule “is merely a specific application of the law of the case doctrine, ” which “prohibits lower courts, with limited exceptions, from considering questions that the mandate of a higher court has laid to rest.” CoreTel Va., LLC v. Verizon Va., LLC, 808 F.3d 978, 679 (4th Cir. 2015). When the appellate court “contemplated that the district court would conduct additional fact-finding, ” however, the district court may rely on new facts, to the extent doing so does not undermine issues “laid to rest” by the mandate. Id.
In the present case, the Fourth Circuit remanded for “a new trial on the issue of what, if any, remedies Bocek is entitled to as a result of the defendants’ breach.” Bocek, 616 F. App’x at 578. Additionally, the Fourth Circuit “offer[ed] no view regarding Bocek’s entitlement to any remedy he has requested, including the imposition of a constructive trust.” Id. at 578 n.7. Thus, the Fourth Circuit contemplated that this Court should consider additional facts and has not “laid to rest” the availability of any remedies.
Under Rule 52(a)(1) of the Federal Rules of Civil Procedure, after trying an action without a jury, “the court must find the facts specially and state its conclusions of law separately.” Fed.R.Civ.P. 52(a)(1). In accordance with those principles, the Court makes the following findings of fact and conclusions of law.
III. Findings of Fact
Bocek began working at ACC in 2003 as a part-time physician receiving an hourly fee. (Tr. 83, 86.) In 2007, Bocek became the only full-time, board-certified allergist at ACC and began serving as the medical director. (Tr. 81-82, 86.) His salary that year was $225, 000, with $45, 000 more in benefits. (Tr. 86-87.) Bocek also negotiated with ACC’s owner, Valentine, to receive yearly salary increases of $60, 000, up to a total of $200, 000. (Tr. 88.) These yearly increases were based on the projection that ACC’s workload would increase and that ACC would open a new practice in Pennsylvania. (Tr. 87.) In 2008, Valentine passed away and ACC’s assets became part of his Estate. (Tr. 88.) Bocek’s salary continued to increase after Valentine’s passing, outpacing the anticipated $60, 000 yearly increases. (Tr. 88.) In 2009, Bocek received $444, 776 in baseline salary and in 2010 he received $449, 428. (Pl.’s Ex. 12 at 26.) With benefits, Bocek received over $500, 000 a year in both 2009 and 2010. (Tr. 49, 83, 87-88.)
Bocek was fired from ACC on Thursday, October 21, 2010. (Def.’s Ex. 25-C.) At that time, Bocek was removed from ACC premises by a police officer and made to sign four no-trespass orders for ACC offices in Montgomery County, Maryland. (Def.’s Ex. 25-B.) These orders and his firing were motivated by a nurse’s complaint that Bocek sexually harassed her at work on October 14, 2010, in addition to a prior allegation of sexual harassment from a female employee, allegations that Bocek wrote himself prescriptions for narcotics on another doctor’s prescription pad, and intermittent absences from work. (Def.’s Ex. 25-C.) Bocek’s large salary also contributed to his firing. (Tr. 100.)
In anticipation of trial, business and valuation expert Joseph Estabrook (“Estabrook”) attempted to estimate how much income Bocek lost as a result of not being able to pay himself a salary and benefits for working at ACC from February 2011 through 2015. (Pl.’s Ex. 12 at ex.5.) Estabrook made this estimation by first averaging Bocek’s salary from 2009 and 2010 to establish a baseline annual income of $447, 102. (Id. at 26.) He then grew that annual salary by a 4 percent cost of living adjustment each year and added $60, 500 in annual benefits. (Id. at 26, ex.5.) After accounting for present value and subtracting various measures of projected mitigation earnings, Estabrook estimated that Bocek lost between $1, 225, 000 and $1, 368, 000 by not being able to employ himself at ACC from February 2011 through 2015. (Id. at 27, ex.5.)
Estabrook’s lost income calculations did not factor in Bocek’s full-time salary from 2007, 2008, or 2009, and did not account for any consideration of ACC’s actual performance in any year. (Pl.’s Ex. 12 at ex.5; Tr. 64-66.) Estabrook testified that the post-sale performance of ACC was not relevant to his estimation because he operated off the assumption that Bocek would be running ACC, whereas A2 was operating ACC after June 2011. (Tr. 66.)
