Opinion
Civil Action No. 2018-0607-TMR
12-19-2018
RE: Cabela's LLC v. Ryan Wellman et al.
David J. Teklits, Esquire
Kevin M. Coen, Esquire
Alexandra M. cumings, Esquire
Morris, Nichols, Arsht & Tunnel LLP
1201 N. Market Street, 16th Floor
Wilmington, DE 19801 Henry E. Gallagher, Jr., Esquire
Timothy M. Holly, Esquire
Mary I. Akhimien, Esquire
Shaun Michael Kelly, Esquire
Connolly Gallagher LLP
1000 West Street, Suite 1400
Wilmington, DE 19801 Dear Counsel:
This letter opinion addresses (1) Defendants' Motion for Reargument filed November 1, 2018, and (2) Plaintiff's Motion for Reargument filed November 2, 2018. For the reasons explained below, I deny both motions for reargument.
I. BACKGROUND
On October 26, 2018, I issued a memorandum opinion granting in part and denying in part Plaintiff Cabela's LLC's ("Cabela's") Motion for Preliminary Injunction (the "Memorandum Opinion"). The Memorandum Opinion addressed whether this Court can enforce various provisions of the Proprietary Matters Agreements (the "PMAs") between Cabela's and Defendants Ryan Wellman, Trent Santero, Mike Riddle, and Jeremy Nesbitt (together, the "Individual Defendants"). First, I concluded that Nebraska law governs the PMAs. Second, I held that the confidentiality and nonsolicitation provisions of the PMAs are enforceable. Third and finally, I held that the noncompetition provisions are not enforceable under Nebraska law because they are overbroad prohibitions of ordinary competition.
Cabela's LLC v. Wellman, 2018 WL 5309954 (Del. Ch. Oct. 26, 2018).
Id. at *7-10.
Id. at *10.
Id. at *11.
Plaintiff and Defendants move for reargument. I address both motions below.
II. ANALYSIS
Under Court of Chancery Rule 59(f), a party may move for reargument within five days after the filing of the Court's opinion. Reargument will be granted only where the Court "overlooked a decision or principle of law that would have controlling effect or . . . misapprehended the facts or the law so the outcome of the decision would be different." The Court permits reargument when a party shows "that the [C]ourt's misunderstanding of a factual or legal principal is both material and would have changed the outcome of its earlier decision." A motion for reargument is not a mechanism to present new arguments or to relitigate claims already considered by the Court.
Pontone v. Milso Indus. Corp., 2014 WL 4352341, at *1 (Del. Ch. Sept. 3, 2014); accord Medek v. Medek, 2009 WL 2225994, at *1 (Del. Ch. July 27, 2009).
VGS, Inc. v. Castiel, 2003 WL 1794210, at *1 (Del. Ch. Mar. 27, 2003).
E.g., Oliver v. Bos. Univ., 2006 WL 4782232, at *1 (Del. Ch. Dec. 8, 2006) ("[N]ew arguments that have not previously been raised cannot be considered for reargument." (quoting Lane v. Cancer Treatment Ctrs. of Am., Inc., 2000 WL 364208, at *1 (Del. Ch. Mar. 16, 2000))); In re ML/EQ Real Estate P'ship Litig., 2000 WL 364188, at *1 (Del. Ch. Mar. 22, 2000) ("Such motions are not a mechanism for litigants to relitigate claims already considered by the court." (citing In re Will of Mansfield, 1990 WL 176795, at *1 (Del. Ch. Nov. 5, 1990))).
A. Defendants' Motion for Reargument
Defendants argue that this Court should hold that under Nebraska law, the confidentiality and nonsolicitation provisions of the PMAs are unenforceable. Defendants contend that the confidentiality and nonsolicitation provisions are unenforceable because Nebraska courts regard confidentiality, nonsolicitation, and noncompetition provisions as a single, integrated restrictive covenant, making all unenforceable when one is unenforceable.
Defs.' Mot. for Rearg. ¶¶ 8, 12. Defendants cite three cases in support of their argument but cited only one of these cases in their Answering Brief opposing Cabela's motion for a preliminary injunction. Id. at 3 n.10; Defs.' Answering Br. 35 n.8, 42 n.35, 46. There, they did not cite the case to argue that the confidentiality, nonsolicitation, and noncompetition provisions form a single, integrated covenant. See Defs.' Answering Br. 35 n.8, 42 n.35, 46.
