In a series of partial summary judgment opinions, the Delaware Chancery Court threw out all non-competition and non-solicitation claims against Alphatec Holdings, Inc., a medical device company, and its chairman and Chief Executive Officer Patrick Miles in a lawsuit filed by Miles’s former employer, NuVasive, Inc. The suit claimed that Miles violated the non-compete and non-solicitation provisions of his employment agreement when he left to work for rival Alphatec in October 2017.
Miles had worked at NuVasive since 2001 and entered an employment contract in September 2016 which included post-employment restrictions against working for a competitor or soliciting NuVasive employees or customers. In October 2017, Miles resigned from NuVasive and accepted a position as the chairman of Alphatec the following day. NuVasive filed suit a week later, claiming that Miles’s departure was part of a year-long scheme that included discouraging NuVasive from acquiring the smaller Alphatec.
Although Miles worked for NuVasive in California, the company is a Delaware corporation and Miles’s employment contract specified that it was governed by Delaware law. While California law generally prohibits covenants not-to-compete, certain employers worked around the restriction by crafting agreements that include a choice of law and forum provision that specified state laws other than California. In response to these attempts to thwart the law, California amended its labor code to prohibit such choice of law and forum provisions, except in certain circumstances.
Unlike California law, Delaware law generally does permit the use of restrictive covenants in employment contracts. In its complaint, NuVasive claimed that Miles’s conduct violated his non-compete and non-solicitation obligations under Delaware law. Miles and Alphatec responded by arguing that the post-employment restrictive covenants in Miles’s employment agreement were void as a matter of law under California law.
The Delaware Court agreed with Miles and Alphatec, rejecting NuVasive’s arguments and finding that California law applied to the employment agreement. As such, the Court held that the post-employment non-compete restrictions were unenforceable as they were contrary to “California’s strong public policy interest against noncompetes.” After additional briefing on the legality of NuVasive’s non-solicitation claims, the court issued a second opinion again siding with Miles and Alphatec holding that “employee non-solicitation covenants are a restraint of trade in violation of California fundamental policy.”
“California statutory law embodies a ‘strict antipathy’ towards any restraint on trade,” explained the Court, “and contractual provisions to the contrary—be they ever so reasonable—are void unless they fit within a statutory exception to that general rule.” Because neither the non-compete provision nor the non-solicitation provisions of Miles’s employment contract fell under any statutory exemption under California law, they were unenforceable.
You can read the Court’s full opinion here.
Whether you are a business owner who is or is considering asking workers to sign a non-compete or non-solicitation agreement or a worker being asked to sign such an agreement, it is always advisable to seek the assistance of an attorney experienced in non-compete law. The Chicago non-compete agreement attorneys at Lubin Austermuehle are among the best non-compete attorneys in the Chicagoland area with over thirty years of experience defending and prosecuting non-compete agreements and unpaid wages and a wide variety of other business dispute lawsuits arising between physicians in the same medical practice. Lubin Austermuehle a firm of Chicago business dispute attorneys handles litigation over non-compete clauses for individuals and businesses of all sizes, including small or closely held businesses for whom competition from an ex-employee can be a serious threat.
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