In Re Kilpatrick

OPINION ON POLLARD DISPOSAL’S MOTION REGARDING AUTOMATIC STAY

INTRODUCTION

On April 30, 1988, Bruce Kilpatrick (the “Debtor”) entered into a written agreement in which he agreed to sell certain equipment to G & G Disposal Corporation. Pursuant to this agreement, the Debtor assigned to G & G all customer accounts belonging to the Debtor’s company, B & K Disposal. The agreement contained a provision whereby the Debtor agreed not to compete with G & G’s refuse-removal business for a period of five years in the counties of Shiawassee, Genesee, Livingston and Saginaw. The agreement required the Debtor to obtain the signatures of his co-debtor spouse and children on a separate covenant not to compete, which the Debtor did on May 1, 1988.

G & G subsequently brought a breach of contract action against the Debtor in Shia-wassee County Circuit Court. On June 28, 1990, that court entered a preliminary injunction which enjoined the Debtor “from engaging in any form of activity related to refuse removal in Shiawassee County.” The Debtor and his wife filed their joint petition for relief under chapter 13 of the Bankruptcy Code on June 12, 1991. Their plan, which was confirmed on December 19, 1991, contained a provision on page 4 stating that “[t]he debtors reject all executory contracts or leases.” Following plan confirmation, and notwithstanding the injunction, the Debtor commenced a refuse-removal business in Shia-wassee County.

G & G assigned its rights under the contract to Pollard Disposal, Inc. and, on June 15, 1992, Pollard filed a “Motion for Declaratory Ruling and for Relief from Automatic Stay.” In this motion, Pollard sought the following relief: (1) a determination that the circuit court’s injunction is “valid and enforceable”; (2) a determination that the automatic stay does not prevent the circuit court from holding the Debtor in contempt for his post-petition violation of the injunction or, if it does, then an order lifting the stay; and (3) relief from the stay so that Pollard can enforce the covenant in state court. For the reasons which follow, the motion will be denied.

DISCUSSION

In opposing Pollard’s motion, the Debtor raised the following arguments: (1) Pollard lacks standing to bring the motion; (2) rejection of the contract relieved the Debtor of his obligation to comply with the covenant not to compete; and (3) Pollard’s remedy for breach of the covenant not to compete or violation of the injunction can be reduced to money damages, and therefore Pollard holds only a claim against the Debtor which is subject to discharge pursuant to § 1328(a). These arguments will be considered seria-tim, followed by a discussion of the automatic stay.

1. STANDING

The Debtor argued that the assignment between G & G and Pollard violated Michigan law because he did not receive notice of the assignment as required by Mich. Comp. *563 Laws § 440.6105. 1 As a result, the Debtor ■ contended, the transfer was ineffective against him, and Pollard therefore lacks standing to sue him.

Since the Debtor’s argument goes to the merits of Pollard’s motion, rather than calling into question whether Pollard is “properly situated” to make the motion, it does not raise an issue as to Pollard’s “standing.” See Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction 2d § 3531 (1992). In any event, I need not address the validity of the Debtor’s defective-assignment argument. Pollard either has a claim against the estate, or it doesn’t. A determination that Pollard has a claim will in all likelihood end the matter. 2

Conversely, if Pollard doesn’t have a claim, then the state-court proceedings would be the more appropriate context in which to challenge the effectiveness of the assignment. Cf. In re Sundale Assocs., 11 B.R. 978, 980-81 (Bankr.S.D.Fla.1981) (debtors’ contention that mortgagee waived accrued interest should be litigated in the pending state-court foreclosure proceeding, rather than in connection with the mortgagee’s request for relief from the automatic stay). I therefore assume that the assignment is valid for present purposes. 3

