COURT OF CHANCERY OF THE STATE OF DELAWARE M ORGAN T

. Z URN V ICE C HANCELLOR L EONARD L. W ILLIAMS J USTICE C ENTER 500 N. K ING S TREET , S UITE 11400 W ILMINGTON , D ELAWARE 19801

- 3734 August 3 1 , 2023

Todd C. Schiltz , Esquire Faegre Drinker Biddle & Reath LLP 22 2 Delaware Ave nue , Suite 1410 Wilmington, D E 19801 Andrea S. Brooks
, Esqui re Wilks Law, LLC 4250 Lancas ter Pike, Suite 200 Wilmington, DE 19805

RE : Centurion Service Group, LLC v. Eric Wilensky , Civil Action No. 2023

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Dear Counsel:

I write to address those aspects of defendant Eric Wilensky’s motion to

dismiss that I did not resolve a t oral argument on July 19, 2023. 1 We have had
occasion to speak several times over the past few months, and this letter is cabined

to the enforceability of t he r estrictive covenants plaintiff Centurion Service Group,

LLC (“Centurion”) assert s Wi lensky breached

. I th erefore rely on the parties’
familiarity with the underlying dispute and the Employment A greement

. Wilensky

mo ve d to dismiss Centurion ’ s si ngle count for breach of Section 5(a) of the
Employment Agr eement , assert ing that the provision is unen forceable and so

Centurion failed to state a claim

. For the reasons that fol low, his motion is
granted.

1 Docket Item (“D.I. ” ) 62. The motion to dismiss and briefing can be found at D.I. 33, D.I. 41, D.I. 42, D.I. 70, and D.I. 71.Centurion Service Group, LLC v. Eric Wilensky,

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I begin with the prefatory issue of choic e of law

. As I ex pla ined from the
bench on July 19, the Employment Agreement ’ s Delaware choice of law provision

is not necessa rily binding

. 2 Following the Restatement (Second) of Conflict of
Laws, Delaware courts do not enforce choice of law provisions w h en doin g so

would ci rcumvent the public policy of another state that has a greater interest in the

matter. 3 Where a differe nt state ’ s law would govern in the absence of a choice of
law provision, where that state has a fundamental public policy regarding

restric tive coven ant s, and where that state has a materially greater interest in the

matter, this Court will defer to that s tate ’ s law even in the face of a Delaware
choice of law provision. 4 Again
, as explained from the bench, Illinois is the

default st a te here : Illinoi s l aw would govern absent the governing agreements’
choice of law provision s. 5 I f enforcement of the restrictive covenants would

2 D.I. 73 at 6

– 8.

3 Cabela ’ s L

LC v. Wellman , 201 8 WL 5309954 , at *7

– 10 (Del. Ch. Oct. 17, 2018); Ascension Ins. Hldgs., LL C v. U nderwood , 2015 WL 356002, at *2

– 3 (Del. Ch. Jan. 27, 2015)

. 4 HighTower Hldg. , LLC v. Gibson , 2023 WL 1856651, at *5 (Del. Ch. Feb. 9, 2023) ; FP UC Hldgs., LLC v. Hamilton , 2020 WL 1492783, at *8 (Del. Ch. Mar. 27, 2020) ; Cabela ’ s , 2018 WL 53099 54, at *7

– 10; As cension , 2015 WL 356002, at *2

– 5

. 5 D.I. 73 at 7 ( “ Centurion is an Illinois LLC with a principal place of business in Illinois, Wilensk y is an Illin ois re side nt, and the em ploy m ent agreeme nt was executed in Illinois

. The alleged breaches a ppear to be ce ntered in Il linois as well. Victori Group is headquartered in Illinois. TAB is an Illinois LLC, and Wilensky ’ s auction license is from the State of Illino is. ” )

.Centurion Service Group, LLC v. Eric Wilensky,

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conflict with a fundamental policy of Illinois law and if Illinois has a materially
greater interest in the i ss ues here than D ela ware , Illinois law governs

. 6
Having reviewed the Illinois law the parties submitted in supplemental
briefing, it seems Illinois common law and Delaware common law are mostly in

step as to the enforce ability o f res trictive covenants

. 7 Illinois law has an additional

statutory restriction on the application of rest rictive covenants to low wage

workers
, but this restriction does not apply to Wilensky

. 8 While Illinois enacted

additional restrictions in 2022, the se do n ot apply to W ilensky’s agreemen t. 9 I see

no basis to d isturb the Employment Agreement ’ s choice of Delaware law . I thank
the par ties for their supplemental briefing on Illinois law.

