Technicolor, Inc. v. Traeger

• Decision Date: 17 June 1976
• Docket Number: No. 5692,5692
• Parties: , 1976-2 Trade Cases P 60,979 TECHNICOLOR, INC., Plaintiff-Appellee, v. Vincent T. TRAEGER, Defendant-Appellant.
• Court: Hawaii Supreme Court

Page 163

551 P.2d 163

57 Haw. 113, 1976-2 Trade Cases P 60,979

TECHNICOLOR, INC., Plaintiff-Appellee, v. Vincent T. TRAEGER, Defendant-Appellant.

No. 5692.

Supreme Court of Hawai'i.

June 17, 1976.

Syllabus by the Court

1. On review of a summary judgment proceeding, the standard to be applied by an appellate court is identical to that employed by the trial court; inference to be drawn from the underlying facts alleged in the materials (such as depositions, answers to interrogatories, admissions and affidavits) considered by the court in making its determination must be viewed in the light most favorable to the party opposing the motion.

2. In considering the validity of the granting of summary judgment under H.R.C.P. Rule 56(c), the appellate court must determine whether any genuine issue as to a material fact was raised and, if not raised, whether the moving party was entitled to judgment as a matter of law.

3. In determining whether a postemployment restrictive covenant is in violation of antitrust laws, questions as to the reasonableness of the covenant, the undue hardship it imposes upon the employee and the employer's justification for imposing such a covenant on the employee are questions of law.

4. Providing employment is sufficient consideration to support an employment contract with a postemployment restrictive covenant in it.

5. HRS § 480-4(c)(4) is not the only allowable type of employment restraint under Hawaii's antitrust laws.

6. State courts must analyze restrictive covenants that are not listed as 'per se violations' and determine their validity by applying a 'rule of reason' test which requires a covenant to be reasonable in order for it to be valid. HRS § 480-4(c).

7. Generally, courts will find a restrictive covenant 'not reasonable' if: (i) it is greater than required for the protection of the person for whose benefit it is imposed; (ii) it imposes undue hardship on the person restricted; or (iii) its benefit to the covenantee is outweighed by injury to the public.

8. In making a 'reasonableness analysis' of a restrictive covenant, the court must examine such factors as geographical scope, length of time, and breadth of the restriction placed on a given activity.

David Bettencourt, Honolulu (Mattoch, Kemper & Brown, Honolulu, of counsel) for defendant-appellant.

Philip J. Leas, Honolulu (William M. Swope, Honolulu, with him on the brief, Cades, Schutte, Fleming & Wright, Honolulu, of counsel), for plaintiff-appellee.

Before RICHARDSON, C. J., and KOBAYASHI, OGATA, MENOR and KIDWELL, JJ.

KOBAYASHI, Justice.

This litigation arises out of an employment agreement between Technicolor, Inc., and Vincent T. Traeger, a former employee of that firm. Technicolor, Inc., sued Mr. Traeger to enjoin him from continuing in the employment of a competing business in breach of a postemployment restrictive covenant in the employment agreement. Mr. Traeger counterclaimed for damages, setting forth four counts based upon Technicolor, Inc.'s alleged violation of Hawaii antitrust laws (Counts I and II), breach of contract (Count III), and interference of a contractual relationship (Count IV). Both parties moved for summary judgment as to each other's action. The trial court issued an order which denied Mr. Traeger's motion and granted Technicolor, Inc.'s motion as to Counts I, II and IV. Counts III ¹ is set for trial.

This is an interlocutory appeal by Mr. Traeger (appellant) from the portion of the order that granted Technicolor, Inc.'s (appellee) motion on the abovementioned counts. At issue in this case is the propriety of the trial court's award. For reasons stated below, we affirm the trial court's grant of summary judgment.

STATEMENT OF THE CASE

Appellant worked for appellee, a photofinishing-services business, from August 1962 to January 1971 in various managerial capacities. His last two positions were that of general manager of appellee's Hawaii operation (January 1963 to October 1969) and of regional vice-president of appellee's operations throughout the states of Hawaii and Washington (October 1969 to January 1971.) In these last two capacities, appellant became involved in a certain amount of customer contact and customer entertainment. He also became privy to appellee's customers list and to certain pricing information which appellee considered confidential. Whether appellant had access to any trade secrets is not clear.

