## Facts

- Maids International, Inc. franchised a household cleaning and maintenance business system and brand.
- Michael and Angela Ward owned and operated Award Services, Inc., a Maids franchisee.
- Maids and Award entered a franchise agreement under which the Wards signed both for the corporation and personally; the agreement defined “Franchisee” to include the Wards, making them jointly responsible.
- The agreement granted exclusive rights to use Maids’ system and name in a defined Massachusetts territory, in exchange for an initial fee and ongoing royalties based on weekly gross sales.
- The agreement contained a two-year post-termination covenant not to compete barring the franchisee (including the Wards) from owning or operating a similar business within a defined geographic area.
- After the franchise term ended, the Wards began operating their own cleaning/maintenance business in the same market area.
- Maids obtained an arbitration award addressing the noncompete breach, including damages and cease-and-desist relief.
- The Wards filed Chapter 7 bankruptcy, and Maids filed an adversary complaint seeking temporary and permanent injunctive relief to enforce the noncompete rather than proceeding only through a proof of claim.

## Issues

1. Whether a creditor’s right to enforce a noncompetition covenant by injunction is a “claim” under 11 U.S.C. § 101(5) when the breach also gives rise to a right to payment.
2. Whether a contract that allows the nonbreaching party to pursue either damages or injunctive relief makes the equitable remedy subject to bankruptcy claims treatment and discharge.

## Decision

- The bankruptcy court held that Maids’ requested injunction constituted a “claim” within the meaning of 11 U.S.C. § 101(5).
- Because the noncompete breach was compensable by money damages under the agreement and applicable law, the parallel right to equitable relief fell within the statutory definition of “claim.”
- The court dismissed Maids’ adversary complaint for injunctive relief and directed Maids to proceed by filing a proof of claim in the Chapter 7 case.

## Legal Principles

- “Claim” under 11 U.S.C. § 101(5) includes a right to an equitable remedy for breach of performance if the breach gives rise to a right to payment.
- An equitable remedy is treated as a bankruptcy “claim” when the same breach is remediable through monetary damages, including where the contract effectively gives the creditor a choice between damages and injunctive relief.
- Bankruptcy law favors comprehensive treatment of debtor obligations through the claims process; a creditor cannot avoid discharge by characterizing a monetizable breach as purely equitable.

## Conclusion

The court treated enforcement of a franchise noncompetition covenant as a dischargeable bankruptcy claim because the breach supported an alternative right to payment, requiring the franchisor to seek recovery through the proof-of-claim process rather than injunctive enforcement against Chapter 7 debtors.


Maids Int'l, Inc. v. Ward (In re Ward), 194 B.R. 703 (Bankr. D. Mass. 1996)