7's Enterprises, Inc. v. Del Rosario

• Decision Date: 13 September 2006
• Docket Number: No. 27364.,27364.
• Citation: 143 P.3d 23
• Parties: The 7'S ENTERPRISES, INC., Plaintiff-Appellee v. Kaoru DEL ROSARIO, Defendant-Appellant and John Does 1-10; Jane Does 1-10; Doe Corporations 1-10; Doe Partnerships 1-10; Doe Entities 1-10; and Doe Governmental Units 1-10, Defendants.
• Court: Hawaii Supreme Court

Page 23

143 P.3d 23

The 7'S ENTERPRISES, INC., Plaintiff-Appellee v. Kaoru DEL ROSARIO, Defendant-Appellant and John Does 1-10; Jane Does 1-10; Doe Corporations 1-10; Doe Partnerships 1-10; Doe Entities 1-10; and Doe Governmental Units 1-10, Defendants.

No. 27364.

Supreme Court of Hawai`i.

September 13, 2006.

Emlyn Higa, on the briefs, for defendant-appellant.

William L. Goo and Norman H. Suzuki (Suzuki & Goo), on the briefs, Honolulu, for plaintiff-appellee.

MOON, C.J., LEVINSON, NAKAYAMA, ACOBA, and DUFFY, JJ.

Opinion of the Court by ACOBA, J.

We hold in this appeal by Defendant-Appellant Kaoru Del Rosario (Defendant), who has been enjoined from working or otherwise being employed as a "briefer" in the State of Hawai`i for a period of three (3) years from July 31, 2004, that (1) training that provides skills beyond those of a general nature may be considered in weighing the reasonableness of a non-competition covenant (the covenant), when such training is combined with trade secrets, confidential information, or special customer relationships weighing in favor of a protectable business interest, (2) the finding by the circuit court of the first circuit (the court)<sup>1</sup> that the training of a briefer such as Defendant is "unique" was not clearly erroneous in light of the evidence in the record, (3) under the circumstances of this case, the court did not abuse its discretion in ruling that the reduction in Defendant's salary by Plaintiff-Appellee The 7's Enterprises, Inc. (Plaintiff) did not amount to "unclean hands," (4) the court did not err in ruling that Plaintiff suffered irreparable harm from Defendant's continued work as a briefer following her resignation, and (5) the court did not err in concluding that the three-year non-competition period was reasonable. Accordingly, we affirm the May 24, 2005 judgment of the court, as amended by the court's July 11, 2005 amended judgment in favor of Plaintiff, except we remand to the court with instructions to amend the judgment to reflect that Plaintiff is enjoined from being employed as a briefer in the County of Honolulu as provided for in the covenant rather than in the State of Hawai`i as the court concluded.

I.

In 1994, Defendant entered into an Employment Agreement with Plaintiff. According to the court, "[b]riefers employed by Plaintiff are primarily hired to promote and sell products from its shop and to sell optional tours and souvenir items" to travel agencies with which Plaintiff had contracted. The employment agreement contained a covenant which precluded an employee from engaging in briefing services on the island of Oahu for a period of three years after the termination of employment with Plaintiff or resignation.² Defendant was aware of the covenant, but felt it did not apply to her as long as she was not directly employed by a tour company. There are only three briefing companies in the State of Hawai`i, Plaintiff included.³

Defendant's training included memorizing scripts, observing actual briefing sessions, responding to questions from customers, and being critiqued as part of the on-the-job training. Defendant was paid $1,400.00 per month during her two-month training period. After this time, Defendant's contract base salary was $2,000.00 per month and she collected 1% commission on her sales.

Defendant first resigned in November 1995 and was rehired by Plaintiff in August 1996. Upon rehiring, Defendant entered into a second employment agreement (the Agreement), which was identical to the one she entered into in 1994.

Defendant was Plaintiff's lowest producer; she did not garner as much business for Plaintiff's store as other briefers. Between 1997 and 2000, Defendant's salary was reduced for certain months by amounts between $200.00 and $800.00 based on her job performance.⁴ Defendant did not object to the salary reductions. During this time, Defendant was paid all of her sales commissions. Following the "9-11" incident, between November 2001 and January 2002, employees of the company received reduced salaries as a result of a drop in tourism activity. In 2002, Plaintiff began to use Defendant less. When Plaintiff did call Defendant to work, Defendant was sent to smaller groups, thereby reducing the possibility of significant commissions.

