Delaware Supreme Court hears another restrictive covenant case

As covered in prior posts (e.g., on our blog and Lexology), there has been an uptick in authority from the Delaware courts concerning restrictive covenants, including whether the scope of a particular covenant is enforceable under Delaware law, whether Delaware law even applies notwithstanding a Delaware “choice of law” provision, or whether the restrictive covenant is supported by adequate consideration. These cases arise in a variety of contexts; for example, some cases were in connection with an asset or business sale and others in the employer-employee setting, and the cases have different procedural postures, some being decided on a motion to dismiss, others at the preliminary injunction stage, and at least one on summary judgment.   

This recent case involves Payscale Inc. filing a lawsuit in the Delaware Court of Chancery in January 2025, seeking to enforce restrictive covenants that were part of its contract with a former director of sales who went on to work for a competitor, BetterComp Inc. The Court of Chancery dismissed Payscale's complaint, which brought claims against both the former employee and BetterComp, holding that a 18-month, nationwide scope noncompete was overbroad and unenforceable. On appeal, Payscale argued that it adequately pled a cause of action as a matter of law and that the Court of Chancery was premature in dismissing its complaint and that discovery should have ensued.  A video of the oral argument can be found here:  Oral Arguments Video Recordings - Supreme Court - Delaware Courts - State of Delaware. This case could shed additional light on Delaware's treatment of restrictive covenants.