A California jury has awarded $8.8 million in damages to a physician-investor whose partners in an ASC venture tricked him out of his share of the center's earnings.

Daniel Taheri, MD, co-owned a dermatology practice with Alex A. Khadavi, MD, when the pair decided to open the Thousand Oaks Surgery Center. Dr. Khadavi brought in anesthesiologist and pain management practitioner Alexander Hersel, MD, as a third partner.

While the new facility won accreditation and eventually gained Medicare's approval, Dr. Khadavi told Dr. Taheri that it had failed to meet Medicare's standards and could not function as a surgery center. The center would be worthless to the physicians, he said, but Dr. Hersel would be able to use the space for other purposes. Dr. Khadavi convinced Dr. Taheri to join him in selling his shares in the venture to Dr. Hersel, at a loss.

Dr. Hersel bought the partners out. Six months later, Dr. Khadavi repurchased 50% of the center without telling Dr. Taheri, who learned 2 years after Dr. Khadavi's investment that the center had been open, and wildly profitable, all along. Dr. Taheri sued Drs. Khadavi and Hersel and the center for fraud and breach of fiduciary duty.

In his response to the lawsuit, Dr. Khadavi explained that he'd reinvested in the center only to keep it afloat. Pre-trial investigations revealed, however, that his cash had gone into Dr. Hersel's pockets, as the center had $200,000 in its coffers and had turned a $16 million profit in its first 3 years.

Dr. Khadavi also argued that Dr. Taheri had been required to sell his shares in the center due to a disciplinary agreement he'd signed with Blue Cross of California over billing discrepancies. Dr. Taheri blamed the billing issues on Dr. Khadavi, however, and noted that the insurer's agreement only required him to stop practicing with Dr. Khadavi, not to drop his ownership shares.

The trial jury ordered the defendants to jointly pay Dr. Taheri about $8 million in compensatory damages, reflecting his lost earnings in the center. It also ordered Dr. Khadavi to pay $500,000 and Dr. Hersel $250,000 in punitive damages. These awards were upheld on appeal.

Dr. Taheri's attorney declined comment. Attorneys for Drs. Khadavi and Hersel did not respond to requests for comment.

Leigh Page