Appellate Case: 23-3136 Document: 81-1 Date Filed: 04/25/2025 Page: 1
`FILED
`United States Court of Appeals
`Tenth Circuit
`
`April 25, 2025
`
`Christopher M. Wolpert
`Clerk of Court
`
`PUBLISH
`
`UNITED STATES COURT OF APPEALS
`
`FOR THE TENTH CIRCUIT
`_________________________________
`
`LARRY A. LAWSON,
`
` Plaintiff - Appellant,
`
`v.
`
`SPIRIT AEROSYSTEMS, INC.,
`
` Defendant - Appellee.
`_________________________________
`
`
`
`
`
`No. 23-3136
`
`Appeal from the United States District Court
`for the District of Kansas
`(D.C. No. 6:18-CV-01100-EFM)
`_________________________________
`
`Joseph T. Baio, Willkie Farr & Gallagher LLP, New York, New York (James C. Dugan
`of Willkie Farr & Gallagher LLP, New York, New York and F. James Robinson, Jr. of
`Hite, Fanning & Honeyman LLP, Wichita, Kansas, with him on the briefs), for Plaintiff-
`Appellant.
`
`Morgan L. Ratner, Sullivan & Cromwell LLP, Washington, D.C. (Jeffrey B. Wall and
`Zoe A. Jacoby of Sullivan & Cromwell LLP, Washington, D.C.; Gary L. Ayers and
`Clayton J. Kaiser of Foulston Siefkin LLP, Wichita, Kansas, with him on the brief), for
`Defendant-Appellee.
`
`_________________________________
`
`Before HOLMES, Chief Judge, BALDOCK, and MATHESON, Circuit Judges.
`_________________________________
`
`HOLMES, Chief Judge.
`_________________________________
`
`This contract dispute requires us to predict whether the Kansas Supreme Court
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`would review a non-competition condition precedent to the receipt of future benefits
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`Appellate Case: 23-3136 Document: 81-1 Date Filed: 04/25/2025 Page: 2
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`under the same reasonableness standard as a traditional non-competition covenant.
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`We draw principal guidance from Kansas common law both as it pertains to non-
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`competition covenants, specifically, and as it defines general background principles,
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`which embrace the policy of freedom of contract. We supplement this guidance with
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`an examination of the general weight and trend of non-Kansas authorities. And
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`viewed in totality, this guidance permits us to confidently predict that the answer is
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`“no”— the Kansas Supreme Court would not review a non-competition condition
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`precedent to the receipt of future benefits under the same reasonableness standard as
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`a traditional non-competition covenant. Consequently, we (1) affirm the district
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`court’s judgment for Defendant-Appellee Spirit Aerosystems, Inc. (“Spirit”); and
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`(2) decline Plaintiff-Appellant Larry Lawson’s invitation to certify the question to the
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`Kansas Supreme Court.
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`After the following summary, our opinion proceeds in four parts. First, we
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`state the facts. Second, we recount this matter’s procedural history. Third, we
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`address the legal issues that resolve this case: (1) the scope of Kansas’s
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`reasonableness test for non-competition covenants; (2) Mr. Lawson’s motion to
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`certify; and (3) the district court’s severability analysis. The fourth section
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`concludes.
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`* * *
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`After several years as CEO of Spirit, Larry Lawson was ready to retire. But
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`Mr. Lawson had a problem: some of his compensation was tied up in unvested long-
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`term incentive stock awards. Those awards were not immediately monetizable: Spirit
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`was only obliged to deliver the value of Mr. Lawson’s shares upon their vestiture,
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`typically years after their initial award. And Mr. Lawson’s employment agreement
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`provided that his retirement would cancel the vestiture of several hundred thousand
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`awarded but unvested shares.
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`To resolve this dilemma, Mr. Lawson struck a bargain with Spirit. The parties
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`memorialized their bargain in a retirement agreement. Under that agreement, Mr.
