Chancery Holds Common Language Caused Non-Solicitation Restrictions to be Overbroad and Unenforceable—BankUnited v. Shulick

In BankUnited v. Shulick (Jan. 2, 2026), the Delaware Court of Chancery, following an evidentiary hearing on a preliminary injunction application, assumed that the duration and geographic scope of BankUnited's customer and employee non-solicitation restrictions were reasonable, but found that the provisions nonetheless were overbroad and unenforceable. The decision highlights: the continued trend of heightened judicial scrutiny of the subject matter scope of restrictive covenants; except in rare circumstances, the Delaware courts' refusal to blue pencil overbroad restrictions to make them enforceable; and how carefully non-solicitation and other restrictive covenants must be drafted so that they will be enforceable.

Key Points

• The court found that a restriction on solicitation of customers-with relatively common language-was overbroad and unenforceable. The court found that BankUnited's restrictions on departing employees' solicitation of customers were overbroad because they swept in not just actual customers with whom the employee had dealt, but also prospective customers whose identity the employee might not even know, as well as customers about whom the employee had received any information whatsoever. The court concluded that an employer has no protectible interest in prohibiting departing employees from contacting "thousands" of customers, most of whom the employee had never dealt with and had no confidential information about.
  
  
• The court also found that a restriction on solicitation of employees-with relatively common language-was overbroad and unenforceable. The court found that BankUnited's restrictions on departing employees' solicitation of fellow employees were overbroad because they not only prohibited soliciting or recruiting employees, but also prohibited encouraging, or attempting to solicit or encourage, employees to leave, and not just to go to a competitor but to "any other entity." The court concluded that the provision advanced no legitimate business interest as it "captures non-competitive conduct" and "restricts speech and conduct unrelated to unfair competition…."
  
  
• The court found that the non-solicitation provisions in BankUnited's Code of Conduct were not binding on employees-even though the employees had acknowledged the Code of Conduct as a condition of employment.
  
  
• The court found that the non-solicitation provisions in BankUnited's agreements that accompanied the employees' annual equity awards likely would have been binding on the employees (if they had not been overbroad). Although the departing employees apparently were "unaware" of the agreements, the court noted that the employees had accessed their annual equity awards through an online portal, maintained by the plan administrator, that required that, before an employee could access the equity award, he had to access, read, and accept the award agreement.
  
  
• The decision reconfirms that most employees do not have non-solicitation obligations based on fiduciary duties. Where there are no contractually binding non-solicitation obligations, non-solicitation obligations potentially can arise under the rubric of fiduciary duties-but, generally, only for directors, officers, and "key management personnel." In this case, the court found that only one of the five defendants possibly was a "key management" person with fiduciary duties to BankUnited, as he was just one person removed from being a direct report to the company's CEO.
  
  
• The decision highlights that overbroad restrictive covenants may leave a company wholly unprotected. Generally, a company will benefit from drafting restrictive covenants with a view to their being enforceable against employees, rather than seeking to obtain the broadest protection that can be negotiated. The court reconfirmed that it will not blue pencil overbroad restrictive covenants to make them enforceable, unless there was equivalent bargaining power between the parties and an opportunity to negotiate the provisions (such as in the context of the sale of a business).

Background

Brett Shulick, a Senior Vice President of BankUnited, successfully led the company's National Title Solutions (NTS) division. He and four other NTS executives (the "Defendants") ultimately became frustrated with BankUnited and, together, discussed leaving as a group, possibly bringing other employees with them. Shulick discussed with Customers Bank the possibility of the Defendants joining it to establish a title solutions division for it. The Defendants believed, and told Customers Bank, that they were not subject to any non-solicitation obligations. During the course of the discussions with Customers Bank, Shulick created a budget for the proposed new division and provided a list of NTS employees who would join him, together with a proposed salary and one-year guaranteed bonus amount for each of them.