2. EFFECT OF REJECTION

The Debtor contended that the covenant is unenforceable because the agreement of which it is a part was rejected, pursuant to 11 U.S.C. §§ 1322(b)(7) and 365(a), by the terms of the Debtor’s confirmed plan. Although some courts lend credence to this theory, it is riddled with problems. First and foremost, it is difficult to reconcile such a contention with the fact that the nondebtor party to a rejected contract is deemed to have a breach-of-contract claim against the debtor under 11 U.S.C. § 365(g). A party would presumably have no such claim if the underlying contract were no longer valid. As has been persuasively argued by others, the theory that rejection somehow “vaporizes” the subject agreement serves no recognized policy, has no statutory or historical support, and inappropriately transforms the “power” to reject (i.e., decline to assume) a contract into some kind of avoiding power. See Andrew, Executory Contracts in Bankruptcy: Understanding “Rejection”, 59 U.Colo.L.Rev. 845, 901-31 (1988); see also Westbrook, A Functional Analysis of Executory Contracts, 74 Minn.L.Rev. 227, 239 (1989) (lamenting the “step taken by a number of courts, positing that obligations owed to the Other Party can be rejected right out of existence”). I therefore “reject” the Debtor’s contention that rejection under § 365 is tantamount to rescission. See In re Udell, 149 B.R. 908, 911 (N.D.Ind.1993); In re Drexel Burnham Lambert Group, 138 B.R. 687, 708-09, 26 C.B.C.2d 1128 (Bankr.S.D.N.Y.1992).

3. AVAILABILITY OF MONEY DAMAGES

The Debtor’s third argument is that Pollard’s rights under the covenant and injunction constitute a “claim” under 11 U.S.C. § 101(5). That being the case, the Debtor contended, Pollard cannot obtain specific per *564 formance of either the covenant or the injunction, but must instead accept the same treatment of its claim as any other unsecured creditor — namely, payment under the plan on a pro rata basis, with any unpaid balance being discharged. Because the analysis for each is somewhat different, I will first consider this argument as it relates to the covenant, and then discuss the injunction.

A. The covenant not to compete

The ease law clearly supports the Debtor’s contention that, if a nondebtor’s rights under a noncompete agreement give rise to a claim, then the nondebtor is not entitled to specific performance of the agreement. See, e.g., Udell, 149 B.R. at 911; Silk Plants, Etc. Franchise Systems v. Register, 100 B.R. 360, 362-63 (M.D.Tenn.1989); In re May, 141 B.R. 940, 942 (Bankr.S.D.Ohio 1992); In re Oseen, 133 B.R. 627, 530 (Bankr.D.Idaho 1991); cf. Ohio v. Kovacs, 469 U.S. 274, 278-83, 106 S.Ct. 705, 707-10, 83 L.Ed.2d 649 (1985) (court order requiring the debtor to clean up polluted property gave rise to a claim dischargeable in bankruptcy). The real issue here is whether Pollard’s right to enforce the covenant is tantamount to a claim.

A “claim” is defined under the Code as a:

(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or

(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.

11 U.S.C. § 101(5). Thus any right which can be reduced to monetary damages is a “claim,” even if that right could also be enforced by means of an “equitable remedy.” See 124 Cong.Rec. 32,393 (1978) (“[I]n some States, a judgment for specific performance may be satisfied by an alternative right to payment in the event performance is refused; in that event, the creditor entitled to specific performance would have a ‘claim’ for purposes of a proceeding under title 11.” (quoted in Kovacs, 469 U.S. at 280, 105 S.Ct. at 708)).

By rejecting the agreement, the Debtor committed a breach. 11 U.S.C. § 365(g). The question, then, is whether the Debtor’s breach of the covenant not to compete gave Pollard “a right to payment.” If it did, then Pollard holds a claim, and is entitled to specific performance of the covenant only if its claim was not discharged. See May, 141 B.R. at 942; In re Cox, 53 B.R. 829, 832, 13 C.B.C.2d 772 (Bankr.M.D.Fla.1985). Before considering whether Pollard has a claim, however, two preliminary issues must be addressed. The first is whether I must look to state law or federal law in determining if a right to payment exists.

