Certain professions such as physicians, can under New Mexico law and the law of many other states form professional corporations to operate their the business which governs their professional affairs. In the case of Aduz Healthcare Services, PC, it was determined, by a 2-1 vote of its partners, that the professional corporation would dissolve and that certain terms concerning the accounting of earnings after the dissolution would apply so as to ensure that the professional corporation receives funds to which it was still entitled. All monies earned from Dr. Herbert Ojiaku’s medical practice were to be deposited first to the corporation, and then timely forwarded to the PC by Rebecca Baeza, a nonparty selected to maintain all relevant accounts and report on the funds received by Dr. Ojiaku during the time in question.
Shortly after this vote of dissolution, Dr. Ojiaku allegedly diverted from the agreed-upon corporate structure by opening two additional bank accounts in the name of Aduz without authorization and without informing his former partners, changed the credit card processing of the corporation to deposit payments into the bank accounts and, seemingly, diverted one of the payment streams from the authorized Aduz account into one of the accounts controlled solely by Defendant. Less than one month after the meeting outlining dissolution terms, the former partners filed suit against Dr. Ojiaku seeking an injunction to enforce corporate decisions, to prohibit interference with corporate decisions, an accounting, breach of fiduciary duties, and conversion.
In the case of Aduz Healthcare Services, PC. v. Ojiaku, the New Mexico District Court ordered Dr. Ojiaku repeatedly to provide a detailed listing of bank records, insurance payments and other transactions in an effort to see how he received and processed fees during the period relevant to the lawsuit. The Doctor did not retain legal counsel during this part of the case, refused to provide documentation for a variety of reasons including that some of the records could be obtained from his banks via subpoena and failed to, when prompted by the court, provide it with a set of findings of fact relevant to the case. In fact, only the Plaintiff provided such findings which were based exclusively on testimony of Ms. Baeza.
After being found in violation of the court’s order, that District Court determined the Defendant was liable for spoliation which constitutes the destruction of evidence. Upon appeal, his counsel whom he retained after the order from the lower court argued he should have only been sanctioned for nonproduction of evidence not spoliation which has greater repercussions. The New Mexico Court of Appeals dismissed this argument noting that the Defendant’s duty to produce was firmly established by a series of court orders which he willfully ignored or violated. “In this case, the district court heard evidence and found that Defendant diverted corporate assets into bank accounts that he created without the knowledge or consent of Plaintiffs. The court received deposition testimony that Defendant claimed not to have liquid assets when he had deposited more than $30,000 into personal accounts. The court also heard testimony that Defendant hindered attempts to access corporate records in the period when Defendant was in primary control” For all of these reasons, the Court of Appeals found the Defendant should be sanctioned with an inference of spoliation and, as a result it upheld the lower court’s ruling that he pay $157,387.33 as attorney’s fees plus interest at a yearly rate of fifteen percent.
This case illustrates the necessity of a corporate officer or director to retain and maintain counsel when a dispute arises over the operation and dissolution of a company. Whatever errors the doctor in this case may have committed before the dissolution, if any, were seriously compounded by his pro se approach to the litigation
Mr. Giddens and the other attorneys at Giddens & Gatton Law, PC have experience advising New Mexico business owners as to which corporate entity will best serve their company’s needs. Giddens & Gatton Law, PC is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico. Call the office at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com for more information