By Dan Schulte, J.D.
MDA Legal Counsel
From the January 2010 issue of the Journal
Question: I am selling my practice. The purchaser is requesting that he be able to continue using my name following the closing. My name would continue to appear on the practice signage, letterhead and in advertisements. I recognize the purchaser’s need to continue to use my name and am willing to agree to this condition in the purchase agreement. However, I would like to know the legal and ethical implications first.
Answer: The purchaser’s foremost concern in acquiring a practice is patient attrition, resulting in a loss of the goodwill being acquired. It is very common for a purchaser to insist that for a relatively short period of time following the closing the selling dentist continues to work in the practice. During this period of time, the selling dentist focuses on making introductions and otherwise acts to ease the transition of the patients to the purchasing dentist. When the selling dentist is unwilling or unable to stay on for a transitional period, other methods are used to promote a complete transition of patients to the purchasing dentist. Continued use of the selling dentist’s name by the purchasing dentist is one such method.
Your question highlights a difference between the legal (not so specific) and the ethical (very specific) requirements dentists are obligated to follow when continuing to use the selling dentist’s name following the closing.
The legal requirement: Requirements contained in the Michigan statutes and administrative code must be followed by all Michigan dentists, whether they are MDA members or not. MCL 333.16221(d) lists “unethical business practices” that, if committed, could result in a dentist being sanctioned. MCL 333.16221(d)(i) specifically prohibits “false and misleading advertising.” Michigan Administrative Code Rule 338.11107 requires that the name of the dentist(s) actually practicing dentistry within an office be clearly disclosed on a sign “near a door, window or wall” of the office. There is no specific statute or Administrative Code Rule specifically stating whether it is false or misleading for the purchasing dentist to continue to use the selling dentist’s name on signs, letterhead or in advertisements following the closing, or for how long the post closing use may continue without becoming false and misleading.
Despite the absence of specific guidance, it should be considered legal to continue to use the seller’s name for a short period of time (one year or less) when purchasing the name of the practice, including the right to use the name of the selling dentist, phone numbers, Web sites and similar intangible assets to ensure the patient base is maintained and the goodwill is effectively acquired. This assumes, however, that the purchasing dentist complies with Administrative Code Rule 338.11107. This means that the name of the selling dentist cannot be included in the required listing of practicing dentists required to be posted in the office unless the selling dentist is continuing to practice.
The ethical requirement: MDA member dentists (in addition to the legal requirements explained above) are required to follow ethical rule 5.G. and MDA Advisory Opinion 5.G.1. Unlike the legal requirement, this ethical rule and advisory opinion are very specific. They provide that without posting a notice the use of the selling dentist’s name may only continue for one year following the closing. The use of the selling dentist’s name may continue longer than one year with the permission of the selling dentist if “prominent notice is provided to the public including, but not limited to, a sign at the office and a short statement on stationery and business cards that the selling dentist “has retired from the practice.”
Therefore, Michigan Dental Association members continuing to use the selling dentist’s name following the closing must not include the name in the list of practicing dentists required to be posted (the legal requirement) and not continue to use the selling dentist’s name for more than one year without posting an additional notice that the selling dentist is no longer practicing in the office (the ethical requirement).