6 HighTower Hld

g. , 2023 WL 1856651, at *5; Focus Fin. Partners, LLC v. Holsoppl e , 241 A.3d 78 4, 820 (Del. Ch. 2020) ( “ The court must consider whether applying the choice

- of

- law provision would displace the default state ’ s law on a substantive issue wher e the default stat e has a mate rially greater interest than the chosen state. ” ).

7 Wilensky conceded that the outcome under Illinois an d Delaware law is the sam e

. D.I. 33 at Br. 4 n.1

. 8 See 820 I ll. C omp. S tat. Ann. 90/5
, 10 ( 2017 ) (prohibiting employers from enteri ng
c ovenants not to compete wi th any low

- w age employe e and defining “ low

- wage emp loye e ” as an em ployee who earns either the hourly rate required by federal, State or local minimum wag e law or $13.00 per hour)

. 9 See 820 I ll. C omp. S tat. Ann. 90/5 ( 20 2 2 ) (d e fin ing “covenant not to c ompete” and “covenant not to solicit” as agreements entered into after January 1, 2022, the effective date of the ac t).Centurion Service Group, LLC v. Eric Wilensky,

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D elaware courts do not mechanically enforce noncompetition or
nonsolicitation agreements. 10 “[A ]gree ments not to compete must be clo sely

scrutinized as restrictive of tr ade.” 11 Delaware courts “carefully review”
noncompete and nonsolicit provisi ons to ensu re that they “(1) [are] reasonable in
geographic scope and temporal duration, (2) advance a legi timat e economic
interest of the p arty seeking its enforc ement, and (3) sur vive a balancing of the
equities.” 12 “Delaware courts have favored the publi c interest of competition in
their review of noncompetition agreements.” 13 Where noncompete or nonsolicit

c ovena nts are un reasonable in part , De laware courts are he sitant to “blue pe ncil”
such agreements to make them reasonable. 14

Section 5(a) states:

Non

- competition. The Executive agrees, in consideration for the obligati ons of the Company hereunder, including , wit hout limit ation, any payment s an d benefits to be given to the Executive , that during the Restricted Time he will not (o ther than as a director, officer,

10 Kodiak Building P’rs, LLC v. Adams , 2022 WL 5240507, at *4 (Del. Ch. Oct. 6, 2022).

11 F aw, Ca sson & Co. v. C rans ton , 37 5 A.2d 463, 466 (Del. Ch. 1977).

12 FP UC Hldgs ., 2020 WL 1492783, at *6 (internal quotation marks omitted) (quoting Lyons Ins. Agen cy, Inc. v. Wilson , 2018 WL 4677606, at *5 (Del. Ch. Sept. 28, 2 018)).

13 Elite Cleaning Co., Inc. v . Capel , 2006 W L 15 65161
, at *4 ( Del. Ch. June 2, 2005) (c iting Tristate Courier & Carriage, Inc. v. Berryman , 2004 WL 835886, at *15 (Del. Ch. Apr. 15, 2004 )).