When appellant was promoted to general manager of the Hawaii opration, he entered into an employment agreement with appellee. Although he had been working for appellee for approximately five months prior to this promotion, appellant was not previously asked to enter such an agreement. Appellant alleges that the agreement was totally appellee's idea and was drafted in whole by appellee. Appellant further states that while he had no objections to the contract at the time, he had only signed it because he felt that it was a requirement for the job.

The crucial clause in the employment agreement in effect prohibited appellant from competing with appellee, or associating with any of appellee's competitors in Hawaii, for the term of the agreement and for three years thereafter. ² The term of the agreement was extended several times by amendments with the final extension running to December 31, 1972.

On January 11, 1971, however, almost two years before the employment agreement was scheduled to end, appellant signed a letter requesting that the agreement be terminated as of that date. The letter also states that in consideration for the early release, appellant agreed not to compete with appellee, or associate with any competitor of appellee's for three years hence in either Hawaii or Washington. Appellant claims that he did not resign voluntarily but did so under threat of criminal prosecution by appellee. Appellee denies using any duress or intimidation to get appellant to sign the termination letter.

Shortly after termination of his job, appellant made futile attempts to secure the job of president of the Hawaii Visitors Bureau. He remained unemployed until mid-July of 1971 when he accepted a position with a photo-finishing business in Califormia. His salary was substantially lower than what he received from appellee and he In May of 1972, appellant quit the California job and returned to Hawaii because he felt that it was 'too much of a hassle living away from the family' and that the job did not offer him the security he desired.

had to live away from his family because they remained here in Hawaii, for reasons unexplained.

In June of 1972, which was within the three-year period of restriction, appellant started working as general manager of a photo-finishing-service firm which competed with appellee in Hawaii. The salary he received was even less than that paid by the California firm but he claims that he was given, or was about to be given a stock option plan, which if firmed up, would give him the opportunity to acquire control of the company. This employment relationship, which was reduced to a written agreement, and the stock option plan, which was not, are the bases of the 'contractual relationship' with which appellee allegedly interfered (Count IV).

It was at this time (June 30, 1972), that appellee filed the original action to enjoin appellant from continuing with the competing business.

Appellant counterclaimed for damages setting forjth four counts. The three counts which we are concerned with on this appeal are, in summary:

Count I. The restrictive covenant in the employment agreement violates HRS § 480-4 ³ in that it unreasonably restrains trade and ocmmerce in the film-processing business in Hawaii. Thus, appellant is entitled to treble damages under HRS § 480-13. ⁴

Count II. The restrictive covenant violates HRS § 480-2 ⁵ because it unreasonably restrains trade in the filmprocessing business in Hawaii. Thus, appellant is entitled to treble damages under HRS § 480-13.

Count IV. Appellee interfered with a contractual relationship between appellant and the competing firm he worked After discovery, which proved to be quite frustracting for appellant, because of appellee's refusal to respond to the bulk of his requests, both parties filed Motions for Summary Judgment as to each other's action. The trial court issued an order denying appellant's motion and granting appellee's as to the three above-summarized counts.

for, and so appellant is entitled to damages.

A summary of appellant's arguments is as follows:

I. Summary Judgment is rarely a proper procedure in a complex restraint of trade case.

II. The Summary Judgment dismissing appellant's counterclaim was improper, in that the lower court was presented with disputed issues of relevant and material fact.

A. The relevant sections of the Hawaii Antitrust law are controlling and dispositive.

B. Under general law of restraints of trade, factual questions were presented to the trial court which precluded disposition by summary judgment.

III. Appellee's continued obstruction and refusal to conduct discovery clearly indicates that there are disputed issues of fact.

OPINION

On review of a summary judgment proceeding, the standard to be applied by this court is identical to that employed by the trial court. Wright & Miller, Federal Practice and Procedure: Civil § 2716. This means that '. . . the inferences to be drawn from the underlying facts alleged in the materials (such as depositions, answers to interrogatories, admissions and affidavits) considered by the court in making its determination must be viewed in the light most favorable to the party opposing the motion.' Gum v. Nakamura, 57 Haw. 39, 549 P.2d 471 (1976); Aku v. Lewis, 52 Haw. 366, 477 P.2d 162 (1970); Abraham v. Onorato Garages, 50 Haw. 628, 446 P.2d 821 (1968). Further, in considering the validity of the granting of summary judgment under H.R.C.P. Rule 56(c), the appellate court must determine whether any genuine issue as...