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`Lawson agreed to stick around as a paid consultant, permitting him to step out of the
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`C-suite while allowing his stock awards to vest as if he remained an active employee.
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`Like any golden parachute, the extended vesting period came with strings
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`attached: Mr. Lawson’s compensation under the retirement agreement, including the
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`extended vesting period, was conditioned on his extended compliance with the non-
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`compete contained in his original employment agreement (the “Covenant” or
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`“Lawson Covenant”). Thus, Mr. Lawson promised not to compete after retiring in
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`exchange for the opportunity to vest in stock awards that otherwise would have
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`terminated upon his retirement.
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`After entering into the retirement agreement, Mr. Lawson also entered a
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`second consultancy agreement—this one with a hedge fund. The hedge fund—which
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`was waging a proxy campaign to take control of one of Spirit’s suppliers, Arconic—
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`touted Mr. Lawson to Arconic’s shareholders as a possible replacement CEO. Spirit
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`deemed this arrangement a violation of the non-competition condition incorporated
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`into the Retirement Agreement. Accordingly, Spirit stopped paying Mr. Lawson for
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`his consulting services and terminated the extended vesting period for Mr. Lawson’s
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`stock awards.
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`Mr. Lawson sued Spirit for breach of contract. The district court held a bench
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`trial and found that Mr. Lawson had not violated the Retirement Agreement’s
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`non-competition condition. See Lawson v. Spirit AeroSystems, Inc. (Lawson I),
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`No. 18-1100-EFM, 2021 WL 4870984, at *1, *17 (D. Kan. Oct. 19, 2021). Spirit
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`appealed. We reversed, holding that Spirit was not required to make payments or
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`stock distributions contemplated by the Retirement Agreement because Mr. Lawson
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`had breached the Covenant. See Lawson v. Spirit AeroSystems, Inc. (Lawson II),
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`61 F.4th 758, 768 (10th Cir. 2023). But, significantly, we remanded for the district
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`court to determine whether the Covenant was enforceable under Kansas law, which
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`reviews traditional non-competition covenants for reasonableness. See id.
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`On remand, the district court found the Covenant enforceable without reaching
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`the reasonableness test. See Lawson v. Spirit AeroSystems, Inc. (Lawson III),
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`No. 18-1100-EFM, 2023 WL 4026509, at *14 (D. Kan. June 15, 2023); see also
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`Aplt.’s App. at 480 (Dist. Ct. Order in Lawson III, dated Jun. 15, 2023). Kansas’s
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`reasonableness test, the court concluded, applies only to traditional non-competes or
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`similar restrictive covenants that impose economic penalties for competition
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`(“penalty-for-competition covenants”). Aplt.’s App. at 468–80. In the district
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`court’s view, the Covenant was not a traditional noncompete or penalty-for-
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`competition covenant, but instead a non-competition condition precedent to the
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`receipt of future benefits. Id. at 472–73. The district court therefore found the
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`Covenant enforceable regardless of its reasonableness and entered judgment for
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`Spirit. Id. at 480.
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`Mr. Lawson now appeals, arguing that the district court should have reviewed
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`the Covenant for reasonableness. He also asks us to certify to the Kansas Supreme
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`Court the question of whether the Covenant is subject to reasonableness review.
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`For the reasons that follow, we affirm the district court’s judgment and deny
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`Mr. Lawson’s motion to certify.
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`I
`
`A
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`Spirit manufactures and sells large commercial aircraft structures. In 2013,
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`Spirit hired Mr. Lawson, an experienced defense industry executive, as its CEO.
