Dermacare's future uncertain in wake of closure, lawsuits

Phoenix Business Journal Story - by Angela Gonzales

A Maricopa County Superior Court judge has appointed a receiver to handle the financial future of Dermacare Laser & Skin Care Clinics Inc., which at one time planned to sign on more than 120 franchisees nationwide.

The Scottsdale-based franchisor is embroiled in several arbitration cases and lawsuits. Its corporate offices have closed, and several franchisees have abandoned the Dermacare name.

At one point, Dermacare had six facilities throughout the Valley.

The company's founder, Carl Mudd, could not be reached for comment.

Four Valley franchisees no longer are affiliated with Dermacare. A facility in Litch­field Park is keeping the brand name, but operating independently.

A records search at Maricopa County Superior Court shows 10 lawsuits have been filed within the past several years against Dermacare Laser & Skin Care Clinics Inc.; its parent, DLC Dermacare LLC; and Mudd. The lawsuits were filed by vendors, franchisees and former Derma­care employees, claiming the company didn't pay its bills.

For example, WS Inc., formerly WGS Packaging Inc., was awarded a judgment of $384,000 against Dermacare Laser & Skin Care Clinics. According to the lawsuit, WS Inc. sued Dermacare in 2006 for not making payments on the clinic Mudd operated in Paradise Valley.

Richard Thomas, attorney for WS, said his client also has a pending claim through the American Arbitration Association for nonpayment of that note.

WS has received default judgments against Mudd, DLC Dermacare and Dermacare Laser Clinics, Thomas said.

"As to both of the entities, Dermacare has obtained the appointment of a formal receiver," he said.

Also named in the WS lawsuit was a Dermacare doctor, Abraham J. Sayegh, who was one of the first doctors to join Dermacare and later became its medical director.

Sayegh also is facing censure by the Ari­zona Medical Board. In March, the board cited him for drug and/or alcohol use after an anonymous complaint was filed in February. According to those filings, Sayegh said he would cease practicing medicine. It was Sayegh's second relapse, according to the medical board.

Meanwhile, Mudd filed a lawsuit in January against a blog on MedicalSpaMD.com, which features communications by former franchisees. Many of the blog entries criticized Mudd and Dermacare. In his lawsuit, filed in Maricopa County Superior Court, Mudd asked the site to reveal the bloggers' Internet service provider addresses so he could sue former Dermacare franchisees for defamation of character.

Mudd's attorney listed in that suit was John Skiba, but he filed a motion with the court Feb. 4 to withdraw as Dermacare's counsel.

Jeff Barson, founder of MedicalSpaMD.com, said the most active Dermacare discussion includes nearly 1,000 comments from existing and former franchisees.

"MedicalSpaMD.com has received numerous 'cease and desist' letters, threats and demands, including copies of a lawsuit and threats of suit against the site and myself personally if I didn't close down the discussion forums and identify all of the individuals who may have commented," Barson said.

"I refused to comply and posted the letters and suit, as well as the case law around anonymous comments on the Web," he said.

Superior Court records show Mudd's lawsuit might be dismissed. Under Arizona law, a plaintiff has 120 days after filing a complaint to serve the defendants. If that does not happen, the court can dismiss the case.

Court records do not show affidavits have been served, said Andre Merrett, an attorney with Quarles & Brady LLP who is representing six Dermacare franchisees in an arbitration dispute through the American Arbitration Association.

When franchisees signed on with the company, their contracts included a stipulation that they would settle disputes through arbitration in lieu of lawsuits, Merrett said.

Trish Gulbranson owned the Dermacare franchises in Mesa and Chandler until February. She recently started getting calls from customers of the nearby Ahwatukee facility, saying it had closed and they were left holding prepaid packages or gift certificates.

Gulbranson decided to honor any unfinished laser services or valid gift certificates that had been purchased from the Dermacare of Ahwatukee office if customers could show their receipts.

"In light of the complete deterioration of the franchise system, (franchisees) simply want to be free from Dermacare and be allowed to go out and operate their businesses on their own in an effort to try and save their investments," Merrett said.

He said he hopes to connect with the receiver to see if the disputes his clients have with the company can be resolved without further litigation.

Other local franchise owners were not willing to discuss the matter.

It seems as though Dermacare and Carl Mudd have attracted the attention of the local press in Arizona. Here's an email discussion I had with Angela Gonzales, a reporter for the Phoenix Business Journal.

