SCOTT D. GALKIN, D.M.D. VS. SMILEDIRECTCLUB, LLC (C-000019-19, MIDDLESEX COUNTY AND STATEWIDE) ( 2021 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2867-19
SCOTT D. GALKIN, D.M.D.,
and NEW JERSEY DENTAL
ASSOCIATION,
Plaintiffs-Appellants,
v.
SMILEDIRECTCLUB, LLC,
DANNY LEEDS, D.D.S., and
ISAAC V. PERLE, D.M.D.,
Defendants-Respondents,
and
ROBERT M. DEROSSO, D.M.D.,
Defendant.
_____________________________
Argued April 28, 2021 – Decided June 11, 2021
Before Judges Whipple and Firko.
On appeal from the Superior Court of New Jersey,
Chancery Division, Middlesex County, Docket No.
C-000019-19.
Arthur Meisel argued the cause for appellants.
Kevin M. Capuzzi argued the cause for respondents
(Benesch, Friedlander, Coplan & Aronoff, LLP,
attorneys; Kevin M. Capuzzi, Michael J. Barrie, and J.
Erik Connolly, on the brief).
PER CURIAM
Plaintiffs Scott D. Galkin, D.M.D., and the New Jersey Dental Association
appeal orders of January 27, 2020, and March 6, 2020. The first order granted
in part defendants' motion to seal the court record, and the second order granted
defendants' motion for summary judgment. We affirm as to both.
Plaintiffs are Galkin, a dentist, and the New Jersey Dental Association, a
non-profit corporation. Defendants Danny Leeds, D.D.S., and Isaac Perle,
D.M.D., are licensed dentists who provide telehealth dental services to clients
in New Jersey. Defendant SmileDirectClub, LLC (SDC), is a dental support
organization that offers non-clinical support services to licensed dentists. SDC
provides clear aligners for professional corporations or groups of licensed
dentists after assessing patients using at-home impression kits and 3D optical
scanning. At the heart of this case is the nature of the relationship among the
defendants.
Leeds is the sole owner of Smile of New Jersey, P.A. (SNJ), a New Jersey
company located in Tennessee that places advertisements on behalf of and
A-2867-19
2
contracts with dentists in New Jersey, but has no physical office in New Jersey.
SNJ also contracts with SDC for non-clinical administrative services, including
billing and records management. Leeds has an employment contract with SNJ.
SDC sources clear aligners from an FDA-certified manufacturer and impression
kits from a lab for SNJ.
On January 28, 2019, plaintiffs filed a complaint for injunctive relief in
Middlesex County, asserting defendants SDC, Leeds, and Perle1 are engaging in
the unlawful corporate practice of dentistry and unlawful practice of dentistry,
N.J.S.A. 45:6-12, and are illegally engaging in direct-to-consumer advertising,
sale, and delivery of aligners to straighten teeth in violation of N.J.S.A. 45:6-
19.
In March 2019, SDC, Leeds, and Perle filed a motion to dismiss plaintiffs'
complaint, which the court denied. Defendants moved for reconsideration,
which the court also denied in June 2019. To protect against the public
disclosure of its proprietary information during the litigation, defendants moved
for, and the court issued, a protective order on August 2, 2019. The protective
order dictated that restrictions be in place forbidding unauthorized disclosure of
1
A third dentist, Robert DeRosso, was named as a defendant in plaintiffs'
complaints but was granted summary judgment, and that order was not appealed.
A-2867-19
3
certain confidential or proprietary information. All parties to the litigation were
permitted through the order to designate as confidential documents: answers to
interrogatories, pleadings, or other material. The judge also denied plaintiffs'
motion for summary judgment.
Later, on January 27, 2020, the court granted defendants' motion to seal
the court record in part, prohibiting public disclosure of agreements and related
documents. The court directed defendants to file revised transcripts that redact
only confidential information pertaining to SDC's business model and written
agreements between SDC and SNJ. The court found SDC satisfied its burden to
show that it would be seriously injured if such information were publicly
disclosed. On March 6, 2020, the court denied plaintiffs' second motion for
summary judgment and granted defendants' cross-motion for summary judgment
after determining SDC does not practice dentistry, nor does it control SNJ. This
appeal followed.
