IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 15-20627

XENON HEALTH, L.L.C.; HAROON W. CHAUDHRY, M.D., 

 Plaintiffs - Appellants

v.

MIRZA BAIG, 

 Defendant - Appellee

Appeal from the United States District Court 

for the Southern District of Texas

Before DAVIS, ELROD, and HIGGINSON, Circuit Judges.

PER CURIAM:*

Plaintiffs-Appellants appeal the district court’s grant of summary 

judgment dismissing their tortious interference with a contract claim on the 

grounds that the underlying agreements were illegal and void under the Texas 

Medical Practice Act because they provided for the practice of medicine in 

Texas without a license. We AFFIRM. 

 

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not 

be published and is not precedent except under the limited circumstances set forth in 5TH 

CIR. R. 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

October 25, 2016

Lyle W. Cayce

Clerk

 Case: 15-20627 Document: 00513733333 Page: 1 Date Filed: 10/25/2016
No. 15-20627

2

I.

Plaintiff Xenon Health, L.L.C. (“Xenon”) is a California company that 

provides anesthesia services to medical facilities and management services to 

anesthesia providers. Plaintiff Haroon W. Chaudhry, M.D. (“Dr. Chaudhry”), 

a resident of California, is the president and chief executive officer of Xenon. 

Xenon sought to expand its services to Texas in early 2011, but Dr. Chaudhry 

was not licensed to practice medicine in Texas and could not provide medical 

services without a Texas license. Xenon’s chief operating officer, Fahim 

Hashim (“Hashim”), contacted his friend and business associate, Defendant 

Mirza Baig. Baig introduced Plaintiff Dr. Chaudhry to Dr. Mutjaba Ali Khan

(“Dr. Khan”), a physician licensed to practice medicine in Texas. 

Dr. Chaudhry was in the process of seeking a Texas medical license and 

agreed with Dr. Khan to establish a Texas entity, Xenon Anesthesia of Texas 

PLCC (“Xenon Texas”), to provide anesthesia services in Texas. Dr. Chaudhry 

and Dr. Khan entered into three agreements in July 2011: (1) a Purchase and 

Sale Agreement (“PSA”), (2) an Equity Interest Assignment Agreement

(“Equity Agreement”), and (3) an Exclusive Management Services Agreement. 

Under the Exclusive Management Services Agreement, Dr. Khan acted 

as managing member of Xenon Texas, but the services were provided by Dr. 

Chaudhry through Xenon in California. Additionally, under the PSA and the 

Equity Agreement, within seven business days of Dr. Chaudhry obtaining his 

Texas medical license, Dr. Khan agreed to sell his interest in Xenon Texas to 

Dr. Chaudhry. Until that sale, Xenon would perform services for Xenon Texas 

for a monthly fee of $750,000. These agreements were all signed 

contemporaneously in July 2011 and became effective on that date. 

Xenon’s chief operating officer, Hashim, left the business in December 

2011, believing that he would be terminated. At that point, Plaintiffs Xenon 

and Dr. Chaudhry filed this suit, alleging that Baig, Hashim, Dr. Khan, and 

 Case: 15-20627 Document: 00513733333 Page: 2 Date Filed: 10/25/2016
No. 15-20627

3

Dr. Khan’s attorney all conspired to take control of Xenon Texas. Plaintiffs 

alleged that Baig, as the “leader” of the effort, caused the termination of all 

three agreements before Dr. Chaudhry obtained his Texas medical license on 

October 1, 2012. 

Plaintiffs’ suit alleged that Baig tortuously interfered with the 

agreements between Xenon/Dr. Chaudhry and Xenon Texas/Dr. Khan. Baig

moved for summary judgment. Finding that the three agreements were illegal 

and void, the district court granted Baig’s motion for summary judgment and 

dismissed the suit. The district court held that the three interrelated contracts 

were void under the Texas Medical Practice Act, which prohibits any person 

from practicing medicine in Texas without a Texas license to do so.1 It followed 

that no suit could lie for interference with a void contract.2 

II.

