Title: Cantor Fitzgerald, L.P. v. Ainslie

State: delaware

Issuer: Delaware Supreme Court

Document:

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
CANTOR FITZGERALD, L.P., 
§ 
A Delaware limited partnership, 
§ 
 
§ No. 162, 2023 
 
Defendant Below, 
§  
 
Appellant, 
§ Court Below: Court of Chancery 
 
§ of the State of Delaware  
 
v. 
§  
 
§ C.A. No. 9436 
BRAD AINSLIE, JASON BOYER,  
§ 
CHRISTOPHE CORNAIRE, 
§ 
JOHN KIRLEY, ANGELINA KWAN, § 
and REMY SERVANT, 
§ 
 
§  
 
Plaintiffs Below,  
§  
 
Appellee. 
§ 
 
Submitted: November 1, 2023 
Decided: 
January 29, 2024 
 
Before SEITZ, Chief Justice; TRAYNOR, LEGROW, and GRIFFITHS, Justices 
and JURDEN, President Judge1 constituting the Court en banc. 
Upon appeal from the Court of Chancery.  REVERSED and REMANDED. 
 
C. Barr Flinn, Esquire, Paul J. Loughman, Esquire, Alberto E. Chávez, Esquire, 
Skyler A. C. Speed, Esquire, YOUNG, CONAWAY, STARGATT & TAYLOR, 
LLP, Wilmington, Delaware; David A. Paul, Esquire (argued), Virginia J. Cardenas, 
Esquire, Sid Nadkarni, Esquire, CANTOR FITZGERALD, New York, New York; 
Benjamin R. Nagin, Esquire, Eric G. Hoffman, Esquire, SIDLEY AUSTIN LLP, 
New York, New York; Tacy F. Flint, Esquire, Frank J. Favia, Jr., SIDLEY AUSTIN 
LLP, Chicago, Illinois for Appellant Cantor Fitzgerald, L.P. 
 
 
 
1 Sitting by designation under Del. Const. art. IV, § 12 and Supreme Court Rules 2(a) and 4(a) to 
complete the quorum. 
2 
Blake A. Bennett, Esquire, COOCH & TAYLOR P.A., Wilmington, Delaware; Kyle 
W. Roche, Esquire (argued) KYLE ROCHE P.A., New York, New York; Velvel 
Freedman, Esquire, Alex Potter, Esquire, FREEDMAN NORMAND FRIEDLAND 
LLP, New York, New York, for Appellees Brad Ainslie, Jason Boyer, Christophe 
Cornaire, John Kirley, Angelina Kwan and Remy Servant. 
 
Richard L. Renck, Esquire, DUANE MORRIS LLP, Wilmington, Delaware; Robert 
M. Palumbos, Esquire, Ryan F. Monahan, Esquire, DUANE MORRIS LLP, 
Philadelphia, Pennsylvania; Jordan L. Von Bokern, Esquire, Tyler S. Badgley, 
Esquire, U.S. Chamber of Commerce, Washington, DC, for the United States of 
America, Delaware State Chamber of Commerce, Managed Funds Association, and 
Securities Industry and Financial Markets Association amici curiae in support of 
Appellant. 
 
Michael L. Vild, Esquire, David G. Holmes, Esquire, CROSS & SIMON, LLC, 
Wilmington, Delaware; Kenneth W. Gage, Esquire, Dan Richards, Esquire, PAUL 
HASTINGS LLP, New York, New York; Corey L. Andrews, Esquire, John M. 
Masslon, II, Esquire, WASHINGTON LEGAL FOUNDATION, Washington, DC, 
for Washington Legal Foundation amicus curiae in support of the Appellant. 
 
Anthony A. Rickey, Esquire, MARGAVE LAW LLC, Wilmington, Delaware; Eric 
A. Posner, Esquire, for Small Business Majority in support of the Appellee. 
3 
TRAYNOR, Justice:  
The courts of this State hold freedom of contract in high—some might say, 
reverential—regard.  Only “a strong showing that dishonoring [a] contract is 
required to vindicate a public policy interest even stronger than freedom of 
contract”2 will induce our courts to ignore unambiguous contractual undertakings. 
This appeal, which concerns the enforceability of the “forfeiture for 
competition” provisions of a limited partnership agreement, puts this principle to the 
test.  The provisions authorize the partnership to withhold distributions otherwise 
owed to a partner who withdraws from the partnership if he engages in specified 
activities in competition with the partnership.  The provisions in this case remain 
operative for four years following a partner’s withdrawal and, among the six 
plaintiffs, resulted in forfeitures ranging from just under $100,000 to over $5 million. 
The Court of Chancery recognized that the debate surrounding the 
enforceability of forfeiture-for-competition devices raises important, and often 
divergent, policy considerations: policies favoring “enforcing private agreements on 
[the] one hand, and disfavoring restraints of trade and allowing individuals to freely 
pursue their profession of choice, on the other.”3  In a thoughtful opinion that draws 
heavily from our case law governing covenants not to compete, the court concluded 
 
2 ev3, Inc. v. Lesh, 103 A.3d 179, 181 n.3 (Del. 2014) (quoting Libeau v. Fox, 880 A.2d 1049, 
1056 (Del. Ch. 2005), aff’d in pertinent part, 892 A.2d 1068 (Del. 2006)). 
3 Ainslie v. Cantor Fitzgerald, L.P., 2023 WL 106924, at *22 (Del. Ch. Jan. 4, 2023) (“Opinion”).  
4 
that, in this context, our State’s interest in protecting competition outweighs our 
interest in enforcing voluntarily entered contracts.  It follows, the court reasoned, 
that, unlike ordinary contract provisions, forfeiture-for-competition provisions 
should be subject—much like restrictive employment covenants are—to scrutiny for 
reasonableness.  According to the Court of Chancery, they could not pass this test 
and are therefore unenforceable.   
Under the circumstances of this case, we balance the relevant policy interests 
differently.  When sophisticated actors avail themselves of the contractual flexibility 
embodied in the Delaware Revised Uniform Limited Partnership Act—a statute that 
is expressly designed “to give maximum effect to the principle of freedom of 
contract and to the enforceability of partnership agreements”4—and agree that a 
departing partner will forfeit a specified benefit should he engage in competition 
with the partnership, our courts should, absent unconscionability, bad faith, or other 
extraordinary circumstances, hold them to their agreements.  As we have observed, 
“[p]arties have a right to enter into good and bad contracts[;] the law enforces both.”5  
Here, the Court of Chancery erred by imposing its notion of reasonableness on the 
very provisions that, when enforced against other departing partners, redounded to 
the plaintiffs’ benefit during their tenure as partners.  
 