14 Kodiak Building P’rs , 2022 WL 5240507, at *4 n.49 (collect ing cases and explaining the basis for th is C ourt ’ s he s i tanc y to blu e pencil ).Centurion Service Group, LLC v. Eric Wilensky,

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employee, agent or consultant of the Company), directly or indirec tly own any interest in, manage, cont rol, parti cipate in (whether as an officer, member, manager, director, employee, consultant, advisor, partner, agent, r epresentative or otherwise), consult with, render services for, or in any other manner engage in any business engaged directly or in direc tly in a C ompetitive Activit y in the Restricted Area, including, withou t limitation, the provision of any other service s which the Company was designing, developing, selling or providing, or planning to design, d evelop, sell or provide, in either case , at any time w hile the Executive was employed by the Company, nor assist or encourage anyone in doing the same , unless the Executive shall have obtained the prior written consent of the Board, provided, however, that the fo regoing restrictions shall not b e con strued to prohibit ownership by the Executive of not more than five per cent (5%) of any class of equity securities of a ny corporation having a class of equity securities registered pursuant to the Securities Exch ange Ac t of 1934, as amended, which are publ icly owned and regularly tra ded on any national securities exchange or over the

- counter market if such ownership repres ents a personal investment and neither the Executive nor any group of persons including the E xecutiv e either directly or indirectly in an y way mana ges or exercises c ontr ol of any such corporation, guarantees any of its financial obligations or otherwise
ta kes part in its business other than exercising his right as an equity holder or seeks to do a ny of t he foregoing. 15 Section 1 supplie s the following definitions: (c ) “ B usiness ” shall mean (i) the buying and selling of medical equipment via auctions and pr ivate sales, (ii) providing medical surplus management for healthcare facilities including ce rtified appraisals, trade

- in value veri ficat ion, asset and facility inve ntor ies, rel ocations and closures for such facilities, and (iii) any other business

15 D.I. 1 Ex. 1 § 5(a) [hereinafter “Agr.”].Centurion Service Group, LLC v. Eric Wilensky,

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activit ies in which the Company, at any time during the Term, is engaged or is actively planning to engage in. (e) “ Competitive Activity ” s hall mean an ac tivity that consti tute s being engaged in the Business or enga ged in any business that is competitive with the Business in the Restricted Area. (i) “ Restricted Area ” shall mean any area within the United States of America, and any other count ries within the world where the C ompa ny is th en actively soliciting and enga ging in (or actively planning to solicit and eng age in) the Business. (j) “ Restricted Time ” shall be the Term and the two (2) year period imm ediately following the Termination Date

. (l) “Term” sh all mean the perio d be ginning on the Effective Date and endin g upon the first to occur of the Expiration Date or the Termination Date. 16 In so many words, Section 5(a) prevents Wilensky from engaging in any business

in turn directly or indire ctly engaged in i) Centurion’s bu siness, ii) any bus iness
competitive with Centurion ’s business, iii) any business Centurion planned to
engage in at any time during Wilensky’s Term, or (iv) any business competitive
with any b usiness Centurion planned to engage in at an y time during Wilens ky’s

Ter m, f or two years after the Termination Date , anywhere in the United States and
any other co untries where Centurion is “ actively soliciting and engaging in” its
actual or planned business.

16 Id. § 1.Centurion Service Group, LLC v. Eric Wilensky,

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Wilens ky asserts that Sect ion 5 (a) is o verbroad in its ge ography and

duration
, that it fails to advanc e a legitimate business interest
, and that it is vague

. I begin with geography and dura tion.
When evaluating the reasonableness of a restrictive covenant, a court must consider ho w the tempora l and geographic r estric tions operate together. The two dimensions necessarily intera ct. To be barred for five years from working in a single county le aves o pen opportunities for the former employee in surrounding areas. To be barred from a n
en t ire stat e for a shorter pe riod, such as a year or less, leaves open the possibility that the for mer employee could live off savings, take a long vacation, or enjo y some garden leave. All else equal, a longer restrictive covenant will be more reasonab le if geograp hically tempered, and a restr ictive covenant covering a broader area will be

more reasona ble if temporally tailored. A restrictive covenant that is maximal ly bro ad across both dimensions requires exceptional justification. To examine each di mensi on indiv idually overlooks the in terac tion and enables employers to justify restrictions that are

un reasonably onerous in combination. 17

Here
, before analyzing the geo graphic and temporal scopes together
, I must

first resolv e the p arti es ’ interpretive diffe rence ove r the g eogra ph ic scope of the