On appeal, plaintiffs argue the court erred granting summary judgment
because defendants are unlawfully engaged in the corporate practice of dentistry
and that it was also error to enter an order protecting portions of the record from
disclosure. We review entry of summary judgment de novo, applying the same
legal standard as the trial court. Conley v. Guerrero, 228 N.J. 339, 346 (2017).
A-2867-19
4
Summary judgment shall be granted "if the pleadings, depositions, answers to
interrogatories and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact challenged and that the
moving party is entitled to a judgment or order as a matter of law." Templo
Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co., 224 N.J. 189, 199 (2016)
(quoting R. 4:46-2(c)).
"When no issue of fact exists, and only a question of law remains, [we]
afford[] no special deference to the legal determinations of the trial court."
Templo Fuente De Vida, 224 N.J. at 199 (citing Manalapan Realty, L.P. v. Twp.
Comm. of Manalapan, 140 N.J. 366, 378 (1995)). But the decision to seal or
unseal portions of the court record is left to the discretion of the trial judge.
Hammock ex rel Hammock v. Hoffmann-LaRoche, Inc., 142 N.J. 356, 380
(1995).
I.
N.J.S.A. 45:6-1 to -69 (the Dental Practice Act) regulates and governs the
practice of dentistry in New Jersey. The State's corresponding administrative
code, N.J.A.C. 13:30-1.1 to -8.26, applies to:
[A]ll licensed dentists, licensed dental hygienists,
registered dental assistants, limited registered dental
assistants, and holders of dental clinic permits, and all
applicants seeking licensure to engage in the practice of
A-2867-19
5
dentistry, dental hygiene, and dental assisting, and
applicants seeking permits to operate dental clinics.
[N.J.A.C. 13:30-1.1(b).]
Failure to comply with this rule "may be deemed professional misconduct and
may subject the licensee, registrant or permit holder to disciplinary action
pursuant to the provisions of 45:1-14 . . . ." N.J.A.C. 13:30-1.1(c).
Plaintiffs argue that defendants violated the "common law" by engaging
in the "unlawful corporate practice of dentistry." They cite to N.J.S.A. 45:6-12,
which states "[n]o corporation shall practice or continue to practice, offer or
undertake to practice, or hold itself out as practicing dentistry." The statute
further states:
No person shall practice or continue to practice
dentistry as an officer, agent or employee of any
corporation, or under the name of any corporation. No
person shall practice or continue to practice dentistry
under any firm name or trade name or under any name
other than his true name, but nothing herein contained
shall prohibit the practice of dentistry by a partnership
under a firm name containing nothing but the surname
of every member of the partnership, and that nothing
herein contained shall prohibit a licensed dentist from
practicing under his own name or under a firm name
containing only the surnames of each member of such
firm. Every person or corporation, violating any of the
foregoing provisions of this section shall be subject to
a penalty of three hundred dollars for the first offense
and six hundred dollars for the second and each
subsequent offense.
A-2867-19
6
Every person practicing dentistry under a firm name as
herein authorized and every person practicing dentistry
or as an employee of another shall cause his name to be
conspicuously displayed and kept in a conspicuous
place at the entrance of the place where such practice
shall be conducted, and any person who shall neglect to
cause his name to be displayed as herein required, shall
be liable to a penalty of one hundred dollars.
[N.J.S.A. 45:6-12.]
Addressing the relevant provisions, the motion judge found SDC is not
engaged in the corporate practice of dentistry, nor is SDC in violation of
N.J.S.A. 45:6-12 because it does not control clinical treatment to patients or the
dentists with whom it contracts. The motion judge also rejected plaintiffs'
contention that a Law Division decision in Allstate Insurance Co. v. Schick, 328
N.J. Super. 611 (Law Div. 1999), and our Supreme Court's decision in Allstate
Insurance Co. v. Northfield Medical Center, 228 N.J. 596 (2017), bar SDC from
its business arrangement as "enabling unlicensed persons to own dental
practices," and so do we.
