The Delaware Court of Chancery’s decision in Hipcricket v. mGage, C.A. No. 11135-CB, (Del. Ch. July 15, 2016), highlights the importance of coordinating the positions taken in different legal proceedings. The plaintiff in Hipcricket appeared to have a binding and enforceable noncompete agreement prohibiting its former vice president of sales (the defendant) from engaging in any post-employment solicitation of the plaintiff’s customers and employees. That defendant breached the agreement shortly after leaving his employment with the plaintiff seemed clear. The plaintiff proved at trial that the defendant joined one of the plaintiff’s competitors and “immediately” began soliciting the plaintiff’s largest clients, including certain of his former accounts. Despite this showing, the plaintiff did not prevail on its breach of contract claim. Instead, the court found that the plaintiff had materially breached the agreement by rejecting, in its Chapter 11 bankruptcy proceeding, the defendant’s claim for unpaid commissions and other amounts plainly due under the agreement. The court ruled that the plaintiff could not “‘have its cake and eat it too’” by enforcing an agreement it had materially breached through the position it took in bankruptcy court.
The plaintiff was a mobile marketing company that provided mobile advertising solutions, primarily through text and multimedia messages. The defendant had been employed by the plaintiff from October 2008 to March 13, 2015, and was a party to annual commission agreements. Those agreements included noncompete provisions prohibiting the solicitation of the plaintiff’s customers and employees following his separation from the company. The agreement also prohibited the misuse of the plaintiff’s confidential information.
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