It is well established that the existence of a claim in bankruptcy is generally determined by state law. See Grogan v. Garner, 498 U.S. 279, 283, 111 S.Ct. 654, 657, 112 L.Ed.2d 755, 763 (1991) (“The validity of a creditor’s claim is determined by rules of state law.”); Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 918, 59 L.Ed.2d 136 (1979) (“Property interests are created and defined by state law. Unless some federal interest requires a different result, there is no reason why such interests should be analyzed differently simply because an interested party is involved in a bankruptcy proceeding.”); In re Udell, 149 B.R. 898, 903 (Bankr.N.D.Ind.1992), rev’d on other grounds, 149 B.R. 908 (N.D.Ind.1993). As suggested in Butner, an exception to this general rule may exist if “some federal interest [so] requires.” Professor Westbrook and others would presumably argue that just such an “interest” is evidenced by § 502(c), which states that “[t]here shall be estimated for purpose of allowance under this section— ... (2) any right to payment arising from a right to an equitable remedy for breach of performance.” See Westbrook, 74 Minn.L.Rev. at 277 n. 215 (“[B]ecause the Code grants such expansive power to the bankruptcy courts to estimate claims, 11 U.S.C. § 502(c) (1988), the damage remedy (the ‘right to payment’) almost always will be available in bankruptcy, even when it might not have been at state law.”); see also In re JRT, Inc., 121 B.R. *565 314, 321, 24 C.B.C.2d 1123 (Bankr.W.D.Mich.1990) (“The Bankruptcy Code takes precedence over any state law regarding the effect of rejection of an executory contract.... Therefore, this court will not examine state law to determine the effect of the rejection....”); In re Norquist, 43 B.R. 224, 231, 11 C.B.C.2d 1146 (Bankr.E.D.Wash.1984) (“The equitable configuration of this court may very well permit a just determination and treatment of [the claim arising from a rejected contract] which could not be accomplished under the rigid application of eviden-tiary rules in state court.”).

But by its own terms, § 502(e) presupposes that a “right to payment” exists in the first instance: if it does (and only if it does), then § 502(e)(2) authorizes the court to estimate the amount of that payment. See Udell, 149 B.R. at 903 (“By this language [i.e., § 502(e)(2) ], Congress is indicating that only when the equitable remedy gives rise to a ‘right to payment’ will it become a claim which the bankruptcy court can estimate and discharge. It is circular to argue that [this] power to estimate the right to payment ... leads to the conclusion that the equitable remedy for a breach gives rise to a ‘right to payment’ ”). I therefore do not believe that the text of § 502(c) supports the conclusion that federal law determines whether a party has a right to payment from the debtor.

Moreover, interpreting § 502(c) as establishing a federal standard regarding the existence of a right to payment ignores the fact that the Code’s legislative history, cited supra p. 564, specifically refers to state law in explaining how a court is to determine whether a party holds a claim under § 101(5). Such an interpretation would thus create a conflict between §§ 101(5) and 502(c) that is easily avoided by a more straightforward reading of the latter subsection.

For these reasons, I agree with those cases holding that applicable state law determines the existence vel non of a “right to payment” arising from the breach of a non-compete agreement. See Udell, 149 B.R. at 912 (“[T]he court agrees with the holding in In re Audra-John Corp., 140 B.R. 752, 757 [23 B.C.D. 18, 26 C.B.C.2d 1554] (Bankr.D.Minn.1992), which specifically concluded that state, not federal law identifies remedies available when seeking to enforce a covenant not to compete against the debtor....”); Oseen, 133 B.R. at 530 (“[t]urning to state law to define the nature of the remedy for breach of a noncompetition covenant”); cf. Kovacs, 469 U.S. at 282, 105 S.Ct. at 709 (citing the fact that “state law gave a state receiver total control over [the debtor’s] assets” as undermining the State’s contention that “no alternative right to payment” existed with respect to a court order requiring the debtor to clean up contaminated property (quoting In re Kovacs, 717 F.2d 984, 987 (6th Cir.1983))).

