## I L L I N O I S 

## O F F I C I A L 

## RE P O R T S Suprem e Court

Reliable Fire Equ ipm ent Co. v. Arredondo , 2011 IL 111871

Caption in S upreme Court: REL IAB L E FIRE EQUI PMENT COMPANY, Appellant, v. ARNOL D ARREDONDO et al. , Appellee s.

Docke t No. 111871

Filed Rehea ringdenied Dec ember 1, 2011 Marc h 26, 2012

Held ( Note : This syl lab us

con st it ute s no pa r t of the opi nio n of the cour t but has bee n pre

par ed by the Repo rt er of D e c i s i o n s f

o r t h e
c o n v e n i e n c e o

f t h e

rea der

. ) The enfor ce ab ility of employees’ covena nt not to compete should be judge d by the three -prong test of rea sonablene ss, of which the employer’ s leg itimate business interest continues to be a part, and which looks to the totality of all of the circ umstances, rathe r than focusing on named specific fac tors.

Dec ision Under Review Appea l from the Appellate Court for the Second Di strict; hear d in that court on appea l from the Circuit Court of Du Pa ge C o u n t y , the Hon. Bonnie M. Wheaton, J udg e, pre siding.

J udg ment J udgments reve rsed; ca use re manded.Counsel on

Appea l Christopher P. Ba naszak and Robert S. Driscoll, of Reinhart Boe rner Van Deur en s.c., of Milwaukee
, Wis consin (Robert G. Bla ck, of N aper ville, of counse l), for a

ppellant.

Tom P. Gre g ory , J ack C. L ai and Ma ria V. V asos, of Gr eg ory

& L ai, of Ba rring ton, for appe llees.

J ustices J USTI CE FREEMAN delivere d the judgme nt of the court, with opinion. Chief J ustice Kilbride and J ustices Thom as, Garman, Ka rmeier , Bur

ke, and The is concurr ed in the judg ment and opinion.

OP INION

¶ 1 Plaintiff, Reliable Fire Equipment Company (Reliable)
, filed a complaint in the cir cuit court of Du Pag e County ag ainst defe ndants Arnold Arre dondo, Rene Gar cia, and Hig h Rise Security Sy stems, L L C (High Rise). Reliable claimed, inter alia
, a brea ch of a noncompetition restric tive covena nt. At the close of a bench trial on this claim, t he circuit court ruled that the covena nt was unenfor cea

ble. A divided panel of the appellate court upheld the circ uit court’s order

. 405 I ll. App. 3d 708. W e allowed Reliable’s petition for leave to appea l. I ll. S. C t. R. 315 (eff. F eb. 26, 2010). We now reve rse the judgme nt of the appellate court and the order of the circuit court, and rema n d th e cause to the circuit court for f urther pr ocee dings.

¶ 2 I . BA CKGROUND ¶ 3 Founde d in 1955, Reliable sells, installs, and service s portable f ire e x tinguisher s and a varie ty of fire suppression and fire alar m sy stems. Reliable desig ns or eng ineer s the sy stems to fit the needs of industrial, commerc ial, and re tail businesses; hospitals and schools; and all manner of nonresidential buildings. Reliable ha s a p p r o xim a te ly 100 employees, including salesper sons, installers, and service technicia ns. Re l iable does the majority of its business in the Chicag o metropolitan are a, northe rn Indiana, a nd southern Wisconsin. ¶ 4 In April 1992, Reliable hired Gar cia as a sy stems technicia n and, approximately one y ear later, offe red Gar cia a sales position, which he acc epted. Sometime in 1997, Reliable require d all employ ees to sign noncompetition restric tive covena nts. In Novemb er 1 9 97 Gar cia signe d his noncompetition agree ment. In November 1998, Reliable hired Arre dondo

as a salesper son. Approxim ately one week later, Arre dondo signe d his noncompetition agree ment. In thei r agree ments, Arre dondo and Gar cia eac h promised, inter alia
, not to compete with Reliable during their employ ment and for one y ear afte r their termination from employ ment in I llinois
, Indiana, or Wis consin. Arre dondo and Gar cia further promised not to solicit any sales or referr als from Reliable customers or ref err al source s, or to solicit