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`When Mr. Lawson accepted the CEO position, he signed an employment
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`agreement (“the Employment Agreement”). The Employment Agreement imposed
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`several restrictions on Mr. Lawson’s conduct. Paragraph 4(c) of the Employment
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`Agreement, under the heading “Non-Compete,” provides:
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`[N]either you nor any individual, corporation, partnership, limited
`liability company, trust, estate, joint venture, or other organization
`or association (‘Person’) with your assistance nor any Person in
`which you directly or indirectly have any interest of any kind
`(without limitation) will, anywhere in the world, directly or
`indirectly own, manage, operate, control, be employed by, serve as
`an officer or director of, solicit sales for, invest in, participate in,
`advise, consult with, or be connected with the ownership,
`management, operation, or control of any business that is engaged,
`in whole or in part, in the Business, or any business that is
`competitive with the Business or any portion thereof, except for
`our exclusive benefit. You will not be deemed to have breached
`the provisions of this Section 4(c) solely by holding, directly or
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`indirectly, not greater than 2% of the outstanding securities of a
`company listed on a national securities exchange.
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`Aplt.’s App. ¶ 10, at 348 (Dist. Ct.’s Findings of Fact & Conclusions of Law in
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`Lawson I, dated Oct. 19, 2021). We refer to this provision as the “Covenant” or
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`“Lawson Covenant.” The Employment Agreement defines “the Business” as “the
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`manufacture, fabrication, maintenance, repair, overhaul, and modification of
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`aerostructures and aircraft components” and notes that Spirit “market[s] and sell[s]
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`[its] products and services to customers throughout the world.” Id. ¶ A, at 97
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`(Employment Agreement, Ex. C to Compl., filed Mar. 28, 2018) (emphasis omitted).
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`The non-competition restrictions of the Covenant ordinarily (as relevant here) would
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`extend for two years after the termination of employment. Id. ¶ 4(c) (establishing the
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`general provisions for “termination of employment”).
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`“Paragraph 4(f) of the Employment Agreement states that a breach under
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`Paragraph 4 ‘cannot adequately be compensated by money damages,’” and
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`consequently that “Spirit ‘will be entitled, in addition to any other right or remedy
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`available to [them] (including, but not limited, to an action for damages, accounting,
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`or disgorgement of profit), to an injunction restraining such breach or a threatened
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`breach and to specific performance of such provisions.’” Id. at 458 (quoting Aplt.’s
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`App. ¶ 4(f), at 104).
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`Mr. Lawson’s compensation package under the Employment Agreement
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`included a salary, short-term incentive stock awards, long-term incentive stock
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`awards, and bonuses. Long-term incentive stock awards are a common form of
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`executive compensation by which an employee is remunerated with the opportunity
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`to acquire discounted shares in their employer. Importantly, Mr. Lawson’s long-term
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`incentive stock awards were not immediately monetizable. Instead, they vested a
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`time certain after Spirit issued the awards. Only upon vestiture was Spirit obliged to
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`deliver the value of the awarded shares to Mr. Lawson. Thus, the Employment
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`Agreement drew an important distinction between the long-term incentive shares’
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`award (at which time they held no value) and those shares’ subsequent vestiture
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`(when the shares became monetizable).
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`Spirit flourished under Mr. Lawson’s leadership, and the company’s stock
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`value rose. Spirit’s increasing stock price redounded to the benefit of both Spirit and
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`Mr. Lawson, substantially boosting the potential value of Mr. Lawson’s
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`compensation package.
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`In late 2015, Spirit communicated to Mr. Lawson its inclination to extend his
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`CEO contract for three years. Mr. Lawson, however, wanted to retire by the end of
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`2016. Spirit protested but to no avail. After Spirit selected a new CEO, it asked Mr.
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`Lawson to retire early and allow his replacement to take over. Mr. Lawson obliged.
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`The Employment Agreement provided that following Mr. Lawson’s retirement,
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`Mr. Lawson would not be entitled to the complete vestiture of any awarded but
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`unvested long-term incentive shares. Because Mr. Lawson retired effective July 31,
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`2016, after the “initial term” of the Employment Agreement, Aplt.’s App., ¶ 1(b),
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`at 98 (emphasis omitted), Mr. Lawson was “entitled to retain only those shares
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`awarded under the [long-term incentive plan, or “LTIP”] that [had] otherwise vested
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`in accordance with the terms of the LTIP as of” his retirement, id. ¶ 6(iii)(B), at 106.
