Delaware Court Rejects Forum Clause in Restrictive Covenant Dispute

11th Jun 2026
The Delaware Court of Chancery declined to rely on a Delaware forum selection clause contained in an agreement that a former executive never received, denying a preliminary injunction in a restrictive covenant dispute involving a private equity-backed telecommunications company. In GI DI Rushmore Parent L.P. v. Donald E. Stoops, Jr., the court found that the company sought to rely on a Delaware forum clause contained in a partnership agreement that had never been provided to the employee, despite later attempting to enforce restrictive covenants tied to an equity incentive award. The ruling addresses a growing legal issue for employers and private equity-backed businesses that use equity incentive arrangements to impose post-employment restrictions. It also examines when employment-related disputes involving restrictive covenants should be governed by local employment laws rather than the internal governance rules of a Delaware entity. For employers, the decision highlights a practical enforcement risk. Restrictive covenants may appear enforceable when drafted, but enforcement can become significantly more difficult if an organisation cannot show that employees received and had access to the agreements on which those restrictions depend. The Jurisdiction Dispute The dispute arose after Donald Stoops left Bluepeak and joined competitor Dobson Fiber. Holdco sought to enforce restrictive covenants contained in an incentive unit agreement linked to an equity award and argued that Delaware courts had jurisdiction because the agreement incorporated a partnership agreement containing a Delaware forum selection clause. The Delaware Court of Chancery rejected that argument and denied a preliminary injunction, finding that Holdco had not established a reasonable likelihood that Delaware courts could exercise personal jurisdiction over Stoops. Central to the court's reasoning was the fact that the forum selection clause appeared in a partnership agreement that Stoops never received despite requesting it multiple times. The case raises a broader question for employers using equity incentive arrangements to impose post-employment restrictions. Even carefully drafted restrictive covenants may prove difficult to enforce if the business cannot demonstrate that employees received and had access to the agreements containing the provisions on which enforcement depends. Jurisdiction, Disclosure and Governing Law The court's analysis centred on two related questions: whether Delaware courts could exercise jurisdiction over Stoops and whether Delaware law should govern the employment-related provisions contained in the incentive unit agreement. Stoops accepted employment after being offered participation in an incentive equity programme. More than six weeks after starting work, he received an incentive unit agreement containing restrictive covenants. That agreement repeatedly referred to a partnership agreement containing a Delaware forum selection clause. The court found that Stoops never received the partnership agreement, was not told where it could be obtained and requested it multiple times without success. Holdco argued that Delaware law and Delaware courts should govern the dispute because the incentive unit agreement incorporated the partnership agreement by reference. The court disagreed. Vice Chancellor J. Travis Laster concluded that Oklahoma had a significant interest in regulating the employment issues at the centre of the dispute because Stoops lived and worked in Oklahoma. The court also rejected the argument that the dispute should primarily be treated as an internal affairs matter involving a Delaware entity. The court viewed the dispute as an employment matter involving restrictive covenants and post-employment obligations rather than a question of corporate governance. As a result, Oklahoma's policies governing employment relationships and restrictive covenants carried substantial weight in the analysis. The court ultimately held that Oklahoma law governed the employment-related features of the agreement and that the Delaware forum clause could not support the exercise of personal jurisdiction over Stoops. Risk Emergence Legal risk first appears when restrictive covenants depend on terms contained in separate documents that employees have not received or cannot reasonably access. Businesses often focus on drafting protections, but enforcement challenges can emerge years later if there is no clear record showing the underlying documents were provided before execution. What Does the Ruling Mean for Non-Compete Agreements? The case does not change the general enforceability of non-compete agreements or restrictive covenants. The court's focus was on enforcement and whether an employer can rely on contractual provisions contained in documents that were never provided to the employee. Companies relying on incorporated agreements should be prepared to show that employees received those agreements and had access to the provisions being relied upon. Businesses operating across multiple states may face additional challenges where local employment laws affect the enforceability of restrictive covenants, forum selection clauses or choice-of-law provisions. Decision Trigger Action is required before litigation begins. Once an organisation intends to rely on incorporated agreements, forum clauses or equity-plan restrictions, it should be able to demonstrate that those materials were delivered and available for review. Without that evidence, enforcement efforts may face immediate procedural challenges regardless of how the underlying restrictions are drafted. Compliance, Governance and Litigation Risk The immediate consequence of the decision was the denial of Holdco's request for a preliminary injunction. The broader significance extends beyond a single dispute and raises practical considerations for employers using equity awards to impose post-employment restrictions. Many modern incentive compensation structures rely on multiple interrelated agreements. Where enforcement depends on incorporated documents, organisations should be able to demonstrate that employees received those materials before execution and had access to them throughout the employment relationship. Document retention procedures and acknowledgement records may later become important evidence if restrictive covenants are challenged. Businesses operating across multiple states should also review whether restrictive covenant provisions, forum selection clauses and choice-of-law arrangements align with local employment laws. Boards, compensation committees and in-house legal teams may wish to assess whether existing incentive-plan processes adequately document delivery and retention of governing agreements. Exposure Escalation Exposure escalates when equity incentive arrangements span multiple jurisdictions. What begins as an alleged breach of a restrictive covenant can expand into disputes over governing law, forum selection, public policy and jurisdiction, increasing both litigation costs and enforcement uncertainty. The Lesson for Employers The court did not determine whether Stoops ultimately breached the restrictive covenants, nor did it prohibit employers from using equity incentive arrangements to impose post-employment restrictions. The judgment makes clear that contractual language alone may not be enough. Employers seeking to rely on restrictive covenants should ensure that employees receive all incorporated agreements and that those restrictions remain compatible with applicable local law. The ruling addressed only the preliminary injunction application and the court's ability to exercise jurisdiction over Stoops. Whether claims proceed elsewhere remains unresolved. The decision nevertheless reinforces a practical point for employers: restrictive covenants become significantly harder to enforce when the agreements supporting them are unavailable to the individuals expected to comply with them.