-2-Reliable employees to lea ve their e mploy

ment with Reliable. ¶ 5 Hig h Rise’s stated purpose was to supply eng ineer ed fire alar m and related au x i l i ar y sy stems throug hout the Chicag o metropolitan are a. In Marc h 2004, Arre dondo was seeking financ ing for High Rise. In April 2004, Hig h Rise was formed as a l imited liability corpor ation. Hig h Rise’s manag ers included Arre dondo and Gar cia. On August 1 7 , 2 004, they signe d an oper atingagree ment for High Rise. ¶ 6 In August 2004, Ernest Horvath, Reliable’s founder and chair man of the board, beca

me
conce rned that Arre dondo and Garci a wer e planning to compete with Reliable. He asked them and another employ ee whether they wer e going to start t heir o wn bus iness, and each denied it. On September 1, 2004, Arre dondo resigned from Reliable eff ective September 15. On Octobe r 1, 2004, Reliable f ired Ga rcia on suspicion of competition. ¶ 7 In Dec ember 2004, Reli ab l e fi l ed i t s o ri gi n al
, m u l t i p l e- co unt complaint ag ainst defe ndants. In count I I Iof its second amended c omplaint, Reliable alleg ed as f ollows. The company had enter ed into valid and enfor cea bl e em p loy

ment agree ments with Arre dondo and Gar cia. In violation of the restric tive covena nts contained there in, Arre dondo and Gar cia eng ag ed in sales activities and provided service s to Reliable customers, an d s o li c it e d r e f e r r a ls from Reliable’s ref

err al s o urce s. Also, Arre dondo and Gar cia solicited sever al named Reliable employees to leave their employ ment with Reliable. As a r esult of their bre ach of contra ct, Reliable a lleg ed dama g es in excess of $400,000. ¶ 8 Def

endants filed a first amende d counter claim that soug ht, inter alia
, a decla ration that t he restric tive covena

nts wer e unenfor cea

ble. In November 2007, the circ uit court held a bench trial on defe ndants’ decla ratory judgme nt action. At the close of t h e ev i d ence, the court ruled that the restric tive covena nts wer e unenfor cea

ble. The court conclude d that Reliable failed to prove the exis tence of a leg itimat e b usiness interest that justified enfor ceme nt of the cove nants. 1 ¶ 9 A sharply

divided panel of

the appe llate cour

t affir med. 405 I ll. App. 3d 708. The lea d opinion upheld the circ uit court’s conclusion that Reliable did not have a leg itimate business interest that justified the enfor ceme nt of the restric tive covena nts. 405 I ll. App. 3d at 743-48. T h e s p ec i al concur

renc e agree d that the circ uit court’s conclusion should be upheld, but disag ree d with the rea soning of the lead opinion. 405 I ll. Ap p

. 3d at 748 (Hudson, J ., specia lly concur

ring ). The dissent agree d with the rea soning of the specia l concur renc e and, based thereon, would reve rse a n d re mand for further proce eding s. 405 I ll. App. 3d at 753, 759 (O’Ma lley , J ., dissenting) . Reliable now a ppeals.

¶ 10 I I . ANALYSI S ¶ 11 A. Standard of Review ¶ 12 Initially
, Reliable observe s that I l l i n o i s co u rt s have descr ibed differ ent standards of

T he ci rc uit cou rt con duc te d a j ury tr ia l on Rel iable ’s re m ai nin g cl ai m s. At the cl ose of 1 Rel iable ’s cas e in chi ef

, the cou rt grant ed def

end ant s’ m oti on for a dir ect ed verdi ct , and def end ant s volunt ar il y dismisse d thei r c ount er cl ai m

.
-3-revie w in restr i ct i v e covena nt case s. It is traditionally stated that the enfor cea bility of a restric tive covena

nt i s a qu es tion of law, the deter mination of which is revie wed de novo ( Mohanty v. St. John Heart Clini c, S.C. , 225 I ll. 2d 52, 63 (2006))
, based on the fac ts in eac h p articula r case