The second preliminary issue is which party bears the burden of proving that Pollard’s rights under the breached covenant constitute a claim for Code purposes. If a proof of claim is properly challenged, the creditor must prove its validity. See In re DeLorean Motor Co. Litigation, 59 B.R. 329, 336-37 (E.D.Mich.1986); In re Premo, 116 B.R. 515, 518 (Bankr.E.D.Mich.1990). Similarly, a creditor contending that the debt owed to it is nondisehargeable bears the burden of proof in an action under § 523(a). See Grogan, 498 U.S. at 282, 287-88, 111 S.Ct. at 657, 659-60,112 L.Ed.2d at 761, 767. Assigning to the obligee the burden of proving that an obligation is not a claim (and hence is not subject to discharge) would be consistent with the foregoing rules. I therefore hold that Pollard must prove that the Debtor’s breach of the covenant not to compete would not entitle it to monetary damages under Michigan law. See Audra-John, 140 B.R. at 759-61.

Turning to the substantive issue, monetary damages may be awarded in Michigan as compensation for violation of a valid noncompete agreement. See, e.g., Lansing-Lewis Servs. v. Schmitt, 188 Mich.App. 647, 651, 470 N.W.2d 405 (1991); Brillhart v. Danneffel, 36 Mich.App. 359, 365-67, 194 N.W.2d 63 (1971). Pollard argued, however, that the state court had “already determined ... that money damages are not an adequate remedy for [the Debtor’s] breach of the Covenant.” P. 9 of Pollard’s Supplemental Brief. *566 Thus Pollard’s implicit contention is that the Debtor is collaterally estopped from arguing that his breach created a right of payment vesting in Pollard.

The preclusive effect of a state court ruling in federal court is determined by reference to the law of that state. See 28 U.S.C. § 1738; Migra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75, 81, 104 S.Ct. 892, 896, 79 L.Ed.2d 56 (1984); In re Moon, 116 B.R. 75, 78 (Bankr.E.D.Mich.1990) (collecting cases). The doctrine of collateral es-toppel, which “bars the relitigation of issues previously decided when such issues are raised in a subsequent suit by the same parties based upon a different cause of action,” Roberts v. City of Troy, 170 Mich.App. 567, 577, 429 N.W.2d 206 (1988), applies only to “an issue of ultimate fact ... determined by a valid and final argument.” Id. (emphasis added). See also Local 98, United Ass’n of Journeymen v. Flamegas Detroit Corp., 52 Mich.App. 297, 302, 217 N.W.2d 131 (1974). Since a preliminary injunction is not a “final judgment,” the Debtor is not precluded from arguing that Pollard is entitled to monetary compensation for his breach. See Hopkins v. Crantz, 334 Mich. 300, 302-03, 54 N.W.2d 671 (1952) (“Defendant ... claims that inasmuch as the circuit judge who first heard the case on a motion for temporary injunction dissolved it, therefore, the question became res judicata. Decision on a preliminary motion in no way affects a final decree.”). 4

The Debtor’s primary argument in this regard is his assertion that “the fact that G & G sued for money damages of $125,000 show[s] that money damages are possible.” P. 7 of Debtor’s Brief. Similarly, the Debtor cited as significant the proof of claim filed by G & G. See p. 3 of Debtor’s Addendum to Brief. In response, Pollard argued that “[t]he filing of the Complaint [by G & G seeking monetary damages as an alternative to an injunction] and the filing of the Proof of Claim are not an election of remedies.” P. 4 of Pollard’s Supplemental Brief.

Pollard’s response to this argument misses the point. The Debtor presumably did not cite G & G’s complaint and proof of claim to establish that Pollard had waived its right to equitable relief under an election-of-remedies theory, 5 but rather as evidence (for whatever it is worth) that G & G believed its damages could be reduced to a dollar figure.