4 6 Del. C. § 17-1101. 
5 Nemec v. Shrader, 991 A.2d 1120, 1126 (Del. 2010). 
5 
I  
A  
Cantor Fitzgerald, L.P., a global financial services company formed under 
Delaware law, operates under an Agreement of Limited Partnership (the 
“Agreement” or “§ _”).6  The plaintiffs in this case—Brad Ainslie, Jason Boyer, 
Christophe Cornaire, John Kirley, Angelina Kwan, and Rémy Servant—are former 
Cantor Fitzgerald limited partners.7  Upon their admission as limited partners, each 
plaintiff voluntarily signed, and agreed to be bound by, the Agreement.8  Each 
plaintiff was also an employee of nonparty Cantor Fitzgerald Hong Kong Capital 
Markets Limited (“Cantor HK”), a Cantor Fitzgerald affiliate;9 between 2010 and 
2011, each voluntarily resigned from employment with Cantor HK and withdrew as 
a partner from Cantor Fitzgerald.10  
B 
Cantor Fitzgerald maintains a “Capital Account”11 for each of its partners that, 
by default, is to be paid out in annual installments over four years following a 
partner’s withdrawal.12  A partner’s Capital Account contains any High Distribution 
 
6 App. to Opening Br. at A3, A9.  Cantor Fitzgerald operates in accordance with the Delaware 
Revised Uniform Limited Partnership Act (“DRULPA”). 
7 Opinion at *2. 
8 Id. 
9 Id. 
10 Id. at *4, *6. 
11 App. to Opening Br. at A12. 
12 Id. at A47, A51–53.  CFLP has the option to accelerate the payments, but not to delay them. 
6 
Units II (“HDII Units”) that the partner elects to purchase as well as the partner’s 
profit share.13  Any distributions and loss share are subtracted from the Capital 
Account.14  Each partner’s “Adjusted Capital Account” balance, used to determine 
the amounts payable to certain partners upon termination of their partner status, 
contains a value equal to the Capital Account without regard to certain regulations 
and adjustments.15   
Within ninety days of the date on which a partner ceases to be one, Cantor 
Fitzgerald will make an initial payment to each former partner consisting of what 
the Agreement calls a “Base Amount.”16  The remaining difference between the Base 
Amount and the partner’s Adjusted Capital Account is an “Additional Amount” 
which is paid out annually on the first, second, third, and fourth anniversaries of the 
Base Amount payment date.17  
In addition to purchasing HDII Units, Cantor Fitzgerald partners can earn 
Partnership Units defined as Grant Units and Matching Grant Units.18  Sections 
11.08, 11.09, and 11.10 govern payments to former partners who are Grant 
Unitholders and Matching Grant Unitholders (the “Grant Amounts”).19  Grant 
 
13 Id. at A30–31. 
14 Id. 
15 Id. at A9–10. 
16 Id. at A46. 
17 Id. at A47. 
18 Id. at A29. 
19 Id. at A51–54. 
7 
Amounts are not held in a partner’s Capital Account; like a former partner’s Capital 
Account balance, however, Grant Amounts are to be paid out in four equal 
installments over four years following a partner’s departure.20  In this opinion, we 
refer to the Grant Amounts and the Additional Amounts collectively as the 
“Conditioned Amounts.” 
The Agreement contains two inter-related mechanisms designed to discourage 
former partners from competing with the partnership following their departure from 
the firm.  The Court of Chancery referred to these mechanisms as the “Restrictive 
Covenants” and the “Conditioned Payment Device.”  Adopting this nomenclature, 
we first describe the operation of these mechanisms before focusing on their inter-
relationship.  
Under § 3.05 of the Agreement, partners agree to a series of “Partner 
Obligations” for a “Restricted Period” following withdrawal from the partnership.21  
These Partner Obligations require former partners to refrain from, directly or 
indirectly,22 (i) breaching the duty of loyalty to Cantor Fitzgerald; (ii) engaging in 
 
20 Id. 
21 The “Restricted Period” is defined as either the date one ceases, for any reason, to be a partner, 
or as a one, two, or four-year period following that date, depending on the activity.  See App. to 
Opening Br. at A19–20, 25–26 (§§ 3.05(a)(i) and (v) (through cessation); § 3.05(a)(iii) (one year); 
§ 3.05(ii) (two years); and §§ 3.05 (iv) and (vi) (four years)).  
22 Section 1.01 defines Affiliate “when used with reference to a specified Person, [as] any Person 
that directly or indirectly through one or more intermediaries controls or is controlled by or is 
under common control with the specified Person.”  Id. at A10. 
8 
certain “Competitive Activity” as defined by § 11.04(c);23 (iii) making or 
participating in the making of any disparaging comments to the media regarding 
Cantor Fitzgerald; (iv) taking advantage of, or providing another person with the 
opportunity to take advantage of a “corporate opportunity”; or (v) taking any action 
to harm, that harms, or that reasonably could be expected to harm, the partnership. 
The obligation mentioned above to refrain from “Competitive Activity” is 
considered a Partner Obligation and is in force as such for two years following a 
partner’s withdrawal.24  According to Section 11.04(c), Competitive Activity occurs 
when a partner (i) directly or indirectly, or by action in concert with others, solicits, 
induces, or influences (or attempts to) solicit, induce, or influence, any other partner, 
employee, or consultant of the partnership or an “Affiliated Entity”25 to terminate 
their employment or other business arrangements with the partnership or any 
Affiliated entity or to engage in any “Competing Business,” 26 or hires, employs, or 
engages (including as a consultant or partner) or otherwise enters into a Competing 
 
23 Section 1.01 states that “Competitive Activities” shall have the meaning given in § 11.04(c).  Id. 
at A13. 
24 Id. at A19–20, A25. 
25 Affiliated Entities are “the limited and general partnerships, corporations or other entities owned, 
controlled by or under common control with the Partnership.”  Id. at A10. 
26 An activity is considered a “Competing Business” if it “(i) involves the conduct of the wholesale 
or institutional brokerage business, (ii) consists of marketing, manipulating or distributing 
financial price information of a type supplied by the Partnership or any Affiliated Entity to 
information distribution services or (iii) competes with any other business conducted by the 
Partnership or any Affiliated Entity if such business was engaged in by the Partnership or an 
Affiliated Entity or the Partnership or such Affiliated Entity took substantial steps in anticipation 
of commencing such business prior to the date on which such Partner ceases to be a Partner.”  Id. 
at A13, A48. 
9 
Business with any such person, (ii) solicits any of the customers of the partnership 
or an Affiliated Entity, induces such customers to reduce their volume of business 
with, to terminate their relationship with, or otherwise adversely affects their 
relationship with the partnership or an Affiliated Entity, (iii) does business with any 
person who was a customer of the partnership or an Affiliated Entity during the 
twelve-month period prior to a partner’s withdraw, (iv) directly or indirectly engages 
in, represents in any way, or is any way connected with, any Competing Business 
that directly competes with the business of the partnership or any Affiliated Entity, 
including as an officer, director, owner, employee, partner, consultant, affiliate or 
other participant in any Competing Business, or (v) assists others in engaging in any 
Competing Business with the partnership or an Affiliated Entity.27  
The determination of whether a limited partner has breached a Partner 
Obligation is to be  made “in good faith by the Managing General Partner in its sole 
and absolute discretion,” and that determination is final and binding.28  Under § 
3.05(b), if a partner breaches his or her Partner Obligations, then, “in addition to any 
other rights or remedies,” Cantor Fitzgerald shall redeem all of the Units held by 
such partner for a redemption price equal to their Base Amount, and the partner loses 
the right to any further distributions, including any Additional Amounts, to which 
 