On Friday afternoon, August 15, 2025, the Defendants resigned from BankUnited and joined Customers Bank. That evening, Customers Bank called fourteen NTS employees and offered them employment, with a Sunday deadline to respond. Shulick spoke briefly that evening with several BankUnited employees to inform them of his resignation. By the end of the weekend, eleven BankUnited employees had accepted employment with Customers Bank. (BankUnited agreed to pay the others additional compensation to incentivize them to remain.) Over the next week, the Defendants contacted certain BankUnited customers to inform them of their departure.

BankUnited sent cease-and-desist letters to Customers Bank and the Defendants, alleging that the Defendants, aided and abetted by Customers Bank, had aggressively solicited NTS employees and customers to follow them to Customers Bank, in violation of non-solicitation obligations set forth in (i) BankUnited's Code of Conduct and (ii) agreements that accompanied the restricted stock awards that had been granted annually to the Defendants (the "Award Agreements"). BankUnited also claimed that the Defendants had misappropriated BankUnited's confidential information and trade secrets. Prior to receiving the cease-and-desist letters, the Defendants were not aware of the Award Agreements. They then learned that the online portal, managed by Merrill Lynch, through which each year they had accessed their stock awards, had prompted them to read and acknowledge their consent to the Award Agreements as a condition to accessing the awards.

At an expedited hearing in February 2025, the court temporarily enjoined the Defendants and Customers Bank from soliciting BankUnited's employees or customers. After oral argument, briefing, and a two-day evidentiary hearing, Vice Chancellor Bonnie W. David held that the Defendants likely were not subject to any enforceable non-solicitation provisions, and ordered the preliminary injunction released.

Discussion

The non-solicitation obligations set forth in the Code of Conduct were not enforceable contractual obligations. Each of the Defendants had "acknowledged" the Code of Conduct as a condition to their employment. The court stated that it is well-settled law that "an employee handbook, which does not set forth terms, conditions, or duration of employment, does not constitute a contract between an employer and employee." As the Defendants were "at-will employees" and "received nothing in exchange" for agreeing to the restrictive covenants in the Code, and as the Code itself stated that it "does not create any obligations to or rights in any…person or entity," the Code did not create enforceable contractual obligations.

The non-solicitation provisions set forth in the Award Agreements likely were binding contractual obligations. The court concluded that, although the Defendants seemed to be unaware of the Award Agreements, the online portal, maintained by the plan administrator, through which BankUnited employees accessed their annual stock awards included a prompt requiring that employees actually read and acknowledge the Award Agreements before the awards could be accessed. The court concluded that, therefore, the obligations in the Award Agreements likely had been accepted by the Defendants, and thus would have been binding on them (if they had not been overbroad).

The Customer Non-Solicitation Provision in the Award Agreements was overbroad and unenforceable. The Award Agreements provided that, for one year after the award-plan Participant's departure from BankUnited, the Participant "shall not, directly or by assisting others, take any action to solicit, divert, take away, contact or call upon, or attempt to solicit, divert, take away, contact or call upon, any clients or customers, including prospective clients or customers, of the Company with whom the Participant had contact, provided services to or received information about during the Participant's employment with the Company at any time or for any reason during the two-year period prior to the Participant's termination of employment, for the purpose of inducing or attempting to induce or divert their business away from, or in any way interfere with their relationship with, the Company" (the "Customer Non-Solicitation Provision").

The court found this provision to be "vastly overbroad." First, it prohibited the employee from contacting any BankUnited customer about whom the employee had "received information," even non-confidential information. While employed by BankUnited, the Defendants had received daily emails attaching basic customer information, including a report (the "NTS Report") listing NTS's current and former customers (and their parent companies and subsidiaries or affiliates). The list contained more than 4,500 entries. The court rejected BankUnited's "untenable position that the…Provision applie[d] to every one of the customers identified on that list-around 1,200 'households' when affiliated entities are grouped together." The court stated that an employer "does not have a legitimate interest in prohibiting any single employee from soliciting thousands of businesses as clients, including many clients with which the employee never came into contact." Second, the court found this provision to be overbroad because it applied not only to current, but also "prospective," clients and customers. Third, the court found this provision to be overbroad because it prohibited the employee from "even attempting to contact or call upon any clients or customers of BankUnited."