However weak the Debtor’s argument may be, the fact remains that it was incumbent upon Pollard to show that breach of the covenant would result in damages too difficult to estimate, and that specific performance/injunctive relief would therefore be its only viable remedy. Since all it did in this regard was to submit evidence that (arguably) demonstrated that a state court judge believed monetary damages would for some reason be. insufficient, it did not make a satisfactory showing. I therefore conclude that Pollard’s rights under the covenant constitute a claim, the dischargeability of which must be litigated in the context of an adversary proceeding. See F.R.Bankr.P. 7001(6).

B. The Injunction

The injunction gave Pollard the right to be free from the Debtor’s competition in Shia-wassee County pending further order of the state court. If violation of that right would give rise to a right of payment, then it would seem that Pollard holds a claim. I cannot reach that conclusion, however, without first considering the significance of the Supreme Court’s decision in Kovacs, supra.

In that case, the State of Ohio had obtained an injunction in state court which included a provision requiring Kovacs to clean up polluted property operated by Kovacs’ corporation. 469 U.S. at 276, 105 S.Ct. *567 at 706. In holding that Ohio’s rights under that provision of the injunction amounted to a claim, the Court focused on the fact that the state sought to enforce the cleanup obligation by obtaining money from Kovaes. Id. at 282-83,105 S.Ct. at 709-10. In particular, the Court made the following observations:

The injunction surely obliged Kovaes to clean up the site. But when he failed to do so, rather than prosecute Kovaes under the environmental laws or bring civil or criminal contempt proceedings, the State secured the appointment of a receiver.... What the receiver wanted from Kovaes after bankruptcy was the money to defray cleanup costs. At oral argument in this Court, the State’s counsel conceded that after the receiver was appointed, the only performance sought from Kovaes was the payment of money_ Had Kovaes furnished the necessary funds, either before or after bankruptcy, there seems little doubt that the receiver and the State would have been satisfied. On the facts before it, ... we cannot fault the Court of Appeals for concluding that the cleanup order had been converted into an obligation to pay money....

Id. See also id. at 283 n. 11, 105 S.Ct. at 710 n. 11 (“The automatic stay provision does not apply to suits to enforce the regulatory statutes of the State, but the enforcement of such a judgment by seeking money from the bankrupt — what the Court of Appeals for the Sixth Circuit concluded was involved in this case — is another matter.”)

One could infer from these comments that Kovaes stands for the proposition that if violation of an injunction gives rise to both an equitable remedy and a right to payment, then the nondebtor holds a claim only if it elects to enforce its payment right. Alternatively, Kovaes arguably supports the contention — advanced by Pollard, see p. 9 of Pollard’s brief — that the nondebtor holds both a claim (the right to payment) and a nonclaim (the right to equitable relief). Under either scenario, Pollard would be free to enforce the injunction so long as it did not seek monetary damages. For the. reasons which follow, however, I reject both of these interpretations of Kovaes.

As noted, § 101(5)(B) provides that the “right to an equitable remedy for breach of performance” is a claim “if such breach gives rise to a right to payment.” (emphasis added). The statute does not state that the party holding the right to an equitable remedy can avoid having that right classified as a claim by the simple expedient of disavowing any interest in pursuing its alternative right to payment. Thus the text of § 101(5)(B) strongly implies that such a party’s intentions vis-a-vis enforcement of a payment right are irrelevant to the determination of whether that party holds a claim.

This interpretation of § 101(5)(B) is reinforced by the very legislative history cited by Kovaes, which indicates that when “a judgment for specific performance may be satisfied by an alternative right to payment in the event performance is refused; in that event, the creditor entitled to specific performance would have a ‘claim’.” 124 Cong.Rec. 32,393 (1978) (quoted in Kovacs, 469 U.S. at 280, 105 S.Ct. at 708; emphasis added). This passage makes clear that the availability of an alternative right to payment is determinative, not whether the nondebtor has demonstrated (or expressed) any inclination to enforce that right.