27 Id. at A48. 
28 Id. at A25–26.  
10 
the partner would otherwise be entitled.29  A partner that breaches her Partner 
Obligations must also indemnify Cantor Fitzgerald and pay any resulting attorneys’ 
fees and expenses, as well as any and all damages resulting from a breach.30  
Moreover, the Agreement provides that Cantor Fitzgerald may seek injunctive relief 
to prevent ongoing breaches of Partner Obligations, including engaging in any 
Competitive Activity, during the Restricted Period.31 
As mentioned above, the Agreement contains a separate, but overlapping, 
mechanism designed to discourage competition by former partners.  Under Article 
XI of the Agreement, the partnership is not obligated to pay the Conditioned 
Amounts if a former limited partner triggers the Conditioned Payment Device.  The 
device is triggered by either of two occurrences—a former partner (i) breaching her 
Partner Obligations (the “No Breach Condition”) or (ii) engaging in Competitive 
Activity (the “Competitive Activity Condition”).  The Conditioned Payment Device 
operates regardless of the reason a partner ceases to be a partner.32 
 
29 Id. at A25.  
30 Id. 
31 Id.  Opinion at *4.  There is no dispute that Cantor Fitzgerald did not seek any such relief in the 
Court of Chancery.  However, Cantor Fitzgerald sued plaintiffs Ainslie and Boyer (and two 
nonparties to this action) in a Hong Kong court following their respective departures, seeking 
injunctive relief and the repayment of loan obligations.  See id. at *6.  In that litigation, Cantor 
Fitzgerald alleged that Ainslie and Boyer violated the terms of restrictive covenants in an 
employment agreement with Cantor HK.  The Hong Kong court denied Cantor Fitzgerald’s request 
for injunctive relief and determined that the noncompete clause contained in the Cantor HK 
employment agreement was unenforceable under Hong Kong law.  Id.  
32 App. to Opening Br. at A48. 
11 
If, during the Restricted Period, the Managing General Partner makes a good 
faith determination that a partner has breached her Partner Obligations, the “No 
Breach Condition,” will not be satisfied, and Cantor Fitzgerald is not obligated to 
pay the Conditioned Amounts.33  Section 3.05(b) contemplates that a partner who 
breaches any Partner Obligation will be subject not only to the restrictive covenants 
contained in § 3.05 permitting Cantor Fitzgerald to seek injunctive relief, but also to 
“all of the consequences,” including those provided for in Article XI, applicable to 
a partner that engages in a Competitive Activity.34   
As previously mentioned, within ninety days of a limited partners’ 
withdrawal, Cantor Fitzgerald is obligated to pay a withdrawing partner the Base 
Amount from her Capital Account.35  Following that payment, the Additional 
Amount is then paid out “[o]n each of the first, second, third and fourth anniversaries 
of the [Base Amount] Payment Date . . . provided, that such Partner . . .  has not 
engaged in any Competitive Activity or otherwise breached a Partner Obligation 
prior to the date such payment is due.”36 
The same Competitive Activity that may trigger the Restrictive Covenants 
likewise triggers the Conditioned Payment Device.  But whether or not a partner has 
 
33 Id. at A47–48.  
34 Id. at A25–26. 
35 Id. at A46. 
36 Id. at A47–48 (emphasis added). 
12 
engaged in Competitive Activity after the Restricted Period is not subject to a “final 
and binding” good faith determination of the Managing General Partner in its “sole 
and absolute discretion”37 as is a breach of Partner Obligations during the initial two-
year post-separation period.  
To remain eligible to receive the Conditioned Amounts, a former limited 
partner must refrain from Competitive Activity “prior to the date such payment is 
due.”38  In other words, the financial disincentive for engaging in Competitive 
Activity is in place for the four years during which the former limited partner is 
eligible to receive payments from the partnership.  So, for example, a partner who 
refrains from Competitive Activity for two years will receive distributions during 
that period, but, upon commencement of competition in the third year forfeits 
distributions thereafter through the fourth year.  
Following their withdrawal as limited partners, Cantor Fitzgerald  determined 
that all the former-limited-partner plaintiffs were ineligible to receive the 
Conditioned Amounts because each had engaged in Competitive Activity within one 
year of voluntarily withdrawing from the partnership.39  
Cantor Fitzgerald determined that Kwan, who was employed as managing 
director and chief operating officer of Cantor HK, after voluntarily resigning from 
 
37 Id.    
38 Id.  
39 Opinion at *4. 
13 
her employment and withdrawing as a partner of Cantor Fitzgerald in September 
2010, immediately began working at Reorient Group Limited (“Reorient”), a global 
financial services group providing institutional brokerage services.40  Following suit 
in May 2011, Ainslie, Cantor HK’s then-managing director and head of Asian 
equities, and Boyer, Cantor HK’s executive managing director, also voluntarily 
resigned from employment with Cantor HK and withdrew as partners of Cantor 
Fitzgerald, and went to work for Reorient in October and September 2011, 
respectively.41  Ainslie and Boyer’s resignation letters, both dated May 30, 2011, 
stated that they intended to join “an entity which may be viewed as a competitor[.]”42   
Kwan joined Reorient as executive managing director and chief operating 
officer.43  Ainslie joined as executive managing director and head of global 
markets.44  And Boyer joined as vice chairman and director.45  In their respective 
roles, each plaintiff was involved in recruiting employees and customers for 
Reorient—including Cantor HK’s employees and customers.46   
Cantor Fitzgerald also determined that in March, September, and November 
2011, Cornaire, Servant, and Kirley, each of whom were employed in Cantor HK’s 
 
40 Opening Br. at 11; App. to Opening Br. at A931 (citing A201, A205, A249, A345). 
41 App. to Opening Br. at A930–01 (citing A201, A205, A346, A445, A509). 
42 Id. (citing A152, A174).  
43 Id. (citing A201, A205, A249, A346). 
44 Id. (citing A508).  
45 Id. (citing A281–82, A303–05). 
46 Id. at A933–34 (citing A281–84, A346, A388, A458, A629). 
14 
equity derivatives division, resigned from Cantor HK and withdrew as partners of 
Cantor Fitzgerald.47  Within a year, each joined ICAP, Cornaire as a managing 
director for equity products, and Kirley and Servant as equities derivatives brokers.48  
ICAP is a global interdealer brokerage that offers many of the same services as 
Cantor Fitzgerald affiliates.49   
Cantor Fitzgerald also determined, as a separate basis for withholding the 
Conditioned Amounts, that the former partners had each breached at least one 
Partner Obligation related to their Competitive Activity.50  Accordingly, Cantor 
Fitzgerald withheld the Conditioned Amounts, which, as mentioned, ranged from 
just under $100,000 to over $5 million.51   
C 
Approximately three years following their voluntary resignations from 
employment with Cantor HK and withdrawal from the Cantor Fitzgerald limited 
partnership, the plaintiffs filed suit in the Court of Chancery asserting breach-of-
contract claims related to the partnership’s enforcement of the Agreement and 
requesting a declaration that “the four-year non-compete provision imposed by [§ 
11.04] is not appropriately limited in time or space, fails to protect a legitimate 
 