Restricted Area

. Wilensky asserts the geog raphic scope encompass es conduct
anywhere in the United States, plus in foreign cou ntrie s where Centurion is
actively s oliciting and engaging in its business or planning to do so

. C e nturio n

par ses the defi nitio n of Restricte d Area as limited to any area, either in the United

17 Del. Elevator, Inc. v. Williams , 2011 WL 1005181, at *8 (Del. Ch. Mar. 16, 2011).Centurion Service Group, LLC v. Eric Wilensky,

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States or abroad, in which Centurion is actively soliciting and engaging in its

business or planning to do so

. Centurion’s reading gives meaning to “any area

wi t hin” t he Un ited States, but Wilensky’s does not; Centurion’s is the proper
reading. 18 Still, even Centurion’s readin g results in a nationwide ban: as
Centurion alleged, “Centur ion e ngages in business nationwide, works with
customers selling equipment in o ver 40 stat es, and mark ets to potential customers
and buyers throughout the United States.” 19

“ A rea(s)” where Centuri on does business are the core of Section 5(a)’s
geograph ic sc ope , but not the entirety . “Area” is “amorphous and ill

- defined.” 20

And t he “ R estric ted A rea ” mentioned in Section 5(a) encompasses not only areas

wh er e Centurion actually engages in or solicits business, but also where Centurion

“is then a ctively planning to solicit and engage in ” b usiness. 21 And the term

“Business” include s “ any o ther bus iness activities in which the Company, at any
time during the Term
, is engaged or is actively planning to engage in. ” 22 S o,

18 Kuhn Constr., Inc. v. Diamond State Port Corp ., 990 A.2d 393, 396

– 97 (Del. 2010) (req uiri ng Del a ware co urts to “give each provisi on and term effect, so as not to render any part of the contract mere surplusage”).

19 D.I. 1 at Com pl. ¶ 11 [hereinafter “ Compl. ” ]

. 20 See Del. Elevator , 2011 WL 1005181, at *9

. 21 Agr . § 1 (i).

22 Agr. § 1 (c).Centurion Service Group, LLC v. Eric Wilensky,

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Section 5(a)’ s geograph ic scope includ es not only “ areas ” where Centurion does
business, but also any “area” where Cen t urio n activ ely planned t o solicit and
engage in any business activities in which it was engaged or actively planning to

engage at any time during Wilen sky’s Term

.

“ Whether the duration of a restrictive covenant is reaso nable turns on the
specific fac ts befor e th e Court

. . . . ” 23 Section 5(a) bans Wilensky for two years
from competing nationwide
, and in any addi tional “area” in which Centurio n
conducts, solicits, or plans to conduct or solicit any actual activity or activity
planned at any time during Wilensk y ’s sevent een

- year employment

. 24 Under a

holistic assess ment, this geographic and temporal scope is not reasonable. 25 The

“ a rea ” contemplated in Section 5(a) casts a limitless net over Wilen sky in both
scope of geo graphy and scop e of con duct

. Wil ens ky is prohibite d fro m working

23 Ain slie v. Can tor Fitzgerald, L.P.
, 2023 WL 106924 , at *1 9 ( Del. Ch. Jan. 4, 2023).

24 D.I. 33 at Br. 1.Centurion Service Group, LLC v. Eric Wilensky,

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not j ust in “ areas ” where Centurion cond ucts its core business of medical
equipment sales and surplus management , but also “ areas ” Centurion might have
thought about entering
, and where Centurion does or tho ught ab out doing any oth e r
activity. Wilensky is similarly prohibited from working in not just Centurion ’ s

actual field, but also any field Centurion planned to enter

. Like in FP UC
Holdings , “in light of the [Employment] Agreement’s failure to define precis e ly

wha t [Centurion ] ’s ‘business’ is, one could argue that [Wilensky] would be in

breach of the non

- comp ete if he were employed [in the medical s ale and surplus]

fiel d an ywhere in the coun try” or abroad. 26 “ Given the vast geographic scope of

