In a pair of decisions from the Delaware Court of Chancery and the Delaware Supreme Court, Vice Chancellor Morgan T. Zurn and the Supreme Court en banc rejected a creative but ultimately unsuccessful attempt to circumvent the reasonableness requirement for restrictive covenants.

What struck me most about Vice Chancellor Zurn’s opinion is how it applies Delaware’s contractarian principles to draw a clear line between what a covenant demands of an employee versus what remedy the employer seeks. The court methodically dismantled the novel argument that seeking damages rather than injunctive relief somehow exempts restrictive covenants from reasonableness review.

The case, Fortiline, Inc. v. McCall, involved a company founder who left and allegedly set up a competing business that poached half the company’s workforce. Fortiline and its parent initially sought a preliminary injunction to enforce restrictive covenants in the employees’ Award Agreements. These covenants were breathtakingly broad, prohibiting the defendants from competing with or soliciting from not just Fortiline, but any business under the parent company’s umbrella—covering completely different business sectors and geographic locations across the entire United States.

Vice Chancellor Zurn denied the preliminary injunction, holding the restrictive covenants were unreasonably broad and unenforceable because their scope was unsupported by the plaintiffs’ legitimate business interests.

Rather than accept this ruling, the plaintiffs regrouped with a creative strategy: they amended their complaint to seek only damages instead of injunctive relief. They then argued—for what appears to be the first time in Delaware jurisprudence—that where a claim for breach of a restrictive covenant seeks only damages and not injunctive relief, the restrictive covenant should not be subject to reasonableness review.

The plaintiffs pointed to the Delaware Supreme Court’s recent holdings in Cantor Fitzgerald, L.P. v. Ainslie and LKQ Corp. v. Rutledge that forfeiture-for-competition provisions are not subject to reasonableness review. They attempted to equate the loss of a supplemental benefit under a forfeiture-for-competition provision to damages for breach of a restrictive covenant.

Vice Chancellor Zurn would have none of it. The court emphasized that Delaware’s contractarian principles require treating provisions for what they are based on what they demand of the employee, not what remedy the company seeks. The opinion carefully distinguished restrictive covenants from forfeiture-for-competition provisions.

A forfeiture-for-competition provision does not prohibit an employee from competing—it merely allows the employer to withhold a contingent benefit if the employee chooses to compete. The employee remains free to work in their chosen field; they just forfeit a supplemental payment. By contrast, a restrictive covenant actually restrains the employee from competing, potentially depriving them of their livelihood.

As the court explained, while Cantor Fitzgerald and LKQ noted that restrictive covenants are enforceable through injunctive relief, the key distinction is based on what the provisions demand of the employee, not what remedy the company seeks. The court stated: “Cantor Fitzgerald and LKQ pin reasonableness review on what the provision demands of the employee, not what the company seeks as a remedy for its breach. If the provision restrains the employee from work, then reasonableness review kicks in.”

The court further explained that Cantor Fitzgerald specifically distinguished liquidated damages triggered by breach of a restrictive covenant from forfeiture-for-competition provisions. The distinction is even more pronounced with unliquidated damages, which restore the company to its pre-breach position through a court award based on proof of breach, injury, causation, and damages—quite different from the contractually predetermined forfeiture of a set benefit upon competition.

The court rejected the plaintiffs’ other arguments as well, including contentions about waste and claims for restitution. Finding that the defendants had established entitlement to judgment as a matter of law and that plaintiffs had presented no material issues of fact, Vice Chancellor Zurn granted summary judgment dismissing all remaining claims.

The Delaware Supreme Court affirmed in a succinct order issued on February 10, 2026, adopting Vice Chancellor Zurn’s thorough analysis.

Key Takeaway: These decisions reinforce that Delaware courts will not allow parties to circumvent established doctrine through procedural gamesmanship. Restrictive covenants that restrain competition must satisfy reasonableness review regardless of whether the employer seeks injunctive relief or damages. The nature of what the covenant demands from the employee—not the remedy sought—determines whether reasonableness review applies. Cantor Fitzgerald and LKQ stand for the proposition that Delaware courts will enforce different types of provisions according to their actual nature, respecting the fundamental distinction between promises that restrict competition and those that merely impose conditions on receiving supplemental benefits. Employers cannot avoid reasonableness review simply by changing litigation strategy mid-stream.