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`Thus, Mr. Lawson’s retirement would have cancelled the vestiture of 408,596 long-
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`term incentive shares. See Aplt.’s App., at 352 (Dist. Ct. Mem. & Order, entered
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`Oct. 19, 2021).
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`B
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`In part to avoid the cancellation of Mr. Lawson’s outstanding awarded shares,
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`Mr. Lawson and Spirit executed a retirement agreement (“the Retirement
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`Agreement”). See id. at 77–86 (Retirement Agreement, Ex. A to Compl., filed
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`Mar. 28, 2018). The Retirement Agreement provided that Mr. Lawson would resign
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`as CEO on July 31, 2016, but that he would provide consulting services to Spirit for
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`two years thereafter. In exchange for Mr. Lawson’s consulting services, Spirit
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`agreed to pay consulting fees, severance payments, and a short-term incentive award,
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`and to contribute another $2,000,000 to Mr. Lawson’s nonqualified deferred
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`compensation plan. Most importantly, section 2(c) of the Retirement Agreement
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`further provided that Mr. Lawson would “continue to vest (as if he were an active
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`employee) in the awards previously granted to him,” id. ¶ 2(c), at 78, including the
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`several hundred thousand awarded but then-unvested shares.
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`But the Retirement Agreement did not entitle Mr. Lawson to enjoy the benefits
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`of “active employee” status without shouldering corresponding burdens. The
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`Retirement Agreement conditioned Mr. Lawson’s compensation—along with the
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`potentiality of compensation engendered by the extended vesting period—on
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`Mr. Lawson’s compliance with certain restrictions. One such restriction was the
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`reprise of the non-compete contained in Mr. Lawson’s 2013 Employment Agreement.
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`As relevant here, Paragraph 2(g) of the Retirement Agreement provides:
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`The Executive [Mr. Lawson] acknowledges that his continuing
`entitlement to payments and/or vesting under this Paragraph 2 shall
`be conditioned upon his reaffirmation of this Agreement through
`the Retirement Date, his cooperation in providing the Transition
`Services, and his continuing compliance with Paragraphs 4, 6, 7,
`10(a) and 15 of the Agreement. The Executive’s failure to . . .
`cooperate in providing the Transition[] Services, or any violation
`of Paragraphs 4, 6, 7, 10(a) or 15 by the Executive, shall terminate
`the Company’s obligation to continue to make payments and to
`continue vesting of awards in accordance with this Paragraph 2.
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`Id. ¶ 2(g), at 79. Paragraph 2(g) of the Retirement Agreement thus conditioned the
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`extended vesting period on Mr. Lawson’s compliance with (among others)
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`Paragraph 7 of the Retirement Agreement. Paragraph 7 of the Retirement
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`Agreement, in turn, incorporated by reference and extended for two years the
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`non-competition covenant in the 2013 Employment Agreement. In full, Paragraph 7
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`provides:
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`The Executive acknowledges and agrees that he shall continue to
`be bound by the terms and conditions of Paragraph 4 of the
`Employment Agreement, the terms of which are incorporated
`herein by reference; provided, however, that the Executive further
`acknowledges and agrees
`that
`the noncompetition and
`non-solicitation periods as set forth under Paragraphs 4(c) and (d)
`of the Employment Agreement shall be extended to the end of the
`Consulting Term.
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`Id., ¶ 7, at 81.
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`Thus, the Retirement Agreement offered Mr. Lawson the opportunity to
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`monetize his already-awarded but as-yet unvested long-term incentive shares, but
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`conditioned Spirit’s obligation to deliver those shares at vesting upon Mr. Lawson’s
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`extended compliance with the non-compete in his Employment Agreement.