The Employee Non-solicitation Provision in the Award Agreements was overbroad and unenforceable. The Award Agreements provided that, for one year after the award-plan Participant's departure from BankUnited, the Participant "shall not, directly or indirectly, solicit, induce, recruit, encourage, take away (or attempt any of the foregoing actions) or otherwise cause (or attempt to cause) any current or former employee or individual independent contractor of the Company to leave his or her employment or engagement with the Company either for employment with the Participant or with any other entity or person, or otherwise interfere with or disrupt (or attempt to disrupt) the employment or service relationship between any such individual and the Company" (the "Employee Non-Solicitation Provision").

The court found the Employee Non-Solicitation Provision to be "fatally overbroad," as it (i) prohibited even unsuccessful "attempts" at solicitation and (ii) prohibited "encourag[ing]" any employee to leave employment with BankUnited for employment "with any other entity or person." With respect to (i), the court noted that, under this provision, if a departing employee called another employee to solicit him, the employee would be in breach even if the other employee never answered the phone. With respect to (ii), the court, citing its recent HKA Global decision (Dec. 16, 2025), stressed that a bar on "encouragement" is facially overbroad as a matter of law because "it captures non-competitive conduct." The court stated that, for example, discussing with an employee whether his joining a different company would be more personally rewarding for him or better aligned with his values would constitute a limitation on speech and conduct that would be unrelated to unfair competition and advance no legitimate business interest.

The court declined to blue pencil the non-solicitation provisions. The court acknowledged that it has discretion to blue pencil overbroad restrictive covenants "under circumstances that indicate an equality of bargaining power between the parties, such as where the language of the covenants was specifically negotiated, valuable consideration was exchanged for the restriction, or in the context of the sale of a business." The facts here, however, reflected a "dramatic contrast to cases evincing equal bargaining power and opportunity for negotiation…." The court observed that, although it had concluded that the Defendants likely consented to the non-solicitation provisions in the Award Agreements, the process for obtaining that consent, and the Defendants' lack of awareness that the Award Agreements existed, underscored the inappropriateness of blue penciling the non-solicitation provisions to make them enforceable.

The Defendants (with Shulick possibly being an exception) likely did not have non-solicitation obligations by virtue of fiduciary duties. BankUnited contended that the Defendants, even if not bound by any contractual obligations with respect to non-solicitation, had such obligations as part of their fiduciary duties to the corporation as "high ranking employees, executives, and persons with access to confidential information…." The court acknowledged that Delaware cases have held that directors, officers, and "key managerial personnel" can have non-solicitation obligations by virtue of their fiduciary duties to the corporation, but stated that the preliminary record suggested that, of the five Defendants, only Shulick conceivably may have fit that description. Shulick was an Executive Vice President and Managing Director of NTS; led a team of 23 people; reported to the head of BankUnited's National Deposits Group, who in turn reported directly to BankUnited's CEO; and had three NTS Senior Vice Presidents and an Assistant VP (i.e., the other Defendants) reporting to him. The court observed that, unlike Shulick, the other Defendants each "managed teams within the NTS division several levels below BankUnited's CEO."

Even if Shulick had fiduciary duties, it was unlikely he breached them. The court noted that fiduciary duties require good faith, loyalty, and fair dealing, encompassing the corollary duties of an agent "to disclose information that is relevant to the affairs of the [company] and to refrain from placing himself in a position antagonistic to his [company] concerning the subject matter of his [company]." Nevertheless, the court clarified, "[A]n agent has no duty to disclose to his principal information obtained in confidence, the disclosure of which would be a breach of duty to a third person. Nor does agency law prohibit an agent from acting in good faith outside his employment even though it may adversely affect his principal's business. Further, an agent can make arrangements…to compete with his principal before terminating his agency, provided he does not act unfairly or injure his principal."