47 Id. at A934–35 (citing Compl. ¶¶ 20, 22, 26, A105, A519). 
48 Id. at A935 (citing A304–05).  
49 Id. (citing A362, A480–81, A529, A552, A615, A708–09, A715, A790). 
50 Id. at A96, A935. 
51 Opinion at *25. 
15 
interest of [Cantor Fitzgerald], and is oppressive, and is therefore unenforceable.”52 
Cantor Fitzgerald moved for summary judgment on all counts (in the amended 
consolidated complaint filed in 2016, there were twelve of them—a breach of 
contract claim and a request for declaratory relief for each plaintiff).53  It argued that, 
because the plaintiffs had engaged in Competitive Activities and also breached their 
Partner Obligations, Cantor Fitzgerald was not contractually obligated to pay any 
Conditioned Amounts to the plaintiffs.54  Cantor Fitzgerald did not move for 
enforcement of the restrictive covenants or request any injunctive relief.  From 
Cantor Fitzgerald’s perspective, as far as the Conditioned Payment Device is 
concerned the plaintiffs were free to compete but only at the cost of forfeiting their 
rights to the Conditioned Amounts.  
The plaintiffs opposed Cantor Fitzgerald’s motion and cross-moved for 
summary judgment.55  The plaintiffs’ cross-motion argued that (i) the restrictive 
covenants and Conditioned Payment Device were restraints of trade that should be 
evaluated as such for reasonableness,56 (ii) the Conditioned Payment Device was an 
unenforceable penalty in the form of a liquidated damages provision enforcing a 
void restrictive covenant,57 (iii) Cantor Fitzgerald was precluded as a matter of law 
 
52 Id. at *7. 
53 Id. 
54 Id. 
55 Id. 
56 App. to Opening Br. at A964–1032. 
57 Id. at A1003. 
16 
from asserting the anticompetition clauses against Ainslie and Boyer,58 (iv) there 
was a genuine dispute of material fact as to whether plaintiffs engaged in 
Competitive Activity,59 and (v) Cantor Fitzgerald was not entitled to summary 
judgment with respect to Ainslie’s base amount.60 
Thus, the parties’ summary judgment motions posed competing frameworks 
for assessing the enforceability of the Conditioned Payment Device.  The plaintiffs 
framed the device as either a penalty that rested on the validity of the underlying 
Restrictive Covenants, as triggered by the No Breach Condition, or as a restraint of 
trade voidable under public policy, as triggered by the Competitive Activity 
Condition.61  In the plaintiffs’ view, enforcement of the Conditioned Payment 
Device under either condition required a review of the Restrictive Covenants for 
reasonableness.  
Cantor Fitzgerald took issue with those characterizations, insisting instead 
that the Conditioned Payment Device merely acted as a condition precedent to 
Cantor Fitzgerald’s duty to pay the Conditioned Amounts, not as a per se restraint 
 
58 Id. at A1007. 
59 Id. at A1014. 
60 Id. at A1028.  Cantor Fitzgerald withheld Ainslie’s Base Amount because Ainslie declined to 
sign a release as requested by Managing General Partner  under § 11.12, which purported to release 
any claims that Ainslie had against Cantor Fitzgerald and would set off amounts he allegedly owed 
Cantor Fitzgerald under § 2.02(c) of the Agreement.  The Court of Chancery granted Cantor 
Fitzgerald’s Motion for Summary Judgment as to Ainslie’s entitlement to the Base Amount and 
that ruling has not been appealed.  Id. at *27. 
61 Id. at *9. 
17 
of trade.62  Cantor Fitzgerald argued that the Restrictive Covenants were only 
relevant to determining whether the No Breach Condition was satisfied.  That is, 
Cantor Fitzgerald argued that it was not seeking to enforce the Restrictive 
Covenants; rather, it was seeking to ensure the plaintiffs’ compliance with the 
standalone No Breach Condition, as to the Additional Amounts, and the standalone 
Competitive Activity Condition, as to all Conditioned Amounts, before it paid the 
Conditioned Amounts.63  Cantor Fitzgerald pressed the Court to view both the No 
Breach Condition and the Competitive Activity Condition of the Conditioned 
Payment Device as any other bargained-for contractual provision—that is, without 
evaluating their reasonableness.64 
D 
The Court of Chancery rejected the plaintiffs’ characterization of the 
Conditioned Payment Device as a damages provision triggered by a breach of the 
Restrictive Covenants.  The court also rejected the plaintiffs’ contention that 
§ 3.05(b) and the No Breach Condition imposed unenforceable penalties.  Instead, 
the court agreed with Cantor Fitzgerald that the absence of a breach of Partner 
Obligations and, separately, the absence of competition were conditions precedent 
to Cantor Fitzgerald’s duty to pay the Conditioned Amounts. 
 
62 Id. 
63 Id. 
64 Id. 
18 
Even so, the Court of Chancery assessed the enforceability of the Restrictive 
Covenants under the standard test applicable to noncompete agreements65 and 
concluded that the covenants were facially overbroad and void as against public 
policy.  The Restrictive Covenants were, according to the court, unenforceable 
promises and, for this reason, the plaintiffs’ failure to comply with them could not 
be a breach of a Partner Obligation.  This meant—or so the court found—that the 
No Breach Condition had not failed.  
The court then turned to the Competitive Activity Condition, a critical 
component of the Conditioned Payment Device that operates independently from the 
No Breach Condition.  These provisions, as the Court of Chancery observed, are 
commonly known as “forfeiture for competition” provisions.  The plaintiffs urged 
the Court of Chancery to treat these provisions as restraints of trade that should be 
evaluated for reasonableness.  Cantor Fitzgerald, by contrast, pressed the court to 
view the forfeiture provisions in the Agreement as financial consequences attending 
a withdrawing partner’s decision to compete and argued in favor of adoption of the 
“employee 
choice” 
doctrine 
under 
which 
courts 
do 
not 
review 
forfeiture-for-competition provisions for reasonableness so long as the employee 
 
65 Delaware courts review noncompete and nonsolicit agreements subject to Delaware law to 
ensure that they are (i) reasonable in geographic scope and temporal duration, (ii) advance 
legitimate economic interests of the party seeking enforcement, and (iii) survive a balancing of the 
equities.  See FP UC Holdings, LLC v. Hamilton, 2020 WL 1492783, at *6 (Del. Ch. Mar. 27, 
2020). 
19 
voluntarily terminated her employment.   
The Court of Chancery noted that “other jurisdictions are split” between these 
positions but that “[o]ther courts have stated that employee choice is the majority 
approach.”66  Giving great weight to two trial court opinions that viewed liquidated 
damages provisions enforcing noncompete and nonsolicit agreements with 
skepticism, the Court of Chancery chose not to apply the employee-choice doctrine 
and subjected the Competitive Activity Condition and the forfeiture resulting from 
its failure to a reasonableness review.   
The court did not select the restraint-of-trade framework to the exclusion of 
the employee-choice doctrine without first considering the contending policy 
interests.  It concluded that: 
Delaware’s emphasis on balancing an employer’s ability to 
contractually protect its good will, confidential information, customers, 
and other assets against the public policy favoring free competition and 
employee mobility, and Delaware’s distaste for liquidated damages 
provisions that restrain trade by requiring employees to pay former 
employers if they compete—even unknowingly and in an amount 
untethered to the employer’s loss—supports joining the ranks of 
jurisdictions that review forfeiture-for-competition provisions for 
reasonableness as restraints on trade.67 
 
Then, analyzing the Competitive Activity Conditions under the reasonableness 
standards that it earlier applied to the No Breach Condition, the Court of Chancery 
 
