In Delaware, covenants not to compete are usually enforced in a court of equity, the Court of Chancery. The Delaware Court of Chancery is the nation’s principal forum for the resolution of corporate governance disputes. For consecutive years, the Delaware court system has been ranked by the U.S. Chamber of Commerce as the best in the nation.
No doubt this accolade is attributable, in part, to the five presiding jurists of the Chancery Court who are known for their highly sophisticated understanding of corporate matters and ability to handle complex litigation. There are no jury trials in Chancery Court. All matters are heard by the Chancellor or one of the four Vice Chancellors and are usually performed on an expedited basis.
The Court of Chancery’s equitable powers enable it to resolve the matters before it in ways a court of law might not. For instance, the Court of Chancery has the ability to reform, or “blue pencil,” what might otherwise be overly broad noncompete agreement.
The Court of Chancery also may award monetary damages under the so-called “clean up doctrine.” This doctrine allows the Court which has acquired jurisdiction in a case to decide both equitable and legal questions provided that the legal questions are incidental to the equitable ones.