In this case, the court stated, the preliminary record showed that the Defendants decided together to leave BankUnited-Shulick did not solicit them. There was no evidence that Shulick solicited other BankUnited employees until after his resignation, nor that he took customer lists or other confidential information with him. Moreover, the court noted, Customers Bank directed the group not to bring confidential information with them, and their offer letters reiterated that instruction. The budget Shulick prepared for Customers Bank was not based on confidential information, as the employee names and positions included were publicly accessible on BankUnited's website and LinkedIn. Shulick credibly testified that, although he could have accessed employees' compensation information to prepare the budget, he did not do so; and although he accessed the NTS Report the day he left BankUnited, he did so to fulfill his BankUnited duties. The court noted that, in discovery, the Defendants each produced a list identifying BankUnited customers for whom they had stored contact information in their cell phones-and information for only a dozen or fewer customers was stored on any of the phones, which, the court stated, "undermin[ed] any suggestion that [the Defendants] intentionally brought confidential client information with [them] to Customers Bank."

We note other recent Court of Chancery decisions with guidance on restrictive covenants-all but one of which found the restrictive covenants at issue to be unenforceable:

• Derge v. D&H (Dec. 8, 2025). This is one of the only recent cases in which the court found that restrictive covenants were not overbroad. The non-compete at issue, entered into in connection with the sale of a business, was reasonable and enforceable-as the geographic scope tracked where the target company operated and where the acquiror managed operations; the 5-year term was reasonable; and the acquiror had a legitimate business interest in preventing the executive from using his extensive knowledge of the target's operations, vendor relationships and customer pricing to compete. The executive agreed to the noncompete as a condition to selling the business; received almost $1 million in the sale for his shares and the noncompete obligation; and provided no evidence that he lacked bargaining power.
  
  
• Daxco v. Diamond (Jan. 22, 2026). The non-compete, which the employee granted in consideration for a profits interest after he had worked his way up in the company, was overbroad, as it protected the interests of both the company for which he worked and all the company's affiliates in the broader corporate structure. While the employee was familiar with the work of the affiliates, the non-compete did not set forth the nature of the work nor scope of the operations of the affiliates. Although the company was a global company, providing SaaS software to gyms and others around the world, the two-year duration and global geographic scope, taken together, were unreasonable, as they effectively precluded the employee from working in 68 countries in geographic proximity to any gym using one of the company's or its affiliates' software products.
  
  
• HKA Global v. Beirise (Dec. 16, 2025). The restrictive covenants were unreasonable, as they protected not just the employer but any "Group Company" (including the employer's direct or indirect parents or subsidiaries); and the non-solicitation provision was overbroad, as it prohibited "encouraging" any employee to leave, even for reasons unrelated to competition.
  
  
• North American Fire v. Doorly (2025). The non-compete in an equity incentive agreement was unenforceable, as the equity units that were the consideration for it were immediately forfeited when the employee was terminated. (The decision has been appealed to the Delaware Supreme Court, with the company arguing that the Court of Chancery erred in failing to assess adequacy of the consideration at the time the parties entered into the noncompete.)
  
  
• Cleveland Integrity v. Byers (2025). The non-compete, entered into in the context of a business sale, was unreasonable because it applied to all of North America, although the company only provided services in the U.S. While the company in 2013 (when the non-compete was agreed) had anticipated expanding beyond the U.S., it in fact had not done so and therefore had no legitimate business interest in seeking protection outside the U.S.
  
  
• Intertek v. Eastman (2023). The non-compete, entered into in the context of a business sale, was unreasonable because it applied worldwide, but the company only served U.S. clients. The court held that the company's advertising its services online did not make it a global business.
  
