Cleveland Integrity Services, LLC v. Randy Byers / Cleveland Integrity Services, LLC v. Michael Frye
C.A. Nos. 2024-0371-MTZ / 2024-0372-MTZ
Del. Ch.Feb 28, 2025Background
- Cleveland Integrity Services, LLC (Cleveland), an oil and gas pipeline inspection company, seeks to enforce restrictive covenants (noncompetition and nonsolicitation) against founders Randy Byers and Michael Frye, who sold their business to Cleveland in 2013 and remained employees until 2024.
- The restrictive covenants were included in a 2013 Stock Purchase Agreement (SPA) at the time of sale to Nautic Partners (Buyer 1).
- Cleveland underwent two subsequent acquisitions: a 2016 sale to another private equity firm (First Reserve/Buyer 2), and a 2023 bankruptcy sale.
- Byers and Frye formed a competing company, Byers & Partners, and solicited Cleveland employees and customers, securing at least one major client.
- Plaintiff sought a preliminary injunction to enforce both restrictive covenants (nationwide noncompete and nonsolicitation), following initial temporary restraining order proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of Noncompete | Noncompete is valid to protect goodwill and confidential information, justified by business sale context. | Noncompete is overbroad, especially geographically (all of North America), and Plaintiff does not have operations outside the U.S. | Noncompete unenforceable—overbroad scope not tied to Plaintiff's legitimate interests; no blue-penciling. |
| Enforceability of Nonsolicitation | Nonsolicitation protects against unfair solicitation of employees, customers, and other business relations, with ties to legitimate business interests | Overbroad, covers too many entities and individuals, and Plaintiff hasn’t demonstrated strong enough interest in affiliates | Nonsolicit enforceable as tailored to Plaintiff’s interests (employee and customer relationships), justified by access to confidential info. |
| Survival of 2013 Restrictive Covenants after acquisitions/bankruptcy | Covenants survived all subsequent transactions and remain enforceable contracts | SPA was not assumed/terminated in bankruptcy or acquisition, so covenants lapsed | Covenants survived; no termination or evidence that rights lapsed; restriction valid under K law. |
| Whether Byers breached the Nonsolicit | Byers solicited key employees and customers in violation of the covenant | No breach; denies solicitations and claims Nonsolicit expired or was invalidated by Plaintiff’s breaches | Byers breached by soliciting employees/customers; preliminary injunction granted against him. |
Key Cases Cited
- Rsch. & Trading Corp. v. Pfuhl, 1992 WL 345465 (Del. Ch.) (scope of noncompetes and nonsolicits tied to employer's legitimate interests and customer base)
- Faw, Casson & Co. v. Cranston, 375 A.2d 463 (Del. Ch. 1977) (restrictive covenants must be closely scrutinized)
- Tristate Courier & Carriage, Inc. v. Berryman, 2004 WL 835886 (Del. Ch.) (sale-of-business noncompetes are reviewed with less skepticism)
(Note: Key cited authorities in the opinion either lack official reporter citations or were cited in Westlaw form, so per the instructions, only those with official citations above are included.)