Defendants raise a new legal argument that they failed to raise in their Answering Brief or during the October 17, 2018 hearing; that new argument cannot provide a basis for reargument. Rule 59 provides an opportunity for parties and the trial court to efficiently correct errors without needing to appeal every mistake. "Motions for reargument[, however,] . . . are not the appropriate method for a party to raise new arguments that it failed to present in a timely way."
Eisenmann Corp. v. Gen. Motors Corp., 2000 WL 303310, at *1 (Del. Super. Feb. 24, 2000) ("The manifest purpose of all Rule 59 motions is to afford the Trial Court an opportunity to correct errors prior to an appeal . . . ." (quoting Hessler, Inc. v. Farrell, 260 A.2d 701, 702 (Del. 1969))).
Anvil Hldg. Corp. v. Iron Acq. Co., 2013 WL 4447840, at *3 (Del. Ch. Aug. 16, 2013) (citing Sunrise Ventures, LLC v. Rehoboth Canal Ventures, LLC, 2010 WL 975581 (Del. Ch. Mar. 4, 2010), aff'd, 7 A.3d 485 (Del. 2010)).
"Reargument . . . is rarely efficient or productive" because it encourages piecemeal litigation. It is often a waste of litigant, counsel, and limited judicial resources, and courts, therefore, should discourage parties from improperly using Rule 59, as Defendants do here. If Defendants wanted to raise this argument, they could and should have done so in connection with the motion for preliminary injunction. "Having failed to do so, [they are] not entitled now to a second bite at the apple."
In re Appraisal of AOL Inc., 2018 WL 3913775, at *1 (Del. Ch. Aug. 15, 2018).
Zutrau v. Jansing, 2014 WL 6901461, at *5 (Del. Ch. Dec. 8, 2014).
Further, the Memorandum Opinion is a preliminary ruling made on a highly expedited basis. Defendants will have the opportunity to raise this argument at a later stage of this litigation. Should this litigation ultimately resolve in favor of the Defendants, the injunction bond will be a source for Defendants' recovery of any damages resulting from the preliminary injunction.
Guzzetta v. Serv. Corp. of Westover Hills, 7 A.3d 467, 469 (Del. 2010).
Thus, I deny Defendants' Motion for Reargument.
B. Plaintiff's Motion for Reargument
In its Motion for Reargument, Cabela's requests that I hold that the noncompetition provision is enforceable under Nebraska law. Alternatively, Cabela's requests that I hold that Delaware law governs the PMAs and that the noncompetition provision is enforceable under Delaware law.
1. The noncompetition provision is unenforceable under Nebraska law
In its argument that the noncompetition provision is enforceable under Nebraska law, Plaintiff contends that I failed to consider the three-part test Nebraska courts use to determine the reasonableness of a noncompetition provision. Plaintiff reads the Memorandum Opinion as enforcing a "per se" rule against noncompetition agreements and argues that I misapprehended Nebraska law. In doing so, Plaintiff appears to ignore pages 30-32 of the Memorandum Opinion where I analyzed the reasonableness of the noncompetition provision of the PMAs and concluded that the "noncompetition provision is a prohibition of ordinary competition and is unreasonable under Nebraska law." Nonetheless, I address the issues Plaintiff raises.
Pl.'s Mot. for Rearg. ¶ 2.
Cabela's, 2018 WL 5309954, at *11.
I did not misapprehend Nebraska law. The Supreme Court of Nebraska recently set out the law governing the reasonableness of noncompetition agreements. It is not ambiguous. "[Nebraska courts] have long recognized that at common law, all contracts in restraint of trade are against public policy and void." "Covenants not to compete, as partial restraints of trade, are enforceable if the covenants are reasonable."
E.g., Gaver v. Schneider's O.K. Tire. Co., 856 N.W.2d 121 (Neb. 2014).
Id. at 127 (citing Sec. Acceptance Corp. v. Brown, 106 N.W.2d 456 (Neb. 1960)).
