Four arguments, four rejections - and an Orwell quote from the bench
An accounting firm’s own paperwork calling a partner an “employee” helped sink its attempt to enforce a non-compete in Delaware.
The Delaware Court of Chancery on October 16, 2026, threw out a restrictive covenant lawsuit brought by the buyers of accounting firm Aprio LLP against a California-based former partner who resigned and started competing.
The backstory starts with a deal. In August 2024, Evolution Parent Holdings - backed by Charlesbank Capital Partners - acquired Aprio’s parent company. Every equity holder had to sign a restrictive covenant agreement barring competition, client solicitation, and use of confidential information for three years. The agreement routed disputes to Delaware courts under Delaware law.
The former partner signed, collected roughly $1 million in consideration, then resigned in October 2025. He launched a new firm, and some Aprio clients began asking to follow him. The buyer sued in Delaware in April 2026.
One problem: the former partner lived, worked, signed, and allegedly breached the agreement entirely in California. California Labor Code Section 925 prohibits employers from forcing California-based employees to agree to litigate out of state as a condition of employment. If the clause violates the statute, the employee can void it.
The buyer tried four arguments. The court rejected every one.
It argued the former partner was a partner, not an employee. Applying the US Supreme Court’s Clackamas test and California’s Ramos and Strother decisions, the court found he had no management authority, no say in the merger, and minimal governance rights. It quoted Orwell: “All partners are equal, but some are more equal than others.” The company’s own filings repeatedly labelled him an “employee.”
It argued the agreement was tied to the merger, not employment. But the buyer conceded anyone who refused to sign would not have kept their job.
It pointed to outside counsel available during the deal. The lawyer’s own affidavit confirmed she never represented the former partner individually and had no recollection of contact with him.
It invoked a California exception for non-competes in business sales. The court noted that exception validates restrictive covenants - not forum selection clauses.
With the Delaware forum clause voided and no other jurisdictional basis, the court dismissed the case. The underlying non-compete and trade secret claims remain unresolved.
For HR teams structuring post-acquisition restrictive covenants: a Delaware forum clause cannot override California’s employee protections, and a “partner” title will not hold if the employment relationship tells a different story.
