IN THE SUPREME COURT OF THE STATE OF DELAWARE
PAYSCALE INC., § § No. 297, 2025 Plaintiff Below, § Appellant, § § Court Below: Court of Chancery v. § of the State of Delaware § ERIN NORMAN and § C.A. No. 2025-0118 BETTERCOMP, INC., § § Defendants Below, § Appellee. §
Submitted: January 14, 2026 Decided: March 19, 2026
Before SEITZ, Chief Justice; TRAYNOR and LEGROW, Justices.
Upon appeal from the Court of Chancery of the State of Delaware. REVERSED and REMANDED.
Steven L. Caponi (argued), Esquire, and Megan E. Hunt, Esquire, K&L GATES LLP, Wilmington, Delaware, for Appellant Payscale, Inc.
John A. Sensing (argued), Esquire, Jesse L. Noa, Esquire, Tyler E. Cragg, Esquire, and Hannah L. Paxton, Esquire, POTTER ANDERSON & CORROON LLP, Wilmington, Delaware, for Appellee Erin Norman and BetterComp, Inc.
LEGROW, Justice: The Court of Chancery dismissed an employer’s effort to enforce several
restrictive covenants, holding that the non-compete clause was unenforceable and
the employer’s allegations relating to breaches of the non-solicitation and
confidentiality clauses were conclusory. We hold that the court’s reasoning rested
on inferences it improperly drew against the employer at the pleading stage, and we
therefore reverse the court’s judgment. Our holding is limited to whether the
employer stated a reasonably conceivable claim for relief; we express no view on
whether any covenant ultimately will be enforced, reformed, or held unenforceable
on a more developed record.
Payscale Inc. filed suit in the Court of Chancery upon learning that its former
employee, Erin Norman, had joined a competitor, BetterComp, Inc. After the court
denied a temporary restraining order and granted a motion to expedite, Norman and
BetterComp jointly moved to dismiss Payscale’s amended complaint, which alleged
claims for breach of contract and tortious interference with contractual and
prospective business relations.
The non-compete clause at issue had a nationwide, eighteen-month scope.
The Court of Chancery correctly approached that restriction with skepticism, noting
that Delaware courts rarely enforce such broad restrictions against employees. But
notwithstanding Payscale’s detailed allegations regarding its nationwide operations,
Norman’s role at the company, her involvement in key company-wide strategic
1 decisions, and the client-driven reasons necessitating the duration of the restriction,
the court held that it was not reasonably conceivable that the non-compete’s scope
was enforceable in light of the minimal value that the court ascribed to the equity
units that Norman received as consideration. That holding, in our view, misapplied
Delaware’s low pleading burden.
As to the non-solicitation and confidentiality clauses, the court dismissed as
conclusory Payscale’s allegations that in the two months since Norman had joined
the competitor, at least five clients had followed her—numbers that were not typical
in the business. The court’s opinion did not address those allegations, which support
a reasonable inference that Norman solicited clients or disclosed confidential
information that permitted BetterComp to unfairly compete.
The court’s conclusions that the non-compete was facially unenforceable and
that Payscale had not adequately pleaded breaches of the other covenants
prematurely weighed the facts and drew inferences against the non-moving party.
We therefore REVERSE the court’s judgment and REMAND for further
proceedings consistent with this opinion so that the court can evaluate these claims
on a more developed factual record.
2 I. In 2016, Norman was briefly employed by Payscale after her initial employer
merged with the company. She later left Payscale but returned in 2021 after it
acquired Norman’s then-employer.
