Sean Brennecke Publishes Article in ABA’s Business Law Today on Delaware Decision Concerning Enforceability of Noncompetition Clauses

Wilmington, Del. (Aug. 13, 2024) - Wilmington Partner Sean Brennecke recently published an article in ABA’s Business Law Today: Business Litigation & Dispute Resolution Month-in-Brief titled, “Delaware Court of Chancery Finds a Restrictive Covenant Overbroad and Denies Preliminary Injunction.” The article describes a recent Chancery Court decision that interpreted the standard for enforcing noncompetition provisions in employment agreements.

Mr. Brennecke opens the article by explaining that in Hub Group, Inc. v. Knoll, 2024 Del. Ch. LEXIS 250, *2 (Del. Ch. July 18, 2024), Vice Chancellor Glassock denied a motion for a preliminary injunction seeking to enforce a noncompete clause in an employment agreement between a company and its former executive. The Vice Chancellor concluded that the agreement was overbroad, and therefore it was not reasonably probable that the company would succeed on the merits of the case. The Court of Chancery reasoned that it would “only enforce noncompetition provisions when the ‘contract is clear, reasonable in scope and necessary to the legitimate interests of the employer.’”

Next, Mr. Brennecke describes the facts of the case, noting that “the clause essentially prohibited Knoll from working for ‘an entity that competes with any of Hub’s 25 entities, located in at least four countries . . . if Knoll (a) does anything ‘substantially the same as’ what he did while employed at Hub or if he possesses any information related to any Hub entity; (b) is in a position related to sales, customer management, [strategy] . . . supervision . . . or research[] . . . ; or (c) could disclose any nonpublic information related to any business conducted by a Hub entity.’” In denying the motion, the Vice Chancellor held that the provision was not supported by such “vague and everyday concerns.”

Mr. Brennecke is vice-chair of Lewis Brisbois’ Directors & Officers Litigation Practice and a member of the Complex Business & Commercial Litigation, Corporate, and Bankruptcy & Insolvency Practices. For more than 15 years, he has represented corporations, alternative entities, and their respective directors, officers, shareholders, members, and managers, in complex litigation matters.

Read the full ABA Business Law Today article here.