66 Opinion at *21. 
67 Id. at *25. 
20 
determined that, although the provision was “more reasonable,” it was unenforceable 
due in large part to its four-year duration, and thus was invalid as an unreasonable 
restraint of trade.68 
Because the court determined that both the No Breach and Competitive 
Activity Conditions were unenforceable, it concluded that the Conditioned Payment 
Device as a whole was “an unreasonable restraint built on unreasonable restrictive 
covenants,” was unenforceable, and could not excuse Cantor Fitzgerald from its 
obligation to pay the Conditioned Amounts.69  Because of this ruling, the court found 
it unnecessary to reach the plaintiffs’ argument that there was a genuine issue of 
material fact as to whether they actually engaged in Competitive Activity.  
Consequently, as to the claims before us now, the Court of Chancery entered 
summary judgment in favor of the plaintiffs, and Cantor Fitzgerald appealed.   
E 
Cantor Fitzgerald presses three arguments germane to our resolution of this 
appeal.  First, Cantor Fitzgerald depicts the Court of Chancery’s analysis as 
unfaithful to our strong contractarian tradition as reflected in the Delaware Revised 
Uniform Partnership Act and our case law.  Second—and not entirely unrelated to 
 
68 Id. at *26.  Recognizing that former partners were still free to compete with the partnership, the 
Court of Chancery said that it would “scal[e] the review back to the more lenient or employer-
friendly review Delaware affords restrictive covenants in the sale of a business as compared to an 
employment agreement.”  Id. at *25.  The court did not, however, describe the manner in which it 
limited its review. 
69 Id. at *28. 
21 
the first—it contends that the Conditioned Payment Device should not be subject to 
judicial review for reasonableness but, instead, should be enforced according to the 
terms to which the parties agreed.  Third and finally, Cantor Fitzgerald argues that 
the Court of Chancery misconstrued the parties’ relationship, focusing on the 
plaintiffs as employees of Cantor HK and not, as it should have, as partners in Cantor 
Fitzgerald.70  
The plaintiffs counter that the Court of Chancery correctly (i) weighed the 
competing policy interests in enforcing private agreements and disfavoring restraints 
of trade, (ii) determined that the Conditioned Payment Device was predicated on an 
unenforceable promise, and (iii) focused on the plaintiffs’ status as Cantor HK 
employees over their status as Cantor Fitzgerald partners. 
II  
A 
There is no dispute that, if the Conditioned Payment Device is enforced 
according to its terms, Cantor Fitzgerald is not required to pay the Conditioned 
Amounts to the plaintiffs.  On the other hand, Cantor Fitzgerald must pay those 
amounts if we determine—as the Court of Chancery did—first, that a public policy 
 
70 Cantor Fitzgerald challenges the Court of Chancery’s refusal to “blue pencil” the Agreement to 
a level of reasonable restrictiveness given the plaintiffs’ “near-immediate competition.”  Because 
we hold that the partnership was justified in withholding the Conditioned Payments, we need not 
address that issue. 
22 
of this State overrides the parties’ unambiguous agreement that the Conditioned 
Amounts are not payable unless the Competitive Activity Condition has been met 
and, second, that the scope of the Competitive Activity Condition is unreasonable.  
We review such questions—that is, questions that hinge on public policy grounds—
de novo.71 
B 
We agree with, and the plaintiffs have not challenged on appeal, the Court of 
Chancery’s conclusion that the Conditioned Payment Device comprises two 
conditions—the No Breach Condition and the Competitive Activity Condition—to 
Cantor Fitzgerald’s duty to pay the Conditioned Amounts.  We also agree that these 
conditions are “disjunctive”72 such that the failure of either relieves Cantor 
Fitzgerald of its duty to pay those amounts.  As to the No Breach Condition, the 
Court of Chancery held that, because the Restrictive Covenants were unenforceable, 
the plaintiffs could not have breached them so as to trigger the No Breach Condition.  
This left Cantor Fitzgerald with the Competitive Activity Condition as a basis for 
eliminating its duty to pay the Conditioned Amounts.  We attend first, therefore, to 
the enforceability of the Conditioned Payment Device to the extent that it was 
triggered by the Competitive Activity Condition. 
 
71 RSUI Indem. Co. v. Murdock, 248 A.3d 887, 902 (Del. 2021). 
72 Opinion at *14. 
23 
C 
In determining whether to review the Conditioned Payment Device for 
reasonableness when the device is triggered by the failure of the Competitive 
Activity Condition, the Court of Chancery relied heavily on Delaware law’s 
“treatment of liquidated damages provisions enforcing noncompete and nonsolicit 
agreements, as distinct from injunctive relief.”73  At the heart of the court’s decision 
was its conclusion that “Delaware’s distaste for liquidated damages provisions that 
restrain trade by requiring employees to pay former employers if they compete—
even unknowingly and in an amount untethered to the employer’s loss—supports 
joining the ranks of jurisdictions that review forfeiture-for-competition provisions 
for reasonableness as restraints on trade.”74  The court’s reliance on this liquidated 
damages analogy was, in our view, misplaced. 
It bears noting here that, earlier in its opinion, the court had rejected the 
plaintiffs’ argument that the Conditioned Payment Device was an unenforceable 
damages provision.  It found, instead, that the Competitive Activity Condition was 
a condition precedent to Cantor Fitzgerald’s duty to pay the Conditioned Amounts.  
We agree with that conclusion, and the plaintiffs do not contest it on appeal.75  This 
distinction is significant; liquidated damages, by definition, are a remedy for breach 
 
73 Id. at *22. 
74 Id. at *25. 
75 See id. at *13–14. 
24 
of contract and are not recoverable for a failure to meet a condition precedent.76   
Despite concluding that the Competitive Activity Condition was a condition 
precedent, the court rested its policy analysis on case law reviewing liquidated 
damages provisions “enforcing noncompete and nonsolicit agreements,”77 as 
contained in employment agreements whose underlying covenants were subject to a 
review for reasonableness.  This comparison is, in our view, inapt.  It does not follow 
that, because courts review restrictive non-competition covenants and liquidated 
damages provisions enforcing them in a particular manner—subjecting them to 
review for reasonableness—we should review forfeiture-for-competition provisions 
in the same way. 
Moreover, the two liquidated damages cases on which the Court of Chancery 
grounded its policy discussion—Faw, Casson & Co., L.L.P. v. Halpen,78 and Lyons 
Insurance Agency, Inc. v. Wark,79— are distinguishable from this case.  Both Wark 
and Halpen dealt with lawsuits initiated by former employers seeking to enforce 
liquidated damages provisions contained in employment agreements against former 
 