We review the district court’s grant of summary judgment de novo.3 

Summary judgment is appropriate “if the movant shows that there is no 

genuine dispute as to any material fact and the movant is entitled to judgment 

as a matter of law.”4 The Court views all evidence in the light most favorable 

to the nonmoving party, drawing all reasonable inferences in that party’s 

favor.5

III.

Plaintiffs-Appellants Xenon and Dr. Chaudhry raise several interrelated issues on appeal, arguing that the district court erred in granting 

Baig’s motion for summary judgment. The district court wrote a 

 

1 Xenon Health LLC v. Baig, No. H-13-1828, 2015 WL 3823623, at *6 (S.D. Tex. June 

19, 2015).

2 Id. at *7. 

3 Johnston & Johnston v. Conseco Life Ins. Co., 732 F.3d 555, 561 (5th Cir. 2013).

4 Fed. R. Civ. P. 56(a). 

5 Crawford v. Formosa Plastics Corp., 234 F.3d 899, 902 (5th Cir. 2000).

 Case: 15-20627 Document: 00513733333 Page: 3 Date Filed: 10/25/2016
No. 15-20627

4

comprehensive opinion addressing these arguments. We consider below the 

issues Plaintiffs raise on appeal. 

Plaintiffs argue on appeal that the district court erred in finding that the 

three agreements were illegal and void under the Texas Medical Practice Act.6

The district court correctly concluded that Dr. Khan’s corporation, Xenon 

Texas, was organized to furnish anesthesia services in Texas, this corporation

was a sham, and these services were being provided by Dr. Chaudhry. The 

Exclusive Management Services Agreement with Dr. Chaudhry’s corporation,

Xenon, makes it clear that Dr. Chaudhry and Xenon had total control of Xenon 

Texas. This agreement provided that Xenon would have the exclusive right to 

furnish the following services for Xenon Texas: 

(i) recruiting, credentialing and scheduling (including ensuring 

vacation coverage) of anesthesia providers (the “Anesthesia 

Providers”), (ii) ordering and maintaining supplies and equipment, 

(iii) management of billing and collection services, (iv) monitoring 

and overseeing regulatory compliance, (v) providing financial 

reports, (vi) implementing quality assurance programs, (vii) 

management of all funds of Xenon (including with respect to 

receipt of accounts receivables and payment of expenses incurred 

by Xenon), and (viii) providing logistics (including, if necessary, 

assisting in structuring employment relationships with 

Anesthesia Providers).7

Dr. Chaudhry explained in his deposition that Dr. Khan was the paper owner 

of Xenon Texas. In addition, Dr. Khan even granted signature authority to Dr. 

Chaudhry. The agreement also provided that Xenon controlled all funds 

received for services provided by Xenon Texas. As the district court concluded, 

 

6 Dr. Chaudhry and Xenon also argue that a Texas state court judgment ordering Dr. 

Khan to transfer his ownership interest in Xenon Texas to Plaintiff binds this Court under 

principles of res judicata. The district court fully explained in footnote 31 of its opinion why 

the Texas state court’s decision is not binding in this suit for tortious interference with the 

contract. Xenon, 2015 WL 3823623, at *6 n.31.

7 Id. at *4 (quoting the Exclusive Management Services Agreement). 

 Case: 15-20627 Document: 00513733333 Page: 4 Date Filed: 10/25/2016
No. 15-20627

5

Dr. Chaudhry alone had authority to enter into agreements to provide 

anesthesia services and services related to that effort on behalf of Xenon Texas. 

The one argument Plaintiffs urge on appeal that requires analysis is that 

the PSA and the Equity Agreement did not relate to the practice of medicine 

in Texas and that the district court erred in finding that it was void. As stated 

above, the PSA required Dr. Khan to transfer Xenon Texas to Xenon within 

seven days of the date Dr. Chaudhry received his Texas medical license. 

