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In re Wojtkun

United States District Court, D. Massachusetts

February 15, 2019

In re PETER WOJTKUN, Debtor.
v.
PETER WOJTKUN, Appellee. JOSEPH G. BUTLER, TRUSTEE OF PETER WOJTKUN Appellant,

         CHAPTER 7

          MEMORANDUM AND ORDER

          Patti B. Saris, Chief United States District Judge.

         INTRODUCTION

         Trustee Joseph Butler appeals from the bankruptcy court's refusal to issue an order barring Debtor Peter Wojtkun from performing dental services for five years within fifteen miles of his former dental practice. The Trustee seeks this order to facilitate the sale of the practice, which is an asset of Wojtkun's Chapter 7 estate. Relying on Wojtkun's duty to cooperate with the Trustee, the bankruptcy court issued an order requiring him to provide information about the practice to the Trustee to assist with the sale and barring him from actively soliciting the practice's patients, but it declined to issue the requested noncompetition order.

         After hearing, the Court AFFIRMS the bankruptcy court's order.

         FACTUAL AND PROCEDURAL BACKGROUND

         Wojtkun filed a petition for Chapter 7 bankruptcy protection in the Bankruptcy Court for the District of Massachusetts on May 7, 2013. Joseph Butler was appointed as trustee the following day. The court granted Wojtkun a discharge on August 13, 2013. At the time he filed his petition, Wojtkun was a practicing dentist and the sole shareholder of Peter Wojtkun DMD P.C., a Massachusetts professional corporation. By filing his petition, his shares in the professional corporation transferred to the Trustee. See In re Wojtkun, No. 16-cv-10843, 2017 WL 888307, at *3 (D. Mass. Mar. 6, 2017) (affirming the bankruptcy court's order permitting the Trustee “to take certain actions as the sole shareholder and director of the corporation”). The professional corporation ceased operating in November 2014.

         Since filing for bankruptcy, Wojtkun has practiced dentistry at the same location where his professional corporation operated, using the same equipment and treating the same patients.

         Wojtkun and the Trustee have repeatedly clashed over the administration of the bankruptcy estate. The Trustee seeks to sell the professional corporation. He contends that he cannot do so, however, because Wojtkun refuses to provide information about the practice to allow for a proper valuation and is operating a new dental practice in the same location, which depresses the value of the professional corporation. On April 25, 2017, the Trustee initiated an adversary proceeding against Wojtkun in the bankruptcy court seeking an injunction pursuant to 11 U.S.C. § 105(a) and 11 U.S.C. § 521(a)(3) to bar him from hindering or interfering with the Trustee's sale of the dental practice, require him to cooperate with the Trustee in the sale, and restrict him from practicing dentistry within fifteen miles of the practice for five years to avoid competition with the purchaser of the professional corporation.

         After Wojtkun moved for summary judgment, the bankruptcy court (Hoffman, J.) issued its decision on August 23, 2018. Because neither 11 U.S.C. § 105(a) nor 11 U.S.C. § 521(a)(3) creates a private right of action, the court treated the adversary proceeding complaint as a motion for an order compelling Wojtkun to comply with his duties under 11 U.S.C. § 521. The court determined that Wojtkun's duty to cooperate with the Trustee in the sale of the professional corporation required him to provide his business and patients records and answer questions about the practice for prospective buyers. It also decided that Wojtkun could not actively solicit patients of the practice, though he could treat patients who sought him out on their own. Wojtkun does not challenge either of these aspects of the bankruptcy court's order.

         The court then addressed the Trustee's request for a noncompetition order. The court acknowledged that Massachusetts law imposes on certain voluntary sellers of a business an implied covenant not to compete with the buyers but determined that this implied covenant did not attach to involuntary sales in bankruptcy. The court recognized that the Seventh Circuit in In re Uniservices, Inc., 517 F.2d 492, 497 (7th Cir. 1975), affirmed a declaration prohibiting a former president and shareholder of the debtor company from competing with the company. The court found Uniservices inapposite, however, because it was a reorganization case and unique equitable factors, namely that the individual forced his employees to enter into covenants not to compete, justified the noncompetition order.

         The court instead found this dispute comparable to In re Glazer, 317 B.R. 488, 490 (Bankr. E.D. Mich. 2004), where a bankruptcy court declined to impose a noncompetition order on a debtor as part of the sale of his chiropractic practice. The court in Glazer declined to do so because the Bankruptcy Code's fresh start policies trumped the competing goal of maximizing creditor recovery and because a noncompetition order would effectively bring the debtor's right to work in a certain area into the estate (in violation of the Code's exemption for post-petition earnings). The bankruptcy court recognized that Glazer did not address a debtor's obligation to cooperate with a trustee under § 521(a)(3) but nevertheless declined to order Wojtkun not to practice dentistry within fifteen miles of the practice for five years.

         The Trustee filed a notice of appeal with this Court on September 24, 2018. He challenges the bankruptcy court's decision ...


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