About three months after rejoining Payscale, Norman entered into an
incentive equity agreement with Sonic Topco, L.P. (“Topco”), Payscale’s holding
company. The agreement bound Norman to restrictive covenants in exchange for
receiving 150,000 Topco “Profit Interest Units” (“PIUs”) in the form of “Service
Units” and “Performance Units.”1 Norman received twenty-five percent of the
Service Units on February 23, 2023, with the remaining Service Units scheduled to
vest periodically over the next three years.2 The Performance Units would only vest
upon the sale of Topco.3
1 App. to Opening Br. at A260 (Incentive Equity Agreement § 4(a)) (“The Profits Interest Units shall be subject to vesting in the manner specified in this Section 4. With respect to the Profits Interest Units issued hereunder, 75% shall be referred to as ‘Profits Interest Service Units’ and 25% shall be referred to as ‘Profits Interest Performance Units’. Profits Interest Units that have become vested are referred to herein as ‘Vested Profits Interest Units’. All Profits Interest Units that have not vested are referred to herein as ‘Unvested Profits Interest Units’.”) (underline and bold in original). For the sake of consistency, all citations will refer to the first incentive equity agreement. As noted below, Norman later entered into a second incentive equity agreement containing substantively identical covenants. 2 Id. (Incentive Equity Agreement § 4(b)) (“Recipient shall vest in (i) 25.0% of the Profits Interest Service Units on February 23, 2023 and the remainder shall vest monthly thereafter in equal amounts of the Profits Interest Service Units over the following three (3) year period thereafter (i.e., approximately 2.083% of the Profits Interest Service Units per month) . . . .”). 3 Id. (Incentive Equity Agreement § 4(b)) (“Recipient shall vest in . . . (ii) 100% of the Profits Interest Performance Units upon a Sale of the Partnership (each such date, a ‘Vesting Date’), in each case, so long as Recipient is and has remained an employee, officer, manager, director or consultant of the Partnership or one of its Subsidiaries from the date hereof through and including 3 The restrictive covenants in the incentive equity agreement include non-
compete, non-solicitation, and confidentiality provisions.4 The non-compete
provision prohibits Norman from engaging in “Competitive Activity” in the United
States for eighteen months after her separation from Payscale.5 The non-solicitation
provision prevents Norman from inducing any employees, clients, or other business
relations from leaving Topco or its subsidiaries.6 Norman is also barred from
disclosing confidential information to other entities or individuals.7
In February 2023, Norman was promoted to Senior Director of Sales,
overseeing Payscale’s sales in the western United States.8 About five months later,
Norman executed a second incentive equity agreement with Topco that contained
such Vesting Date. There shall be no proportional or partial vesting in the periods prior to each Vesting Date and all vesting should only occur on the applicable Vesting Date. Notwithstanding the foregoing, the Board may, in its sole discretion, provide for accelerated vesting of the Profits Interest Units at any time.”) (bold in original); see Answering Br. at 6–7. 4 App. to Opening Br. at A263–67 (Incentive Equity Agreement §§ 7 and 8). 5 Id. at A266 (Incentive Equity Agreement § 8(a)). “‘Competitive Business’ means any business conducted by the Partnership or any of its Subsidiaries as of such Recipient’s Separation Date or any business proposed to be conducted by the Partnership or any of its Subsidiaries as evidenced by a written business plan in effect prior to such Recipient’s Separation Date.” Id. at A268 (Incentive Equity Agreement § 9). 6 App. to Opening Br. at A266 (Incentive Equity Agreement § 8(b)). 7 Id. at A263 (Incentive Equity Agreement § 7(a)) (“Recipient agrees that Recipient will not disclose to any unauthorized Person or use for Recipient’s own (or any other Person’s) account any Confidential Information without the Board’s written consent . . . .”). 8 Norman was one of Payscale’s three most senior sales leaders, but she did not have a C-Suite position. See Opening Br. at 8.
4 the same restrictive covenants as the first agreement and awarded her another 25,000
PIUs.9
Later that year, in December 2023, Norman voluntarily resigned from
Payscale and accepted a position at a consulting firm. About ten months later,
however, Payscale learned that Norman had left the consulting firm and begun
working for BetterComp, a Payscale competitor.
Payscale brought three claims in the Court of Chancery: breach of contract
against Norman (Count I), tortious interference with contractual relations against
BetterComp (Count II), and tortious interference with prospective business relations
against Norman and BetterComp (Count III). Payscale immediately moved for a
temporary restraining order and to expedite the case. The Court of Chancery denied
the request for a temporary restraining order but granted the motion to expedite,
reasoning that Payscale pleaded a colorable claim as to all counts.
Norman and BetterComp then moved to dismiss. Payscale responded by
filing an amended complaint, adding 33 paragraphs of “detailed allegations.”10
Norman and BetterComp moved to dismiss the amended complaint, and the parties
briefed and argued the motion.
