Tenth Circuit Rules Forfeiture-for-Competition Not Subject to Non-Compete Reasonableness Test
In Lawson v. Spirit AeroSystems , Inc. , the U.S. Court of Appeals for the Tenth Circuit upheld the forfeiture of certain stock awards for violating a covenant not to compete. Like the Seventh Circuit in LKQ Corp. v. Rutledge (which applied Delaware law), the Tenth Circuit concluded that, under Kansas law, the remedy of forfeiting future compensation is not subject to the same reasonableness standard as traditional enforcement of a non-compete obligation. The Tenth Circuit reached this conclusion even though the executive’s agreement included both a forfeiture-for-competition provision and traditional enforcement rights ( i.e. , the right for the company to pursue monetary damages and specific performance), because the agreement terms enabled the forfeiture provision to be severed from the traditional enforcement provisions. Background and the Court’s Analysis A retirement agreement allowed the former CEO of Spirit AeroSystems (“Spirit”) to receive cash payments ...