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PLAINTIFF RADIATION ONCOLOGIST, THE SOLE SHAREHOLDER IN PLANTIFF PROFESSIONAL SERVICE CORPORATION, WHICH PAID PLAINTIFF ONCOLOGIST’S SALARY, SUCCESSFULLY SUED THE HOSPITAL WHICH EMPLOYED HIM FOR BREACH OF CONTRACT; THE COURT, IN A MATTER OF FIRST IMPRESSION, HELD THAT PLAINTIFF’S SALARY WAS NOT A CORPORATE EXPENSE AND THEREFORE WAS RECOVERABLE AS LOST PROFITS IN THE BREACH OF CONTRACT ACTION (THIRD DEPT).

The Third Department, in a full-fledged opinion by Justice Fisher, determined plaintiff’s salary, paid to hm as the sole shareholder in a professional service corporation, was not a corporate expense and therefore could be recoverable as damages for lost profits in this breach of contract action. Plaintiff, a radiation oncologist, successfully sued the hospital for breach of contract after the hospital terminated him. The instant dispute is about the available damages. In addition to ruling plaintiff could recover his lost salary from his professional service corporation as damages, the Third Department held defendant could present proof plaintiff mitigated his damages by finding employment, through another professional service corporation, with another hospital. The Third Department affirmed Supreme Court’s rulings:

Plaintiffs commenced this action asserting causes of action for, among others, breach of contract, wrongful termination, libel and slander. Following the completion of disclosure and motion practice, a judgment was entered in favor of plaintiffs on the four remaining causes of action for breach of contract. A jury trial on damages was scheduled, and the parties filed respective motions in limine disputing the method of calculating damages and whether evidence of ]plaintiffs’] duty to mitigate the damages suffered from defendant’s breach may be submitted to the jury. Such dispute essentially distills to whether the salary paid by a professional service corporation to its sole shareholder must be treated as an expense in calculating the lost profits, thus subtracting it from the corporation’s profits and correspondingly reducing its damages. Supreme Court, in a pair of well-reasoned decisions, determined that [plaintiff’s] salary as paid by [plaintiff professional service corporation] under the coverage agreement is not an expense and could be recoverable as damages for lost profits. Supreme Court further found that evidence of [plaintiffs’] efforts to mitigate the damages suffered from defendant’s breach may be submitted to the jury, and whether or not [plaintiff’s] postbreach earnings are income derived because of defendant’s breach is a question to be resolved by the jury in determining damages. Radiation Oncology Servs. of Cent. N.Y., P.C. v Our Lady of Lourdes Mem. Hosp., Inc., 2025 NY Slip Op 06112, Third Dept 11-6-25

Practice Point: Here, in a matter of first impression, the Third Department ruled that plaintiff oncologist, whose salary was paid by plaintiff professional service corporation in which plaintiff oncologist was the sole shareholder, could, in a breach of contract action, recover his lost salary as lost profits. In other words, in this situation, plaintiff’s salary was not considered to be a corporate expense which must be deducted from lost profits when calculating damages for breach of contract.

 

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