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`The conditional structure of the Retirement Agreement could not have been
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`clearer: “any violation of [the non-compete Covenant] . . . by [Mr. Lawson] shall
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`terminate [Spirit’s] obligation . . . to continue vesting of awards . . . .” Id. ¶ 2(g),
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`at 79 (emphasis added). Because the unvested, awarded shares had no value at the
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`time of Mr. Lawson’s retirement, and would have been canceled absent the
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`Retirement Agreement, the Retirement Agreement’s extended vesting period created
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`a framework to compensate Mr. Lawson for ongoing post-employment services and
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`conduct—e.g., consulting and non-competition—and did not reflect delayed
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`disbursement of compensation Mr. Lawson had already earned as Spirit’s CEO.1
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`To be clear, the Retirement Agreement unequivocally shifted
`1
`Mr. Lawson’s contract with Spirit into the realm of a non-competition condition
`precedent in which Mr. Lawson had a choice: compete (i.e., breach) and forgo the
`future monetary benefits of vested shares or refrain from competing (i.e., comply
`with the Covenant) and receive those benefits. Viewed in isolation, the
`non-competition features of the Employment Agreement gave Mr. Lawson no such
`competitive choice. That Agreement clearly provides that Mr. Lawson shall not
`compete with Spirit for two years following the termination of his employment, and
`further entitles Spirit to enforce the noncompete with an injunction. See Aplt.’s App.
`¶¶ 4(c), 4(f), at 103–104; see also Lawson II, 61 F.4th at 767.
`
`However, in light of Mr. Lawson’s subsequent negotiation of the Retirement
`Agreement with Spirit, the Employment Agreement’s terms cannot be viewed in
`isolation. In particular, as it relates to Mr. Lawson’s competitive choice, the
`Retirement Agreement explicitly converted the Employment Agreement’s
`non-competition covenant into a condition precedent by noting that Mr. Lawson’s
`“continuing entitlement to payments and/or vesting . . . shall be conditioned upon”
`certain actions—most notably, abiding by the Covenant, Aplt.’s App. ¶ 2(g), at 79.
`And, as we later recount, see Part II.D, infra, the district court ultimately severed the
`Covenant’s injunctive enforcement mechanism, id. at 461, leaving no doubt that
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`C
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`Mr. Lawson hoped to serve on the boards of other companies in retirement.
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`To that end, he met with an analyst at a hedge fund, Elliott Management (“Elliott”).
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`Elliott was the largest shareholder in Arconic, a company that, like Spirit,
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`manufactures aerostructure components.
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`Elliott thought Arconic was underperforming. So Elliott initiated a hostile
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`takeover, aiming to replace Arconic’s CEO by nominating additional directors to
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`Arconic’s board. Elliott informed Mr. Lawson of its plans and disclosed its interest
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`in proposing him as Arconic’s replacement CEO. Mr. Lawson had reservations:
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`Spirit’s general counsel indicated that Mr. Lawson’s provision of services to Arconic
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`would violate the Retirement Agreement. To assuage Mr. Lawson’s concerns, Elliott
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`prepared a Consulting Agreement and an Indemnification Agreement. Under the
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`latter agreement, Elliot promised to indemnify Mr. Lawson for any losses caused by
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`his participation in the Arconic proxy contest, including any action taken by Spirit
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`for his potential breach of the Retirement Agreement.
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`On the same day that Mr. Lawson signed the Indemnification Agreement,
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`Elliot launched its proxy contest. Elliot’s proxy war ended when Arconic’s CEO sent
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`an allegedly threatening communication to a principal officer of Elliot, at which point
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`Mr. Lawson could make his competitive choice under the Retirement Agreement free
`from restraint. Thus, for purposes of this appeal, the upshot is that Paragraph 2(g) of
`the Retirement Agreement is the clause at issue, not the Employment Agreement.
`And Paragraph 2(g) of the Retirement Agreement is a condition precedent providing
`Mr. Lawson with a choice: breach and forgo vesting, or comply and vest.