the non

- compe t e, [Ce nturion] mus t demonstrate it is protecting a particularly

25 Centurion relies on cases from 2007 and earlier for the proposition that a two

- year covenant is reasonable. See Weichert Co. of Pa. v. Young , 2007 WL 43 7282 3, at * 4 (Del. Ch. Dec. 7, 2007); T

ristate Courier & Carriage, Inc. v. Berryman , 2004 WL 835886, at *11 (Del. Ch. Apr. 15, 2004); Copi of Del., Inc. v. Kelly , 1996 WL 633302, at *5 (Del. Ch. Oct. 25, 1996). These cases predate Del aware Elevator ’s pres crip tion to consider the time period a n d geography together, and considered them sep arately. Del. Elevator , 2011 WL 1005181, at *9 ; see Weichert Co. of Pa.
, 2007 WL 437282 3, at *3; Tr istate Courier & Carriage , 2004 WL 835886, at *11; Copi of D el. , 1996 WL 633 302, at *5 ; see a lso All Pro Maids, I

nc. v. Layton , 2004 WL 1878784, at *5 n.23 (Del. Ch. Aug. 9, 2004) (offering dicta on two

- year restrictions “coverin g limited area s” given the one

- year period in that case was conceded to be reasonable )

. 26 2020 WL 1 4927 83 at * 7.Centurion Service Group, LLC v. Eric Wilensky,

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strong economic interest to persuade th e Court that the non

- compete is

enforceab le. ” 27 “ A greater scope must be sup ported b y a greater interest

. ” 28

C enturion has faile d to demonstrate any inte rest worth protecti n g with

Secti on 5(a). “[T]his C ourt has enforced non

- competes with a nationwide scope,
but only in ins tances where the competing party agrees, in connection with the sale

of a b usiness, to st and down from competing in the relevant indu stry . . . anywhere

. . . for a stated period of time after the sale.” 29 This is not such an instance :
Wilensky entered into the E mploymen t Agreement in 2018
, 30 when he was alre ady
employed by Centurion

. 31 Centurion’s Complai nt giv es lip service to Wilensky ’ s “finding deals” a nd “foster [ing] relationships
, ” and to his access to Centurion’s

confidential information i ncludi ng lists of bu yers, selle rs, and vendor s. 32 These
vague and everyday concerns do not demonstrate Section 5(a) is warranted by a
particularl y strong economic i n terest

. C enturion offers no facts to support that

27 Id

. 28 Ainslie
, 2023 WL 106924 , at *16

. 29 FP UC Hldgs.
, 2020 WL 1492783, at *7.

30 Compl. ¶ 2

. 31 S ee D.I. 33 at Br. 1 (indicatin g Wilensky began working for Centurion in 2005 and was terminated in 2022 ) ; s ee also Kodiak Building P’rs , 2 022 WL 5240 507, at * 7 ( “ D elaware law also contemplates denying injunctive enforcement of an overbroad restrictive covenant because of the power dynamic between an employer and emplo yee at the time of signing

. ” )

.Centurion Service Group, LLC v. Eric Wilensky,

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Sectio n 5(a) i s needed to pr otect any “particularly strong economic interest” from
otherwise lawful competition by Wilensky. And the acknowle dgements Wilensky

assented to in Sectio n 5 ( g) of the Employmen t Agreement cannot carry

Centurion’s burden to demonstrate Sect ion 5(a) i s ne ce ssary. 33

I conclude Section 5(a) is unenforceable. I decline to blue pencil it. 34
Wilensky’s motion to dismiss is GRANTED.

Si ncerely,

/s/ Morgan T. Zurn

Vice Chanc e llor

MT Z / m s

cc : All Counsel of Record, via File & Serve Xpr ess

32 Co mpl. ¶¶ 17, 26, 27, 28.

33 See Kodiak Bui ldin g P’rs
, 2022 WL 5240507, at *5

– 7 (concluding a “ mechanical submission to an employee ’ s promise not to ch all enge a restrictive covenant would fly in the face of the public policy that compels revi ew of that covena nt ” )

. 34 Id

. at *4 n.49.