We agree with the district court that the PSA and the Equity Agreement

were an integral part of the overall scheme for Xenon to control Xenon Texas

and were inextricably intertwined with the Exclusive Management Services 

Agreement. It is significant that the PSA required action by Dr. Khan during 

the time Xenon was actively operating Xenon Texas in the provision of 

anesthesia services. More specifically, Dr. Khan agreed to (1) “disclose . . . each 

and every action he takes with respect to [Xenon Texas] and each and every 

decision he makes on behalf of [Xenon Texas]”; (2) give Dr. Chaudhry and his 

agents access to all of Xenon’s “personnel, properties, books, contracts, 

commitments, tax returns and records,” as well as any other information Dr. 

Chaudhry might request; and (3) refrain from paying any dividends or 

distributions, incurring any debt, or selling company assets.8 These provisions 

in the PSA strengthened Dr. Chaudhry’s control over Xenon Texas’s medical 

practice before Dr. Chaudhry obtained his medical license and were designed 

to protect the value of his investment in Xenon Texas. 

The PSA and the Equity Agreement were designed to avoid the 

possibility for Dr. Khan to dispose of Xenon Texas or deplete assets in Xenon 

Texas until Dr. Chaudhry obtained his medical license. In other words, 

through the PSA, Dr. Chaudhry tried to preserve the asset he developed in 

 

8 Purchase and Sale Agreement, July 2011, at 5-7. 

 Case: 15-20627 Document: 00513733333 Page: 5 Date Filed: 10/25/2016
No. 15-20627

6

Xenon Texas while he was directing the practice of medicine in Texas in 

violation of the Texas Medical Practice Act. The PSA and Equity Agreement

were executed contemporaneously with the other contracts and played a 

central role in allowing Dr. Chaudhry to indirectly practice medicine in Texas 

and reap the benefit of that illegal practice once he obtained his license. 

IV.

In sum, the district court correctly analyzed these three interrelated

contracts that were designed by Dr. Chaudhry to give him almost total control 

over the medical practice of Xenon Texas. This was done to permit Dr. 

Chaudhry to illegally practice medicine in Texas and reap the benefit of 

receiving the asset he developed through this illegal activity. For these reasons

and the reasons assigned by the district court in its careful opinion, the 

judgment of the district court is AFFIRMED. 

 Case: 15-20627 Document: 00513733333 Page: 6 Date Filed: 10/25/2016
No. 15-20627

7

HIGGINSON, Circuit Judge, concurring in part and dissenting in part:

I agree with the majority opinion that the Exclusive Management 

Services Agreement violated the Texas Medical Practice Act and accordingly 

agree that Plaintiffs’ tortious interference claim predicated on the Exclusive 

Management Services Agreement cannot survive summary judgment. 

However, I respectfully disagree with the majority opinion’s conclusions 

concerning the Purchase Sale Agreement (“PSA”) and the Equity Interest 

Assignment Agreement (“Equity Agreement”). Instead, I would hold that 

Plaintiffs have put forward sufficient evidence—at least at this stage—to 

create a genuine issue of material fact concerning whether the PSA and Equity 

Agreement are separate from the unlawful Exclusive Management Services 

Agreement and therefore, are enforceable.

As an initial uncontested matter, neither the PSA nor the Equity 

Agreement, standing alone, violates the Texas Medical Practice Act. The PSA 

expressly conditions its effect on Chaudhry, or his designee, receiving a Texas 

medical license. And, the Equity Agreement, as an exhibit to the PSA, is 

subject to the same condition. Thus, the majority opinion’s illegality holding 

must depend on the assertion that the PSA and the Equity Agreement “were 

an integral part of the overall scheme for Xenon to control Xenon Texas and 

were inextricably intertwined with the Exclusive Management Services 

Agreement.” 

Even granting the argument that all three agreements were 

“inextricably intertwined,” the legal conclusion that the PSA and the Equity 

Agreement are therefore necessarily illegal and void does not follow, as Texas 

courts implicitly have held assessing these same agreements.

