1. Describe the formation of the joint venture between Drs. Kurwa and Kislinger.

2. What is meant by the statement “Dr. Kislinger unilaterally terminated the joint venture”?

3. Did the two doctors owe a fiduciary duty to each other as joint venturers under the Trans Valley Eye Associates, Inc., business organization?

Prior to 1992, Drs. Kurwa and Kislinger maintained their own ophthalmologist practices in the San Gabriel Valley. They subsequently agreed to pursue a new business model at that time by creating a joint venture where, under what is called a “capitation agreement,” HMOs would pay the joint venture a monthly fee based on the number of members of the HMO in exchange for their ophthalmologist services. They signed a handwritten “Agreement between Bud and Mark” in which they outlined the structure within which they would solicit business and share profits. They agreed to incorporate as a professional medical corporation to operate their joint venture business. Thus, Trans Valley Eye Associates, Inc., was formed. The joint venture had capitation agreements with three HMOs serving some 200,000 patients in the year before its demise and earned revenues of $2 million. Beginning September 26, 2003, Dr. Kurwa was suspended from the practice of medicine for 60 days and placed on five years’ probation by the California Medical Board. The doctors also discovered at that time that their corporation did not contain a specific statement in its Articles of Incorporation that it was a professional medical corporation, thus making it an ordinary for-profit corporation. In this setting Dr. Kislinger unilaterally terminated the joint venture and appropriated for himself, without any compensation to Dr. Kurwa, the very successful 11-year venture. Dr. Kislinger contended that Dr. Kurwa had no standing to bring an action against him on behalf of Trans Valley. From adverse decisions in the trial court, Dr. Kurwa appealed.

JUDICIAL OPINION

KRIEGLER, J.… Courts in other states have likewise recognized that joint venturers may choose to operate their venture in the corporate form without divesting themselves of the rights and obligations of joint venturers. (See, e.g., Richbell Info. Servs. v. Jupiter Partners (2003) 309 A.D.2d 288, 765 N.Y.S.2d 575, 585; Yoder v. Hooper (ColoApp. 1984) 695 P.2d 1182, 1187–1188; Jolin v.

Oster (1969) 44 Wis.2d 623, 172 N.W.2d 12, 17; Campbell v. Campbell (1967) 198 Kan. 181, 422 P.2d 932, 941.) Here, the complaint alleges that Drs. Kurwa and Kislinger formed a joint venture to provide medical services to HMO patients by entering into capitation agreements with local medical groups. The doctors incorporated the joint venture, and issued shares of stock to the two principals.

Dr. Kislinger induced the HMOs to terminate their contracts with the corporation and to enter into capitation agreements exclusively with his medical corporation. These facts state a cause of action for breach of fiduciary duty owed by one joint venturer to another. …………….