In Schick, insurer Allstate accused defendant medical providers of
creating "a group of sham medical corporations that appeared to be owned by
plenary licensed physicians as required by applicable administrative
regulations." 328 N.J. Super. at 615. Allstate argued that the defendants'
A-2867-19
7
scheme was hatched in order to "circumvent administrative regulations requiring
that diagnostic facilities be owned by plenary licensed physicians and
regulations prohibiting plenary licensed physicians from being employed by
chiropractors or non-licensees." Id. at 616. The documents memorializing the
relationship between the physicians and medical corporations had specious
authenticity. Id. at 623. A significant portion of Schick pertained to alleged
insurance fraud (the Insurance Fraud Protection Act, N.J.S.A. 17:33A-1 to -30)
and violation of medical licensing regulation through the New Jersey Board of
Medical Examiners, N.J.A.C. 13:35-2.6, which are not of moment in the present
case. See id. at 614, 627-29. Schick can be further distinguished from the case
at bar because the administrative regulations and legislative statutes in question
for dental licensing and medical licensing are different. The court in Schick
ultimately decided that there were issues of fact related to the supervision of
licensed physicians, specifically related to potentially forged documents, and
that this precluded summary judgment in favor of the defendant medical
providers. Id. at 616.
In Northfield, the insurer again contended that defendants—in that case,
a chiropractor and his management company—knowingly violated the Insurance
Fraud Prevention Act. 228 N.J. at 599. The Court evaluated this fraud claim
A-2867-19
8
through the lens of regulations for a medical practice, in specific, codified at
N.J.A.C. 13:35-6.16. Id. at 601. In Northfield, a medical doctor who owned a
corporation did not participate in his patients' treatment. Id. at 626. The Court
in Northfield decided the defendants had violated Board standards by putting an
unlicensed chiropractor in control of a medical practice. Id. at 615.
Schick and Northfield do not apply here. SNJ is a valid professional
corporation owned and controlled by a licensed dentist; there are no credible
allegations that SNJ is a sham corporation, that it is substantially controlled by
SDC, or that it was formed to evade insurance requirements or statutory
regulations. Moreover, SNJ is not a plenary medical practice, which would be
subject to a different set of regulations.
In addition, SNJ is not owned or controlled by unlicensed strangers to the
profession. On this point, plaintiffs argue that a succession agreement between
SDC and SNJ would allow SDC to effectively take ownership of SNJ through
an SDC designee. However, the succession agreement requires SNJ be owned
by a New Jersey-licensed orthodontist or dentist. Thus, the safeguards in place
in the agreements maintain management and ownership of SNJ under the Dental
Practice Act; its operations and those of SDC must comport with the statute.
A-2867-19
9
Plaintiffs also argue that SDC is engaged in the "direct-to-consumer
advertising, sale and delivery of clear-plastic orthodontic aligners to straighten
teeth in violation of N.J.S.A. 45:6-19."
N.J.S.A. 45:6-19 defines a person engaged in the practice of dentistry as
someone who, in pertinent part:
(1) Uses a dental degree, or the terms "mechanical
dentist" or the use of the word "dentist" in English or
any foreign language, or designation, or card, device,
directory, poster, sign, or other media whereby he
represents himself as being able to diagnose, treat,
prescribe or operate for any disease, pain, deformity,
deficiency, injury, or physical condition of the human
tooth, teeth, alveolar process, gums, cheek, or jaws, or
oral cavity and associated tissues; or
(2) Is a manager, proprietor, operator, or conductor of
a place where dental operations are performed; or
(3) Performs dental operations of any kind gratuitously
. . . or
(4) Uses himself or by any employee, uses a Roentgen
or X-ray machine for dental treatment, dental
radiograms, or for dental diagnostic purposes; or
(5) Extracts a human tooth or teeth, or corrects or
attempts to correct malpositions of the human teeth or
jaws; or
(6) Offers and undertakes, by any means or method, to
diagnose, treat or remove stains or concretions from
human teeth or jaws; or
A-2867-19
10
....
(8) Takes impressions of the human tooth, teeth, jaws,
or performs any phase of any operation incident to the
replacement of a part of a tooth, teeth, or associated
tissues; or
(9) Performs any clinical operation included in the
curricula of recognized dental schools or colleges.
[(Emphasis added.)]