9 App. to Opening Br. at A283 (Second Incentive Equity Agreement § 1). 10 See Opening Br. at 2.
5 The Court of Chancery granted the defendants’ motion to dismiss, holding
that (i) the non-compete was unenforceable because it was overbroad in geographic
scope and temporal duration, its consideration was “vanishingly small,” and it was
not circumscribed to protecting Payscale’s legitimate business interests; (ii) Payscale
did not adequately allege breaches of the non-solicitation and confidentiality
provisions; (iii) the tortious interference with contractual relations claim against
BetterComp failed because its viability relied upon the enforceability of the
restrictive covenants; and (iv) Payscale failed to state a claim for tortious
interference with prospective business relations.
Payscale appeals the Court of Chancery’s holdings for the breach of contract
claim against Norman (Count I) and the tortious interference with contractual
relations claim against BetterComp (Count II). Payscale has not appealed the
dismissal of the tortious interference with prospective business relations claim
against Norman and BetterComp (Count III).
II.
“We review de novo the dismissal by the Court of Chancery of a complaint
under Rule 12(b)(6).”11
11 City of Sarasota Firefighters’ Pension Fund v. Inovalon Holdings, Inc., 319 A.3d 271, 288 (Del. 2024) (quoting Malpiede v. Townson, 780 A.2d 1075, 1082 (Del. 2001) (internal citation omitted)).
6 III.
A. In Count I of its amended complaint, Payscale alleges that Norman breached
the non-compete, non-solicitation, and confidentiality provisions in the incentive
equity agreements. On appeal, Payscale contends that the trial court erred in ruling
that the non-compete was unenforceable at the motion to dismiss stage because the
amended complaint adequately pleads that (i) the provision’s nationwide scope and
temporal duration are reasonable given Norman’s role, and (ii) the covenant protects
Payscale’s legitimate business interests. Payscale also maintains that the amended
complaint pleaded sufficient facts to support its claim that Norman breached the non-
solicitation and confidentiality provisions. Norman disagrees with Payscale,
asserting that the non-compete is facially unenforceable and the allegations that she
breached the non-solicitation and confidentiality provisions were conclusory.
To determine whether the restrictive covenant is enforceable, we look at the
entirety of the agreement in light of Norman’s position within the company.12
“Delaware courts review non-compete and non-solicit agreements ‘subject to
Delaware law to ensure that they are (i) reasonable in geographic scope and temporal
12 See Sunder Energy, LLC v. Jackson, 305 A.3d 723, 753 (Del. Ch. 2023), aff’d in part, rev’d in part, 332 A.3d 472 (Del. 2024) (“When evaluating the reasonableness of a restrictive covenant, a court examines the restriction holistically and in context. That means evaluating all of the dimensions of the restrictive covenant and considering how it operates with other restrictions in the contract.”).
7 duration, (ii) advance legitimate economic interests of the party seeking
enforcement, and (iii) survive a balancing of the equities.’”13 A court reviews the
duration and geographic scope of a restriction together, and the restriction’s
reasonableness is a fact-intensive inquiry.14 The company’s business interests and
other equitable factors are independent analyses.
1. The non-compete that Payscale seeks to enforce states:
Noncompetition. During the Employment Period or Engagement Period, as applicable, and ending eighteen (18) months following the Separation Date (the “Protection Period”), Recipient covenants and agrees that following Recipient’s termination of employment for any reason, he or she shall not engage in a Competitive Activity . . . .15 “Competitive Activity” is defined as to “own, manage, operate, control, participate
in, render services for, or in any other manner engage in, anywhere in the United
States, any Competitive Business . . . .”16 “Competitive Business” is defined as “any
business conducted by [Topco] or any of its Subsidiaries as of [Norman’s]
13 Sunder Energy, LLC v. Jackson, 332 A.3d 472, 485 (Del. 2024) (quoting Cantor Fitzgerald, L.P. v. Ainslie, 312 A.3d 674, 684 n.65 (Del. 2024) (citation omitted)). 14 See Delaware Elevator, Inc. v. Williams, 2011 WL 1005181, at *8 (Del. Ch. Mar. 16, 2011), judgment entered, (Del. Ch. 2011) (“When evaluating the reasonableness of a restrictive covenant, a court must consider how the temporal and geographic restrictions operate together.”). See also Intertek Testing Servs. NA, Inc. v. Eastman, 2023 WL 2544236, at *3 (Del. Ch. Mar. 16, 2023). 15 App. to Opening Br. at A266 (Incentive Equity Agreement § 8(a)). The parties do not dispute that the non-compete has an 18-month duration. See Opening Br. at 19–20; see also Answering Br. at 20. 16 App. to Opening Br. at A268 (Incentive Equity Agreement § 9).