76 See Brazen v. Bell Atlantic Corp., 695 A.2d 43, 67 (Del. 1997) (“[l]iquidated damages, by 
definition, are damages paid in the event of a breach.”) (citing Restatement (Second) of Contracts 
§ 356 (1981)); Supernus Pharms., Inc. v. Reich Consulting Grp., Inc., 2021 WL 5046713, at *6 
(Del. Ch. Oct. 29, 2021) (“nonperformance of a condition precedent is not a breach of contract 
since the purpose of the condition is merely to qualify the duty to perform immediately.”).  
77 Opinion at *22. 
78 2001 WL 985104 (Del. Super. Ct. Aug. 7, 2001). 
79 2020 WL 429114 (Del. Ch. Jan. 28, 2020).  
25 
employees—an insurance agent and accountant, respectively.80  In both cases, the 
court considered whether the damages the employer demanded for breach of the 
restrictive covenant were reasonable in light of the employees’ actions and 
concluded that damages provisions untethered to an employer’s reasonable interests 
in preventing competition, and unrelated to any action taken by a former employee, 
were unreasonable restraints of trade.81 
Here the claims under review were not brought by an employer seeking to 
enforce a liquidated damages provision for an employee’s breach of a restrictive 
covenant in an employment agreement; rather, this is a lawsuit initiated by former 
limited partners against the partnership requesting that a forfeiture-for-competition 
provision be declared invalid under the same test as applied to traditional 
noncompete agreements.  Unlike in Halpen and Wark, the provision at issue here is 
not a penalty enforced against an employee based on the breach of a restrictive 
covenant; it is a condition precedent that excuses Cantor Fitzgerald from its duty to 
pay if the plaintiffs fail to satisfy the condition to which they agreed to be bound in 
order to receive a deferred financial benefit.   
That cases concerning liquidated damages as a remedy for breach of 
restrictive covenants do not provide reliable guidance here finds support in decisions 
 
80 See Wark, 2020 WL 429114, at *2; Halpen, 2001 WL 985104, at *1.  
81 See Wark, 2020 WL 429114, at *7; Halpen, 2001 WL 985104, at *1 & n.1.  
26 
of the United States District Court for the District of Delaware and the Superior 
Court.  For example, in W.R. Berkley Corporation v. Dunai,82 the district court 
determined that a provision requiring a corporate vice president to return $200,000 
in stock benefits if she engaged in competitive activity within one year of leaving 
the company was not, as Dunai asserted, a noncompete.  Relying in part on W.R. 
Berkeley Corporation v. Hall,83 the court reasoned that this was so because the 
considerations underlying a traditional noncompete, such as a restriction on freedom 
of employment, were absent from a provision calling only for a forfeiture of 
benefits.84  The court also rejected Dunai’s argument that the clawback provision 
was an unenforceable liquidated damages provision.  In the court’s words, the 
clawback was not “a $200,000 penalty for working for a competitor; it [wa]s 
returning a supplemental benefit for breaching the terms of a bargain.  That is not a 
liquidated-damages provision.”85   
Hall reached a similar conclusion.  There, a senior vice president quit his 
employment to pursue an opportunity with a competitor.86  Within six months, he  
exercised stock options and realized a gain of approximately $180,000.87  The stock 
 
82 2021 WL 1751347 (D. Del. May 4, 2021).  
83 2005 WL 406348 (Del. Super. Ct. Feb. 16, 2005).  
84 Id. at *2.  Reviewing the clawback provision as a term in a contract, not as a noncompete, the 
court determined the that it was reasonable.   
85 Id.  
86 Hall, 2005 WL 406348, at *1. 
87 Id. 
27 
incentive plan permitted the company to “recapture the profits” if Hall competed 
with the company within six months of exercising his option.88  Hall attempted to 
frame the recapture provision as a liquidated damages provision, but the court 
determined that, no matter the “spin” put on the provision, Hall’s “freedom of 
employment was not abridged and the provision was “simply a contractual 
obligation that require[d] a senior management employee to remain with the 
company for six months . . . to retain the full benefit of the stock option.”89  Hall 
“knew of this obligation and simply now [was] asking the [c]ourt to free him of this 
responsibility.”90  The court declined to do so.91 
In short, we are not satisfied that our liquidated damages jurisprudence 
provides a policy-based counterweight sufficient to override our strong interest in 
enforcing contracts as written.  We turn then to the policy considerations that weigh 
in favor of enforcing the Conditioned Payment Device. 
D 
In ascertaining the public policy of this State as it relates to the enforceability 
of the provisions of limited partnership agreements, we need not look far.  The 
Delaware General Assembly explicitly declared that it is the policy of the Delaware 
 
88 Id. 
89 Id. at *3, *5. 
90 Id. at *5.  
91 Id. 
28 
Revised Uniform Limited Partnership Act (“DRULPA”) “to give maximum effect 
to the principle of freedom of contract and to the enforceability of partnership 
agreements.”92  We have recognized that: 
[DRULPA’s] basic approach is to permit partners to have the broadest 
possible discretion in drafting their partnership agreements and to 
furnish answers only in situations where the partners have not expressly 
made provisions in their partnership agreement.  Truly, the partnership 
agreement is the cornerstone of Delaware limited partnership, and 
effectively constitutes the entire agreement among the partners with 
respect to the admission of partners to, and the creation, operation and 
termination of, the limited partnership.  Once partners exercise their 
contractual freedom in their partnership agreement, the partners have a 
great deal of certainty that their partnership agreement will be enforced 
in accordance with its terms.93 
 
The emphatic policy statement in DRULPA corresponds with our courts’ 
tradition of “ensur[ing] freedom of contract . . . in order to facilitate commerce.”94  
We “uphold[] the freedom of contract and enforce[] as a matter of fundamental 
public policy the voluntary agreements of sophisticated parties.”95  As former Chief 
Justice Strine, while serving as Vice Chancellor, wrote in a passage we have since 
cited with approval: 
 
92 6 Del. C. § 17-1101(c); see also Boardwalk Pipeline Partners, LP v. Bandera Master Fund LP, 
288 A.3d 1083, 1108 (Del. 2002) (noting “the primacy of partnership agreements” and that 
“Delaware courts respect the terms of a partnership’s governing agreements to preserve the 
‘maximum flexibility’ of contract.”); see also Ketler v. PFPA, LLC, 132 A.3d 746, 748 (Del. 2016) 
(“The public policy of this [S]tate is typically determined by the Delaware General Assembly.”). 
93 Elf Atochem N. Am., Inc. v. Jaffari, 727 A.2d 286, 291 (Del. 1999) (quoting Martin I. Lubaroff 
& Paul Altman, Delaware Limited Partnerships § 1.2 (1999)).  
94 eV3, Inc., 103 A.3d at 181 n.3. 
95 NAF Holdings, LLC v. Li & Fung (Trading) Ltd., 118 A.3d 175, 180 n.14 (Del. 2015) (emphasis 
added).  
29 
When parties have ordered their affairs voluntarily through a binding 
contract, Delaware law is strongly inclined to respect their agreement, 
and will only interfere upon a strong showing that dishonoring the 
contract is required to vindicate a public policy interest even stronger 
than freedom of contract. 
 
