In re Oca, Inc.
| Decision Date | 12 December 2008 |
| Docket Number | No. 07-30430.,07-30430. |
| Citation | 552 F.3d 413 |
| Parties | In the Matter of: OCA, INC., formerly doing business as Orthodontic Center of America; Orthalliance New Image; Orthodontic Centers of Texas, Inc.; Pedoalliance, Inc.; Orthoalliance, Inc., a Delaware Corporation, Debtors. Doug Crosby, D.D.S., Donald B. Doan, D.D.S., Glenwood Jordan, D.D.S., Elgin E. Wells; Plaintiffs-Appellees, OCA, Inc., A Delaware Corp.; Pedoalliance, Inc.; Plaintiffs-Appellants, Richard R. Woehrle, D.D.S., M.S.; Michael M. Dillingham, D.D.S., P.C., a Texas Professional Corporation; Michael M. Dillingham, D.D.S.; Austin Orthodontic Specialists; Robert P. Buck; Buck Orthodontices Associates, P.C.; Stephen N. Cole; Bay Area Orthodontices, P.C., Plaintiffs-Appellees, v. Orthalliance New Image; Orthondontic Centers of Texas, Inc.; Defendants-Appellants, Dudley M. Hodgkins; Dudley M. Hodgkins, D.D.S., M.S.D., P.C., a Texas Professional Corp.; William R. Izzard; Ruby Izzard, D.D.S., P.C., Defendants-Appellees, Orthoalliance, Inc., a Delaware Corporation; Defendant-Appellant, Ron Risinger, D.D.S.; Ron Risinger, D.D.S., P.C., Movants-Appellees. Robert Packard; Packard Orthodontics, P.A., Amicus Curiae. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Sean Joseph McCaffity, Rochelle Hutcheson & McCullough, Plano, TX, for Packard and Packard Orthodontics, PA, Amici Curiae.
Appeal from the United States Bankruptcy Court for the Eastern District of Louisiana.
Before GARWOOD, CLEMENT and ELROD, Circuit Judges.
Debtors-appellants OCA, Inc., formerly doing business as Orthodontic Centers of America, Inc.; OrthAlliance New Image, Inc.; Orthodontic Centers of Texas, Inc.; PedoAlliance, Inc.; and OrthAlliance, Inc. (collectively "OCA") directly appeal the January 17, 2007 interlocutory order of the bankruptcy court granting partial summary judgment and holding that the Business Services Agreements or Management Agreements (collectively the "BSAs") that OCA entered with a number of orthodontists and their professional corporations (collectively the "Orthodontists")1 were illegal under Texas law. We affirm.
This case arises out of a dispute over various BSAs, which OCA had entered into with Orthodontists in the state of Texas.2 According to the terms of the BSAs, OCA purchased or leased office space and purchased equipment for each office. OCA was also responsible for billing patients, filing insurance claims, hiring nondental personnel, setting dress codes, and managing a bank account through which the dental practice's funds flowed. The Orthodontists were not authorized to withdraw funds from the operating account, so OCA periodically transferred money from these accounts to pay the Orthodontists their compensation. In exchange, the Orthodontists agreed to work a minimum number of hours each week at the practice and not to perform orthodontic work outside that office. The Orthodontist would receive an hourly rate for seeing patients, and OCA would receive an hourly management fee in addition to being reimbursed for its overhead. Profits were then split according to the respective ownership interests of OCA and the Orthodontists. The BSAs were to be in force for long periods of time, some up to forty years, and their terms severely restricted the Orthodontists' ability to terminate or assign them.
The Orthodontists entered this case at various points in the litigation stream. Appellee orthodontist Buck initially brought suit against Orthalliance, Inc. in Texas state court seeking an accounting and a declaration that his BSA was void for illegality under Texas law. The case was removed to federal court and later transferred to the United States District Court for the Northern District of Texas on November 11, 2002. Appellee orthodontist Cole brought a similar suit that was eventually consolidated with Buck's case and others in Penny v. OrthAlliance, Inc. ("Penny"), Case No. 3:01-CV-1569-N, in the Northern District of Texas, in June 2004.3 The district court severed Cole's and Buck's cases from the Penny litigation in July 2005. OCA's filing for chapter 11 protection in the proceedings below in the Eastern District of Louisiana stayed Cole's and Buck's cases on March 6, 2006. The bankruptcy court, however, lifted the stay for the purpose of allowing the Northern District of Texas district court to rule on whether Buck's and Cole's BSAs were void for illegality under Texas law. On November 20, 2006, the district court for the Northern District of Texas held that the BSAs were void for illegality because they were nearly identical to the contracts in Penny that were held to be illegal under Texas Occupation Code § 251.003(a)(4). The district court then transferred the remainder of the case to the bankruptcy court for the Eastern District of Louisiana.
