Packard v. OCA, Inc., 2010 U.S. App. LEXIS 22070

OCA, a Delaware corporation, and Packard, a Texas dentist, entered into the Packard-OCA Business Services Agreement (BSA) superseding the Apple-Packard contract after Apple’s bankruptcy.
OCA paid approximately $4.99 million in upfront affiliation payments and advances to Packard in exchange for the BSA’s long-term management services and the development of up to seven new offices.
Five years into the BSA, Packard terminated the agreement and OCA sued for declaratory relief that the Packard-OCA contracts were illegal; OCA also asserted counterclaims for unjust enrichment, money had and received, and related theories.
The district court held the contract illegal under Texas law, lifted a prior stay, and later ruled on the counterclaims, ultimately granting summary judgment in favor of Packard on those counterclaims.
This court later held the BSA and related contracts illegal in In re OCA, and the district court determined OCA’s equitable counterclaims could proceed only if they fell within narrow exceptions to the general rule against recovering in connection with an illegal contract.
The Fifth Circuit affirmed the district court, concluding that (a) OCA could not recover independent of the illegal contract, (b) the parties were in pari delicto, and (c) public policy did not warrant relief.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Can OCA recover independent of the illegal contract?	OCA contends it may recover under a non-incidental reliance theory.	Packard argues any recovery would be intertwined with the illegal contract.	No; recovery cannot be had independent of the illegal contract.
Are the parties in pari delicto?	OCA claims it was less culpable due to lack of knowledge and Packard's duty to prevent unlicensed practice.	Packard and OCA bear substantially equal responsibility for the illegal contract.	Yes, they are in pari delicto; the exception does not apply.
Does public policy support relief for OCA?	Relief would serve public policy by deterring unlicensed practice and recognizing equities.	Public policy does not favor relief where the public interest is to prevent unlicensed practice, and the wrongdoer should not be aided.	No; the public policy exception does not apply.

In re OCA, Inc., 552 F.3d 413 (5th Cir. 2008) (court held BSA illegal for unlicensed dental practice)
Norman v. B.V. Christie & Co., 363 S.W.2d 175 (Tex. Civ. App. Houston 1962) (contribution recovery despite another illegal contract)
Morrison v. City of Fort Worth, 155 S.W.2d 908 (Tex. 1941) (recovery under mandatory statute despite illegal contract)
Beer v. Landman, 31 S.W. 805 (Tex. 1895) (no recovery for parties to an illegal contract; exceptions limited)
Lewy v. Crawford, 23 S.W. 1041 (Tex. Civ. App. 1893) (recovery of money where funds remain with stakeholder; limits when funds have vested)
Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299 (Supreme Court, 1985) (in pari delicto doctrine; conditions for applicability in securities context)
Plumlee v. Paddock, 832 S.W.2d 757 (Tex. App. Fort Worth 1992) (public policy considerations in relief against illegal professional conduct)
City of Denton v. Municipal Administrative Services, Inc., 59 S.W.3d 764 (Tex. App. Fort Worth 2001) (rescissory recovery discussion for illegal municipal contracts)
Lewy v. Crawford, 23 S.W. 1041 (Tex. Civ. App. 1893) (stakeholder-money recovery when illegal contract involved)
Sherrard v. After Hours, Inc., 464 S.W.2d 87 (Tex. 1971) (fraud/undue influence considerations in illegal contract relief)