Such public policy interests are not to be lightly found, as the wealth-
creating and peace-inducing effects of civil contracts are undercut if 
citizens cannot rely on the law to enforce their voluntarily-undertaken 
mutual obligations.96 
Of course, as this quotation notes, freedom of contract is not absolute.  For 
instance, “contracts that offend public policy or harm the public are deemed void, as 
opposed to voidable.”97  But, given our “strong interest in freedom of contract[,]”   
covenants not to compete subject to Delaware law do not fall into this category.98  
 
Here, the Court of Chancery recognized that the Competitive Activity 
Condition, which does not “limit[] a partner’s ability to compete or otherwise obtain 
employment,”99 stands on different footing than underlies non-competition 
covenants such as the Restrictive Covenants underpinning the No Breach Condition.  
The Agreement, and in particular Section 11.02(c), states unambiguously: 
Each partner acknowledges that this Article XI is intended solely to 
reflect the economic agreement between the Partners with respect to 
amounts payable upon a Partner’s Bankruptcy or Termination.  Nothing 
in this Article XI shall be considered or interpreted as restricting the 
ability of a former Partner in any way from engaging in any 
Competitive Activity, or in other employment of any nature whatsoever, 
 
96 RSUI Indem. Co., 248 A.3d at 903 (quoting Libeau, 880 A.2d at 1056–57).  
97 Lincoln Nat’l Life Ins. Co. v. Joseph Schlanger 2006 Ins. Tr., 28 A.3d 436, 441 (Del. 2011). 
98 NuVasive, Inc. v. Miles, 2018 WL 4677607 (Del. Ch. Sept. 28, 2018). 
99 Opinion at *14. 
30 
subject in either case to the restrictions elsewhere in this Agreement 
(including without limitation in Sections 3.05 and 8.06).100 
 
Thus, the Competitive Activity Condition does not restrict competition or a 
former partner’s ability to work; nor does competition support injunctive relief.  But 
if the former partner wishes to compete with Cantor Fitzgerald during the relevant 
time, Cantor Fitzgerald need not confer the deferred benefit on the former partner, 
who has agreed to forfeit that benefit upon engaging in competition.  
E 
With these principles in mind, we turn to the parties’ competing perspectives 
on the policy implications surrounding enforcement of the Conditioned Payment 
Device.  The plaintiffs, on the one hand, argue that the forfeiture-for-competition 
provision implicates the public policy disfavoring restraints of trade and thus urge 
the Court to adopt the same reasonableness analysis that is applied to traditional 
noncompetes.  On the other hand, Cantor Fitzgerald argues that we should be guided 
by the employee-choice doctrine, which “assumes that an employee who elects to 
leave a company makes an informed choice between forfeiting a certain benefit or 
retaining the benefit by avoiding competitive employment.”101  
Jurisdictions adopting the plaintiffs’ view conclude that the threat of 
economic loss from a forfeiture provision operates as a restraint of trade.  
 
100 App. to Opening Br. at A46 (emphasis added). 
101 Lucente v. Int’l Bus. Machines Corp., 310 F.3d 243, 254 (2d Cir. 2002). 
31 
Additionally, because the purpose of a forfeiture provision—to deter competitive 
employment—is identical to a typical restrictive covenant, those courts find it 
appropriate to evaluate forfeiture provisions for reasonableness using the same lens 
through which they would view a traditional noncompete agreement.102   
Jurisdictions adopting the employee-choice doctrine reason that the forfeiture, 
unlike the restraint prohibiting competition included in an employment contract, 
does not prohibit the employee from engaging in competitive work but merely denies 
her the right to some financial benefit if she chooses to engage in competitive 
activity,103 and thus they are not restraints of trade.104   
 
102 See Fearnow v. Ridenour, Swenson, Cleere & Evans, P.C., 138 P.3d 723 (Ariz. 2006); Deming 
v. Nationwide Mut. Ins. Co., 905 A.2d 623, 634 (Conn. 2006) (analyzing a forfeiture-for-
competition clause under the reasonableness test applied to covenants not to compete but 
recognizing that this was not the majority approach); Frame v. Merrill Lynch, Pierce, Fenner & 
Smith, Inc., 97 Cal. Rptr. 811 (Ct. App. 1971) (citing Muggill v. Reuben H. Donnelley Corp., 398 
P.2d 147 (Cal. 1965)); Flammer v. Patton, 245 So. 2d 854 (Fla. 1971); A.L. Williams & Assocs. v. 
Faircloth, 386 S.E.2d 151 (Ga. 1989); Prudential Locations, LLC v. Gagnon, 509 P.3d 1099 (Haw. 
2022); Torrence v. Hewitt Assocs., 493 N.E.2d 74 (Ill. App. Ct. 1986); Woodward v. Cadillac 
Overall Supply Co., 240 N.W.2d 710 (Mich. 1976); Harris v. Bolin, 247 N.W.2d 600, 602 (Minn. 
1976); Mungas v. Great Falls Clinic, LLP, 221 P.3d 1230, 1238 (Mont. 2009); Brockley v. Lozier 
Corp., 488 N.W.2d 556 (Neb. 1992); Gaver v. Schneider’s O.K. Tire Co., 856 N.W.2d 121 (Neb. 
2014); Ellis v. Lionikis, 394 A.2d 116 (N.J. Super. Ct. App. Div. 1978) (citing Knollmeyer v. Rudco 
Indus., Inc., 381 A.2d 378 (N.J. Super. Ct. App. Div. 1977)); Werlinger v. Mut. Serv. Cas. Ins. 
Co., 496 N.W.2d 26, 29–30 (N.D. 1993); Graham v. Hudgins, Thompson, Ball & Assocs., Inc., 
540 P.2d 1161 (Okla. 1975); Lavey v. Edwards, 505 P.2d 342 (Or. 1973); Almers v. S.C. Nat. Bank 
of Charleston, 217 S.E.2d 135 (S.C. 1975); Rosploch v. Alumatic Corp. of Am., 251 N.W.2d 838, 
840 (Wis. 1977).  In Pollard v. Autotote, Ltd., 852 F.2d 67 (3d Cir. 1988), the United States Court 
of Appeals for the Third Circuit surmised that we would follow this approach.  By our decision 
today, we respectfully confute that prediction.   
103 See, e.g., Grebing v. First Nat. Bank of Cape Girardeau, 613 S.W.2d 872, 875–76 (Mo. Ct. 
App. 1981).  
104 As best we can discern, other jurisdictions that have taken up this issue are split.  See e.g., 
Lucente, 310 F.3d at 254; S. Farm Bureau Life Ins. Co. v. Mitchell, 435 So. 2d 745, 747 (Ala. Civ. 
App. 1983); Collister v. Bd. of Trustees of McGee Co. Profit Sharing Plan, 531 P.2d 989, 990 
32 
F 
The distinction between a restrictive non-competition covenant that precludes 
a former employee from earning a living in his chosen field and an agreement that 
 
