## Facts

- Bruce Kilpatrick operated a waste-disposal business and sold equipment and customer accounts to another disposal company under a written agreement containing a covenant not to compete.
- The purchaser’s rights under the agreement, including the noncompetition covenant, were later assigned to Pollard Disposal, Inc.
- Pollard alleged Kilpatrick breached the covenant by reentering the refuse-collection business and soliciting former customers.
- A Michigan state court entered a preliminary injunction requiring Kilpatrick to comply with the covenant and refrain from competing within the agreed limits.
- Kilpatrick and his wife filed a joint Chapter 13 petition after entry of the injunction.
- The confirmed Chapter 13 plan stated that the debtors rejected all executory contracts or leases; Kilpatrick treated the noncompetition agreement as rejected.
- Pollard filed a bankruptcy-court action seeking declaratory relief that it could continue enforcing the state-court injunction; Pollard disavowed any right to monetary damages and sought only injunctive enforcement.

## Issues

1. Whether a creditor’s right to enforce a covenant not to compete solely by injunction, after disclaiming any right to money damages, is a “claim” under 11 U.S.C. § 101(5)(B).
2. Whether rejection of an executory contract through a confirmed Chapter 13 plan converts the creditor’s injunctive enforcement rights under a noncompetition covenant into a dischargeable prepetition claim.
3. Whether the automatic stay under 11 U.S.C. § 362(a) bars enforcement of the state-court injunction when the creditor seeks only non-monetary relief.

## Decision

- The court granted Pollard declaratory relief.
- The court held Pollard’s injunctive enforcement right was not a “claim” under § 101(5)(B) because Pollard renounced any right to payment and sought only forward-looking equitable relief.
- The court held the obligation to comply with the covenant, as pursued by Pollard, was not dischargeable in the Chapter 13 case.
- The court held the automatic stay did not bar Pollard from enforcing the state-court injunction because Pollard was not seeking to collect or recover a bankruptcy “claim.”

## Legal Principles

- Under 11 U.S.C. § 101(5)(B), an equitable remedy is a bankruptcy “claim” only if the breach gives rise to a right to payment; the provision targets situations where the equitable remedy functions as a substitute for money.
- A creditor’s express waiver or disavowal of money damages can remove an injunction-based enforcement right from the definition of “claim” when the relief sought is genuinely non-monetary.
- Rejection of an executory contract under 11 U.S.C. § 365(g) is treated as a breach that may generate a prepetition claim for damages, but rejection does not necessarily eliminate non-monetary obligations where the counterparty seeks no damages.
- The automatic stay under 11 U.S.C. § 362(a) generally bars acts to collect or recover a “claim”; if no “claim” exists, injunctive enforcement aimed at stopping prohibited conduct is not stayed on that basis.

## Conclusion

The bankruptcy court ruled that a covenant not to compete enforced only through injunctive relief, with the creditor disclaiming any right to money damages, does not constitute a bankruptcy “claim” under § 101(5)(B); therefore, the obligation was not discharged in Chapter 13 and enforcement of the state-court injunction was not barred by the automatic stay.


In re Kilpatrick, 160 B.R. 560 (Bankr. E.D. Mich. 1993)