## Facts

- Robert Packard, an orthodontist, and his professional corporation operated an orthodontic practice in Texas.
- Packard initially contracted with a practice-management company for long-term services; that company later entered bankruptcy and sold assets, including the contract, to OCA.
- After the asset sale, Packard and OCA executed new agreements, including a long-term Business Services Agreement (BSA) that superseded the prior arrangement.
- The BSA had a 25-year term and required OCA to provide extensive administrative and business services (e.g., staffing support, facilities and equipment, accounting, billing and collections, marketing, and operational consulting).
- The BSA also required OCA to develop up to seven new offices with Packard and to advance funds to support development.
- OCA paid Packard nearly $5 million in up-front payments and advances; OCA claimed Packard retained a net benefit of about $2.28 million after amounts repaid during several years of performance.
- About five years into the BSA, Packard terminated the arrangement and filed suit seeking a declaration that the agreements were illegal and void under Texas law restricting the corporate practice of dentistry.
- OCA asserted counterclaims, including equitable theories of unjust enrichment and money had and received to recoup the alleged net benefit.
- On appeal, OCA did not dispute that the agreements were illegal; the dispute centered on whether Texas law permits equitable restitution despite the illegality.

## Issues

1. Whether, under Texas law, a party to an illegal professional-services management agreement may recover benefits conferred through equitable claims of unjust enrichment or money had and received.

## Decision

- The Fifth Circuit affirmed summary judgment for Packard on OCA’s equitable counterclaims.
- The court held that Texas public policy bars restitutionary relief where the claimed benefits were conferred pursuant to, and are inseparable from, an illegal contract.
- Because OCA’s payments and advances arose from the void management arrangement, OCA could not use unjust enrichment or money had and received to recover those sums.

## Legal Principles

- Texas courts generally refuse to grant relief that would recognize, enforce, or indirectly validate an illegal contract that violates public policy.
- Unjust enrichment is not an independent cause of action under Texas law; it is a restitution concept that cannot be used to circumvent the illegality of the parties’ express bargain.
- A money-had-and-received claim is equitable and restitutionary, and it is barred when recovery would depend on benefits transferred under an illegal agreement.
- When parties voluntarily participate in an illegal bargain, Texas policy commonly leaves them as found, favoring deterrence over reallocating losses between participants.

## Conclusion

The Fifth Circuit held that, because the dentistry management agreements were illegal under Texas public policy, OCA could not obtain restitution through unjust enrichment or money had and received for payments made under those void agreements, and summary judgment for Packard was properly affirmed.


Packard, D.M.D., M.S. v. OCA, Inc., 624 F.3d 726 (5th Cir. 2010)