Id. (citing Boisen v. Petersen Flying Serv., Inc., 383 N.W.2d 29 (Neb. 1986)).
Nebraska courts use a three-part test when considering the reasonableness of a covenant not to compete.
Id.
First, is the restriction reasonable in the sense that it is not injurious to the public; second, is the restriction reasonable in the sense that it is no greater than is reasonably necessary to protect the employer in some legitimate interest; and, third, is the restriction reasonable in the sense that it is not unduly harsh and oppressive on the employee."[Nebraska courts] have suggested that it is often best to consider the second feature identified above and initially determine if the restraint is in aid of some legitimate interest of the employer." The parties focus their arguments on only the second prong, whether the restriction is "reasonable in the sense that it is no greater than is reasonably necessary to protect the employer in some legitimate interest." In particular, Plaintiff contends that in determining the reasonableness of the noncompete provision, I failed to consider the PMAs as whole documents and the facts Nebraska courts consider relevant to determining the reasonableness of the restrictions "under the circumstances."
Polly v. Ray D. Hilderman & Co., 407 N.W.2d 751, 754 (Neb. 1987) (quoting Am. Sec. Servs., Inc. v. Vodra, 385 N.W.2d 73, 78 (Neb. 1986)); accord Sec. Acceptance Corp., 106 N.W.2d at 463.
Gaver, 856 N.W.2d at 127-28 (citing Boisen, 383 N.W.2d 29).
See Pl.'s Mot. for Rearg. ¶ 18; Defs.' Opp'n ¶ 12.
Polly, 407 N.W.2d at 754.
Pl.'s Mot. for Rearg. ¶ 4.
Nebraska's law recognizes that a restriction on competition may not be "greater than reasonably necessary to protect the employer in some legitimate interest." "An employer has a legitimate business interest in protection against a former employee's competition by improper and unfair means, but is not entitled to protection against ordinary competition from a former employee." The Supreme Court of Nebraska draws a distinction between ordinary competition and unfair competition:
Gaver, 856 N.W.2d at 130 (citing Boisen, 383 N.W.2d 29).
Id. (quoting Aon Consulting, Inc. v. Midlands Fin. Benefits, Inc., 748 N.W.2d 626, 638 (Neb. 2008)).
To distinguish between "ordinary competition" and "unfair competition," we have focused on an employee's opportunity to appropriate the employer's goodwill by initiating personal contacts with the employer's customers. Where an employee has substantial personal contacts with the employer's customers, develops goodwill with such customers, and siphons away the goodwill under circumstances where the goodwill properly belongs to the employer, the employee's resultant
competition is unfair and the employer has a legitimate need for protection against the employee's competition.
Id. at 131 (quoting Aon Consulting, 748 N.W.2d at 638) (citing Mertz v. Pharmacists Mut. Ins. Co., 625 N.W.2d 197 (Neb. 2001); Moore v. Eggers Consulting Co., 562 N.W.2d 534 (Neb. 1997), superseded by statute on other grounds, Nebraska Wage Payment and Collection Act, Neb. Rev. Stat. § 48-1229(4) (2010), as recognized in Coffey v. Planet Gp., Inc., 845 N.W.2d 255, 261 (Neb. 2014)).
"A covenant not to compete, as a partial restraint of trade, . . . is not available to shield an employer against ordinary competition." "Unlike the areas of goodwill, confidential information, and trade secrets, an employer does not ordinarily have a legitimate business interest in the postemployment preclusion of an employee's use of some general skill." "[T]he law does not look with favor upon restrictions against competition, and therefore, an agreement which limits the right of a person to engage in a business or occupation will be strictly construed." A covenant that "is greater than is reasonably necessary to protect [the employer's] legitimate interest . . . is thus unreasonable and unenforceable."
Id. at 132 (quoting Boisen, 383 N.W.2d at 34-35).
Id. 131 (citing Moore, 562 N.W.2d 534).
Id. (citing Sec. Acceptance Corp., 106 N.W.2d 456)).
Polly, 407 N.W.2d at 756.