Under one of the mitigation scenarios, Estabrook referred to an industry salary database to determine the median salary for an allergist working at a medical practice with ten physicians. (Pl.’s Ex. 12 at ex.5; Tr. 50.) According to Estabrook’s analysis, such a doctor would receive $234, 832 a year plus $30, 000 in benefits. (Pl.’s Ex. 12 at ex.5; Tr. 50.) At the time Bocek was fired from ACC, the practice employed one full-time physician (Bocek) and four part-time physicians who worked one or two days a week. (Tr. 82.) Of those, Bocek was the only board-certified allergist. (Tr. 82.)
Bocek’s actual income since being terminated from ACC is unknown. After being fired and losing the opportunity to acquire ACC, Bocek continued to pursue opening his own practice. (Tr. 114.) In the summer of 2011, he secured a loan of $600, 000 to be applied toward this goal. (2013 Tr. 107.) In April 2012, Bocek opened an office in Manassas, Virginia and in the summer of 2012 he opened a second office in Germantown, Maryland. (Tr. 114-115.) Bocek’s income from those practices is unknown, but Bocek previously testified that those practices were not profitable in 2013. (2013 Tr. 117.)
Bocek entered into the consulting agreement with JGA on November 10, 2010, less than three weeks after being fired from ACC. (Def.’s Exs. 1, 25-C.) Upon his initial interactions with Amato, Bocek did not disclose his intention to acquire ACC, although that acquisition was on his mind. (Tr. 116.) Bocek raised the possibility of acquiring ACC to Amato five days later. (Def.’s Ex. 2.) Bocek explained the cause of his firing as relating to his high salary. (See Tr. 100-101.) Bocek also repeatedly requested that his name be kept out of Amato’s discussions with the Estate for the purchase of ACC, because his lawyer was involved in severance negotiations with ACC. (See Def.’s Exs. 3, 4, 5, 6, 8, 20.)
Bocek never disclosed to Amato the allegations of sexual harassment, prescription forgery, or the no-trespass orders. (Tr. 101.) Amato did not question Bocek further about his firing because Amato believed Bocek’s explanation that his salary caused his termination. (Tr. 187-188.)
The Court credits Amato’s testimony that he would never have entered into a business relationship with Bocek if he knew of Bocek’s history with ACC. (Tr. 134-136.) Amato credibly explained that JGA’s clients and lending sources rely on JGA to screen investment opportunities, including a client’s character. (Tr. 135.) Amato terminated JGA’s contract with Bocek after verifying the information he learned from ACC’s practice manager about Bocek’s firing. (Tr. 136-137; Def.’s Ex. 27.) By that time, the Estate had already petitioned the Pennsylvania court to approve JGA’s acquisition of ACC. (Def.’s Exs. 28, 29.)
The Court credits Amato’s testimony that, upon terminating JGA’s agreement with Bocek, Amato had no intention to continue with the ACC acquisition. (Tr. 137.) It was investor Brian August (“August”) who proposed continuing with the ACC transaction. (Tr. 137.) Additionally, although Bocek’s counsel sent a letter to Amato warning him not to continue with the ACC acquisition, August’s lawyer advised Amato that the transaction was legal. (Tr. 137-138.) Several other facts corroborate that August, not Amato, was the driving force to continue with the ACC acquisition. For example, August was the party with the financial clout to conduct the transaction, August and his wife acquired a larger interest in A2, August continues to operate ACC after Amato resigned, and August unilaterally reduced Amato’s ownership stake in A2 from 49 percent to 3 percent. (Tr. 137-138, 169; 2013 Tr. 7.)
The Pennsylvania court approved the acquisition of ACC on June 22, 2011. (2013 Tr. 82.) During 2011, Amato and August attempted to manage ACC according to the “status quo” while they got their “feet wet.” (Tr. 143.) The new owners did make some changes at ACC during this time, including hiring a few new doctors and losing the ability to bill for ...