The foregoing excerpt from the legislative history also buttresses another point that is evident from a fair reading of the statute itself: namely, that the nondebtor’s equitable rights do not constitute a “nonclaim” separate and distinct from the nondebtor’s right to payment. See also id. (“[T]he result [under § 101(5)(B) is] that the equitable remedy [with respect to which an alternative right of payment exists] will be susceptible to being discharged in bankruptcy.”). Rather, the equitable right is itself a claim by virtue of the fact that the substantive law provides the nondebtor with an alternative right to monetary damages.

Thus, interpreting Kovaes in either of the manners suggested would be contrary to both the language of § 101(5)(B) and that statute’s legislative history. Fortunately, however, the opinion lends itself to an interpretation which does not pose this problem.

*568 In rendering its decision, the Court quoted favorably from the opinions of both the bankruptcy court and the Sixth Circuit. The bankruptcy judge had reasoned that “[tjhere is no suggestion by [the State] that [Kovacs] can render performance under the affirmative obligation other than by the payment of money. We therefore conclude that [the State] has a claim against [Kovacs].... ” Id. at 281, 105 S.Ct. at 709 (quoting In re Kovacs, 29 B.R. 816, 818 (Bankr.S.D.Ohio 1982)). Similarly, the Sixth Circuit observed:

Ohio does not suggest that Kovacs is capable of personally cleaning up the environmental damage he may have caused.... Kovacs cannot personally clean up the waste he wrongfully released into Ohio waters. He cannot perfoim the affirmative obligations properly imposed upon him by the State court except by paying money or transferring over his own financial resources.

Id. 469 U.S. at 282, 105 S.Ct. at 709 (quoting In re Kovacs, 717 F.2d 984, 987-88 (6th Cir.1983)). Based in part on these comments by the lower courts, the Court observed that, “[a]s we understand it, the Court of Appeals held that, in the circumstances, the cleanup duty had been reduced to a monetary obligation.” Id. See also id. 469 U.S. at 283, 105 S.Ct. at 710 (“[W]e cannot fault the Court of Appeals for concluding that the cleanup order had been converted into an obligation to pay money.... ”); id. at 285, 105 S.Ct. at 711 (“As the case comes to us, ... the State seeks to enforce [Kovacs’] cleanup obligation by a money judgment.”).

As stated earlier, one could reasonably infer from Kovacs that it was the State’s post-injunction conduct which effectively “converted” the injunction into a “money judgment.” But the foregoing passages from the lower-court decisions suggest an alternative interpretation: i.e., the cleanup injunction in essence represented an obligation to pay money, because for all practical purposes that was the only way that the debtor could carry out his obligation. So understood, Ko-vacs simply stands for the proposition that an injunction which on its face requires non-monetary performance, but which in reality obliges the debtor to spend money, creates a claim for Code purposes. Under this interpretation, the nondebtor’s efforts to enforce the injunction are relevant only insofar as they contradict the nondebtor’s contention that violation of the injunction did not give rise to a right of payment. See Kovacs, 469 U.S. at 282, 105 S.Ct. at 709 (“Ohio claims there is no alternative right to payment, but when Kovacs failed to perform, state law gave a state receiver total control over all Kovacs’ assets.” (quoting Kovacs, 717 F.2d at 987)).

Because this alternative interpretation focuses on the nature of the injunction, rather than the enforcement methods chosen by the nondebtor, it does not run afoul of § 101(5)(B). Accordingly, I conclude that Kovacs held only that if, as a practical matter, compliance with an injunction requires an expenditure of money on the debtor’s part, then the nondebtor holds a claim. See May, 141 B.R. at 943 (interpreting Kovacs as providing that, “where the debtor must expend money to comply with an injunction, the obligation arising under the injunction is a ‘debt’ ” 6 ); cf., e.g., Earle v. Carson, 188 U.S. 42, 47, 23 S.Ct. 254, 256, 47 L.Ed. 373 (1903) (whenever feasible, statutes should be interpreted so as to avoid potential conflicts).

