On December 31, 2020, the Nevada Supreme Court issued an opinion addressing and clarifying several issues relating to the power of the court to reform or modify an unreasonable noncompetition agreement often referred to as blue penciling.
In Duong v. Fielden Hanson Isaacs Miyada Robison Yeh, Ltd., 136 Nev. Adv. Op. 87 (2020), the employer sought to enjoin two anesthesiologists from breaching noncompetition agreements. After the employer merged with another company in 2016, the anesthesiologists entered into employment contracts that contained a noncompetition provision restricting the anesthesiologists from working at several facilities. The agreement also contained language requesting that, if any provision of the agreement is found unreasonable by a court, “any such provision shall nevertheless be enforceable to the extent such court shall deem reasonable, and, in such event, it is the parties’ intention . . . and request that the court reform such portion in order to make it enforceable.” The district court blue-penciled the noncompetition agreement pursuant to NRS 613.195(5), which requires the court to reform an unreasonably restrictive covenant to the extent necessary to enforce it, and granted the preliminary injunction to enforce the modified agreement against the anesthesiologists.
On interlocutory appeal, the anesthesiologists argued that the noncompetition agreement was unreasonable and thus wholly unenforceable under Golden Road Motor Inn, Inc. v. Islam, 132 Nev. 476, 376 P.3d 151 (2016). The anesthesiologists further argued that the district court improperly applied NRS 613.195(5) because the statute did not become effective until 2017 (after the anesthesiologists entered into their noncompetition agreements in 2016).
Ruling in favor of the employer, the...