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`the existing Arconic board turned on and ousted the incumbent CEO. Thereafter,
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`Elliot placed three new directors on Arconic’s board. Ultimately, however, Mr.
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`Lawson was not selected as a finalist for the Arconic CEO position.
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`D
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`Two days after Elliot announced its proxy challenge, Spirit notified
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`Mr. Lawson’s counsel that Mr. Lawson was in breach of the non-competition
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`Covenant incorporated at Paragraph 7 of the Retirement Agreement. Characterizing
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`Mr. Lawson’s participation in the proxy contest as an “egregious violation” of the
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`Covenant, Spirit informed Mr. Lawson that all future payments contemplated by the
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`Retirement Agreement would be cancelled. See id. ¶ 49, at 358. Spirit subsequently
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`refused to deliver to Mr. Lawson the value of his outstanding long-term incentive
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`shares on their contemplated vesting dates. In fact, Spirit refused to compensate
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`Mr. Lawson under the Retirement Agreement at all.
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`Initially, Spirit asserted that Mr. Lawson was obligated to return funds Spirit
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`had previously paid to him under the Retirement Agreement. Spirit also suggested it
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`might seek injunctive relief to enforce the Covenant. Ultimately, though, Spirit never
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`sought damages or injunctive relief. Thus, in the instant case, Mr. Lawson seeks only
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`to recover the money and stock awards that Spirit refused to pay and vest (i.e., future
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`benefits), as opposed to already-earned compensation.
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`All told, Mr. Lawson’s participation in the Arconic proxy contest cost him
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`nearly $31 million, of which almost $29 million was attributable to Spirit’s
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`cancellation of Mr. Lawson’s unvested LTIP shares. Elliot covered more than $26
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`million of Mr. Lawson’s losses under the Indemnification Agreement.
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`II
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`The issues before us are drawn into sharp relief by this case’s tortuous
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`procedural history, especially Spirit’s previous appeal in Lawson II.
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`A
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`Invoking diversity jurisdiction under 28 U.S.C. § 1332, Mr. Lawson sued
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`Spirit in the United States District Court for the District of Kansas, seeking relief for
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`breach of contract. The case proceeded to a nine-day bench trial in June 2021.
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`Mr. Lawson maintained that he had not violated the Covenant and that Spirit had thus
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`breached the Retirement Agreement by refusing to compensate him. Spirit contended
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`that Mr. Lawson had violated the Covenant, so he was not entitled to cash payments
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`or stock vestiture under the Retirement Agreement.
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`Particularly relevant here, Mr. Lawson also proposed an alternative theory of
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`the case: Even if the district court found him in breach, he argued, the court should
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`void the Covenant as “unreasonable” under Weber v. Tillman, 913 P.2d 84 (Kan.
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`1996), which articulated a four-factor test governing the enforceability of
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`non-competes in Kansas employment contracts. Spirit responded that the Covenant
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`was not subject to Weber review—which it asserted applies only to traditional non-
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`competes—and that even if Weber did apply the Covenant was reasonable.
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`B
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`In Autumn 2021, the district court issued findings of fact and conclusions of
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`law and entered judgment for Mr. Lawson. See Lawson I, 2021 WL 4870984. The
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`court found that Mr. Lawson’s arrangement with Elliott did not violate the Covenant
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`because (1) Elliott was not engaged in the same business as Spirit; (2) Mr. Lawson
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`and Elliott did not control Arconic but were in fact adverse to Arconic in the proxy
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`contest; and (3) Elliott did not use Mr. Lawson’s assistance to invest in Arconic.
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`Thus, as the district court concluded, “Spirit breached the Retirement Agreement by
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`failing to pay Plaintiff [Mr. Lawson] the sums due under the Agreement.” See id.
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`¶ 24, at 383.