  
• Kodiak v. Adams (2022). The non-compete, entered into in the context of a business sale, was unreasonable as it was not limited to the target company's actual businesses and markets but included the buyer's entire group of companies and unrelated business lines.

Practice Points

• Based on BankUnited, a company should consider the following drafting points: (i) Limit a non-solicitation of customers covenant so that it does not: (a) prohibit contacting "any customer," including prospective customers and customers the person had no confidential information about and/or no contact with, nor (b) prohibit "attempting" to solicit customers. BankUnited indicates that a list of "thousands" of customers who cannot be solicited may itself suggest overbreadth. (ii) Limit a non-solicitation of employees covenant so that it does not: (a) without appropriate limitations, prohibit "discussing" with or "encouraging" an employee to leave their employment for employment with "any other person or entity," nor (b) prohibit "attempting" to solicit employees or encourage them to leave.
  
  
• Restrictive covenants should be appropriately tailored (preferably, with the advice of legal counsel). If a company seeks to obtain the broadest protections it can negotiate, it may be left without any protection at all, as the court generally declines to blue pencil overbroad employee covenants to make them enforceable. Further, the Delaware courts may not enforce provisions that the parties set forth to provide for judicial blue penciling, to concede the reasonableness of the provisions, or to permit the company to resolve related factual issues in its sole discretion. The court will consider blue penciling restrictive covenants to render them enforceable when the parties had "equality of negotiating power" and "opportunity to negotiate" the provisions. Where that is the case (usually, in the context of high-level executive employment agreements or the sale of a business), the company may wish to seek to include a provision in the agreement indicating the parties' intention that the provisions will be blue penciled if necessary for enforceability.
  
  
• Companies should consider reviewing their outstanding restrictive covenants to assess whether they may be overbroad. Given the trend in recent years toward increased judicial scrutiny of restrictive covenants, and more decisions finding restrictive covenants to be overbroad, companies may want to review employees' existing restrictive covenants to assess their enforceability, and, if significant to the company, the possibility of amending them to increase the likelihood of enforceability.
  
  
• Companies could consider crafting different templates for restrictive covenants for different categories of employees. While the most senior executives at a company often are subject to specific, negotiated agreements with respect to restrictive covenants, all other employees typically are subject to the same broad-based company policies and form agreements. Companies should consider whether there is a limited group of employees-who are not the most senior executives, yet have substantial customer-facing positions and/or a substantial potential for taking customers or employees with them if they leave-who, to protect the company's interests, should be subject to arrangements more tailored to their roles and relationships with customers and employees.
  
  
• Employees leaving a company should seek to ensure that they know about, understand, and comply with any non-solicitation obligations that are binding on them. Companies, in most cases, should not rely on non-solicitation obligations set forth in the company's Code of Conduct as being binding on employees. If restrictive covenants are set forth in agreements that accompany benefits accessed by employees through an online platform, the company should ensure that there is a prompt for accepting the agreement and that the prompt requires the employee to access and read the agreement before acknowledging acceptance. A company that departing employees are joining should consider directing the employees (in their offer letters or otherwise in writing) to comply with any non-solicitation obligations and not to bring confidential information with them.
  
  
• Companies should keep apprised of state law developments. In 2025, the federal government de-emphasized federal efforts that had been in process to limit the use of employee restrictive covenants, but state legislatures have continued to be active in this area. Several states (such as Arkansas, Colorado, Indiana, Louisiana, Montana, New Hampshire, Oregon, Utah, and Texas) have enacted or expanded statutes that ban or limit noncompete agreements for health care practitioners. Some states (such as Wyoming, Colorado, Virginia, and, it is expected, New Jersey), more generally, have enacted laws narrowing the circumstances under which restrictive covenants are permissible. Two states (Florida and Kansas) instead have enacted laws reflecting employer-friendly approaches.

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