8 Separation Date or any business proposed to be conducted by [Topco] or any of its
Subsidiaries as evidenced by a written business plan in effect prior to [Norman’s]
Separation Date.”17
In dismissing Payscale’s claim, the court concluded that (i) the provision’s
geographic scope and duration were overbroad, and (ii) the non-compete went
beyond protecting Payscale’s legitimate economic interests. The court reached those
conclusions under Rule 12(b)(6), which requires a claimant to plead a reasonably
conceivable claim. Under the rule,
(i) all well-pleaded factual allegations are accepted as true; (ii) even vague allegations are “well-pleaded” if they give the opposing party notice of the claim; (iii) the Court must draw all reasonable inferences in favor of the non-moving party; and (iv) dismissal is inappropriate unless the “plaintiff would not be entitled to recover under any reasonably conceivable set of circumstances susceptible of proof.”18 Applying Rule 12(b)(6)’s minimal standard to plead a cause of action,19 we
conclude that it is reasonably conceivable that the non-compete is enforceable as
applied to Norman. In holding otherwise, the trial court failed to credit Payscale’s
factual allegations and the reasonable inferences to be drawn from them.
17 Id. (Incentive Equity Agreement § 9). 18 Erste Asset Mgmt. GmbH v. Hees, 341 A.3d 1008, 1025 (Del. 2025) (quoting Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (citations and internal quotation marks omitted)). 19 Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Holdings LLC, 27 A.3d 531, 536 (Del. 2011).
9 i.
To support the covenant’s geographic scope, Payscale’s amended complaint
alleges that Payscale operates nationwide and Norman’s work at Payscale had
national significance. As a Senior Director of Sales, Norman was one of Payscale’s
most senior sales leaders.20 Although her role at Payscale focused on the western
portion of the country,21 Norman’s work was not confined to that region.22 Norman
collaborated with directors of other regions and was involved in senior-level
strategic decisions that applied across the company’s various sales regions.23 In
particular, Payscale alleges that “Norman met regularly with Payscale’s Chief
Revenue Officer, Senior Vice President of Revenue, Vice President of Sales, and
Vice President of Solutions Consulting to discuss sales, marketing, and product
development strategies.”24
Additionally, as a high-ranking executive, Norman was privy to Payscale’s
confidential information, including customer-pricing models and financial reports,
and was actively involved in company-wide operations across the United States.25
20 App. to Opening Br. at A223 (Am. Compl. ¶ 50). 21 Id. at A222, A224–25 (Am. Compl. ¶¶ 48, 55). 22 Id. at A226–27 (Am. Compl. ¶ 59). 23 Id. at A223, A227 (Am. Compl. ¶¶ 51, 60). 24 Id. at A224 (Am. Compl. ¶ 54). 25 Id. at A223, A226 (Am. Compl. ¶¶ 52, 58).
10 The amended complaint expressly alleges that the non-compete’s national scope is
also based upon the nature of Payscale’s customers because “[m]any of Payscale’s
customers, particularly the Enterprise customers, operate nationwide or, at least,
beyond the borders of the state in which they are headquartered.”26
To justify the non-compete’s eighteen-month duration, the amended
complaint emphasizes features of Payscale’s relationship with its “Enterprise”
customers. Payscale states that Enterprise customers are “high-value” clients
because they “typically maintain long-term relationships with Payscale, exhibit high
renewal rates, and generally do not move to a new vendor frequently.”27 The typical
length of an Enterprise contract is three years; Norman’s non-compete is half that
length: eighteen months.28
Given the non-compete’s national scope, Payscale “must demonstrate it is
protecting a particularly strong economic interest to persuade the Court that the non-
compete is enforceable.”29 Payscale alleges that the non-compete’s terms are
directly tied to protecting specific contracts with its most valued customers; at the
pleadings stage, it is reasonable to infer that protecting relationships with these key
26 App. to Opening Br. at A220 (Am. Compl. ¶ 41). 27 Id. at A245 (Am. Compl. ¶ 128). 28 Id. at A219 (Am. Compl. ¶ 36); App. to Opening Br. at A266 (Incentive Equity Agreement § 8(a)). 29 See FP UC Holdings, LLC v. Hamilton, 2020 WL 1492783, at *7 (Del. Ch. Mar. 27, 2020).
