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Qualsett v. Abrahams

Court of Appeals of Nebraska

April 19, 2016

RICHARD QUALSETT, INDIVIDUALLY AND AS ATTORNEY IN FACT FOR THE FORMER SHAREHOLDERS OF OASIS PUBLISHING, INC., APPELLANT,
v.
DAVID ABRAHAMS, INDIVIDUALLY AND AS ATTORNEY IN FACT FOR THE FORMER SHAREHOLDERS OF OASIS PUBLISHING, INC., APPELLEE

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[Copyrighted Material Omitted]

Page 394

         Editorial Note:

         This opinion is not Designated for Permanent Publication.

          Appeal from the District Court for Lancaster County: STEPHANIE F. STACY, Judge.

         Robert R. Creager, of Anderson, Creager & Wittstruck, P.C., L.L.O., for appellant.

         Thomas E. Zimmerman and John C. Hahn, of Jeffrey, Hahn, Hemmerling & Zimmerman, P.C., L.L.O., for appellee.

         IRWIN, PIRTLE and RIEDMANN, Judges.

          OPINION

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         [23 Neb.App. 959] Riedmann, Judge.

         INTRODUCTION

         Richard Qualsett, in his capacity as attorney in fact for the former shareholders of Oasis Publishing, Inc. (Oasis), filed a complaint against David Abrahams, a former Oasis shareholder, alleging breach of fiduciary duty. Abrahams filed a counterclaim, seeking a declaration that he was entitled to recovery of funds Qualsett was withholding from him. In response to the counterclaim, Qualsett asserted the affirmative defense of recoupment, based upon Abrahams' alleged breach of fiduciary duty. The district court for Lancaster County (1) granted summary judgment to Abrahams on Qualsett's complaint, on the basis that the statute of limitations barred Qualsett's claim against him, and (2) entered judgment for Abrahams on his counterclaim, rejecting Qualsett's claim for recoupment, following a bench trial. Qualsett appeals both orders.

          [23 Neb.App. 960] After reviewing the record on appeal, we agree that Qualsett was not entitled to recoupment on Abrahams' counterclaim, because he failed to prove all of the elements of a breach of fiduciary duty claim. Because Qualsett was unsuccessful on his breach of fiduciary duty claim asserted as a defense to Abrahams' counterclaim, we need not determine whether the statute of limitations barred his affirmative claim of breach of fiduciary duty asserted in his complaint. Therefore, we affirm the court's order in favor of Abrahams.

         BACKGROUND

         Qualsett, Abrahams, and Craig Smith formed Oasis. Abrahams served as president and managed the day-to-day activities of the company, while Qualsett provided the majority of the company's financial backing and Smith contributed financially and to marketing. Some smaller shareholders also purchased Oasis stock. The business of Oasis involved creating digital, searchable versions of statutes and case law. Through litigation, Oasis obtained a license from West Publishing Company that allowed it to utilize that company's case law pagination.

         In April 2001, Oasis shareholders negotiated the sale of all of Oasis' stock to Jurisearch Holdings, LLC (Jurisearch). To effectuate the sale, the Oasis shareholders signed an irrevocable power of attorney naming Qualsett, Abrahams, and Smith as attorneys in fact for Oasis. The stock purchase agreement with Jurisearch involved a cash payment at closing of $1,110,000, largely to retire Oasis' debt, and a promissory note upon which Jurisearch was to make monthly interest payments followed by balloon principal payments

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in June 2001 and April 2003. The parties also agreed during negotiations that Abrahams would go to work for Jurisearch following the sale to assist with the transition. Although Abrahams began working with Jurisearch immediately after the stock sale, his employment agreement was not signed until later that year. Abrahams ultimately signed two contracts at the same time: [23 Neb.App. 961] an employment agreement and a noncompetition agreement (the noncompete agreement). Two versions of the employment agreement appear in the record. One version of the employment agreement references the noncompete agreement, which in turn references an employment agreement; the other version makes no reference to the noncompete agreement. Abrahams' employment agreements paid him in membership units or in stock options. His noncompete agreement paid him separately $10,000 per month for 2 years.

         In April 2003, Jurisearch's final balloon principal payment came due and the former Oasis shareholders learned that Jurisearch would be unable to pay what it owed. Qualsett, Abrahams, and Smith, operating under their power of attorney, approved a 1-year extension of Jurisearch's principal payment with continued interest payments. In March 2004, former Oasis shareholders again rolled over Jurisearch's principal payment. Annual rollovers of the principal amount due to Jurisearch's inability to pay continued in this manner until the April 2007 principal payments were coming due. Qualsett states that after the 2006 rollover agreement, he learned that Abrahams had been receiving payments on a noncompete agreement as well as an employment agreement from Jurisearch. Qualsett took over negotiations of the 2007 rollover from Abrahams because he was upset that Abrahams was ...


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