Even if the covenant protects an employer's legitimate interest, "[a] finding that an employer [has] a legitimate business interest . . . does not automatically validate a covenant not to compete. . . . [I]t remains necessary for [the court] to determine if the covenant not to compete is no greater than reasonably necessary to protect this interest." Further, Nebraska courts will not "rewrite the covenant so as to make it 'no greater than is reasonably necessary.'" "It is not the function of the courts to reform unreasonable covenants not to compete solely for the purpose of making them legally enforceable."
Moore, 562 N.W.2d at 539-40 (citing Vlasin v. Len Johnson & Co., 455 N.W.2d 772, 776 (Neb. 1990)).
Polly, 407 N.W.2d at 756-57 (citing Boisen, 383 N.W.2d 29; Philip G. Johnson & Co. v. Salmen, 317 N.W.2d 900 (Neb. 1982)); see also H & R Block Tax Servs., Inc. v. Circle A Enters., Inc., 693 N.W.2d 548, 553 (Neb. 2005) (citing CAE Vanguard, Inc. v. Newman, 518 N.W.2d 652 (Neb. 1994); Brockley v. Lozier Corp., 488 N.W.2d 556 (Neb. 1992); Vlasin, 455 N.W.2d 772; Philip G. Johnson & Co., 317 N.W.2d 900).
Gaver, 856 N.W.2d at 134 (citing Moore, 562 N.W.2d 534).
There are five provisions in the PMAs at issue in this litigation: nonsolicitation of customers, nonsolicitation of vendors, nonsolicitation of employees, nondisclosure of confidential information, and noncompetition.
For a period of eighteen months after leaving Cabela's, the Individual Defendants each may not
directly or indirectly, on [his] own behalf or by aiding any other individual or entity, call on, solicit the business of, sell to, service, or accept business from any of [Cabela's] customers (with whom [he] had personal contact and did business with during the eighteen (18) month period immediately prior to the termination of [his] employment).Cumings Aff. Ex. 17 § 4; id. Ex. 18 § 4; id. Ex. 19 § 4; id. Ex. 20 § 4.
For a period of eighteen months after leaving Cabela's, the Individual Defendants each may not "[s]olicit, communicate, or do business with any of [Cabela's] business partners, independent contractors, vendors, or suppliers (with whom [the Individual Defendant] had personal contact and did business with during the eighteen (18) month period immediately prior to the termination of [his] employment) for or on behalf of a Competitor." Id. Ex. 17 § 5(b); id. Ex. 18 § 5(b); id. Ex. 19 § 5(b); id. Ex. 20 § 5(b).
For a period of eighteen months after leaving Cabela's, the Individual Defendants each may not "directly or indirectly, on [his] own behalf or by aiding any other individual or entity, hire, employ, or solicit for employment any employee of [Cabela's] with whom [he] had personal contact or about whom [he] received Confidential Information while employed by [Cabela's]." Id. Ex. 17 § 6; id. Ex. 18 § 6; id. Ex. 19 § 6; id. Ex. 20 § 6.
The Individual Defendants each may not "directly or indirectly disclose to any person or entity or use for any purpose or permit the exploitation, copying, or summarizing of any Confidential Information of [Cabela's], except as specifically required in the proper performance of Employee's duties for [Cabela's]." Id. Ex. 17 § 1(b); id. Ex. 18 § 1(b); id. Ex. 19 § 1(b); id. Ex. 20 § 1(b). "Confidential Information" includes
information about [Cabela's] products and services, markets, customers and prospective customers, the buying patterns and needs of customers and prospective customers, purchasing histories with vendors and suppliers, miscellaneous business relationships, investment products, pricing, quoting, costing systems, billing and collection procedures, proprietary software and the source code thereof, financial and accounting data, data processing and communications, technical data, marketing concepts and strategies, business plans, mergers and acquisitions, research and development of new or improved products and services, and general know-how regarding the business of [Cabela's] and its products and services.
For a period of eighteen months after leaving Cabela's, the Individual Defendants each may not "directly or indirectly, perform services within the United States of America or Canada for a Competitor that are the same as or similar to the services [he] performed for [Cabela's] during the eighteen (18) month period immediately prior to the termination of [his] employment." Id. Ex. 17 § 7; id. Ex. 18 § 7; id. Ex. 19 § 7; id. Ex. 20 § 7. "Competitor" includes "any . . . multi-state, multi-province, and/or multi-channel retailer engaged in the sale of products and/or services associated with hunting, fishing, or camping." Id. Ex. 17 § 7; id. Ex. 18 § 7; id. Ex. 19 § 7; id. Ex. 20 § 7.
