An appellate division of the New York Supreme Court recently upheld a decision awarding the owners of Animal Care Hospital in Vestal, N.Y., $89,030 in lost revenue after the practice’s previous owner was arrested and convicted for soliciting sex over the Internet from an undercover police officer posing as a 13-year-old girl.
Animal Care Hospital’s original owner, Timothy Fitzpatrick, sold the practice to Ted Sprinkle, Tom Butera and Lance Sprinkle in December 2004 for $1.7 million, including $908,000 for goodwill value, according to the court’s decision. Fitzpatrick was arrested in Fairfax, Va., a few months later, in March 2005.
Because he was a well-known veterinarian in the community, the decision states, “local television news broadcast the report of plaintiff’s arrest, television crews appeared in the parking lot of the Animal Care Hospital, and reporters interviewed clients as they came and went from the practice soliciting reaction from patients of the hospital to the plaintiff’s arrest.”
About $400,000 of the purchase was financed by Fitzpatrick through a personally guaranteed promissory note, and the new owners failed to pay him in April and May 2005. So Fitzpatrick declared them in default and accelerated the note. Animal Care made up the late payments and continued paying until April 2007, when they stopped altogether, court documents state. Fitzpatrick sued to recover the outstanding balance plus accelerated interest and legal fees.
Animal Care then entered a counterclaim, alleging that Fitzpatrick’s arrest constituted a breach of the purchase agreement and seeking compensation for the resulting damages to practice revenue and value. During the ensuing trial, Fitzpatrick claimed that he did not intend his conduct to harm the value of the practice and therefore he had not violated the agreement. The state Supreme Court did not agree.
“Incredulously, plaintiff attempts to distinguish his intentional conduct from the goodwill of Animal Care Hospital by arguing that his acts of soliciting a minor for sex over the Internet and then attempting to meet that minor in person were not done by him ‘intentionally’ in order to ‘directly’ impair the business,” reads decision by the Supreme Court of Broome County. “There is no question in this court’s mind that plaintiff’s conduct leading to his arrest and conviction was an intentional act on his part.”
The appeals court upheld this finding, stating that “such an interpretation is contrary to the plain meaning of [the purchase agreement], and Supreme Court properly determined that the conduct that led to plaintiff’s arrest and conviction constituted a breach of the [agreement].”
Animal Care brought in veterinary consultant Gary Glassman, CPA, as an expert witness to calculate the practice’s losses during the one-year period between Fitzpatrick’s arrest and conviction. Glassman calculated a 15.8 percent decrease in revenue amounting to $89,030. The appellate court upheld the New York Supreme Court decision awarding $89,030 to Animal Care for loss of revenue. However, it also found that the new owners had to pay Fitzpatrick the remaining balance on the loan, albeit without accelerated interest and offset by the damages awarded.
According to Fairfax, Va., news reports, Fitzpatrick was sentenced in July 2010 to one year in jail and ordered to pay a $2,500 fine.