Sunder Energy, LLC recently sought to enforce a non-compete agreement against its former head of sales in the Delaware Court of Chancery. Sunder Energy, LLC v. Jackson, 2023 WL 8166517. Vice Chancellor J. Travis Laster denied Sunders' application for a preliminary injunction. In doing so, he decried the fact that the Court of Chancery is increasingly asked to decide disputes involving non-compete agreements under the laws of other states, including California. In a footnote, he cited the following decisions with a California nexus:

Gener8, LLC v. Castanon, 2023 WL 6381635 (Del. Ch. Sept. 29, 2023);

Sorrento Therapeutics, Inc. v. Mack, 2023 WL 5670689 (Del. Ch. Sept. 1, 2023);

UBEO Hldgs., LLC v. Drakulic, 2021 WL 1716966 (Del. Ch. Apr. 30, 2021);

Focus Fin. P’rs, LLC v. Holsopple, 250 A.3d 939 (Del. Ch. 2020);

Focus Fin. P’rs, LLC v. Holsopple, 241 A.3d 784 (Del. Ch. 2020);

NuVasive, Inc. v. Miles, 2020 WL 5106554 (Del. Ch. Aug. 31, 2020);

NuVasive, Inc. v. Miles, 2019 WL 4010814 (Del. Ch. Aug. 26, 2019); and

NuVasive, Inc. v. Miles, 2018 WL 4677607 (Del. Ch. Sept. 28, 2018).

Why was the case brought in Delaware? Sunder is a Delaware limited liability company and the restrictive covenant was included in the LLC agreement. According to Vice Chancellor "[b]usinesses and their lawyers do that so they can invoke Delaware's contractarian regime and argue that it should override how other jurisdictions regulate restrictive covenants". Vice Chancellor Laster seems to believe that this is a consequence of the internal affairs doctrine. However, I do not believe that placement of a covenant in a limited liability company agreement automatically qualifies that covenant as an LLC's internal affairs, which are matters peculiar to the relationships among or between the LLC and its current managers, members and officers —because otherwise an LLC could be faced with conflicting demands. Edgar v. MITE Corp. 457 U.S. 624, 645 (1982) (paraphrased). A non-compete could be more properly viewed as dealing with external affairs of the LLC - the relationship of its managers and members to third parties (i.e., competitors).