Legitimate interests of an employer which may be protected from competition include: the employer's trade secrets which have been communicated to the employee during the course of employment; confidential information communicated by the employer to the employee, but not involving trade secrets, such as information on a unique business method; an employee's special influence over the employer's customers, obtained during the course of employment; contacts developed during the employment; and the employer business's development of goodwill.
Gaver, 856 N.W.2d at 130-31 (quoting 54A Am. Jur. 2d Monopolies and Restraints of Trade § 906, at 208 (2009)).
The provisions in the PMAs prohibiting solicitation of customers, vendors, and employees are no greater than reasonably necessary to protect Cabela's legitimate interests in its goodwill with customers, vendors, and employees because the covenants "restrict[] the former employee[s] from working for or soliciting the former employer's [customers, vendors, and employees] with whom the former employee actually did business and [had] personal contact." The provision prohibiting the disclosure or misuse of Confidential Information also serves a legitimate interest, the protection of Cabela's "confidential information communicated by the employer to the employee" and "trade secrets which have been communicated to the employee during the course of employment."
Polly, 407 N.W.2d at 756.
Gaver, 856 N.W.2d at 130-31.
The noncompetition provision, however, prohibits ordinary competition. The stated purpose of the noncompetition provision is to "prevent the improper use of Trade Secrets and Confidential Information and the resulting unfair competition and misappropriation of Goodwill and other proprietary interests," but on its face, the provision overbroadly prohibits competition, including competition that does not utilize Cabela's confidential information, trade secrets, or goodwill. The plain language of the provision does not restrict its limitation on competition to only unfair competition. Therefore, following the teachings of Gaver and Polly, I conclude that the noncompetition provision is unenforceable because it is overbroad, and I may not reform it to make it enforceable.
Sources cited supra note 39.
Plaintiff points to nothing in the facts and circumstances that changes this analysis. To the contrary, the facts and circumstances, as reflected in the language of the PMAs, cut against Plaintiff's argument. The nonsolicitation provisions of the PMAs protect Cabela's goodwill and prevent unfair competition as the Nebraska courts have defined it; the confidentiality provision protects against improper use of confidential information and trade secrets. The noncompetition provision adds nothing but a restriction on ordinary competition.
Cabela's states that Nebraska courts consider both the language of the agreement and the context in which it applies. To support this statement, Plaintiff relies on the holding in Securities Acceptance Corp. v. Brown. In Securities Acceptance Corp., the Supreme Court of Nebraska evaluated the reasonableness of a noncompetition agreement largely based on the time and geographic space limitations denoted in the agreement. The court held that the agreement was unreasonable because it prohibited Brown from competing, for a period of eighteen months after the termination of Brown's employment, with Securities Acceptance Corp. in any city where he had ever worked for Securities Acceptance Corp. This provision, the court held, was "unduly harsh and oppressive on Brown." The court did not otherwise analyze whether the noncompete agreement was no greater than is necessary to protect the employer in some legitimate interest, including whether the noncompete agreement prohibits ordinary competition or unfair competition.
Pl.'s Mot. for Rearg. ¶ 11.
106 N.W.2d 456 (Neb. 1960).
Id. at 467.
Id.
Id.
Additionally, the Supreme Court of Nebraska decided Securities Acceptance Corp. over fifty years ago. Although the Securities Acceptance Corp. opinion uses many of the same standards the 2014 Gaver opinion uses, the court's interpretation of those standards has evolved in the half century since it decided Securities Acceptance Corp. Nebraska has developed its law regarding the enforcement of covenants not to compete, and it is incorrect to ignore these developments.
E.g., id. at 462 ("At common law all contracts in restraint of trade were against public policy and void."); id. at 463 (stating the same three-prong test for reasonableness of partial restraints of trade).