. See Tarr v. Stearman , 264 I ll. 110, 118-19 (1914); Lanzit v. J.W. S ef t o n Manufacturing Co. , 184 I ll. 326, 330 (1900). In the case at bar, the circ uit court held a bench trial to deter

mine the enfor cea

bility of the postemploy

ment restric tive covena

nt. Gene rally
, the standard of revie w in a bench trial i s wh ether the order or judgme nt is ag ainst the manifest weight of

the evidenc e. Eyc haner v. Gross , 202 I ll. 2d 228, 251 (2002); Kalata v. Anheuser-Busch Cos. , 144 I ll. 2d 425, 433 (1991). ¶ 13 Howeve r, the c ase at bar c alls for only one standa

rd of revie w. The issue prese nted for revie w i s not whether the circuit court’s order is supported by sufficie nt evidenc e, thereby

nece ssitating the manifest weight of the evidenc e standard with its attendant defe renc e. See Schulenburg v. Signatrol, Inc

. , 37 I ll. 2d 352, 356 (1967). Rather, the issue here is whether the circ uit court applied the corr ect leg al test to the evidenc e prese nted. This is a question of law which is re viewed de novo

. In re A.H

. , 207 I ll. 2d 590, 593 (2003).

¶ 14 B. TheThree Ba sic Components of Reasonable ness ¶ 15 Two panels of our appellate court h av e qu es t i o n ed wh et h er I llinois rec og nizes the leg itimate business interest of the promisee as a require ment of an enfor cea ble restric tive

covena nt. We now take the oppor tunity to corre ct this misconception. ¶ 16 This court long ago e x plained that a contrac t in total and gene ral restraint of trade was “undoubtedly” void beca

use it “nec essar ily ” injures t he public at larg e and the individual promisor. Such a contra ct deprive s the public of the industry of the promisor, and deprive s the promisor of the opportunity to pursue an occupation and there by support his or her family

. Hursen v. Gavin , 162 I ll. 377, 379-80 (1896). Howeve r, it is equally established that

a restric tive covena

nt will be upheld if it contains a re asonable restra int and the agree ment i s s upported by considera tion. Storer v. Brock
, 351 I ll. 643, 647 (1933) (collecting case s );

acc ord 6 Richard A. L ord, Wil liston on Contracts § 13:1, at 7-11 (4th ed. 2009); Restatement (Second) of Contrac ts § 186 & c mt. a (1981). ¶ 17 “T h e m o d er n , p re v ai l i ng common-law standard of rea sonablen es s fo r em p l o y ee agree ments not to compete applies a three -prong ed test.” BDO Seidman v. Hirshberg
, 712 N.E.2d 1220, 1223 (N.Y. 1999). A restric tive covena nt, assuming it is ancillar y to a v al id employ ment rela tionship, is rea sonable only if the covena nt: (1) is no g reater than is require d for the protec tion of a leg itimate business interest of the employ er- promisee; (2) does not impose undue hardship on the employ ee- promisor, and (3) is not injurious to the public. Id. ; Restatement (Sec ond) of Contrac ts § 187 cmt. b, § 188(1) & cmts. a, b, c (1981)

. Fur ther, 2 the extent of the employ er’ s leg itimate business interest may be limit ed by ty pe of activity
, g eographic al area, and time. Restatement (Second) of Contracts § 188 cmt. d (1981). This

Sin ce anc il lari ty is re q u i r e d
, o n e m ay des cr ibe the te st of re aso nab le nes s as having fou r 2 el ements, exp re ssl y li st ing anc il la ri ty, ins te ad of thr ee el ements, whic h ass um es anc il la ri ty. See 15 Gra ce Mc Lane Gie sel , Cor bin on Co ntr act s § 80.6 , at69 ( re v. ed. 20 03)

.

-4-court long ag o established the three -dimensional rule of rea son in I llinois and has repe atedly

acknow ledg ed the require ment of the promisee’ s leg itimate bu s i n ess interest down to the prese nt day

. ¶ 18 In Hursen v. Gavin , 162 I ll. 377 (1896), afte r rec iting the g ener al principle that contra cts in total and g ener al re straint of trade are void as ag ainst public policy , this court stated:

“B ut a contra ct, which is only in partial restra int of trade
, is valid, provided it is

rea sonable and has a consideration to suppo rt it. [C itations.] The restra int is

rea sonable, when it is such only as to aff ord a fair prot ection to the interests of the party, in whose favor it is imposed. If the restraint goes beyond such fair protection, i t is oppressive to the other party and injurious to the interests of the public

