OPINION OF THE COURT BY McKENNA, J.
This case addresses the enforceability of a non-compete agreement restricting Lorna Gagnon ("Gagnon"), a former employee of Prudential Locations, LLC ("Locations"), from "establishing her own brokerage firm in the State of Hawai‘i within one year after terminating her employment with Locations" and from soliciting persons "employed" or "affiliated with" Locations. At issue are two restrictive clauses within the non-compete agreement: a non-compete clause and a non-solicitation clause.
We hold as follows: (1) the ICA erred in failing to address whether the non-compete and solicitation clauses were ancillary to a legitimate purpose not violative of HRS Chapter 480, as required by HRS § 480-4(c) (Supp. 2015); (2) restricting competition is not a legitimate ancillary purpose, as HRS § 480-4(a) prohibits contracts in restraint of trade or commerce in the State; (3) to establish a violation of a non-solicitation clause, there must be evidence that the person subject to the solicitation clause actively initiated contact; and (4) summary judgment was properly granted in favor of Gagnon as to the non-compete clause, but summary judgment should not have been granted for one agent as to the non-solicitation clause due to a genuine issue of material fact regarding whether Gagnon actively initiated contact.
We therefore vacate the Intermediate Court of Appeals' ("ICA") July 2, 2020 judgment on appeal and the Circuit Court of the First Circuit's ("circuit court") December 9, 2016 final judgment in favor of Gagnon and remand to the circuit court only with respect to the alleged breach of the solicitation clause as to one agent. We otherwise affirm the judgments of the ICA and the circuit court.
Locations is a real estate brokerage firm with offices in Kapahulu, Pearlridge, Mililani, Kailua, and Kapolei. Gagnon worked as a real estate salesperson in New Hampshire from 1989 and later became a licensed real estate broker in 1999. Gagnon had previously owned an independent brokerage business, and from 2003 to 2008, she owned and operated a RE/MAX real estate franchise in New Hampshire.
In 2008, Gagnon moved to Hawai‘i after interviewing with Locations while on the mainland, then accepted a "sales coach" position with Locations. On August 8, 2008, Gagnon signed a "Confidentiality and Non-Competition Agreement." The Confidentiality and Non-Competition Agreement contained four parts: (1) recitals; (2) confidentiality and proprietary rights; (3) agreement not to compete ("Non-Compete Agreement"); and (4) remedies of company. The Non-Compete Agreement was comprised of non-compete and non-solicitation clauses. In summary, the clauses prohibited Gagnon from establishing her own brokerage firm in the State of Hawai‘i and from soliciting other persons affiliated with Locations to terminate their affiliations to work with her. The clauses prohibited these acts for a one-year period after her employment termination.
The Confidentiality and Non-Compete Agreement provided as follows:
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT (the "Agreement"), is made and entered into as of the date set forth below, by and between Prudential Locations Real Estate, LLC, a [Hawai‘i] limited liability company, the employer described below ("Company") and the employee described below ("Employee").
1. Recitals.
1.1 The primary business of the Company is to provide real estate brokerage and/or property management services in the State of [Hawai‘i], hereinafter collectively referred to as the "Business."
1.2 The Business involves confidential and proprietary information and procedures and trade secrets of the Company and its subsidiaries, and such Information is a special, valuable and unique asset of the Business.
1.3 Employee is employed by the Company and will have access to such confidential and proprietary information, procedures and trade secrets of the Company.
1.4 Employee, in consideration of future employment, agrees to enter into this Agreement for the protection of the Business.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, do promise and agree as follows:
2. Confidentiality and Proprietary Rights. Employee acknowledges and agrees that he or she will have access to confidential and proprietary information and procedures and trade secrets of the Company and its subsidiaries, and that such information is a special, valuable and unique asset of the business of the Company and its subsidiaries. Employee further acknowledges and agrees that such confidential and proprietary information and procedures and trade secrets belonging exclusively to the Company includes, without limitation, the following: (i) any information which is not generally developed, made or obtained by the Company or any of its subsidiaries or which otherwise came into possession of the Company or any of its subsidiaries, (ii) all memoranda, files, books, papers, letters, drawings, documents, formulas, specifications, investigations, and other processes data, and all copies thereof and therefrom, in any way relation to the Company or any of its subsidiaries, whether used, developed, made or obtained by the Company or any of its subsidiaries or which otherwise came into the possession of the Company or any of its subsidiaries, (iii) all information related to clients and customers, including without limitation, clients and customer lists, and identities of existing, past and prospective clients and customers, prices charged or proposed to be charged to any existing, past and prospective client or customer, client or customer contacts, special customer requirements, and all related information; (iv) sales and marketing strategies, plans, materials and techniques, research and development information, trade secrets and other know-how or other information pertaining to the financial condition, business, research and development or prospects of the Company or any of its subsidiaries; and (v) patterns, devices, compilations of information, copyrightable material and technical information, if any, in any way relating to the Company or any of its subsidiaries (hereinafter collectively referred to as the "Confidential Information").
2.1 Restriction on Use of Confidential Information. Employee agrees that, except in performance of duties under an employment arrangement with the Company, Employee shall not directly or indirectly, at any time or place, during his or her employment and at anytime after Employee ceases to be an employee for any reason whatsoever, use for his or her own benefit or for the benefit of any third party, or disclose to any third party, any Confidential Information acquired by reason of his or her status as an employee or former employee of the Company, including without limitation, Confidential Information belonging or relating to the Company or its subsidiaries, affiliates and customers. Employee agrees that the duration, geographic area and scope of this provision is reasonably necessary for the protection of the Company and does not and will not impose undue hardship on Employee.
3. Agreement Not To Compete. Employee agrees that Employee shall not, directly or indirectly, within the State of Hawaii where the Company conducts or has conducted business, during his or her employment and for a period of one (1) year after Employee ceases to be an employee for any reason whatsoever, (i) represent, furnish consulting services to, be employed by, or engage or participate in the same or similar business, or perform services for third parties which are generally comparable or competitive with those performed by the Company with respect to the Business ("Comparable Services"), (ii) own or operate, or become proprietor, partner, principal, agent, consultant, employee, trustee, director, officer, stockholder or investor, of any person, firm or business which engages or participates in the same or similar business or businesses conducted by the Company, including without limitation, the Business, or which performs Comparable Services, (iii) engage in any activity or conduct adverse to the Business or Interests of the Company, or (iv) induce or encourage any other persons employed or affiliated with the Company to terminate their relationship with the Company. Notwithstanding the foregoing, Company agrees that the Employee may, independently or as an employee or independent contractor of an existing real estate brokerage company act as a real estate salesperson or broker/salesperson, and such conduct shall not constitute a violation of this paragraph (the "Permitted Activities"). Permitted Activities however shall not include (i) Employee's formation of a real estate brokerage company with other real estate salesperson(s), (ii) Employee's solicitation of other persons employed or affiliated with the Company.
(Emphasis in original.)
In June 2013, Gagnon terminated her employment with Locations, and in August 2013, she opened a new RE/MAX franchise in Hawai‘i called Prestige Realty...