Appellee orthodontist Izzard terminated his BSA in April 2005, before OCA filed for bankruptcy. Appellees orthodontists Wells, Doan, Dillingham, Crosby, Jordan, and Woodworth were still performing under their respective BSAs when OCA filed for bankruptcy.
After filing for chapter 11 protection, OCA, as debtor in possession, commenced adversary proceedings in the bankruptcy court against Hodgkins and Izzard seeking a declaration that their BSAs were not void for illegality under Texas law. Appellees orthodontists Doan, Crosby, Wells, and Dillingham brought adversary proceedings seeking to have their BSAs declared void for illegality. In a contested proceeding, appellee orthodontist Woodworth filed a motion for summary judgment, which sought to have his BSA declared void for illegality. The bankruptcy court held a joint hearing to determine the legality of all of the Texas BSAs on January 10, 2007. At this hearing, the bankruptcy court announced from the bench that it was granting the Orthodontists' motions for partial summary judgment and holding that the BSAs were void for illegality under Texas law based on several prior Texas federal district court rulings in similar cases. The bankruptcy court entered its Order Granting Partial Summary Judgment on January 17, 2007.
On January 19, 2007, OCA moved to have the bankruptcy court certify its interlocutory judgment for direct appeal under 28 U.S.C. § 158(d)(2), and the Orthodontists moved to have the January 17, 2007 order made final. On March 7, 2007, the bankruptcy court granted OCA's motion and certified that the requirements to directly appeal its January 17, 2007 order to the Fifth Circuit were present. It also denied the Orthodontists' motions to make its earlier judgment final.4 OCA filed its petition for direct review of the bankruptcy court's interlocutory order with the Fifth Circuit on March, 16, 2007. The petition was granted on May 15, 2007.
OCA directly appealed to this court the bankruptcy court's January 17, 2007 interlocutory order pursuant to 28 U.S.C. § 158(d)(2). This statute was enacted to provide for direct review of bankruptcy court judgments, orders, or decrees by the applicable court of appeals in cases where the bankruptcy court or the district court certify that there is no controlling decision from the Supreme Court or circuit court, the case involves a matter of public importance, there are conflicting precedents, or an immediate appeal may materially advance the progress of the bankruptcy proceeding. 28 U.S.C. § 158(d)(2)(A)(i)-(iii). If this certification is made, the applicable court of appeals has jurisdiction if it authorizes the direct appeal. Id. § 158(d)(2)(A).
On March 7, 2007, the bankruptcy court certified that this case met the requirements for direct appeal because it involved a question of law on which there was no controlling decision by the Fifth Circuit or the Supreme Court, it involved a matter of public importance, and a direct appeal would materially advance the progress of the case. A panel from this court granted OCA's petition for leave to appeal under section 158(d). The only question is whether section 158(d)(2) permits this court to hear direct appeals from interlocutory orders of bankruptcy courts.5
The text of the statute grants the courts of appeals "jurisdiction of appeals described in the first sentence of subsection (a)." Id. § 158(d)(2)(A) (emphasis added). The first sentence of section 158(a) grants district courts jurisdiction over bankruptcy appeals from interlocutory orders or decrees if granted leave by the district court. Id. § 158(a)(3). Since interlocutory orders are included in the first sentence of subsection (a) and all of the other jurisdictional prerequisites of section 158(d)(2) are met, this court has jurisdiction to hear OCA's direct appeal from the bankruptcy court.6
Since this is an appeal from an interlocutory order from the bankruptcy court regarding a question of law on which there is no controlling precedent, we will treat this appeal essentially as we treat certified questions from district courts. See 28 U.S.C. § 1292(b).
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