, a n d

, conseque ntly, void upon the ground of public policy. ” (Emphasis added.) Id

. at 380. This court held that the restric tive covena nt was valid, explaining: “One element of the value of t he busi ness t ransf

err ed by appellant to appellee was the probability
, that the custom ers of the former would continue to trade with the latter ***. *** The limit ation here did not g o beyond what was nece ssary for the protec tion of appellee in the prosec ution of the business purcha sed by him, and was, there fore
, rea sonable.” Id. at 382. In Hursen , as in a prior case , Linn v. Sigsbee
, 67 I ll. 75 (1873), this court applied what came to be the Restatement’s three

component test of rea sonablene ss: g iven that the restric tive covena nt was ancillar

y to the sale of the bu s i n es s, (1) the restra int was nece ssary to protec t the leg itimate interest of the promisee; (2) the restra int did not impose a hardship on the promisor or the public; a nd (3) the extent or scope of

the re straint was other

wise re asonable

. ¶ 19 In Bauer v. Sawyer , 8 I ll. 2d 351 (1956), sever al phy sicians wer e members of a Kankakee medical partne rship. The partne rship agree ment provided in pertinent part that if a member withdrew or terminated association with the partne rshi p, that person would not prac tice medicine within a 25-mile radius of Kankakee for five y ear s. Id

. at 353-54. This c ourt held that an injunction should issue ag ainst a phy sician who left the partne rship. This court rec ited the g ener al principles that wer e well est ab l ished by that time: “In deter mining whether a restra int is rea sonable it is nece ssary to c onsider whether enfor ceme nt w ill [ 1] be injurious to the public or [2] cause undue hardship to the promisor, and [3 ] wh et h er t he restra int imposed is g reater than is nece ssary to protec t the promisee. [C itation s

. ]” Id. at 355. In addition, the time and territory limit ations must be rea sonable. Id

. This court considere d eac h of the three rec og nized elements of rea sonablene ss. In so doing, th e co u rt ca refully and specific ally examined the interest o f t h e partne rship-promisee

. The court agree d with the principle that members of a partne rship have a leg itimate busines s i n t er es t in protec ting themselves ag ainst the competition of an outgoing partne r, and that a restric tive covena nt to that eff ect is not opposed to public policy

. Id. at 356-57 (c ollectingauthorities). ¶ 20 In House of Vision, Inc. v . Hiyane , 37 I ll. 2d 32 (1967), an employer br oug ht an ac tion to enfor ce an employ ee’ s covena nt not to compete. This court beg an its analy sis of the restric tive covena

nt by discussing the employ er’ s leg it i m at e business interest: “ Here the interest to be protected was the interest of the plaintif f in its customers. ” (Emphasis added.) Id

. at 37-38. Only afte r this court articulated the employ er’ s leg itimate business interest did it consider the rea sonablene ss of the time and territory limit ations, or the lack there of. Id. at

-5-38-39.

¶ 21 In Cocke rill v. W ilson
, 51 I ll. 2d 179 (1972), the narr ow issue prese nted was whether the time and territory limit ations of the restric tive covena nt wer e g reater th an nece ssary to protec t the plaintiff. Id. at 183. This court beg an its analy sis of the provision by rec iting the three components of rea sonablene ss: injury to the public; undue har dship on the promisor; and the need for the protec tion of the limit ation by the promisee. This court rec og nized that “the interest plaintiff soug ht to protec t by the covena nt was his interest in his clients.” Id

. at 184. ¶ 22 In Mohanty v. St. John He a r t C l i n i c, S

. C. , 225 I ll. 2d 52 (2006), plaintiff- phy sicians soug ht a decla

ratory judgme nt that the restric tive covena nts in their employ

ment agree ments

wer e void. Def

endants, the employ er- clinic and its owner , counter claimed for declaratory , injunctive, and other relief