You'll notice that Angela is asking to be commented by the physicians on the site who may have personal experience with Dermacare and Carl Mudd. Her contact information is below. Comments welcome.

Via the contact form on Medical Spa MD:

Subject: Dermacare and Carl Mudd
Message: I'm writing a story about Carl Mudd and Dermacare. Do you have a phone number or email I can use to reach him? Do you have an update on the DLC Dermacare LLC v. John and Jane Does (CV2008-090071) lawsuit. It looks like there was an intent to dismiss in April Any updates?

Angela Gonzales
Senior Reporter
Phoenix Business Journal
agonzales@bizjournals.com
602 308 6521

 _________________

My Response:
Hi Angela,
I'm afraid I don't have any information about where Carl Mudd is. However, I do know that there is a tremendous amount of discussion about where he is on my site at Medical Spa MD. There are plenty of people asking that exact question. If you'd like, I can get you in touch with some of those people. The only interaction I've had with Carl Mudd or Dermacare is a couple of cease and desist letters he's sent me and a threat to sopenia and sue me if I didn't hand over all of the names and IP addresses of people discussing Dermacare on my site.

Let me know if you'd like some of these physicians to contact you.
Yours,
Jeff Barson

 _________________

On Fri, Jul 11, 2008 at 2:37 PM, Angela Gonzales writes back:
Thanks for getting back to me so quickly, Jeff. Yes, I would really like to talk to these doctors.
It looks like that lawsuit is in limbo since Dermacare’s attorney withdrew as general counsel and because it doesn’t look like Dermacare has served anyone.
Thanks for your help!
Would you like to give me an official comment for my story regarding the immense dialogue on your site?

Angela Gonzales
Senior Reporter
602.308.6521

 _________________

I responded:
Hi again Angela,
I'll see if I can't get you some feedback from the physicians on the site. I'd also be happy to provide a comment.

MedicalSpaMD.com is an active community of thousands of plastic surgeons, dermatologists, and aesthetic physicians looking to enhance the free exchange of information about the treatments and business of cosmetic medicine. (With more than 50,000 unique visitors each month and thousands of members it's by far the leading site on the web in this area.)

Among the more active  discussion threads have to do with the practices, treatments, and leadership of medical spa franchises like Dermacare, American Laser Clinics, Sona, Solana, and others. The most active Dermacare discussion has almost 1000 comments from existing and former franchisees.

The site has become the focal point for these physicians to communicate to each other and hadn't gone over well with the medspa franchises looking to isolate these physicians. MedicalSpaMD.com has received numerous cease and desist letters, threats and demands, including copies of a lawsuit and threats against the site and myself personally if I didn't close down the discussion forums and identify all of the individuals who may have commented. (The lawsuit named all of these individuals by their 'screen name'.) I refused to comply and posted the letters and suit as well as the case law around anonymous comments on the web.
Happy to provide more if needed.
Yours,
Jeff Barson
Medical Spa MD

By CHMD: Just viewed "How to inject Juvederm Injectable Gel" by Allergan 2007.  This instructional video was terrible! 

The scariest Botox email that I've received in a while came today. I'm just guessing here but it appears that the email comes from China:

"We are offering 100IU vials of botulinum type A. Equal to Allergan brand of Botox.  Excellent product, long lasting results. $100 per vial. We also have the best generic Restylane on the market. Crosslinked for excellent long lasting results.
We sell to many spas, nurses and doctors in the USA. We have helped them to grow their business and see more profits. You are guaranteed to receive your order, we offer fast service.
Contact us
[Name]
[phone number]"

Anyone using this type of product on a patient is headed for big trouble.

Seems that Solana Medspas site is down. I've received two emails this morning asking if they've gone out of business and this comment on a Solana discussion thread in the forums:

"Well it looks like Buckingham and company can't hurt anyone else. The website is down and they are nowhere to be found. Hey, Over It...the truth hurts. Are you sure you aren't a Solana Owner in denial or just covering your rear end? Between the University of Arizona charges, Brooks College 60 Minutes expose and firing, Health West fiasco and connections, continuing client failures, deadbeat dad website stating a failure to pay tens of thousands in child support to his ex-wife (which was the final straw on why we didn't contract with Solana), etc... Wake up everyone associated or affiliated with Buckingham. it is time you recognize him for who he is before he hurts more people."

 I don't know why the Solana Medspas site is down but it can't be a good sign. (The first time you load the page you may see a little 'Solana Medspas Logo' flicker for just a second before you're redirected to the under construction page. This is usually a sign that the ISP has suspended the account.