HKA’s overbroad non-compete collapses in Delaware Chancery Court ruling

The court also addressed part of HKA’s TSA-based claim. After the partners announced their planned resignation on June 14, 2024, the parties entered a Transition and Settlement Agreement (TSA) on August 6, 2024, governed by Delaware law, under which HKA agreed to partially release the partners from certain non-competition covenants to allow them to work for Accuracy, subject to fee-sharing arrangements. HKA argued that a TSA warranty (Section 8.1) was breached because, it said, the partners had already solicited HKA employees, which would have breached the RCA and a separate English-law Nominee Deed. The court held Count II failed to the extent it was premised on the RCA, because a void or unenforceable restrictive covenant imposes no legal duty and conduct cannot legally constitute a breach of a nullity. As to the Nominee Deed theory, the court held it could not adjudicate that predicate issue in Delaware because the Nominee Deed’s forum selection clause required disputes over its covenants to be resolved exclusively in England, and it dismissed that portion without prejudice to proceeding in the proper English forum.