The Dental Practice Act also outlines what specific activities are not
considered practice of dentistry:
(7) The making of artificial restorations, substitutes, or
appliances for correction of disease, loss, deformity,
malposition, dislocation, fracture, or injury to the jaws,
teeth, lips, gums, cheeks, palate, or cases, models, or
from impressions furnished by a licensed and registered
dentist, on written prescription only; provided, that
such prosthetic or orthodontic appliances, or the
services rendered in the construction, repair, or
alteration thereof, shall not be advertised, sold or
delivered, directly or indirectly, to the public by the
dental technician or dental laboratory as principal or
agent.
[N.J.S.A. 45:6-19(7) (emphasis added).]
Because SDC markets orthodontic appliances on behalf of licensed
dentists and does not treat patients, it is not a dental technician or dental
laboratory; therefore, this provision of the Act does not apply to SDC. The
aligners provided to patients are prescribed by dentists or orthodontists.
A-2867-19
11
The management services agreement executed between SDC and Smile of
NJ explicitly lists services SDC will provide; for example, recruitment and
supervision of non-clinical personnel, payroll and taxes, patient record
maintenance, laboratory services, and various additional non-clinical services.
In addition, the agreement states SDC:
[S]hall not interfere in any manner or to any extent with
the performance of any [c]linical [p]ersonnel's medical
or professional judgment. Nothing contained in this
[a]greement shall be construed to permit the
ManagementCo [2] to (a) engage in the practice of
medicine, dentistry or dental hygiene, it being the sole
intention of the [p]arties that the professional
healthcare services performed by the [p]ractice are to
be rendered by the [p]ractice and its [c]linical
[p]ersonnel, (b) own or maintain any part of the
[p]ractice, (c) control or operate the [p]ractice in any
manner, (d) engage any person to practice medicine,
dentistry or dental hygiene or (e) control, influence, or
attempt to control or influence or otherwise interfere
with the exercise of the [c]linical [p]ersonnel's
independent professional judgment regarding the
diagnosis or treatment of a dental disease, disorder or
physical condition.
The motion judge found that SDC's marketing informs that patients' dental
treatment is handled by licensed dentists and orthodontists. The dentists do not
work for SDC, and SDC only provides non-clinical services to the contracting
2
SDC Holding LLC refers to itself in its agreements as "ManagementCo."
A-2867-19
12
parties. Therefore, because SDC is not engaged in dentistry according to the
statutory definition, defendants' marketing materials do not violate N.J.S.A.
45:6-19.
II.
Finally, we reject plaintiffs' argument that the judge abused his discretion
in granting defendants' motion to seal, and in denying plaintiffs' motion to vacate
the order granting motion to seal. The motion judge retains discretion over the
decision to seal documents. Rule 1:2-1 states:
All trials, hearings of motions and other applications,
pretrial conferences, arraignments, sentencing
conferences (except with members of the probation
department) and appeals shall be conducted in open
court unless otherwise provided by rule or statute. If a
proceeding is required to be conducted in open court,
no record of any portion thereof shall be sealed by order
of the court except for good cause shown, as defined by
R[ule] 1:38-11(b), which shall be set forth on the
record.
[(Emphasis added).]
Rule 1:38-11(b) states that "good cause" to seal a record exists when:
(1) Disclosure will likely cause a clearly defined and
serious injury to any person or entity; and
(2) The person's or entity's interest in privacy
substantially outweighs the presumption that all court
and administrative records are open for public
inspection pursuant to R[ule] 1:38.
A-2867-19
13
Good cause must be measured by the standard of "reasonableness." Hammock,
142 N.J. at 386.
In the January 10, 2020 hearing, the motion judge found that the
agreements among defendants should be kept under seal: "I find that the only
reason that conclusory language is pretty -- pretty clear that the commercial
interest confidentiality information is -- should be protected from public
disclosure." He later added that "[t]he Supreme Court said that if it's clearly
something that should be confidential information. I don't think any evidence
[is] necessary. I think it's clear that the confidential information is there." The
order specifies that SDC has satisfied its burden of showing that public
disclosure of agreements and depositions would cause defendants serious injury
because the documents "contain highly sensitive information that, if put in the
wrong hands, could competitively harm [d]efendants." We discern no abuse of
the court's discretion. All of the remaining arguments raised by plaintiffs lack
sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
A-2867-19
14