Vinson & Elkins
MONTH-IN-BRIEF (Jul 2024)
Business Litigation
Delaware Court of Chancery Finds a Restrictive Covenant Overbroad and Denies Preliminary Injunction
By Sean M. Brennecke, Lewis Brisbois
The Delaware Court of Chancery will only enforce noncompetition provisions when the “contract is clear, reasonable in scope and necessary to the legitimate interests of the employer.” Hub Group, Inc. v. Knoll, 2024 Del. Ch. LEXIS 250, *2 (Del. Ch. July 18, 2024). Vice Chancellor Glasscock’s July 18, 2024, decision in Hub Group, Inc. v. Knoll, is the latest case interpreting that standard.
In Hub, the Vice Chancellor denied a motion for a preliminary injunction seeking to enforce a noncompete clause in an employment agreement between Hub and a former executive, Christopher Knoll, finding the agreement was overbroad, and therefore it was not reasonably probable that Hub would succeed on the merits. Id. at *33.
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.” Id. at *31–32.