11 customers is in Payscale’s “particularly strong economic interest.”30 Although
discovery and a more discerning standard of review may well support the conclusion
that the non-compete is not reasonable as applied to Norman, the “reasonably
conceivable” standard that Norman and BetterComp invoked by moving to dismiss
the claims does not permit the trial court’s conclusion that the non-compete’s scope
and duration were facially unreasonable.31
30 But cf. Centurion Serv. Grp., LLC v. Wilensky, 2023 WL 5624156, at *5 (Del. Ch. Aug. 31, 2023). The Court of Chancery has previously emphasized that a covenant with a nationwide scope is typically upheld when it is tied to the sale of a business. See FP UC Holdings, 2020 WL 1492783, at *7 (“To be sure, this court has enforced non-competes with a nationwide scope, but only in instances where the competing party agrees, in connection with the sale of a business, to stand down from competing in the relevant industry . . . anywhere . . . for a stated period of time after the sale. These broader restrictions make sense following the sale of a business.”) (citations omitted); see also Centurion Serv. Grp., 2023 WL 5624156, at *5 (“These vague and everyday concerns do not demonstrate Section 5(a) is warranted by a particularly strong economic interest.”). But we have never held that there is a bright-line rule under which a non-compete with a nationwide scope is facially unenforceable outside the context of a sale of a business. 31 Based on the facts alleged, Payscale has sufficiently pleaded a breach of the non-compete. Norman’s role at BetterComp has significant geographic overlap with her role at Payscale. Even focusing on a narrower, regional geographic scope, Payscale alleges that Norman’s work in BetterComp’s east region overlaps with Payscale’s west region in “Indiana, Mississippi, Arkansas, and Louisiana.” App. to Opening Br. at A238 (Am. Compl. ¶ 90). In addition, the amended complaint discusses the similarities in Norman’s duties and interactions with customers. Payscale asserts that, within ten months of leaving Payscale, Norman: [H]olds a senior-level sales position at BetterComp (just like she did at Payscale), manages a sales team (just like she did at Payscale), is involved in sales strategy (just like she was at Payscale), and directly and indirectly solicits customers and potential customers with 1,000 or more employees (just like she did at Payscale). Id. at A237–38 (Am. Compl. ¶ 88). It also highlights that Norman’s work “pitching and selling BetterComp’s flagship services . . . directly competes with Payscale’s MarketPay product,” which targets “Enterprise-level companies.” Id. at A238 (Am. Compl. ¶ 89).
12 ii.
On appeal, Norman also argues that the compensation was inadequate to
support the breadth of the restrictions, emphasizing Payscale’s statement that the
PIUs were worth $0 at the time of issuance and may never become valuable.32
Consideration plays two roles in the analysis of restrictive covenants: first, the court
may inquire whether consideration was exchanged such that a contract was formed;
and second, consideration informs the balance of equities as the court assesses the
reasonableness of the restrictive covenants. Norman’s argument regarding
consideration conflates the formation analysis and the balancing of the equities.
In reaching its holding about the non-compete’s reasonableness, the Court of
Chancery relied in part on its conclusion that the consideration that Norman received
was “vanishingly small” in relation to the scope of the restriction that the non-
compete imposed.33 That analysis was mistaken in two respects. First, the relative
value of the consideration that an employee receives is appropriately included in the
balancing of the equities, but the court did not conduct that balancing in this case.34
32 Answering Br. at 7, 10, 23. 33 Opening Br. Ex. A (Court of Chancery Op. at 13). 34 See FP UC Holdings, 2020 WL 1492783, at *6 (“When applying this balancing test, the court should take notice of the consideration an employee received in exchange for her promise not to compete before determining whether the non-compete is reasonable.”) (citations omitted).
