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Diederich v. Yarnevich

November 21, 2008


Appeal from Saline District Court; JACK L. LIVELY, judge.


1. The rules concerning summary judgment are repeated and applied.

2. Officers and directors of a corporation have a strict fiduciary duty to act in the best interests of the corporation and its stockholders. This duty requires officers and directors to work for the general interests of the corporation and the stockholders. Directors also owe the same fiduciary duty between themselves.

3. Fiduciary duties owed by directors and officers do not extend to employees of the firm. Directors do not breach their fiduciary duty if they fire an employee, who is also a shareholder, for a legitimate business reason.

4. In Kansas, a person who, without justification, induces or causes a breach of contract will be answerable for any damages caused thereby. The five elements of a tortious interference with a contract claim are: (1) the contract; (2) the wrongdoer's knowledge thereof; (3) his or her intentional procurement of its breach; (4) the absence of justification; and (5) damages resulting therefrom.

5. An official of a corporation, acting for the corporation and within the scope of his or her representation of the corporation, cannot be liable for tortious interference with a contract the corporation could legally act on.

6. The elements of a civil conspiracy are (1) two or more persons; (2) an object to be accomplished; (3) a meeting of the minds in the object or course of action; (4) one or more unlawful overt acts; and (5) damages as the proximate result thereof. Conspiracy is not actionable without commission of some wrong giving rise to a cause of action independent of the conspiracy.

7. Where the individual defendants are named and described as officials of the corporate defendant in a petition, with no allegations that these defendants acted other than in their official capacities on behalf of the corporate defendant, and no allegation remotely indicates that they were pursuing their course as individuals or for individual advantage, the acts of the individual defendants must be regarded as the acts of the corporation, and when so acting they cannot conspire with the corporation of which they are a part.

8. When conduct could satisfy the elements of both a breach of contract or of an independent tort, unless the conduct is permitted by the express provisions of a contract, a plaintiff may pursue both remedies. However, the independent tort must cause damages beyond those suffered by breach of contract.

9. One purpose of the rule against splitting a cause of action is to protect defendants from multiple lawsuits on a single cause of action. The one-action rule differs from res judicata. Res judicata requires identical parties to apply, but the one-action rule does not.

The opinion of the court was delivered by: Hill, J.



This lawsuit pitted attorney Daniel K. Diederich, plaintiff, against the stockholders in his former law firm, Kennedy Berkley Yarnevich & Williamson, Chartered, of Salina. The stockholders are Defendants George W. Yarnevich, Larry G. Michel, Tom A. Williamson, and James R. Angell. Using several theories -- breach of contract, breach of fiduciary duty, tortious interference with a contract, and civil conspiracy -- Diederich sued the stockholders after he was fired. The district court granted summary judgment to the Defendants while denying Diederich's motion for partial summary judgment. Diederich appeals, contending error in all the court's rulings. A corporation acts through the work of its officers, directors, and employees. Because the Defendants are stockholders and directors of the corporation and they were acting within the scope of their duties when they dismissed Diederich for cause, we hold Diederich's claims do not survive summary judgment. We affirm.

The background facts show a working relationship decaying after Diederich altered some time records.

Diederich is an attorney licensed to practice law in Kansas. He began his career at the firm Kennedy, Berkley, Yarnevich & Williamson, Chartered, a Kansas professional corporation, in 1983. Diederich became a stockholder in 1987. The defendants are lawyers and stockholders of the firm. During the period at issue in this litigation, stockholder Tom Kennedy was president of the corporation. Kennedy died in January 2005, before Diederich sued.

Controlling Agreements and Bylaws

Since this is a professional corporation made up of lawyers, it naturally had several written contracts and bylaws drafted to govern its group. Diederich and the other stockholders signed amended employment agreements in January 2004. These agreements controlled all aspects of their employment with the corporation. Diederich, at the time, was a member of the board of directors and agreed to and approved the terms of the amended employment agreement. Therefore, beginning March 1, 2004, the deferred compensation agreement, amended employment agreement, stockholders' agreement, corporate bylaws, and articles of incorporation governed Diederich's relationship with the firm.

The amended employment agreement provided the employment relationship between the corporation and the attorney "shall continue indefinitely until terminated . . . by either party serving written notice on the other party at least thirty (30) days prior to the effective date of such termination of employment." The stockholders' agreement stated that if a stockholder were no longer employed by the corporation, then the stockholder had to sell his or her stock to the corporation according to the terms outlined in the agreement. The corporate bylaws require a 10-day written notice for special stockholder meetings. A stockholder can waive the notice requirement either before or after the meeting. The bylaws also state:

"Any action required to be taken at a meeting of the stockholders, or any other action which may be taken at a meeting of the stockholders, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the stockholders entitled to vote with respect to the subject matter thereof."

The bylaws call for a 5-day notice to members of the board of directors before any special meeting of the board. This notice requirement can be waived before or after the meeting. Normally, a board member's attendance at such a meeting amounted to a waiver of notice unless the director attended the meeting in order to object to transacting any business because the meeting was not properly called.

Nonetheless, the lawyers did much of the firm business informally, often at lunch meetings. They set stockholders' and directors' meetings often by e-mail, rather than by sending formal notices as set out in the bylaws. Diederich admits that they transacted much of the business at stockholders meetings for which no formal notice was given to the stockholders. The lawyers rarely prepared minutes for meetings where they transacted business. If the business needed something in writing, the firm would prepare a consent to any action taken after the fact. Diederich admitted that he was not aware of any minutes, corporate consents, or resolutions about the hiring or firing of employees.

Altered Time Sheets

On March 1, 2004, a prebilling ledger was prepared that reflected all the legal work done for a particular client on a probate estate dating back to 2001. When the ledger was prepared the firm had not yet sent a bill to the client. Prebill ledgers contain important data. They show the identity of the client, the attorney, the date of services, the attorney who did specific work, a description of the work done, the total hours worked by each attorney, and the total fees for those services. The attorneys who worked on this matter were Diederich, Cochran, and Michel.

The attorneys had a chance to correct these prebilling ledgers before they sent the final bill to the client. Diederich admitted that on the day they printed one ledger, he altered the figures by crossing out Cochran's and Michel's initials next to work they had done and replacing them with his ...

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