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`The district court explicitly found that Mr. Lawson’s long-term incentive
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`award shares were not immediately monetizable and that Spirit was only obligated to
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`deliver the awarded shares on their vesting date. The district court further found that,
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`at the time of his resignation, Mr. Lawson had an interest in over 400,000 unvested
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`awarded shares, all of which would have been canceled absent the Retirement
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`Agreement’s extended vesting period.
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`Because the district court concluded that Mr. Lawson had not violated the
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`Covenant, it did not reach the question of reasonableness under Weber.
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`C
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`Spirit appealed, assigning error to the district court’s conclusion that
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`Mr. Lawson had not violated the Covenant. See Aplt.’s Opening Br., No. 21-3213, at
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`*20–22 (10th Cir., filed Mar. 3, 2022). Spirit also maintained that the Covenant was
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`not a traditional non-compete subject to Weber review and, in any event, that it
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`satisfied Weber’s four-factor test. See id. at *46–56. Mr. Lawson responded that
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`Spirit’s interpretation of the Covenant flunked at least three out of four prongs of
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`Weber review. See Aplee.’s Resp. Br., No. 21-3213, at *42–44 (10th Cir., filed
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`May 5, 2022).
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`We reversed the district court’s judgment and remanded the case. See
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`Lawson II, 61 F.4th at 759–60. We held that the Retirement Agreement conditioned
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`Mr. Lawson’s receipt of future benefits on his continued compliance with the
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`Covenant and that Mr. Lawson had indeed breached the Covenant because
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`(1) Mr. Lawson had an interest in Elliott; (2) Elliott invested in Arconic; and
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`(3) Arconic was engaged in the manufacture of aircraft components and that activity
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`fell within the Employment Agreement’s definition of “Business.” See id. at 759–66.
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`Consequently, Mr. Lawson’s arrangement with Elliott “triggered a forfeiture of
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`Mr. Lawson’s right to future benefits.” Id. at 766.
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`Without ruling on the Covenant’s enforceability, we observed that the
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`Retirement Agreement “unambiguously made Mr. Lawson’s compliance with the
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`covenant a condition to his future payments and vesting of stock awards.” Id. at 767
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`(emphasis added). Nonetheless, we noted, the Covenant “also subjected Mr. Lawson
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`to remedies [by Spirit] such as damages, accounting, disgorgement of profits, and an
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`injunction” and “prohibits Mr. Lawson from working for competitors even though
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`Spirit doesn’t seek to enforce these prohibitions.” Id. (emphasis added). We thus
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`concluded that the Covenant could be enforced in two ways: as a traditional
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`non-competition covenant or penalty-for-competition clause or, alternatively, as a
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`non-competition condition precedent to receipt of future benefits. Id. We counseled
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`that “a court would need to consider how to approach the issue of enforceability” in
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`light of the Covenant’s dual enforcement mechanisms. Id. We further suggested that
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`“if the covenant serves only as a condition to future payments, rather than as a
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`restraint against competition, there may be no public policy to inhibit enforcement”
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`and, in fact, “public policy could support the enforceability of contracts in which
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`employers compensate highly paid executives to avoid working for competitors.” Id.
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`at 767–68.
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`Finally, we noted that Spirit had not attempted to enforce the Covenant as a
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`traditional non-compete or penalty-for competition covenant, but only as a condition
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`precedent to receipt of future benefits. See id. at 768. To account for this distinction,
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`we noted, “a court must determine whether the covenant’s dual [enforcement
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`mechanisms] are severable.” Id. The parties failed to brief the severability issue in
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`Lawson II and, given that the severability question “entail[ed] a fact-intensive
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`inquiry” and “could directly affect the enforceability of the covenant,” we “reverse[d]
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`and remand[ed] for further proceedings to determine the enforceability of the
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`covenant.” Id. We did not disturb the district court’s characterization of
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`Mr. Lawson’s outstanding stock awards as unvested and thus not immediately
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`monetizable, see id. at 759, nor did we quibble with the district court’s
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`characterization of the Covenant as a condition precedent to the receipt of future
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`benefits, see id. at 760, 767–68.
