In Sunder Energy v. Jackson, No. 455, 2023 (Del. Supr., December 10, 2024), the Delaware Supreme Court upheld the Delaware Court of Chancery’s decision not to enjoin a former employer and member of a Delaware LLC from competing with plaintiff. The decision turned on two different versions of what outcome best reflected Delaware’s public policy favoring freedom of contract. The plaintiff contended that the court should “blue pencil” a contractual noncompete to give the plaintiff the benefit of his bargain, even if the contract was overly broad. The defendant contended that when a party did not negotiate in any way the terms of the covenant not to compete and received minimal consideration in exchange, and the covenants themselves were overly broad, the Court of Chancery has discretion to decline to enforce the covenants entirely. As described below, the Supreme Court held that the circumstances in which Delaware courts have blue penciled contracts differed from those present here and upheld the Court of Chancery’s denial of the requested injunction.

Background Facts

The defendant, a top sales performer, left the company when management changed the compensation system and structure of its business. The defendant then left to join a customer as its CEO. Hundreds of other salespersons followed. The defendant was not aware of the restrictions on competition that would have precluded him from working for a competitor until his new employer asked for his agreements with plaintiff at a time when the new employer was attempting an amicable negotiation with plaintiff. The defendant only left when it appeared those negotiations were on the verge of success. But they did not ultimately succeed and the plaintiff, a Delaware limited liability company based in Utah, sued to enjoin defendant from competing.