Fredericks Peebles & Morgan LLP, appellee.
Fred Assam, appellant.
Declaratory Judgments. An action for
declaratory judgment is sui generis; whether such action is
to be treated as one at law or one in equity is to be
determined by the nature of the dispute.
Partnerships: Accounting: Appeal and Error.
An action for a partnership dissolution and accounting
between partners is one in equity and is reviewed de novo on
Declaratory Judgments: Equity: Appeal and
Error. In reviewing an equity action for a
declaratory judgment, an appellate court tries factual issues
de novo on the record and reaches a conclusion independent of
the findings of the trial court, subject to the rule that
where credible evidence is in conflict on material issues of
fact, the reviewing court may consider and give weight to the
fact that the trial court observed the witnesses and accepted
one version of the facts over another.
Partnerships. The interpretation of a
partnership agreement presents a question of law.
Appeal and Error. An appellate court
independently reviews a lower court's rulings on
questions of law.
Courts: Jurisdiction: States. In answering
any choice-of-law question, a court first asks whether there
is any real conflict between the laws of the states.
Jurisdiction: States. An actual conflict
exists when a legal issue is resolved differently under the
law of two states.
Contracts. A contract written in clear and
unambiguous language is not subject to interpretation or
construction and must be enforced according to its terms.
Actions: Appeal and Error. An appellate
court determines the nature of an action from the relief
Neb. 671] 10. Breach of Contract:
Damages. A suit for damages arising from breach of a
contract presents an action at law.
Trial: Expert Witnesses. The trier of fact
is not bound to accept expert opinion testimony.
Trial: Evidence. Evidence not directly
contradicted is not necessarily binding on the triers of
fact, and may be given no weight where it is inherently
improbable, unreasonable, self-contradictory, or inconsistent
with facts or circumstances in evidence.
Witnesses: Testimony. The credibility of a
witness is a question for the trier of fact, and it is within
its province to credit the whole of the witness'
testimony, or any part of it, which seemed to it to be
convincing, and reject so much of it as in its judgment is
not entitled to credit.
Options to Buy or Sell: Valuation: Words and
Phrases. "Fair market value" is the price
that a willing buyer would pay a willing seller, both persons
having reasonable knowledge of all relevant facts and neither
person being under compulsion to buy or to sell.
Options to Buy or Sell: Presumptions. The
willing buyer-willing seller rule presumes that a potential
transaction is to be analyzed from the viewpoint of a
hypothetical buyer whose only goal is to maximize his or her
Options to Buy or Sell. The willing
buyer-willing seller rule is applied using the viewpoint of
an objective hypothetical buyer, rather than a subjective
from the District Court for Douglas County: Shelly R.
Stratman, Judge. Affirmed.
A. Domina, of Domina Law Group, PC, L.L.O., for appellant.
P. Chesire, Brian J. Brislen, and Cathy S. Trent-Vilim, of
Lamson, Dugan & Murray, L.L.P., and James J. Banks, of
Banks & Watson, for appellee.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Kelch, and
appeal concerns a determination of Fred Assam's ownership
interest in the law firm of Fredericks Peebles & Morgan
LLP (FPM). After Assam voluntarily withdrew from [300 Neb.
672] the firm, FPM filed suit seeking a declaration of the
rights of FPM and Assam under the governing partnership
agreement (Partnership Agreement). Following a bench trial,
the district court for Douglas County declared the fair
market value of Assam's interest in FPM to be $590, 000.
For the reasons stated herein, we affirm.
a limited liability partnership composed of legal
professionals. FPM has a nationwide practice which
specializes in handling legal issues impacting Native
American tribes, including, but not limited to, facilitating
interrelationships between Native American tribes and the
federal government, state governments, and other tribes, as
well as foreign governments and foreign companies. FPM
represents Native American tribes, entities, and individuals,
as well as banks and financial institutions which deal with
Native American tribes.
organized under the laws of the District of Columbia, and its
principal place of business is located in Omaha, Nebraska. At
the relevant time, FPM had dozens of attorneys throughout
offices in Sacramento, California; Louisville, Colorado;
Sioux Falls, South Dakota; Omaha, Nebraska; Winnebago,
Nebraska; Peshawbestown, Michigan; and Washington, D.C.
October 1, 2014, FPM had five equity partners: Thomas W.
Fredericks, John M. Peebles, Lance G. Morgan, Conly J.
Schulte, and Assam. Fredericks, Peebles, Schulte, and Assam
each held a 23.25 percent interest in FPM, and Morgan held
the remaining 7 percent. FPM traditionally implemented a team
approach in servicing its clients' accounts, but nearly
90 percent of FPM's clients were brought in by
Fredericks, Peebles, Morgan, and Schulte. Assam, a financial
attorney, worked on accounts brought in by the other equity
partners. Only three clients followed Assam when he left FPM,
two of which maintained a relationship with FPM.
Neb. 673] In early 2014, FPM undertook a thorough financial
review in order to implement long-term planning. The partners
began to discuss changes to their compensation structure in
order to reward younger partners for bringing in new clients.