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`D
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`On remand, the district court ruled in favor of Spirit. See Aplt.’s App.
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`at 456–80 (Dist. Ct. Mem. & Order, entered Jun. 15, 2023); see also Lawson III,
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`2023 WL 4026509. The court’s analysis proceeded in two steps.
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`First, based on our suggestion that “[i]f severable, and ‘the covenant serves
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`only as a condition to future payments, rather than as a restraint against competition,
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`there may be no public policy to inhibit enforcement,’” the court considered whether
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`the Covenant’s enforcement mechanisms were severable. Aplt.’s App. at 457–58
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`(quoting Lawson II, 61 F.4th at 767). The district court concluded that “[t]he
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`condition precedent is easily severable from the remainder of the covenant’s
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`enforcement mechanisms.” Id. at 461 (bold typeface omitted). In support, the
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`district court noted that (1) the injunctive and damages mechanisms, on the one hand,
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`and the condition precedent mechanism, on the other, “are quite distinct, offering
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`both a carrot and stick disincentivizing Plaintiff from working with actual or
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`potential competitors”; (2) the relevant agreements contain broad severability
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`clauses; and (3) Spirit had disavowed any intention of enforcing the Covenant by
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`seeking an injunction or damages. See id. at 463–66.
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`Second, the district court considered “whether the application of the condition
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`precedent was consistent with Kansas law.” Id. at 467. The district court began by
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`outlining Kansas’s case law on the enforceability of non-competition covenants,
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`concluding that “Kansas courts have recognized the validity of predicating an award
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`of future benefits upon compliance with a contract[’s] conditions.” Id. at 469 & n.30
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`Appellate Case: 23-3136 Document: 81-1 Date Filed: 04/25/2025 Page: 18
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`(emphasis added) (first citing Sweet v. Stormont Vail Reg’l Med. Ctr., 647 P.2d 1274,
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`1280 (Kan. 1982); and then citing Mirrow v. Barreto, 80 F. App’x 616, 618 (10th
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`Cir. 2003)). Consequently, the district court predicted that the Kansas Supreme
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`Court would not extend Weber reasonableness review to the Covenant’s enforcement
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`because it was a non-competition condition precedent to the receipt of future
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`benefits.
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`Mr. Lawson resisted, referring the court to Varney Bus. Servs., Inc. v. Pottroff,
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`wherein the Kansas Supreme Court applied the Weber test to a non-traditional non-
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`compete provision. Aplt.’s App. at 469 (quoting Varney, 50 P.3d 1003, 1015 (Kan.
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`2002)). But the district court declined Mr. Lawson’s invitation to apply the rule in
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`Varney. Id. According to the district court, the operative question was not whether
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`the Covenant constitutes a “traditional” non-compete, but the character of the
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`Covenant’s incentive structure. The covenant in Varney, though “non-traditional”—
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`insofar as it required the promisor to pay a percentage of new earnings to the
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`promisor’s former employer—is identical to a “traditional” non-compete or penalty-
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`for-competition clause insofar as it leverages negative economic consequences to
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`discourage competition. Id. at 469–70. As the district court put it:
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`Neither Varney, nor any of the cases cited in that decision,
`involved a condition precedent, where the relevant provision does
`not directly prohibit the reemployment or force the employee to
`essentially lose all the benefits of his new employment. Varney
`simply provides no support for Plaintiff's argument that all
`economic disincentives from alternative employment are subject
`to Weber’s reasonableness requirement.
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`Id. at 470.
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`The district court also rejected Mr. Lawson’s analogy to Ainslie v. Cantor
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`Fitzgerald L.P., C.A. No. 9436-VCZ, 2023 WL 106924, at *2 (Del. Ch. Jan. 4, 2023)
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`(unpublished). In Ainslie,