. The circ uit c ourt conc luded that the g eographic restric tion wa s
rea sonable, b u t t h at the activity restric tion–the prac tice of medicine–wa s g reater than

nece ssary to protec t the defe ndants’ interests, which was card i o l o gy

. The appellate court

reve rsed, concluding that the activity restric tion, within the narr owly drawn g eographic limit s, would not cause undue hardship and was not g reater than neces s ary to protec t the defe ndants’ intere sts. Id. at 61-62. ¶ 23 Be fo re th i s court, plaintiffs contende d, inter alia
, that their restric tive covena nts were

unrea sonably overbr oad in their time and activity restric t i ons. Id

. at 75. In upholding the restric tive covena

nts, this court ex p ressly repe ated the three established components of

rea sonablene ss: “[T] his court has a long tradition of upho l d ing covena nts not to compete in employ ment contra cts involving the perf ormanc e of profe ssional service s when the limit ations as to time and territory are not unrea sonable. [C itations.] In deter mining whether a restra int is rea sonable it is nece ssary to consider whether enfor ceme nt will be injurious to the public or cause undue hardship to the promisor, and whether the restraint imposed is greater than is nece ssary to protect the promisee

. [C itation.] ” (Interna l quotation marks omitted.) (Emphasis adde d.) Id. at 76. In upholding the restric tive covena nt, this court stated: “ Thus, we find that the restraint on the practice of medicine

, here, was not greater than nece ssar y t o p r o t ect the defendants’ interests . This is particula rly so beca

use the restric tion on plaintiffs is in e ffe ct only within

a nar rowly circ umscribed a

rea of a la rg e metropolitan a

rea .” (Empha sis added.) Id . at 77. ¶ 24 This discussion shows that this court, from as far back as Linn and Hursen , through case s such as Bauer and House of Vision , and down to the prese nt day in Mohanty
, has repe atedly

rec og nized the three -dimensional rule of rea son, specific ally including the element of the leg itimate business interest of the promisee. Howeve r, in Sunbelt Rentals, Inc. v. Ehlers
, 394 I l l

. Ap p

. 3d 421 (2009), a panel of our appellate court conclude d that the test o f

rea sonablene ss of a restric tive covena nt is something other than the prev alent three -prong inquiry long e stablished by

this court. ¶ 25 I n S

u n b el t , E h lers was a sales repr esentative for Sunbelt. He had enter ed i n t o an
em p l o y ment agree ment containing a restric tive covena nt providing that he would not compete with Sunbelt within a 5 0-mile radius of any of S unbelt’s s tores for one y ear afte r

-6-the date of the ex piration or t ermination of his employ ment. Ehlers resig ned from S u nb elt and, within the one-year restric tion, a ccepted a position with one of Sunbelt’s competitors. Sunbelt sued Ehlers and his ne w employer, seeking injunctive relief

. Sunbelt
, 394 I ll. App. 3d at 423-25. ¶ 26 The circ u i t co u rt enfor ced the restric tive covena nt, finding that the time and ter ritory limit ations of the restric tive covena nt wer e rea sonable, but did not appl y t h e leg itimate b u s i n es s interest test as interpre ted by the appellate court. Id. at 425. The appellate court briefly surveyed only some of the abo v e-discusse d case s from this court and conclude d: “Ac cording ly
, beca

use (1) the Supreme Court of I llinois has never embra ced the ‘leg itimatebusiness-intere st’ test and (2) its application is inconsistent with the sup reme court’s long history of analy sis in restric tive covena nt case s, we reje ct the ‘leg itimate-business-intere st’ test.” Id. at 431. The Sunbelt court presc ribed that a court, when prese nted with the issue of whether a restric tive covena nt should be enfor ced, should evaluate its rea sonablene ss based only on its time and territory restric tions. “Thus, this court need not eng ag e in an additional d iscussion reg arding the application of the ‘leg itimate-business-inte r e s t’ te s t b e c a u s e th a t te s t constitutes nothing more than a judicial g loss incorrec tly applied to this area

of l aw by the appellate court.” Id

. ¶ 27 In the prese nt case , while the ap p el l at e co u rt justices disag ree d among st themselves

conce rning the proper application of the leg itimate busine ss inter est component of the rule of rea son, eac h member of the panel reje cted the conclusions of Sunbelt

. 405 I ll. App. 3d at 723; Id. at 749 (Hudson, J ., specia lly concur ring ); Id. at 755 (O’Ma lley
, J ., dissenting)