 Case: 15-20627 Document: 00513733333 Page: 7 Date Filed: 10/25/2016
No. 15-20627

8

Under Texas law, which all parties agree applies here, where an 

“incidental” clause of a contract is unlawful but the “original consideration of 

the contract is legal,” the “invalid provisions may be severed and the valid 

portion of the agreement upheld.” Rogers v. Wolfson, 763 S.W.2d 922, 925 (Tex. 

App. 1989), writ denied (June 7, 1989). “An illegal or unconscionable provision 

of a contract may generally be severed so long as it does not constitute the 

essential purpose of the agreement.” In re Poly-Am., L.P., 262 S.W.3d 337, 360 

(Tex. 2008). “The relevant inquiry is whether or not parties would have 

entered into the agreement absent the unenforceable provisions.” Id. If the 

parties would have still entered into the agreement absent the unenforceable 

clauses, the illegal terms may be severed and the agreement may still be 

enforced. See Whiteside v. Griffis & Griffis, P.C., 902 S.W.2d 739, 744 (Tex. 

App. 1995), writ denied (Nov. 16, 1995). Courts determine whether an illegal 

clause is severable from the agreement as a whole by looking to the parties’ 

intent as evidenced by the terms of the agreement. Montgomery v. Browder, 

930 S.W.2d 772, 778–79 (Tex. App. 1996), writ denied (Apr. 18, 1997) 

(“Severability of the contract is determined by the intent of the parties as 

evidenced by the language of the contract.”).

Although asserting that all three agreements essentially functioned as 

one, the district court did not consider whether the PSA or the Equity 

Agreement are severable from the Exclusive Management Services 

Agreement. There is at least enough evidence to find a genuine issue of 

material fact that they are. 

First, and most importantly, the PSA contains a severability clause. 

Section 15.13 of the PSA provides, “In case any one or more of the provisions 

contained in this Agreement is for any reason held to be invalid, illegal or 

unenforceable in any respect, such invalidity, illegality, or unenforceability 

will not affect any other provisions of this Agreement . . . .” “[T]he purpose of 

 Case: 15-20627 Document: 00513733333 Page: 8 Date Filed: 10/25/2016
No. 15-20627

9

a severability clause is to allow a contract to stand when a portion has been 

held to be invalid.” John R. Ray & Sons, Inc. v. Stroman, 923 S.W.2d 80, 87 

(Tex. App. 1996), writ denied (Feb. 21, 1997). Although a severability clause 

alone will not save an unlawful contract, see Stroman, 923 S.W.2d at 87, “[t]he 

presence of a severability clause sheds light on the agreement’s ‘essential 

purpose.’ ” Coronado v. D. N.W. Houston, Inc., No. 13-CV-2179, 2015 WL 

5781375, at *10 (S.D. Tex. Sept. 30, 2015). Accordingly, Texas courts have 

relied on the presence of severability clauses to determine that an unlawful 

clause was not essential to a contract. See, e.g., Poly-Am., 262 S.W.3d at 360 

(“We agree with Poly–America that the intent of the parties, as expressed by 

the severability clause, is that unconscionable provisions be excised where 

possible.”).

Second, the recitals to the PSA indicate that the purpose of the 

agreement was to transfer all of Khan’s interest in Xenon Texas to Chaudhry. 

That purpose can function entirely independently from the pre-transfer 

management rights given to Chaudhry by the Exclusive Management Services 

Agreement. That is, Chaudhry could have purchased Xenon Texas without 

managing the company prior to the purchase. 

Third, the PSA contains terms that make little sense against the 

backdrop of an enforceable Exclusive Management Services Agreement. For 

example, why would the PSA require Khan to give Chaudhry access to Xenon 

Texas’s books and records when the Exclusive Management Services 

Agreement gave Chaudhry control over Xenon Texas’s financial reports? 

These overlapping terms equally suggest that the PSA was intended to operate 

independently from, not “inextricably intertwined” with, the Exclusive 

Management Services Agreement.

Fourth, the fact that the parties chose to structure the Exclusive 

Management Services Agreement, the PSA, and the Equity Agreement as 

 Case: 15-20627 Document: 00513733333 Page: 9 Date Filed: 10/25/2016
No. 15-20627

10

separate agreements suggests that each was meant to function independently. 

