DER Security Corp v. Enetrics LLC

Background

DER Security moved to dismiss counterclaims asserted by Enetrics and Fox. The counterclaims concerned non-compete provisions, which the opinion says had expired, and an alleged interference with Enetrics’s partnership discussions with UL Solutions. DER had also given Fox and Enetrics a broad, unconditional, and irrevocable promise not to sue based on past, present, or future conduct involving those provisions.

Mootness

The court held that requests for forward-looking relief were moot because the non-compete provisions had expired and DER had issued its covenant not to sue. The forward-looking relief included an injunction preventing DER from relying on the provisions and a declaration that the contract was void. The court also held that there was no basis for declaratory relief concerning an expired agreement.

The court did not find all relief unavailable. It held that the first and third counterclaims were not moot to the extent they sought backward-looking relief, including actual damages that Fox and Enetrics allegedly suffered when DER attempted to enforce the non-compete provisions and attorneys’ fees they might recover in connection with seeking those damages.

Intentional Interference Claim

DER argued that Enetrics had not adequately pleaded intentional interference with economic relations. Enetrics alleged that it was discussing a partnership with UL Solutions, that DER sent UL Solutions a cease-and-desist letter asserting that Fox had violated the non-compete agreement, and that UL Solutions then indefinitely paused the partnership discussions.

The court held that these allegations sufficiently pleaded the basic elements of an intentional interference with economic advantage claim. It also held that the alleged cease-and-desist letter plausibly could be an independently wrongful act, meaning conduct that is independently unlawful or wrongful apart from its effect on the business relationship. Assuming California law applies, the court cited California Business and Professions Code § 16600.5, which bars a former employer from attempting to enforce a void non-compete contract. The court stated that Fox’s non-compete was void under California law when DER sent the letter.

Disposition

The court granted in part and denied in part DER Security’s motion to dismiss the counterclaims. It also stated that the ruling did not resolve the contract’s choice-of-law issue because the motion did not squarely raise it. The opinion further noted that DER did not argue that it lacked knowledge that the contract was void under California law, while observing that this likely would not matter at the pleading stage.

Judge Vince Chhabria signed the order on July 17, 2025.