Defendant claimed that in June 2004, she discovered that one of the tour companies that had contracted with Plaintiff for briefers, H.I.S. Hawaii, Inc. (H.I.S.), intended to stop using Plaintiff and to utilize briefers from another company.⁵ Defendant voluntarily resigned on July 31, 2004. According to Plaintiff's president, Fusami Laurent (Laurent), she had learned that H.I.S. management wanted to hire one of Plaintiff's briefers, and in order to do this H.I.S. would make the employee want to leave Plaintiff's company in order to be employed by H.I.S. After leaving Plaintiff, Defendant contacted H.I.S. to inquire if it would hire her. H.I.S. stopped using Plaintiff in August 2004. Shortly after leaving Plaintiff, Defendant formed a company called Shiella LLC with her husband and began doing work as a briefer. On August 15, 2004, Defendant began working for Four Seasons Agency of Hawaii, Inc., which provided briefing services through Shiella LLC to H.I.S., Plaintiff's former client.

On October 20, 2004, Plaintiff filed its Complaint for Injunctive and Other Relief (the Complaint), seeking to enjoin Defendant from continuing to engage in conduct in violation of the Agreement. Plaintiff also prayed that it be awarded general and/or specific damages, attorney's fees and costs, and such other and further relief which the court "deems to be fair and just." On October 22, 2004, Plaintiff filed its Motion for Issuance of Preliminary Injunction (motion for preliminary injunction) requesting that the court enjoin Defendant from working as a briefer until a trial on the merits.

On November 12, 2004, Defendant filed her answer to the Complaint as well as a counterclaim alleging, inter alia, that Plaintiff (1) "failed and refused to provide employment to Defendant as required under the terms of the . . . Agreement," (2) "failed and refused to pay Defendant the full amount of commissions due under the terms of the . . . Agreement," and (3) "failed and refused to pay Defendant the full amount of base salary due under the terms of the . . . Agreement."

On March 1, 2005, following a hearing, the court granted Plaintiff's motion for preliminary injunction. The court issued, inter alia, the following findings of fact (findings):

2. Briefers employed by Plaintiff are primarily hired to promote and sell products from its shop and to sell optional tours and souvenir items for which Plaintiff has entered into contracts with travel agencies. . . .

3. Laurent . . . trains the company's [b]riefers. . . .

4. The training which may take several months or longer involves complete memorization of scripts, observing of [sic] actual briefing sessions and responding to questions from customers. . . .

5. There are only three (3) briefing companies in Hawaii.

. . . .

9. Defendant was aware that the Agreement contained [the covenant], but felt that it did not apply to her as long as she was not employed directly by a tour company.

. . . .

11. After deciding to leave Plaintiff, Defendant contacted . . . [H.I.S.] to inquire if it would hire Defendant as a [b]riefer. . . .

. . . .

15. Defendant continued to sell optional tours and gift packages for . . . H.I.S., which was a former client of Plaintiff. . . .

. . . .

17. From time to time, Plaintiff reduced Defendant's base salary based on her job performance. . . .

18. Defendant did not object to the salary reduction. . . .

19. Plaintiff continued to pay Defendant her full base salary after the 9-11 terrorist incident. . . .

(Emphases added.) The court, in its conclusions of law (conclusions) ruled as follows:

1. The [covenant] in the Agreement was reasonable in scope and duration.

2. Defendant breached the . . . Agreement by continuing to work as a [b]riefer after she left Plaintiff.

3. Under the sliding scale standard set forth in UARCO, Inc. v. Lam, 18 F.Supp.2d 1116 (D.Haw.1998), there is a strong likelihood that Plaintiff will prevail on the merits of the case.

4. There is a possibility that Plaintiff suffered irreparable harm.

5. Plaintiff is entitled to preliminary injunctive relief.

(Emphasis added.) The court ordered that Defendant be "immediately enjoined from working or otherwise being employed as a [b]riefer."⁶

On May 24, 2005, after a bench trial, the court found for Plaintiff on its complaint for injunctive relief, and found for Defendant on her counterclaim for breach of the employment contract. The court adopted the findings filed on March 1, 2005, regarding the motion for preliminary injunction. The court also found, inter alia, as follows:

2. Plaintiff has and will suffer a loss of customers or clients as a result of Defendant leaving Plaintiff's employ and working elsewhere as a briefer.

3. It is difficult to measure the damages suffered by Plaintiff as a result of Defendant leaving Plaintiff's employ and working elsewhere as a briefer.

4. The purpose of the [covenant] in the . . . Agreement was to prevent a briefer from seeking employment elsewhere using the special training received while employed by Plaintiff.

5. The training of and the services performed by a briefer are unique.

6. Defendant acquiesced to the reduction in her salary and did not terminate her employment with Plaintiff at that time despite having grounds to do so.

7. Plaintiff did not pay Defendant . . . her full salary during the time that she was employed. . . .

8. Plaintiff's conduct in not paying Defendant . . . her full salary does not amount to unclean hands.

(Emphases added.) In its conclusions, the court ruled in the following manner:

2. The [covenant] was reasonable in scope and duration under Technicolor, Inc. v. Traeger, 57 Haw. 113, 122, 551 P.2d 163...