Delaware Business Litigation Report

Chancery Refuses to Enforce Nationwide Noncompete

Centurion Service Group, LLC v. Wilensky, C.A. No. 2023-0422-MTZ (Del. Ch. Aug. 31, 2023)
In Frontline Techs Parent LLC v. Murphy, C.A. 2023-0546-LWW (Del. Ch. Aug. 23, 2023), the Court of Chancery recently declined a subsidiary’s attempt to enforce a non-compete provision benefitting the parent. A week later, in Centurion, the Court likewise declined to enforce a non-compete, this time based on its unreasonably broad scope. Though the Court ultimately applied a Delaware choice-of-law provision, Centurion highlights that Delaware courts do not blindly apply such clauses “when doing so would circumvent the public policy of another state that has a greater interest in the matter.” The decision also reinforces that Delaware courts scrutinize non-competes and are hesitant to “blue pencil” overly broad terms to recraft them as reasonable – instead, Delaware courts tend to decline to enforce them altogether. Here, the at-issue non-compete prevented the former employee from engaging in any business directly or indirectly engaged in Centurion’s business, any business competitive with Centurion’s business, or any business competitive with any business Centurion planned to engage in at any time during the employee’s employment, for a period of two years after his termination date, anywhere in the United States. The Court found these terms unreasonable, explaining that the geographic scope and duration taken together “casts a limitless net over [defendant] in both scope of geography and scope of conduct,” and taking particular issue with the language covering any field the company “planned to enter.” 

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