LKQ CORPORATION, Plaintiff/Counter-Defendant, Appellant, v. ROBERT RUTLEDGE, Defendant/Counter-Claimant, Appellee., 2024 Del. LEXIS 419

Summary

• •The Delaware Supreme Court held that its decision in Cantor Fitzgerald v. Ainslie, which endorsed the "employee choice doctrine" and held that forfeiture-for-competition provisions in limited partnership agreements are enforceable and not subject to reasonableness review, applies outside the limited partnership context.
• •Forfeiture-for-competition provisions in employee agreements, such as restricted stock unit (RSU) agreements, are enforceable under Delaware law based on freedom of contract principles, and are not subject to reasonableness review as restraints of trade.
• •The requirement to return previously received benefits upon competition does not alter the enforceability of forfeiture-for-competition provisions under the employee choice doctrine.

• •LKQ Corporation, a Delaware corporation, required certain key employees to sign RSU Agreements that awarded stock units subject to vesting and forfeiture if the employee competed with LKQ within nine months ...