See Polly, 407 N.W.2d at 755 (holding that the restrictive covenant must both protect a legitimate business interest of the former employer and be "no greater than is reasonably necessary" to protect that interest); Am. Sec. Servs., Inc. v. Vodra, 385 N.W.2d 73, 78 (Neb. 1986) (noting that a former employee's appropriation of goodwill properly belonging to the employer distinguishes "unfair competition" from "ordinary competition"); Philip G. Johnson & Co., 317 N.W.2d at 903-04 (listing factors the court considers when determining whether a restraint on competition is enforceable); Diamond Match Div. of Diamond Int'l Corp. v. Bernstein, 243 N.W.2d 764, 765 (Neb. 1976) ("A restrictive covenant will not be enforced where the effect would be to protect plaintiff from ordinary competition rather than to protect plaintiff's business against competition by improper and unfair methods."); Sec. Acceptance Corp. v. Brown, 106 N.W.2d 456, 466 (Neb. 1960) ("[T]he general rule is that a contract in partial restraint of trade must be reasonable in its terms and limited in its extent, that is, limited as to both time and space.").
Cabela's also cites to Brockley v. Lozier Corp. In that opinion, the Supreme Court of Nebraska held that a forfeiture provision, which Nebraska courts analyze using the same standards they use for noncompetition provisions, was unreasonable because the duration of the noncompete period was greater than reasonably necessary to protect the employer's legitimate business interest. Cabela's relies on Brockley to assert that noncompete provisions are enforceable to prevent competitive endeavors by a former employee who has acquired confidential information from the former employer. Cabela's applies Brockley to the facts of this case to argue that because the Individual Defendants had access to and used Cabela's confidential information and trade secrets during their periods of employment, enforcement of the noncompetition provision in the PMAs protects Cabela's from unfair competition through Defendants' use of its confidential information and trade secrets.
488 N.W.2d 556 (Neb. 1992).
Id. at 563-64.
Pl.'s Mot. for Rearg. ¶¶ 13, 15.
Id. ¶¶ 16-17.
In Brockley, the Supreme Court of Nebraska explained that the employer is not entitled to protection against ordinary competition. A partial restraint on trade "is reasonable only if, taken as a whole, its dimensions are proportioned in relation to each other so as to keep the burden on the employee down to the minimum consistent with reasonable protection to the employer's legitimate interests." The court held that the forfeiture provision was unreasonable because its duration was longer than necessary to protect the employer's legitimate interest in protecting its confidential information. The court did "not consider whether the other requirements are reasonable." Thus, the court did not consider whether the provision prohibited ordinary competition. My holding in the Memorandum Opinion does not contradict the holding in Brockley. My analysis addresses the conduct prohibited by the noncompetition provision, not its duration.
Brockley, 488 N.W.2d at 563.
Id. at 563-64 (quoting Am. Sec. Servs., 385 N.W.2d at 79).
Id.
Id. at 564.
See Cabela's, 2018 WL 5309954, at *11.
Cabela's use of Securities Acceptance Corp. and Brockley is unconvincing. The Memorandum Opinion enjoins the Individual Defendants' use of confidential information and trade secrets by enforcing the confidentiality provision of the PMAs. The Memorandum Opinion also enjoins the Individual Defendants' misappropriation of Cabela's goodwill by enforcing the nonsolicitation provisions of the PMAs. The "fair or natural import of the language" of the noncompetition provision prohibits competition independent of whether that competition uses Cabela's confidential information, trade secrets, or goodwill; in other words, the noncompetition provision is overbroad in its prohibition of ordinary competition and, thus, is unreasonable and unenforceable under Nebraska law.
Sec. Acceptance Corp., 106 N.W.2d at 462.
See Polly, 407 N.W.2d at 754-57.
2. Nebraska law governs the PMAs
Plaintiff contends that I misapprehended Nebraska law and incorrectly concluded that "the noncompetition provision in the PMAs is per se unenforceable in Nebraska." This conclusion, according to Cabela's, led to the incorrect holding that Nebraska law governs the PMAs despite the Delaware choice-of-law provision in the PMAs and the similarities between Delaware and Nebraska law regarding the reasonableness of noncompetition provisions.
Pl.'s Mot. for Rearg. ¶ 2.
Id.
