By: James Duckham
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
In In re Hurvitz, the Bankruptcy Court for the District of Massachusetts granted Blue Grace Franchise (“Blue”) relief from an automatic stay because Blue’s right to enforce the noncompetition and nonsolicitation provisions in its franchise agreement were not claims under section 101(5) of the United States Bankruptcy Code (the “Code”). In February 2015, Blue and Carl Hurvitz entered into a franchise agreement that gave Hurvitz a nonexclusive and limited license to use Blue’s services and technology. This agreement contained restrictive covenants that prohibited Hurvitz from competing or soliciting business away from Blue for two years after the agreement was terminated. In January 2016, Blue terminated the agreement and Hurvitz began to work for Freight Management Company (Freight), a direct competitor of Blue. In April 2016 Blue filed suit in Massachusetts Superior Court, and in May 2016 Blue was granted a temporary restraining order that enjoined Hurvitz from continued employment at Freight and from soliciting or contacting Blue’s former, current, or perspective clients. On May 16, 2016, Hurvitz filed a petition for relief under chapter 7 of the Code, which pursuant to section 362 of the Code, resulted in an automatic stay of the restraining order. Blue then made a motion to the bankruptcy court requesting relief from the automatic stay. Ultimately, the bankruptcy court granted relief from the automatic stay finding that the franchise agreement’s provisions were not considered claims under the Code.