13 Second, the court could not determine that the consideration was “vanishingly small”
based on the facts pleaded in the amended complaint.
The contract-formation analysis of consideration turns on whether some
consideration was exchanged at the time of contracting, not whether that
consideration was “adequate” to support the accompanying restriction.35 In North
American Fire Ultimate Holdings, LP v. Doorly, we reversed the Court of
Chancery’s dismissal of an amended complaint, holding that consideration for a
restrictive covenant is reviewed at the time of contracting and that “somewhat
contingent” consideration, which does not hold value at the time a party seeks to
enforce the contract, still constitutes consideration.36
That is not to suggest that the adequacy of consideration is irrelevant in the
context of restrictive covenants; the balancing-of-the-equities inquiry affords the
court discretion to weigh the breadth of a restrictive covenant against the
consideration that supports it.37 But pleaded facts will not always lend themselves
35 Cf. Cox Commc’ns, Inc. v. T-Mobile US, Inc., 273 A.3d 752, 764 (Del. 2022) (stating that, when analyzing contract formation, “we limit our inquiry into consideration to its existence and not whether it is fair or adequate”) (quoting Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010)). 36 N. Am. Fire Ultimate Holdings, LP v. Doorly, 2026 WL 274647, at *4 (Del. Feb. 3, 2026) (TABLE). 37 The Court of Chancery did not conduct a balancing-of-the-equities analysis in its decision. As explained above, however, it considered the adequacy of the consideration within the context of the restriction’s geographic and temporal scope.
14 to this balancing process, and they did not in this case.38 Norman was granted
150,000 PIUs in the first incentive equity agreement, and she received another
25,000 PIUs under the second incentive equity agreement following her promotion.39
The amended complaint states that the PIUs are worth $0 at the time of issuance, but
it alleges that the PIUs have significant value “at the time of an event, typically a
sale.”40 The parties disagree factually as to whether Norman retained her vested
PIUs and the value of those units.41 The reasonable inferences the court must draw
at the pleading stage regarding the PIU’s value would not support the conclusion
that the equities balance against Payscale with respect to the consideration
exchanged. Again, that balancing may shift on a more-developed record.
iii.
It is also reasonably conceivable that the non-compete advances Payscale’s
legitimate economic interests. This inquiry “focuses on whether the non-compete is
38 At the pleading stage, no discovery has been conducted, and it may often be difficult for a court to determine the adequacy of contingent consideration without discovery. As such, Norman’s reliance on FP UC Holdings, LLC v. Hamilton to support her claim regarding the inadequacy of the consideration is not persuasive. FP UC Holdings determined that the former employee received “token consideration” after reviewing the record submitted by the parties during its injunction proceedings. See FP UC Holdings, 2020 WL 1492783, at *7. 39 App. to Opening Br. at A222 (Am. Compl. ¶¶ 46, 47). 40 Id. at A228 (Am. Compl. ¶ 62). 41 Compare Answering Br. at 22 (stating that Norman believes that her PIUs “were cancelled by operation of the plain terms of Section 8(e)”) with App. to Opening Br. at A228 (Am. Compl. ¶ 61) (stating that Payscale believes that the incentive equity agreement allows Norman to “receive payment relating to the PIUs if there is a sale,” except for the “125,782 unvested PIUs [that] were cancelled upon Norman’s resignation”).
15 ‘essential for the protection of the employer’s economic interests,’”42 which requires
that the non-compete be tailored to protect the party’s interest.43 For a restrictive
covenant, “‘[l]egitimate interests’ recognized by Delaware law include protection of
employer goodwill[] and protection of employer confidential information from
misuse.”44 In this case, the amended complaint asserts that Payscale’s legitimate
business interests include retaining its high-value customers and preventing
competitors from usurping its business.45 The incentive equity agreement similarly
states that Topco has an interest in “protecting its Confidential Information and its
Trade Secrets.”46
The Court of Chancery dismissed Payscale’s claim after finding that the non-
compete provision was broader than necessary to protect these business interests. In
so holding, the court focused on two things: (i) its conclusion that the non-compete
effectively barred Norman from working anywhere in the world; and (ii) its view
that the inclusion of Topco and other subsidiary businesses within the scope of the
42 FP UC Holdings, 2020 WL 1492783, at *6 (citing Norton Petroleum Corp. v. Cameron, 1998 WL 118198, at *3 (Del. Ch. Mar. 5, 1998)). 43 See Norton Petroleum, 1998 WL 118198, at *4 (“The scope of a restrictive covenant must be tailored to protect Norton’s legitimate business interests . . . .”). 44 Kan-Di-Ki, LLC v. Suer, 2015 WL 4503210, at *20 (Del. Ch. July 22, 2015) (citations omitted). 45 See, e.g., App. to Opening Br. at A249 (Am. Compl. ¶ 143). 46 Id. at A266 (Incentive Equity Agreement § 8).
