Chancery Acknowledges Non-Competes Treated More Skeptically In Recent Decisions

The case Sunder Energy, LLC v. Jackson, C.A. No. 2023-0988-JTL relates to non-compete covenants contained in an LLC operating agreement. In November, the Court of Chancery denied a preliminary injunction enforcing the covenants. In Delaware, appeals to the Supreme Court are as-of-right, but only when a case is fully decided — a party appealing a preliminary injunction denial is almost always told to wait, unless the trial court "certifies" an immediate appeal. The Sunder Energy plaintiff asked the trial court to do just that, and late last month, Vice Chancellor Laster took the rare step of granting certification.

In his 35-page opinion explaining why he was certifying the appeal, the Vice Chancellor addressed, among other points, the plaintiff's argument that "over the past few years, there has been a growing trend that disfavors restrictive covenant litigation in the Court of Chancery."