Plaintiff argues, exactly as it did in its motion for preliminary injunction, that the Delaware choice-of-law provision is enforceable because the noncompetition provision in the PMAs is enforceable under Nebraska law. In support of its argument, Plaintiff asserts that "Nebraska has no 'fundamental policy' against enforcing employment-based noncompetition agreements such as those included within the PMAs that are premised on an employee's access to the employer's confidential and trade secret information." Here, Cabela's understates the scope of the plain language of the noncompetition provision. As I explained above and in the Memorandum Opinion, the noncompetition provision of the PMAs goes beyond protecting Cabela's confidential information, trade secrets, and goodwill; the noncompetition provision prohibits ordinary competition. This is especially true when I consider the provision in connection with the "facts and circumstances," as Cabela's argues I must. That is, four of the five provisions at issue in the PMAs are reasonable; they protect against improper use of Cabela's confidential information and trade secrets and against solicitation of Cabela's customers, vendors, and employees. Only the noncompetition provision is unreasonable; this provision protects no interest of Cabela's except to prohibit ordinary competition. This prohibition against ordinary competition violates Nebraska's fundamental policy against such prohibitions.
Id. ¶ 20.
Id. ¶ 21.
See DCS Sanitation Mgmt., Inc. v. Castillo, 435 F.3d 892, 897 (8th Cir. 2006) (holding that application of Ohio law would violate a fundamental policy of Nebraska law).
Cabela's exaggerates the similarities between Nebraska law and Delaware law with regard to noncompetition agreements. Plaintiff points out that Delaware law, like Nebraska law, requires that the noncompetition agreement advance a legitimate interest of the employer. That much is true. Plaintiff, however, fails to point out that Nebraska law, unlike Delaware law, also requires that "the restriction . . . [be] no greater than is reasonably necessary to protect the employer in some legitimate interest" and that the legitimate interest may not include ordinary competition.
Pl.'s Mot. for Rearg. ¶ 21.
See, e.g., Hough Assocs., Inc. v. Hill, 2007 WL 148751, at *14 (Del. Ch. Jan. 17, 2007).
Polly, 407 N.W.2d at 754.
Plaintiff ignores the inconsistency between Delaware and Nebraska law when it argues that both states' courts treat noncompetition agreements similarly. In Nebraska, "[a] covenant not to compete . . . is not available to shield an employer against ordinary competition," although the employer may protect itself against improper or unfair competition. In contrast, an agreement prohibiting the very same ordinary competition is enforceable in Delaware so long as the agreement is not "oppressive to an employee."
Gaver v. Schneider's O.K. Tire. Co., 856 N.W.2d 121, 130 (Neb. 2014) (alteration in original) (quoting Chambers-Dobson, Inc. v. Squier, 472 N.W.2d 391, 399 (Neb. 1991)).
Id. (quoting Boisen v. Petersen Flying Serv., Inc., 383 N.W.2d 29, 33 (Neb. 1986)); Aon Consulting, Inc. v. Midlands Fin. Benefits, Inc., 748 N.W.2d 626, 638 (Neb. 2008); Polly, 407 N.W.2d at 755.
EDIX Media Gp., Inc. v. Mahani, 2006 WL 3742595, at *7-8 (Del. Ch. Dec. 12, 2006) (enforcing noncompete agreement as to actions that compete directly with plaintiff's business activities); see also Hough Assocs., 2007 WL 148751, at *6, 14-15 (Del. Ch. Jan. 17, 2007) (enforcing noncompete agreement against ordinary competition); Del. Express Shuttle, Inc. v. Older, 2002 WL 31458243, at *6, 14 (Del. Ch. Oct. 23, 2002) (same). --------
Thus, I deny Plaintiff's Motion for Reargument.
III. CONCLUSION
For the foregoing reasons, I deny Defendants' and Plaintiff's Motions for Reargument. An implementing order is filed with this letter opinion.
IT IS SO ORDERED.
Sincerely,
/s/Tamika Montgomery-Reeves
Vice Chancellor TMR/jp
Id. Ex. 17 § 1(a); id. Ex. 18 § 1(a); id. Ex. 19 § 1(a); id. Ex. 20 § 1(a).