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THE DENTISTS’ FEE-SPLITTING AGREEMENT VIOLATED THE EDUCATION LAW; A COURT WILL NOT ENFORCE AN ILLEGAL CONTRACT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the complaint seeking to enforce an illegal contract should have been dismissed:

… [T]he plaintiff entered into an asset purchase agreement (hereinafter the APA) to sell certain assets of its dental practice to the defendant, a licensed dentist who retained his own separate practice. The APA specified a purchase price of $250,000. A portion of that amount was to be paid as a percentage of the monthly revenue generated by the plaintiff’s practice or, under certain conditions, a percentage of the revenue generated from a potential sale of the defendant’s separate practice. * * *

The defendant established his entitlement to dismissal of the causes of action alleging breach of contract and unjust enrichment pursuant to CPLR 3211(a)(7). As the defendant correctly contends, the APA constituted a voluntary prospective arrangement for the splitting of fees in violation of the Education Law because it required the defendant to pay the plaintiff a percentage of revenue generated by the plaintiff’s practice and, under certain conditions, the defendant’s own separate dental practice (see Education Law §§ 6509-a, 6530[19] …). “‘It is the settled law of this State (and probably of every other State) that a party to an illegal contract cannot ask a court of law to help him or her carry out his or her illegal object, nor can such a person plead or prove in any court a case in which he or she, as a basis for his or her claim, must show forth his or her illegal purpose'” … . “‘Where the parties’ arrangement is illegal the law will not extend its aid to either of the parties . . . or listen to their complaints against each other, but will leave them where their own acts have placed them'” … . Advanced Dental of Ardsley, PLLC v Brown, 2024 NY Slip Op 03804, Second Dept 7-17-24

Practice Point: A fee-splitting agreement between dentists violates the Education Law.

Practice Point: A court will not enforce an illegal contract.

 

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