Morosky v. Phoenix Dental Systems, Inc. (In re Phoenix Dental Systems, Inc.)

144 B.R. 22, 1992 Bankr. LEXIS 1231
CourtDistrict Court, W.D. Pennsylvania
DecidedAugust 11, 1992
DocketBankruptcy No. 91-00187E; Motion No. 92-0194
StatusPublished

This text of 144 B.R. 22 (Morosky v. Phoenix Dental Systems, Inc. (In re Phoenix Dental Systems, Inc.)) is published on Counsel Stack Legal Research, covering District Court, W.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Morosky v. Phoenix Dental Systems, Inc. (In re Phoenix Dental Systems, Inc.), 144 B.R. 22, 1992 Bankr. LEXIS 1231 (W.D. Pa. 1992).

Opinion

OPINION

WARREN W. BENTZ, Bankruptcy Judge.

Background

Before the Court is a Petition for Declaratory Relief filed by William Morosky, D.M.D. (“Dr. Morosky”) requesting an Order granting him the right to contact former patients which he served while employed at Phoenix Dental Systems, Inc. (“Debtor” or “Phoenix Dental”).

Dr. Morosky asserts that the First Amendment of the United States Constitution protects a professional’s right to contact his former patients where the professional’s prior employer is in bankruptcy. Dr. Morosky further asserts that the names of the Debtor’s patients are not trade secrets and that even if the patient names are trade secrets, Dr. Morosky is entitled to contact those patients known to him from relationships outside of his employment with the Debtor.

It is the Debtor’s position that the First Amendment protections of commercial speech have no applicability to the facts of this case, that the patient names are a trade secret of the Debtor, and that Dr. [24]*24Morosky has no right to interfere with patient relationships which were created through the efforts of the Debtor.

Facts

Dr. Morosky was hired as part of the Debtor’s professional staff for the purpose of providing dental services. No restrictive covenant or other such contractual restriction exists between Dr. Morosky and the Debtor. The Debtor filed its voluntary Petition under Chapter 11 of the Bankruptcy Code on March 5, 1991. Subsequently, Dr. Morosky terminated his employer/employee relationship with the Debtor effective March 28, 1992 and entered the private practice of dentistry. The Debtor permitted Dr. Morosky to take the files of certain patients identified as Dr. Morosky’s family members and personal friends.

By letter dated March 20,1992, the Debt- or stated its position that, other than family members and personal friends, Dr. Moro-sky had no right to contact any patient to notify them of his departure and of his availability for future treatment. Dr. Mo-rosky then filed the within Petition for Declaratory Relief seeking an Order granting him the right to contact former patients which he served as an employee of the Debtor.

Issues

1. Whether the First Amendment of the United States Constitution protects a dentist’s right to contact patients he formerly served as an employee of another entity.

2. Whether the names of the Debtor’s patients are trade secrets.

3. Whether Dr. Morosky may contact patients he served prior to his employment as well as patients he obtained through efforts of his own during his employment with the Debtor.

Discussion

I. First Amendment

Dr. Morosky directs us to the cases of Metromedia, Inc. v. City of San Diego, 453 U.S. 490, 101 S.Ct. 2882, 69 L.Ed.2d 800 (1981) and Shapero v. Kentucky Bar Association, 486 U.S. 466, 108 S.Ct. 1916, 100 L.Ed.2d 475 (1988) to support his assertion that the protections of the First Amendment give him the right to contact former patients which he served as an employee of the Debtor.

The Metromedia and Shapero cases stand for the proposition that Dr. Morosky has a right to advertise his services to the public and any prohibition placed on him by professional societies, governmental units or other entities is improper. The Debtor has no objection to Dr. Morosky advertising his services to the public.

Dr. Morosky, however, is not asserting merely a right to advertise to the public, but wants the right to contact the Debtor’s patients with whom Dr. Morosky had contact while employed by the Debtor. The First Amendment protection afforded “commercial speech” in the above cases does not apply to the instant case.

The First Amendment does not shield a party from liability for inappropriate interference with existing relationships of the Debtor with its patients.

II. Trade Secrets

Information which is confidential and constitutes a valuable asset is a trade secret for which an employer is entitled to protection from disclosure or use by former employees. Robinson Electronic Supervisory Co., Inc. v. Johnson, 397 Pa. 268, 154 A.2d 494 (1957); Morgan's Home Equipment Corp. v. Martucci, 390 Pa. 618, 136 A.2d 838 (1957).

The information must be a particular secret of the employer and not a general secret of the trade in which he is engaged. Morgan’s Home Equipment, 390 Pa. at 624, 136 A.2d at 842; Bettinger v. Carl Berke Assoc., Inc., 455 Pa. 100, 314 A.2d 296 (1974). The right of an employer to be protected against improper use of a trade secret by a former employee must be balanced against the right of the employee to pursue his occupation and livelihood. Fidelity Fund, Inc. v. DiSanto, 347 Pa.Super. 112, 500 A.2d 431 (1985).

[25]*25Numerous Pennsylvania courts have discussed the issue of whether an employee’s use of his former employer’s customer client names constitutes an improper use of a trade secret. If the customer names and information have been compiled by the employer and represent a material investment of the employer’s time and money, the information is highly confidential and is a valuable asset of the employer. Such data constitutes a trade secret and is not subject to use or dissemination by a former employee. Robinson, 397 Pa. at 272-73, 154 A.2d at 496-97; Morgan’s Home Equipment, 390 Pa. at 623, 136 A.2d at 842.

However, where the customer names and information is widely known throughout the industry or where such information is readily ascertainable from an independent source, the employer’s customer list is not so protected. Fidelity Fund, Inc. v. DiSanto, 347 Pa.Super. 112, 500 A.2d 431 (1985); Bettinger v. Carl Berke Assoc., Inc., 455 Pa. 100, 314 A.2d 296 (1974); Van Products v. General Welding and Fabricating Co., 419 Pa. 248, 213 A.2d 769 (1965).

Dr. Morosky asserts that the names of the Debtor’s patients are general information and not a particular secret of the Debtor’s business; that the patient names “constitute nothing more than names of individuals who may need dental work;” and that because “all persons eventually need dental work,” the names of specific and particular people that come to the Debtor’s offices are not a particular secret.

We find that the names of the Debtor’s patients are a trade secret. The names of the Debtor’s patients are unique to the Debtor and are not ascertainable from an outside source. The Debtor’s patients are its most valuable asset.

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Related

Metromedia, Inc. v. City of San Diego
453 U.S. 490 (Supreme Court, 1981)
Shapero v. Kentucky Bar Assn.
486 U.S. 466 (Supreme Court, 1988)
Fidelity Fund, Inc. v. Di Santo
500 A.2d 431 (Supreme Court of Pennsylvania, 1985)
Morgan's Home Equipment Corp. v. Martucci
136 A.2d 838 (Supreme Court of Pennsylvania, 1957)
Robinson Electronic Supervisory Co. v. Johnson
154 A.2d 494 (Supreme Court of Pennsylvania, 1959)
Van Products Co. v. General Welding & Fabricating Co.
213 A.2d 769 (Supreme Court of Pennsylvania, 1965)
Bettinger v. Carl Berke Assoc., Inc.
314 A.2d 296 (Supreme Court of Pennsylvania, 1974)

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Bluebook (online)
144 B.R. 22, 1992 Bankr. LEXIS 1231, Counsel Stack Legal Research, https://law.counselstack.com/opinion/morosky-v-phoenix-dental-systems-inc-in-re-phoenix-dental-systems-pawd-1992.