16 covenant expanded the restriction beyond Payscale’s business. Both conclusions
rested on inferences that the court drew against Payscale.47
First, the Court of Chancery’s construction of the non-compete provision as
having a worldwide effect elided the provision’s express terms, which limits
“Competitive Activity” to conduct occurring “anywhere in the United States.”48 To
reach its conclusion regarding the “practical effect” of the non-compete, the court
looked to the non-solicitation provision’s inclusion of Topco’s unnamed subsidiaries
and their prospective clients.49 As explained below, the court’s objection to the
inclusion of unnamed subsidiaries disregarded the amended complaint’s allegations.
Moreover, although the amended complaint acknowledges that some of Payscale’s
clients have worldwide operations,50 there are no allegations that Topco, Payscale,
or Payscale’s subsidiaries conduct or plan to conduct business outside of the United
States. Significantly, Norman did not defend on appeal the trial court’s
interpretation of the covenant’s “worldwide” scope.51
47 See Opening Br. Ex. A (Court of Chancery Op. at 15). 48 App. to Opening Br. at A268 (Incentive Equity Agreement § 9). 49 Opening Br. Ex. A (Court of Chancery Op. at 14). 50 App. to Opening Br. at A220 (Am. Compl. ¶ 41) (“Many of Payscale’s customers, particularly the Enterprise customers, operate nationwide or, at least, beyond the borders of the state in which they are headquartered. Several of Payscale’s customers also operate internationally.”). 51 Answering Br. at 18–20 (describing the scope as “nationwide”), 24–28 (discussing the legitimate-interests inquiry without referencing the court’s analysis of the unlimited geographic scope created by the non-solicitation clause).
17 Second, the court’s concern about the non-compete’s inclusion of Topco’s
unnamed subsidiaries disregarded the amended complaint’s allegation that Payscale
is Topco’s only operating subsidiary and “[a]ll of Payscale’s subsidiaries conduct
the same line of business as Payscale—namely, compensation data, software, and
services.”52 Given that allegation, it is reasonable to infer that the non-compete is
limited to Payscale’s business interests. Although Norman raises various arguments
and hypotheticals to challenge whether the covenant is tailored to Payscale’s
business interests, those arguments would require us to draw inferences in Norman’s
favor, which we cannot do at this stage.53 Payscale has sufficiently pleaded that the
non-compete advances its specific, legitimate economic interests.
52 App. to Opening Br. at A230–31 (Am. Compl. ¶ 67). Payscale explains that “[a]lthough the Agreements do not explicitly state what lines of business are conducted by Sonic Topco or its subsidiaries, Norman was well-aware of the type of business that would give rise to Competitive Activity under the noncompetition clause when signing the Agreements.” Id. (Am. Compl. ¶ 67). 53 The non-compete provision at issue also differs from those previously disfavored by the court. Norman cites Hub Group, Inc. v. Knoll to argue that the restrictive covenant is not narrowly tailored, but the restrictive covenant at issue in Hub Group included any business the company was “‘actively considering or was considering’ in the year ‘preceding the date of the end of Employee’s employment with [the company][.]’” Hub Grp., Inc. v. Knoll, 2024 WL 3453863, at *9 (Del. Ch. July 18, 2024), appeal refused, 346 A.3d 1127 (Del. 2024) (“This prohibition extends to entities not yet competing with any Hub entity but planning to conduct business one day that may compete with a Hub entity.”). Such a restriction is substantially broader and vaguer than Payscale’s restriction, which includes only business or proposed business “as evidenced by a written business plan in effect prior to” Norman’s departure. App. to Opening Br. at A268 (Incentive Equity Agreement § 9) (emphasis added). And, critically, Hub Group was decided after expedited discovery and on the employer’s motion for a preliminary injunction. Hub Grp., 2024 WL 3453863, at *5.
