Sean Brennecke Authors Article for ABA’s Business Law Today on Delaware Courts’ Approach to Noncompete Agreements
Wilmington Partner Sean Brennecke recently published an article in ABA's Business Law Today concerning how Delaware courts analyze noncompete agreements.
Mr. Brennecke opens the article, titled "Covenants Not to Compete: The Current State of Delaware Law," by observing that, while Delaware courts tend to be wary of noncompetes, they have historically enforced such provisions. He writes that, while the applicable standard for assessing noncompetes has "remained nominally consistent," recent decisions indicate that "these provisions are being scrutinized more closely."
Wilmington, Del. (November 5, 2024) - Wilmington Partner Sean Brennecke recently published an article in ABA's Business Law Today concerning how Delaware courts analyze noncompete agreements.
Mr. Brennecke opens the article, titled "Covenants Not to Compete: The Current State of Delaware Law," by observing that, while Delaware courts tend to be wary of noncompetes, they have historically enforced such provisions. He writes that, while the applicable standard for assessing noncompetes has "remained nominally consistent," recent decisions indicate that "these provisions are being scrutinized more closely."
As Mr. Brennecke explains, the enforceability of a noncompete is determined by the "reasonableness test," which considers whether the provision “(1) [is] reasonable in geographic scope and temporal duration, (2) advance[s] a legitimate economic interest of the party seeking its enforcement, and (3) survive[s] a balancing of the equities." While the fact-intensive nature of this inquiry "does not lend itself to bright-line tests," Mr. Brennecke provides an overview of the recent case law applying the reasonableness test to identify some common themes and trends, including the trend against using the so-called "blue pencil rule," to revise the scope and/or duration of noncompetes.
In addition, Mr. Brennecke discusses other issues related to noncompetes and similar restrictive covenants both in Delaware and nationally, including the Delaware Supreme Court's recent decision upholding a "forfeiture for competition" provision; and the Federal Trade Commission's efforts to ban the use of noncompetes (which is currently on hold pending challenges in federal court).
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 Business Law Today article here.