Fredericks proposed that compensation should be based on
client generation, while others proposed that compensation
should be based upon equity ownership. The partners exchanged
and refined proposals over a period of months, and FPM
ultimately arrived at a hybrid of the two compensation
to the testimony of Peebles, Assam had not kept up to date on
the various proposals and voiced concern about only
Fredericks' initial proposal, which Assam felt negatively
impacted his compensation. As a result of his concerns, Assam
hired the accounting firm Eide Bailly LLP to perform a
valuation of his equity interest in FPM.
evening of October 2, 2014, Assam sent an email to his
partners in which he voluntarily resigned from FPM. In the
email, Assam advised, "As you are all aware, over the
course of the last few months, I have been under a personal
attack by . . . Fredericks." Assam stated the
compensation structure Fredericks had proposed would
"transfer complete control of [FPM] over to
[Fredericks]. This means the life of my family and me will
[sic] in complete control of a man who does not care for me
and, in fact, will apparently act with intent to only to
[sic] harm me."
following morning, Assam, whose office is located in Sioux
Falls, flew to Denver, Colorado, to attend a partner meeting
at the Louisville office, which had been scheduled prior to
Assam's resignation email. During his flight, Assam
reviewed some of the more recent compensation structure
proposals and realized the documents he had relied on when
deciding to resign had significantly changed. At the meeting,
Assam told the partners he had made a mistake and wanted to
rescind his resignation and rejoin FPM. The partners declined
and formally voted to accept Assam's resignation.
Neb. 674] The FPM partners then continued their meeting and,
as part of their ongoing financial review, addressed the
agenda item of how to treat approximately $10 million in old
accounts receivable. Many of FPM's clients are sovereign
under federal law and therefore may not be sued to collect on
past-due billing absent a waiver of sovereign immunity. FPM
has a practice of not requesting such a waiver from its
clients so as to not jeopardize client relationships. As a
result, according to the testimony of Morgan, FPM has a
lower-than-average collection rate.
carried a significant amount of outstanding accounts
receivable for an extended period of time. At the partnership
meeting, FPM decided to write off as uncollectable
approximately $10 million in old accounts receivable.
Assam's resignation, the partners made him an offer of
payment intended to represent the fair market value of his
equity interest as set out in the Partnership Agreement.
However, the two sides could not agree as to the value of
2014, FPM filed a declaratory judgment action to determine
the value of Assam's interest. Assam filed an answer and
counterclaim for an accounting and fair valuation of his
interest in FPM, based on the Partnership Agreement. Assam
sought a money judgment and attorney fees. FPM filed an
amended complaint which asserted claims for breach of
contract, breach of fiduciary duty, fraud, constructive
fraud, rescission, disgorgement, and an accounting. Assam
filed an answer which denied such claims and stated
trial, FPM moved without objection to conform its pleadings
to the adduced evidence in order to clarify that its sole
claim was for declaratory judgment as to the amount it owed
Assam for the fair market value of his ownership interest, as
provided under the Partnership Agreement. Assam clarified
that he maintained his counterclaim for an accounting, fair
valuation, and a money judgment, plus attorney fees.
Neb. 675] The Partnership Agreement is dated May 1, 2007, and
was signed by Fredericks, Peebles, Morgan, Schulte, and Assam
on August 9, 2008. The parties agree that the provision which
governs the determination of Assam's equitable interest
in FPM is:
In the event any Equity Partner gives a notice of voluntary
withdrawal more than sixty months of July 1,
2003, such withdrawing Equity Partner will receive
an amount equal to 100% of the fair market value of the
Equity Partner's interest in the Partnership as of the
date of such notice of voluntary withdrawal, which amount
will be paid out in six equal monthly installments without
court heard valuation testimony from several expert
witnesses. FPM called William Brennan, a management
consultant for the legal profession. Assam called Chad
Flanagan and Jay Fullerton, of Eide Bailly. In addition,
Assam called Matthew Stadler as an expert witness. Assam
himself also opined as to valuation.
has worked for over a decade as a principal with a law firm
management consulting group. He testified that in the past 25
years, he has consulted with over 500 firms of all types and
sizes. Prior to becoming a management consultant, Brennan
worked as an accountant and auditor. Brennan's work
experience includes serving as chief financial officer and
executive director for two law firms, one of which had 250
consultant, Brennan developed a specialty in law firm mergers
and acquisitions, which included performing firm valuations.
Over his career, he had performed about 25 firm valuations.
He previously testified in court seven times as an expert in
law firm valuation. He is published in the area of valuation
and is a frequent speaker on the issue of law firm financial
Neb. 676] Brennan spent over 100 hours on his valuation of
FPM and drafted a 48-page report. Brennan's report
demonstrated several different business valuation approaches
for comparison. Brennan testified that although market-based,
asset-based, and income-based approaches are each generally
accepted, the income approach is best for valuing law firms.
Brennan stated the market-based approach is not useful for
valuing law firms, because such businesses are privately
owned and therefore a firm's private transaction data is
not publicly available to be used to compare value with other
businesses in the market. As for an asset-based approach,
Brennan testified firm assets must be adjusted down to their