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Dr. Charles Martin, An Illinois Resident v. Integramed

June 21, 2011


The opinion of the court was delivered by: Judge Rebecca R. Pallmeyer


In May 2009, Dr. Charles Martin ("Dr. Martin" or "Plaintiff") entered into a Management Services Agreement ("Agreement") with Maryland & Virginia Phlebology, P.C. ("MVP") and Vein Clinics of America, Inc. ("VCA"), two medical corporations that operate clinics specializing in the treatment of venous disorders. The agreement designated VCA as the Manager of MVP and named Plaintiff a shareholder. Together with that agreement, Plaintiff executed a Stock Power and a Shareholder Limited Power of Attorney ("Power of Attorney"). In March 2010, VCA exercised the Power of Attorney, declaring its intention to purchase Plaintiff's interest for $100 for resale to another physician, Dr. Satish Vayuvegula. Believing that this transaction violated the parties' agreement, Plaintiff filed suit against MVP, VCA, IntegraMed, Inc.*fn1 and Claude E. White, the Vice President of VCA and Manager of MVP (collectively, "Defendants"), for breach of contract, breach of fiduciary duty, conversion, as well as several violations of the Maryland Code of Corporations and Associations. In response to Defendants' motion to dismiss the original complaint for failure to state a claim, Plaintiff filed an amended complaint.

On December 6, 2010, the court dismissed all counts in Plaintiff's First Amended Complaint without prejudice [Doc. No. 24], concluding that Plaintiff sought a remedy for an alleged breach of contract, but failed to identify which provisions of the parties' agreement had been breached. In a Second Amended Complaint, Plaintiff renews his claims for breach of fiduciary duty and conversion, and has added a request for a valuation of his shares in MVP. Defendants again move to dismiss, and for the reasons set forth below, the motion is granted.


The following facts are drawn from Plaintiff's Second Amended Complaint, unless otherwise noted, and recounted in the light most favorable to Plaintiff. Smith v. Medical Benefit Administrators Group, Inc., 639 F.3d 277, 279 (7th Cir. 2011).

I. The Parties

Dr. Martin is a physician who specializes in phlebology: the diagnosis and treatment of varicose veins and other disorders of venous origin. (2d Am. Compl. at 3, ¶ 10.) Vein Clinics of America, Inc. ("VCA") and Maryland & Virginia Phlebology, P.C. ("MVP") are two medical corporations that operate clinics specializing in phlebology. (Defs.' Mot. to Dismiss at 2.) IntegraMed, Inc. is a specialty healthcare service provider.*fn2 Claude E. White is the Vice President of VCA and Manager of MVP. (2d Am. Compl. at 2, ¶ 6; VCA to Martin of 3/30/10, Ex. 3 to 2d Am. Compl.)

II. Management Services Agreement

In January 2001, VCA hired Dr. Martin to serve as a Physician Manager at one of VCA's local clinics in Orland Park, Illinois. (2d Am. Compl. at 3, ¶ 12.) Beginning in 2007, Plaintiff also served as Medical Director for VCA at various other clinics in Maryland and Virginia. (Id. at 3, ¶ 14.) In May 2009, Dr. Martin, VCA and MVP entered into Management Services Agreement ("Agreement").*fn3 (Id. at 4, ¶ 20.) The Agreement formally defined the relationship between the parties, designating VCA the Manager of MVP and Dr. Martin as a shareholder. (Amended and Restated Management Services Agreement, Ex. 1 to 2d. Am. Compl.) Section 4.12 of the Agreement, the provision now in dispute, states, in relevant part:

[I]mmediately upon the occurrence of a Transfer Event (as defined herein) all of the Stock held by the Shareholders . . . shall be immediately deemed transferred to the Designated Person (as defined herein), without action by the Shareholders. . . . The purchase Price shall be One Dollar ($1.00) per Share but no more than One Hundred Dollars ($100.00) in total price for all the Shares.

The Agreement made clear that VCA, as Manager, controlled the tenure of the shareholders. It defined "Transfer Event" to include the "date of Manager's written instruction to a Shareholder to transfer the Shares to a Designated Person." A "Designated Person" is defined as "an individual licensed to practice medicine in the State, who is designated by the Manager (VCA) to take ownership of the Shares." (Agreement at 4.12 (f).)

At the same time as he signed the Agreement, Plaintiff executed a Stock Power, granting VCA the power to transfer his shares in accordance with the Agreement between MVP, VCA and himself. (Stock Power, Ex. 2 to 2d Am. Compl.) Plaintiff also executed a Shareholder Limited Power of Attorney ("Power of Attorney") in which he appointed VCA as his "true and lawful attorney-in-fact," and authorized VCA to "take any and all actions on [his] behalf to effectuate the provisions of Section 4.12 of the Agreement." (Shareholder Limited Power of Attorney, Ex. F to Agreement; Power of Attorney, Ex. A to Defs.' Mot. Dismiss.) Plaintiff claims that at all times the stock certificates and power of attorney were "held for the benefit of Plaintiff" by Defendant Claude E. White, but neither MVP nor White ever issued the original stock certificates to him. (2d Am. Compl. at 6, ¶¶ 30, 33.)

III. Termination of Plaintiff's Interest in MVP

On March 30, 2010, Defendant White sent Dr. Martin a letter stating VCA's intent to sell his stock interest to another physician specializing in phlebology, Dr. Satish Vayuvegula, pursuant to Section 4.12 of the Agreement. (VCA Letter, Ex. 3 to 2d Am. Compl.) The letter announced that the sale would be effective April 1, 2010. Enclosed with the letter was a check for $100.00 in payment for Dr. Martin's shares. (Id.) Asserting that VCA had no authority to transfer his shares under the Power of Attorney, Plaintiff filed the ...

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