. We do likewise. Sunbelt overlooke d o r misapprehe nded thi s court’s above-disc ussed case l aw that est abli shed the three -prong inquiry into the rea sonablene ss of restric tive covena nts. Contrar y to this authority
, Sunbelt “disallows inquiry into whether the employer has an interest o th er than suppression of ordinary competition.” Id. at 723 (lea d op.). “ Sunbelt seems to say that the employer’ s leg itimate interest is whateve r the parties agree to in the contra ct. [C itation.] I f the employer’ s leg itimate inter est is a matter of contra ct only
, then the quoted languag e in the above supreme c ourt ca ses would be supe rfluous.” Id . at 733. ¶ 28 Specifica lly
, the appella t e co u rt i n S u n belt misread this court’s Mohanty decision in support of its err oneous conclusion. The appellate court discussed Mohanty and even quoted Mohanty ’s reci t at i o n of the three -prong rule of rea son. Sunbelt
, 394 I ll. App. 3d at 430 (quoting Mohanty
, 225 I ll. 2d at 76). Howeve r, the appellate court observe d that the Mohanty court did not mention the e mploy er’ s leg itimate business interest in upholding that restric tive

covena nt. Therefo re , the appellate court conclude d that the leg itimate business interest component of the t hree -prong rule of rea son was no longe r valid i n I l l i n o i s , if it ever was. Sunbelt , 394 I ll. App. 3d at 430-31. ¶ 29 We emphatica lly disag ree

. Even a cursor y revie w of Mohanty ref

utes this rea soning. The plaintiff-phy sicians contende d that the restric tive covena nts wer e unrea sonable only beca use their activity and temporal restr i ct i o n s were overbr oad. Mohanty
, 225 I ll. 2d at 64. They

never challeng ed the defe ndant-e mploy ers’ leg itimate busine ss inter est, there by conce ding the point. Fur

ther, this court expressly rec ited the leg itimate interest of the promisee as a component of the three -prong rule of rea son. Indeed, Mohanty ’s rec ognition of the leg itimate business interest of th e p ro m i see was unanimous. The specia l concur renc e observe d that

-7-plaintiffs d i d n o t dispute that defe ndants had “a clea rly asce rtainable rig ht in need of protec tion.” Id. at 80 (Ka rmeier
, J ., specia lly concur ring
, joined by Gar

man , J

. ). Even the dissent rec og nized “the leg itimate business interests that employers such as defe ndants wish to protec t.” Id. at 93 (F ree man, J ., dissenting)

. L astly
, in upholding the restric tive covena nt, this court stated: “ Thus, we find that the restraint on the practice of medicine

, here, was not greater than nece

ssary to protect defendants’ interests .” (Em p h as i s added.) Id

. at 77 (majority op.). Sunbelt

is hereby overr uled. ¶ 30 Fur

ther, in Steam S

a l es Co r p

. v. Summers , 405 I ll. App. 3d 442 (2010), the appe llate

c o u r t p r o p a g a te d S u n b e lt ’ s e r

r o r : “ A s o p p o sed to the leg itimate-business-intere st test, Sunb e lt cites the two-prong rea sonablene ss test appea ring in Mohanty
, the most rec ent supreme court

case addre ssing restric tive covena nts.” Id

. at 457. The court in Steam Sales g oes on to discuss

“ M o hanty ’s rea sonablene ss test versus the leg itimate-business-inte r e s t te s t. ” I d

. T o th e e xtent that Steam Sales char acte rizes Mohanty as deviating from the above- described g ener al three

prong rule of rea son, Steam Sales is hereby overr uled. Ba s ed o n t h is court’s extensive prec edent, we continue to rec og nize the leg itimate business interes t o f t he promisee as a long- established compone nt in the three- prongrule of r eason.

¶ 31 C. Application of Employ er’ s L eg itimate Business Intere st ¶ 32 Be fore this court, Reliable co n t en d s th at t h e lower courts misapplied the leg itimate business interest o f th e p rom isee, as a component of the three -prong rule of rea son, in assessing the enfor cea

bility of the noncompetition a g ree ment. The separ ate appellate court opinions in the prese nt case debate d two approa ches to applying this component. We assess these a naly tical sche mes. ¶ 33 C er t ai n l y , t h e p re v al en t t h re e- p rong inquiry “fle shes out the leg al standard [ o f

rea sonablene ss] a bit.” Consultant s & Designers, Inc. v. Butler Servic e Group, Inc. , 720 F.2d 1553, 1557 (11th Cir. 1983). Howeve r, the three -prong test of rea sonablene ss rema ins “unstructur ed.” Reddy v. Community Health Foundation ofMan , 298 S.E.2d 906, 911 (W. Va. 1982). Notably
, “[p] rec edents are of less than usual value beca use the question of

rea sonablene ss must be decide d on an ad hoc basis. There is no inflexi ble formula.” (Interna l quotation marks omitted.) Consu l t a n t s & Designers, Inc. , 720 F.2d at 1557; acc ord Ferrofluidics Corp. v. Advanc ed Vac uum Components, Inc

