On February 3, 2026, the Delaware Supreme Court, sitting en banc, unanimously reversed the Delaware Court of Chancery in North American Fire Ultimate Holdings, LP v. Doorly. The decision addresses a recurring question in private-company deals: whether a restrictive covenant supported by equity awards remains enforceable after those awards are forfeited.
In Doorly, an executive received incentive equity units subject to time-based and performance-based vesting. In exchange, he signed a set of restrictive covenants, including a non-compete. The governing agreement provided that all of his units, whether vested or unvested, would be forfeited if he were terminated for cause. The company later alleged that he had formed a competing business. It then terminated him for cause, triggered the forfeiture, and sued to enforce the non-compete.
The Delaware Court of Chancery dismissed the claim. In its view, the equity awards were the sole consideration the executive received for agreeing to the covenants, and once the equity was forfeited, the consideration supporting the covenants disappeared along with it. The company was left trying to enforce an agreement that, on the Chancery Court’s reading, no longer had any consideration behind it.
The Delaware Supreme Court disagreed. Drawing on its earlier decision in Newell Rubbermaid Inc. v. Storm, the Court explained that the adequacy of consideration is measured at the time the contract is formed, not at the time a party seeks enforcement. When contingent equity is granted, it has real value because it represents a genuine opportunity for future economic benefit. A contractual remedy that later forfeits that equity as a consequence of the executive’s own breach does not retroactively eliminate the consideration that supported the agreement at signing.
Two practical takeaways follow from the decision. First, the Delaware Supreme Court did not endorse any particular scope, duration, or geographic reach for a non-compete. Those elements will continue to be reviewed on their own terms under Delaware law. Second, agreements that identify equity awards as the sole consideration for restrictive covenants can be written more defensively. Reciting multiple, overlapping forms of consideration, such as continued employment and access to confidential information, makes the agreement more resilient to the kind of argument the executive advanced in Doorly.
