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A Flourtown, Pa., dermatologist has settled a dispute over a patient list with his former employees after a judge ruled last fall that the employees had misappropriated trade secrets when they used the dermatologist’s patient list to launch their own practice. Payments of the $400,000 total agreed to by the parties began last week, said David E. Landau of Wolf, Block, Schorr, and Solis-Cohen. Landau represented the dermatologist with Michael Shaffer of Shaffer & Gaier. During settlement negotiations, George Bochetto of Bochetto & Lentz represented the defendant doctors, Toby Shawe, a dermatologist, and Samy Badawy, a surgeon, and their new practice, Skinsmart Dermatology and Aesthetic Center. In October, Common Pleas Judge Gene D. Cohen refused to dismiss the claims of the plaintiff, Andrew Pollack, and found he was entitled to summary judgment on liability for three claims –misappropriation of trade secrets, unjust enrichment and breach of the implied duty of loyalty. The one issue Cohen left to a jury was the amount of damages Pollack was entitled to for his claims. A trial date was never scheduled after the case settled in February, according to the court docket. “The theory of damages we had filed with the court was a disgorgement of ill-gotten profits off of our client list,” Schaffer said. “That’s the theory we would have tried, had we tried damages.” Cohen heard Commerce Case Management Program cases, such as Pollack v. Skinsmart Dermatology and Aesthetic Center, up until his retirement earlier this year. Bochetto noted that Cohen’s summary judgment ruling was “genuinely novel.” “I would have loved to have taken it up on appeal because I don’t think the analysis would have held up,” he said. “We were able to get a favorable settlement, so we didn’t get that opportunity.” While the judge’s opinion was “lengthy and insightful,” Bochetto said, “I think he was wrong.” Bochetto pointed to a state law that governs the professional conduct of physicians and requires those departing a medical practice to notify patients that they are doing so. When departing doctors aren’t getting along with those remaining at the practice — as was the case in Pollack — someone still has to notify the patients, Bochetto said. That was what Shawe and Badawy did, he said. “Unfortunately, [the statute] was never raised in defense of the summary judgment motion,” Bochetto said, referring to Section 16.61(17) of 49 P.A.C., “Abandoning a Patient.” Bochetto took over the defendants’ representation after the summary judgment ruling. Shawe and Badawy were previously represented by Alfred J. Monte Jr. of Monte & McGraw in Skippack, Pa. While no state statute specifically requires attorneys or others departing a professional firm to notify clients, Bochetto said he believes attorneys have an ethical obligation under the rules of professional responsibility to do so. Without an appeal, Bochetto will have to wait for another case to test his theory under Section 16.61, he said. According to Cohen’s opinion, the defendants asserted that the Philadelphia Institute of Dermatology’s patient list wasn’t a trade secret because certain names on the list may not have belonged exclusively to the practice. The judge disagreed, saying the argument “minimizes the additional efforts of PID in organizing and compiling the contact and other information for each patient. At bottom, this argument does not counter the finding that the patient list is a trade secret, but impacts the issue of damages.” In ruling on the unjust enrichment claim, Cohen concluded the patient list was “the core of plaintiff’s practice” and the defendants had used it in setting up their own practice. “The patient list was a trade secret and defendants took it from plaintiff without compensation.” The defendants asserted there could be no unjust enrichment in the case because they had an ethical duty to take the patient list. Cohen again disagreed, saying the ethics argument had no impact on any of the elements of the claim. According to the judge’s opinion, Pollack had been discussing the sale of the majority of his practice’s locations with Shaw and Badawy, and a tentative agreement was reached in June 2002. The sale never took place, and Shawe and Badawy resigned that August. Cohen determined the evidence showed that, prior to their resignations, Shawe and Badawy directed staff employees to copy the appointment books they kept and printouts of certain portions of the restricted database containing more than 20,000 names of the practice’s patients. The doctors wanted information relating to patients they had seen at Pollack’s practice, but only certain Philadelphia Institute of Dermatology employees could access the database, according to the opinion. Although Shawe and Badawy didn’t open Skinsmart until Sept. 3, 2002, they hired Pollack’s medical assistant, Natalie Wilson, just three days after submitting their resignation letters, Cohen noted. Wilson used the list to call patients and reschedule them with Skinsmart. Shawe and Badawy also contacted patients and referring doctors, according to the opinion. Court records show that Pollack went to court soon after Skinsmart opened and asked for a temporary restraining order to block Shawe and Badawy from using the patient list. Common Pleas Judge Esther Sylvester refused to issue an injunction. Cohen’s order, dated October 2004, granted summary judgment in favor of Pollack’s claims for misappropriation of trade secrets and unjust enrichment, and dismissed the defendants’ counterclaims of fraud and replevin. Cohen didn’t award damages, but estimated that a “substantial” number of the patients at Skinsmart came from the Pollack patient list and “resulted in profits for Skinsmart of approximately $700,000.”

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