Delaware Supreme Court Refuses to Enforce Noncompete Against Company Founder Who Joined Competitor

In Sunder Energy, LLC v. Tyler Jackson, the Delaware Supreme Court ruled that courts can decline to blue pencil overbroad restrictive covenants, reinforcing the importance of enforceability and fairness in contract terms.

The Delaware Court of Chancery deemed the noncompete overbroad as it restricted Jackson's affiliates from any sales—"As written, Jackson's daughter cannot go door to door selling Girl Scout cookies." This highlights the potentially excessive nature of the covenant.

The court expressed concerns regarding the indefinite nature of the noncompete, which could last for two years after Jackson ceased to own incentive units, effectively leaving it up to Sunder when to enforce the restriction.

Sunder’s assertion to blue pencil the agreement was rejected, emphasizing that even if Jackson might breach a narrower covenant, the overbroad nature rendered it unenforceable in its entirety.

Read at Intellectual Property Law Blog