. , 968 F.2d 1463, 1470 (1st Cir. 1992) (collec ting authorities); Restatement (Second) of Contracts § 188 cmt. a, at 42 (1981) (“N o mathematica l formula ca n be off ere d for this proce ss”). ¶ 34 Un d er s o m e ci rc u m s t ances, “a promise to ref rain from competition is a natura l and

rea sonable means of protec ting a leg itimate interest of the promisee.” Restatement (Second) of Contracts § 188 cm t

. b (1 981). In the case of a postemploy ment restra int, wher e the employ er- promisee exacts from the employee a promise not to compete afte r termination of the employ

ment, the restra int i s u s ually justified on the g round that the employer has a leg itimate business interest in restra ining the employ ee from appr opriatingthe employ er’ s (1) confide ntial trade information, or (2) customer relationships. Included within these prec epts are sever al fa ctors for a cour t to consider. Id

. cmts. b, g ; acc ord Harlan M. B lake, Employe e Agree ments Not to Compete , 73 Har v. L . Rev. 625, 651-74 (1960)

.

-8-¶ 35 Be yond this recognized description of the leg itimate business interest of the employ er,

some courts have endea

vored to “fur

ther explain what must be considere d.” 1 5 Gr ac e McL ane Giesel, Corbin on Contracts § 80.6, at 70 (re v. ed. 2003). Such attempts usually collapse into lists of fac tors. See, e.g. , Chambers-Dobson, Inc. v. Squier , 472 N.W.2d 391, 400 (Ne b. 1991) (and case s cited there in); Arthur Murray Dance Studios of Cleveland, Inc.

v. W itter , 105 N.E.2d 685, 694-99 (Ohio C.P. 1952) (listing f actor s). Fur

ther, c ompilers of such lists repe at there is n o ex ac t fo rmula require d in a court’s analy sis. “The fac tors or considerations to be used in that balanc ing test are not weighted; that i s , there is no presc ribed method by which more or less weight is assig ned to eac h fac tor to be considere d in the balanc ing test ***.” Chambers-Dobson
, 472 N.W.2d at 400. Also, compilers of such lists repeat that the f

actor s therein a

re not e x clusive. Arthur Murray , 105 N.E.2d at 695. ¶ 36 Howeve r, our appellate court did develop a formula for assessing the leg itimate busine ss interest of the promisee. Fur ther, some of the fac tors considere d in this formula wer e highly weighted, if not conclusive. In Nationw ide Adve rtising Servic e, Inc. v. Kolar
, 28 I ll. App. 3d 671 (1975), plaintiff a dvertisingag ency soug ht to enfor ce a restric tive covena nt a g ainst its fo rmer employee and appea led the denial of enfor ceme nt. Plaintiff contende d that “u n d er I llinois law an employer such as it had a leg itimate business interest in its customers which

was subject to protec tion through enfor ceme nt of an employ ee’ s covena nt not to compete.” Id. at 673. ¶ 37 In summarizing t he principles on which the court based i ts earlier analy sis in the same
case ( Nationw ide Adve rtising Serv ice, Inc. v. Kolar
, 14 I ll. App. 3d 522 (1973))
, the Kolar court wr ote as follows: “[A]n employer’ s business interest in c ustomers is not alway s subject to protec tion t h ro ugh enfor ceme nt of an employee’ s covena nt not to compete. Such interest i s deeme d proprieta

ry and protec table only if cer tain fac tors are shown. A covena nt not to compete will be enfor ced if [1] the employee acquir ed confide ntial information t h rough his employ

ment and subsequently attempted to use it for his own b en ef i t

. [C itation.] An employer’ s interest in its customers also is deeme d proprieta ry if, [2] by the nature of the business, the customer relationship is near -per manent and but for his association with plaintiff, defe ndant would never have had contac t with the clients in question. ( Cocke rill v. W ilson (1972), 51 I ll. 2d 179 ***; Canfield v. Spear (1969), 44 I ll. 2d 49 ***.) Conversely
, a protec t ab l e i n t ere st in customers is not

