Robert C. Penny, Et Al., Plaintiffs, V. Orthalliance, Inc., Defendant.

ROBERT C. PENNY, et al., Plaintiffs, v. ORTHALLIANCE, INC., Defendant.

UNITED STATES DISTRICT COURT (N.D. TEXAS)

255 F. Supp. 2d 579 (2003)

I. BACKGROUND

Robert C. Penny ("Penny"), Keith Stewart ("Stewart"), and William M. Reeves ("Reeves") (the "Individual Plaintiffs") are doctors of dental surgery, specializing in the practice of orthodontics; the Individual Plaintiffs are all licensed to practice dentistry in Texas. The Defendant, Orthalliance, Inc., ("Orthalliance") provides business and consulting services to orthodontic entities. The Plaintiffs Penny Orthodontics, P.C. ("Penny P.C."), Stewart Orthodontics, P.C. ("Stewart P.C."), William M. Reeves, P.C. ("Reeves P.C.") (collectively "Practice Groups" or "Groups"), the Individual Plaintiffs, and Orthalliance entered into a series of agreements in which Orthalliance acquired the physical assets of  the Individual Plaintiffs' orthodontic practices and agreed to provide practice management services. In return, the Individual Plaintiffs received a substantial amount of money and agreed to remain working at their practices for at least five years and to not compete with Orthalliance following the termination of the Parties' agreements. The Plaintiffs claim that Orthalliance failed to perform its obligations under the agreements and now bring this action seeking various forms of relief including a declaration regarding the invalidity of the Parties' agreements as constituting the unauthorized practice of dentistry.

Although some differences exist among the transactions entered into by the Parties, each involve certain core contracts: (1) a "Purchase and Sale Agreement" between Orthalliance and each Individual Plaintiff or their respective formerly owned corporation; (2) a "Service Agreement" between Orthalliance and the respective Practice Group; and (3) an "Employment Agreement" between the Individual Plaintiff and his Practice Group (collectively "Agreements"). Under the Purchase and Sale Agreement,...