(Colo. App. 1975); Trumble v. Farm Bureau Mut. Ins. Co. of Idaho, 456 P.3d 201, 212 (Idaho 
2019); Miller v. Foulston, Siefkin, Powers & Eberhardt, 790 P.2d 404, 413 (Kan. 1990); Kops v. 
Lee, 871 So. 2d 1187 (La. Ct. App. 2004); Alco-Columbia Paper Serv., Inc. v. Nash, 273 So. 2d 
630, 634 (La. Ct. App. 1973) (“The forfeiture provision was one of the conditions to which the 
defendant agreed when he entered the plan. We are convinced that he is bound by it.”); Allegis 
Grp., Inc. v. Jordan, 951 F.3d 203, 210–11 (4th Cir. 2020) (applying Maryland law) (“the 
defendants have pointed to no case in which a condition precedent has been reviewed for 
reasonableness, even in the employment context . . . [p]articipants in the Incentive Plan were well 
compensated, high-level professionals who were given the option to join the program during their 
employment and, following separation, had the further choice of whether to receive payments or 
to compete with Allegis and its subsidiaries.”) (emphasis in original); Cheney v. Automatic 
Sprinkler Corp. of Am., 385 N.E.2d 961, 964 (Mass. 1979) (“[T]he majority view in this country 
seems to be that a forfeiture for competition clause in an employment agreement is enforceable 
without regard to . . .  reasonableness[.]”); Alldredge v. City Nat’l Bank & Tr. Co. of Kansas City, 
468 S.W.2d 1 (Mo. 1971); Grebing, 613 S.W.2d 872; Swift v. Shop Rite Food Stores, Inc., 489 
P.2d 881, 883 (N.M. 1971); Kristt v. Whelan, 164 N.Y.S.2d 239 (N.Y. App. Div. 1957); Rochester 
Corp. v. Rochester, 450 F.2d 118 (4th Cir. 1971) (applying Virginia law); Fraser v. Nationwide 
Mut. Ins. Co., 334 F. Supp. 2d 755, 760–61 (E.D. Pa. 2004) (noting that the defendant “could either 
abide by the conditions required to receive the deferred compensation or not, it was his choice” 
and that it was “probable that [the defendant] recognized the loss . . .  as the opportunity cost of 
accepting other employment, and chose to compete because it was more economically 
advantageous to do so); Garner v. Girard Tr. Bank, 275 A.2d 359 (Pa. 1971); Ekman v. United 
Film Serv., Inc., 335 P.2d 813, 814 (Wash. 1959) (“We know of no legal prohibition which 
prevents competent parties from contracting as to the terms and conditions under which unaccrued, 
prospective, and contingent commissions shall be paid. The elements which nullify a contract as 
being in restraint of trade are not present here.”).  See also Cont’l Carbonic Prod., Inc. v. Cohen, 
241 S.W.3d 296 (Ark. 2006); Montgomery v. Lowe, 507 F. Supp. 618, 620 (S.D. Tex. 1981) (“[A] 
distinction may be drawn where the consequence of violating a non-competitive clause is a clearly 
defined and understood forfeiture of accrued benefits contributed by the protected party. . . . The 
burden in such a case is contemplated by both parties and does not in any way interfere with [the 
defendant’s] livelihood.”) (internal citations omitted); Exxon Mobil Corp. v. Drennen, 452 S.W.3d 
319, 329 (Tex. 2014) (noting that, “under Texas law,” a forfeiture clause in non-contributory 
profit-sharing plan was not a covenant not to compete—but reserving the decision as to whether 
such provisions are unreasonable restraints of trade under Texas law, such that they are 
unenforceable, for another day); Rieves v. Buc-ee’s Ltd., 532 S.W.3d 845, 853 (Tex. App. 2017); 
Connell v. Wells Fargo & Co., 2016 WL 4733448 (S.D. Tex. Sept. 12, 2016), subsequently aff’d, 
699 F. App’x 446 (5th Cir. 2017). 
33 
allows a former partner to compete but at the cost of relinquishing a contingent 
benefit is, in our observation, significant.  In the restrictive-covenant context, the 
former employee is effectively deprived of his livelihood and, correspondingly, 
exposed to the risk of serious financial hardship.  This gives rise to the strong policy 
interest that justifies the review of unambiguous contract provisions for 
reasonableness and a balancing of the equities, two exercises typically foreign to 
judicial review in contract actions.  By contrast, however, forfeiture-for-competition 
provisions, which, unlike restrictive covenants, are not enforceable through 
injunctive relief, do not prohibit employees from competing and remaining in their 
chosen profession, and do not deprive the public of the employee’s services, present 
no such concern.  The policy interest that preponderates in the former case is 
diminished—if it does not vanish—in the latter.  To put it another way, the interest 
to be vindicated when evaluating a covenant that prohibits competition and that 
might even preclude gainful employment is significantly weakened when 
competition—often (as in this case) highly remunerative—is permitted.  That 
diminished interest is insufficient to override DRULPA’s directive to “give 
maximum effect to the principle of freedom of contract and the enforceability of 
partnership agreements.”  
34 
G 
Finally, we address the Court of Chancery’s observation that forfeitures are 
disfavored and do not enjoy our courts’ contractarian deference.105  This is so, the 
court reasoned, because, like liquidated damages provisions, forfeiture provisions 
might conflict with public policy or result in inequitable outcomes.106    
We disagree that the common law’s disfavor of forfeitures extends to limited 
partnership agreements.  As the Court of Chancery recognized, 6 Del. C. § 17-306 
permits partnership agreements to contain consequences that would be “unavailable 
in a standard commercial contract, most notably penalties and forfeitures.”107   
This express divergence from the common law on forfeitures, considered in 
light of DRULPA’s statutory mandate to honor freedom of contract in partnership 
agreements, leads us to conclude that forfeitures in limited partnership agreements 
should enjoy this court’s deference on equal footing with any other bargained-for-
term in a limited partnership agreement.108  Although it is conceivable that a 
public-policy interest or inequitable outcome could, under some circumstances, 
 
105 Opinion at *24. 
106 Id. 
107 Id. at *12 (noting that “[i]n the partnership setting, the common law disfavor of penalties yields 
to statute” and explaining that “that 6 Del. C. § 18-306 which mirrors Section 17-306, departs from 
the common law in that it ‘authorizes LLC agreements to provide for remedies that would be 
unavailable in a standard commercial contract, most notably penalties and forfeitures.’”).    
108 See In re Cellular Telephone P’ship Litig., 2021 WL 4438046, at *73 (Del. Ch. Sept. 28, 2021) 
(discussing that DRUPA, 6 Del. C. § 15-408, which mirrors 6 Del. C. § 17-306 “authorizes” 
forfeitures in partnership agreements).   
35 
outweigh the interest in freedom of contract enshrined in DRULPA, such 
circumstances are not present here.109   In this case, the plaintiffs voluntarily entered 
into the partnership and the Agreement, elected to compete with the partnership upon 
their departure, and thereby assumed the risk of the forfeiture.110 
III 
To sum up, we disagree with the Court of Chancery’s conclusion that 
forfeiture-for-competition provisions like the one at issue here are restraints of trade 
subject to review for reasonableness.  When sophisticated parties agree in a limited 
partnership agreement that a partner, who voluntarily withdraws from, and then 
competes with, the partnership, will forfeit contingent post-withdrawal financial 
benefits, public-policy considerations weigh in favor of enforcing that agreement.  It 
follows that the court erred in ruling that Cantor Fitzgerald could not rely on the 
Competitive Activity Condition and the Conditioned Payment Device to withhold 
the Conditioned Payments from the plaintiffs.  We therefore reverse the Court of 
Chancery’s final judgment and remand for further proceedings consistent with this 
 
109 See Restatement (Second) of Contracts § 227(1) explaining that the court’s preference for 
contractual interpretations that reduce the risk of forfeiture resulting from a condition need not be 
present where “the event is within the obligee’s control, or the circumstances indicate that he has 
assumed the risk.” 
110 Cantor Fitzgerald’s internal documents suggest that it relies on the Conditioned Payment 
Device to excuse its obligation to make payments to an estimated 40% of former partners.”  See 
Answering Br. at 12 citing App. to Answering Br. at B32.  See also id. at A538 (at his deposition, 
Servant testified that “everyone knows if you go to competition [. . .] [t]hen you may have to 
forfeiture part of the your -- all your shares.”). 
 
36 
opinion, including a determination whether there is a genuine issue of material fact 
as to whether the plaintiffs engaged in Competitive Activity.