SYNOPSIS - BURNETT & ASSOCIATES 6-94
UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF KENTUCKY
V. ADV. NO.
This matter is pending on the motions of the defendants . . . to abstain from hearing this proceeding, or, in the alternative, to dismiss this case with prejudice.
. . . .
The complaint alleges that the defendants . . . each entered into a Sales Representative Employment Agreement with Burnett & Associates, Inc. which contains a covenant not to compete. The complaint further alleges the defendants are willfully violating the covenant not to compete. The court is asked to enjoin the defendants from violating the covenant not to compete or, in the alternative, if it is determined that there is an adequate remedy at law, to require the defendants to pay damages for harm to the plaintiff and to the status of the plan of reorganization.
. . . .
The Sales Representative Employment Agreements with the defendants were not assumed by the debtor in possession prior to confirmation of or pursuant to the debtors confirmed plan. In fact, the agreements may have terminated by the terms thereof when the assets of the debtor were sold to Insurance Associates of Kentucky, Inc. It seems doubtful that contracts of this nature could be assumed and assigned by the debtor in possession without the consent of the defendants. 11 U.S.C. § 365(c)(1)(A). Contracts not assumed are deemed rejected as of the date of the commencement of the debtors chapter 11 case. 11 U.S.C. § 502(g).
The question of whether the noncompetition covenants in these executory employment agreements are enforceable against the defendants appears to this court to be sufficiently related to the debtors bankruptcy case and to involve questions of bankruptcy law and policy to the extent that this action should be decided by the bankruptcy court.
Accordingly, the motions of the defendants to abstain from hearing, or, in the alternative to dismiss this matter, are overruled.
By the court -
Joe Lee, Chief Judge
W. Thomas Bunch
David F. Broderick
R. Bruce Stith
Robert C. Stilz
Guy M. Graves