Kovacs therefore does not undermine the analysis suggested earlier, which is that Pollard’s rights under the injunction constitute a claim if the Debtor’s violation of the injunction would give rise to a right of payment. 7 As with the covenant not to compete, I must turn to state law in addressing that issue.

*569 In Michigan, “there are three sanctions which may be available to a court to remedy or redress contemptuous behavior: (1) criminal punishment to vindicate the court’s authority; (2) coercion, to force compliance with the order; and (3) compensatory relief to the complainant.” In re Contempt of Dougherty, 429 Mich. 81, 98, 413 N.W.2d 392 (1987). As noted in Dougherty, id. at 97, 413 N.W.2d 392, the compensatory sanction is codified at Mich.Comp.Laws § 600.1721, which provides:

If the alleged misconduct has caused an actual loss or injury to any person[,] the court shall order the defendant to pay such person a sufficient sum to indemnify him.... The payment and acceptance of this sum is an absolute bar to any action by the aggrieved party to recover damages for the loss or injury.

Thus the Debtor’s violation of the injunction gave rise to two possible consequences that are nonmonetary — namely, criminal punishment or civil coercion. 8 But the important point here is that such violation also raised the possibility of monetary damages pursuant to Mieh.Comp.Laws § 600.1721. Whether the injunction created a claim pursuant to § 101(5)(A) and/or (B) therefore depends on whether these monetary damages, which are theoretically available in any contempt proceeding, would actually be available to Pollard given the facts of this case. Because Pollard failed to prove that it would not be entitled to money damages, I conclude that its right to enforce the injunction via contempt proceedings is itself a claim subject to discharge.

4. AUTOMATIC STAY

Pollard asked the Court to rule that criminal enforcement of the injunction is excepted from the automatic stay by 11 U.S.C. § 362(b)(1), which provides that “[t]he filing of a [bankruptcy] petition ... does not operate as a stay — (1) ... of the commencement or continuation of a criminal action or proceeding against the debtor.” Properly speaking, Pollard has an interest only in pursuing civil remedies against the Debtor for violating the injunction: while it presumably could bring to the state court’s attention possible grounds for criminal contempt and testify in any such proceedings, the State would be the party in interest to the proceeding, not Pollard in its private capacity. See Dougherty, 429 Mich. at 95-96, 413 N.W.2d 392 (“In [the case of coercion,] the private party is interested in the enforcement of the order, and, the moment he is satisfied, the imprisonment ceases. On the other hand, the State alone is interested, in the enforcement of the penalty, it being a punishment which operates in terrorem, and by that means has a tendency to prevent a repetition of the offense in other similar cases.” (quoting People ex rel. Attorney General v. Yarowsky, 236 Mich. 169, 172, 210 N.W. 246 (1926))). Thus to the extent Pollard seeks a determination from this Court that the Debt- or’s bankruptcy does not vitiate the criminal enforceability of the injunction, it arguably lacks standing to do so.

I need not address that matter, however, because Pollard obviously does have standing insofar as it seeks a determination from this Court that Pollard would not violate the automatic stay by initiating, or participating in, criminal contempt proceedings brought against the Debtor for violations of the injunction. Since the answer to that question turns on whether the injunction is criminally enforceable, 9 1 must make that determination even if Pollard does not have standing to argue the issue directly.

Any criminal sanction imposed on the Debtor for violation of the injunction would of course stem from the fact that the *570 Debtor competed with Pollard in Shiawassee County. I have determined that Pollard’s right under the injunction to be free from the Debtor’s competition amounted to a claim. Thus the issue may properly be framed as this: can a state criminalize a debtor’s refusal to honor an obligation that constitutes a claim under federal bankruptcy law? For the reasons which follow, I conclude that it