18 Accordingly, the trial court erred in dismissing Payscale’s claim that Norman
breached the non-compete provision.
2. The trial court dismissed Payscale’s claim for breach of the non-solicitation
and confidentiality provisions based on its conclusion that the allegations were
pleaded on “information and belief” without any additional facts.54 We disagree.
In the amended complaint, Payscale alleges that “BetterComp recruits
Payscale employees in order to gain access to Payscale’s Confidential Information
and gain a competitive advantage.”55 It specifically asserts that “approximately one-
54 Opening Br. Ex. A (Court of Chancery Op. at 18). The non-solicitation provision at issue states: (b) Nonsolicitation. Recipient agrees that, during the Protection Period, Recipient shall not, and shall cause Recipient’s Affiliates not to (or to otherwise assist any other Person to), directly or indirectly (i) induce or attempt to induce any employee, advisor or independent contractor of any member of the Partnership Group to leave the employ or engagement of the Partnership Group, or in any way interfere with the relationship between any member of the Partnership Group and any of their respective employees, advisors or independent contractors, or (ii) induce or attempt to induce any client, customer, supplier, vendor, licensor, lessor or other business relation of any member of the Partnership Group (or any prospective client, customer, supplier, vendor, licensor, lessor or other business relation with which any member of the Partnership Group has entertained discussions regarding a prospective business relationship) to cease or refrain from doing business with any member of the Partnership Group, or in any way interfere with the relationship (or prospective relationship) between any such client, customer, supplier, vendor, licensor, lessor or other business relation and any member of the Partnership Group (including, but subject to Section 7(a) above, making any negative statements or communications about any member of the Partnership Group or any of their respective equity holders, directors, officers, advisors or employees). App. to Opening Br. at A266 (Incentive Equity Agreement § 8(b)). 55 App. to Opening Br. at A246 (Am. Compl. ¶ 133).
19 third of BetterComp’s current employees are former Payscale employees.”56
Regarding its Enterprise contracts, Payscale highlights its difficulty in re-signing
those clients after they contract with a competitor, stating that, “[s]ince 2018,
Payscale has renewed contracts with only 283 former Enterprise customers.”57
Linking this business challenge to Norman’s employment at BetterComp, Payscale
alleges that “shortly after Norman began working for BetterComp, Payscale has lost
at least five Enterprise customers to BetterComp, and believes that several more
Enterprise customers have left Payscale for BetterComp.”58
Those allegations are not conclusory; the loss of several Enterprise contracts
within two months of Norman joining BetterComp, Norman’s high-ranking position
within Payscale, the challenges associated with losing high-value Enterprise
customers, and the nature of BetterComp’s recruiting process are particularized
factual statements that support Payscale’s breach claims. Without discovery,
Payscale could not be expected to plead more particularized facts about its
competitor’s business or competitive practices.
Accordingly, the amended complaint pleads a reasonably conceivable claim
that Norman may have used or disclosed confidential information to BetterComp
56 Id. (Am. Compl. ¶ 133). 57 Id. at A219 (Am. Compl. ¶ 36). 58 Id. at A245 (Am. Compl. ¶ 128).
20 and, at a minimum, assisted BetterComp in soliciting Payscale’s customers and
employees. The trial court erred in dismissing it.
B. The trial court dismissed Payscale’s claim for tortious interference with
contract on the basis that Payscale failed to plead a breach of contract claim in Count
I. Norman conceded on appeal that Count II turns on Count I’s viability.59 Since we
have held that the court erred in dismissing Count I, it follows that the Court of
Chancery’s dismissal of Count II also must be reversed.
IV.
Accordingly, we REVERSE the Court of Chancery’s judgment below and
REMAND for further proceedings consistent with this decision.
59 Answering Br. at 36–37 (“Payscale’s tortious interference with contract claim rises and falls with the enforceability of the Restrictive Covenants.”).