Put another way, there was nothing to stop the parties from drafting a 

commercially reasonable agreement that combined all three agreements into 

one.

Significantly to me, finding that the PSA and the Equity Agreement 

could be enforceable would square our judgment with the rulings of the Texas 

courts. As the majority opinion acknowledges, Texas courts previously have 

found the PSA enforceable. Those rulings are in serious tension with the 

majority opinion’s holding that the PSA is illegal and void under Texas law. 

The majority opinion’s explanation for this divergence adopts footnote thirtyone of the district court’s opinion. Id. Footnote thirty-one distinguished the 

Texas cases by arguing that the those cases only concerned the PSA’s legality 

after Chaudhry received his Texas medical license. The district court 

reasoned:

Plaintiffs’ allegations of tortious interference in this case, however, 

allegedly accrued in late 2011 and the early months of 2012, when 

Plaintiff Chaudhry had neither a Texas administrative medicine 

license nor a Texas clinical medical license. . . . Whatever the postmedical licensure effect was, if any, that the Texas state courts 

may have found inured to the benefit of Chaudhry when he 

received a Texas administrative medicine license, he had no 

administrative medical license or clinical medical license in Texas 

in late 2011 and during the first nine months of 2012 when the 

alleged tortious interference occurred, and the contracts then were 

void as against public policy.

But, the district court’s conclusion is not supported by the record; 

Plaintiffs have put forward evidence of tortious interference after Chaudhry 

received his Texas medical license. At his deposition, Chaudhry stated that on 

October 9, 2012, Xenon wrote to Khan to inform him that Chaudhry had 

obtained his medical license. Chaudhry contends that Khan did not respond 

to that letter because of Baig’s influence; specifically, he claims that Khan 

 Case: 15-20627 Document: 00513733333 Page: 10 Date Filed: 10/25/2016
No. 15-20627

11

wanted to settle the dispute following Xenon’s letter but did not do so because 

of Baig. In support, Chaudhry cites Fahim Hashim’s testimony. Hashim 

testified that Khan did not want to be involved in the ongoing conflict but Baig 

convinced him otherwise. Accordingly, I am apprehensive that the majority 

opinion adopts a footnote proposition contradicted both by the record and also 

by Texas state courts.

That being said, I recognize that there is record evidence to support the 

argument that the Exclusive Management Services Agreement’s unlawful 

terms might not be severable from the PSA and the Equity Agreement. For 

example, the PSA became effective in July 2011—before Dr. Chaudhry 

received his medical license. And, although the contemplated purchase was 

not to occur until after Chaudhry got his license, the preceding time period was 

still relevant because the PSA set the purchase price as the sum of (1) Xenon 

Texas’s startup expenses and (2) five percent of collections from anesthesia

procedures performed between the effective date and either (a) the closing date 

or (b) 180 days later. Thus, the purchase price in the PSA depended on revenue 

generated during the period of unlawful management. This structure allowed 

Chaudhry to exploit the benefits of business that he generated during the 

pendency of the Exclusive Management Services Agreement. 

To be clear, I would not find—at least at this stage of the litigation—that 

the PSA and Equity Agreement are lawful. Instead, I would reverse the 

district court’s holding with respect to the PSA, Equity Agreement, and 

conspiracy claims, and thereby allow the district court to consider, on a full 

trial record, whether the PSA and Equity Agreement are so “inextricably 

intertwined” that they cannot be severed from the unlawful Exclusive 

Management Services Agreement.

Because I see a material issue of fact as to the separateness of these 

agreements, and especially because the district court did not engage in any 

 Case: 15-20627 Document: 00513733333 Page: 11 Date Filed: 10/25/2016
No. 15-20627

12

severability analysis that might harmonize our holding with the rulings of the 

Texas courts, I respectfully dissent. 

 Case: 15-20627 Document: 00513733333 Page: 12 Date Filed: 10/25/2016