rec og nized wher e the customer list is not secr et ( House of Vision, Inc. v. Hi ya n e (1967), 37 I ll. 2d 32 ***), or wher e the customer re l at i o n s h ip is short-term and no specia liz ed knowledg e or trade secr ets are involved.” Kolar
, 28 I ll. App. 3d at 673. Although the Kolar court cited this court’s decisions in Cocke r i l l
, Ho u s e of Vision , and Canfield as authority for this formulation of a l egit imate business interest “test,” none of those case s used that test in their respe ctive analy ses. Rather, eac h decision was based on the totality of its own fac ts. ¶ 38 During the 36 y ear s subsequent to Kolar
, our appellate court has variously set forth this “test” as the sine qua non for the enfor ceme nt of a covena nt not to compete. See, e.g. , Hanche tt Paper Co. v. Melc hiorre
, 341 I ll. App. 3d 345, 351 (2003); Dam, Snell & Taveirne,

-9-Ltd. v. Verchota
, 324 I ll. App. 3d 146, 151-52 (2001); Carter-Shi el ds v. Alton Health

Institute , 317 I ll. App. 3d 260, 268 (2000); Springfield Rare Coin Galleries, Inc. v. Mileham
, 250 I ll. App. 3d 922, 929-30 (1993); A.B. Dick Co. v. American Pro-Tech
, 159 I ll. App. 3d 786, 792-93 (1987); Reinhardt Printing Co. v. Feld
, 142 I ll. App. 3d 9, 15-16 (19 86); see also Outsource Internati onal, Inc. v. Barton , 192 F.3d 662, 666 (7th Cir. 1999) (applying I l l i n o i s law); Curtis 1000, Inc. v. Suess , 24 F.3d 941, 947 (7th Cir. 1994) (“B ut I llinois
, unlike Delaw are , limit s the interests that a covena nt not to compete may protec t t o trade

secr ets, confide ntial information, and relations with ‘nea r-pe rmane nt’ cu s tomers of the employ er” ). Even further
, and exemplary of this erro n eous prolifer ation of templates, our appellate court has develope d two alternative “tests” to deter mine its “nea

r-pe rmane nce” prong of its conclusive two-prong test for a promisee’ s leg itimate business interest. Some courts analy

ze the near -per

manent relationsh ip a c c o r d in g to s e v e n o b je c ti ve fac tors. See, e.g. , Hanche tt Paper , 341 I ll. App. 3d at 352 (quoting Audio Properties, Inc. v. Kovach
, 275 I ll. App. 3d 145, 148-49 (1995) ); Office Mate s 5, North Shore, Inc. v. Haze n , 234 I ll. App. 3d 557, 572-73 (1992). In contra st, other courts follow a “natur e of the business” test. See, e.g. , Lawrence & Allen, Inc. v

. Cambridge Human Resource Group, Inc. , 292 I ll. App. 3d 131, 142 (1997) ( collectingcase s). ¶ 39 In the prese nt case , the lead opinion in the appellate co u rt ap p l i ed t hese “tests” in up h o l d i n g the circ uit court’s ruling that the noncompetition restric tive covena nt was unenfor cea

ble. 405 I ll. App. 3d at 743-48. The specia lly concur ring justice agree d with the circ uit c ourt’s result, but based on the totality of the circ umstances prese nted in the rec ord. He stated: “Ana ly

zing such covena

nts w ith r efe renc e to the totality of the circ umstances to deter mine if an employ er has a protec table interest, as opposed to utilizing the ty pical rig id version of the leg itimate-business-intere st test, will lead to results more g rounded in the true considerations of a g iven ca se.” Id. at 751 (Hudson, J., specially concur ring ). We agree

. 3 ¶ 40 To the extent the appellate court’s “tests” are conclusive, they are plainly contra ry to the above- described g ener al principles perta ining to the promisee’ s leg itimate business interest based on the totality of the circ umstances of the particula r case

. T h e u n derstanda ble temptation is to view exemplary fac ts prese nted in particula r case s as the outermost boundary of the inquiry

. Thus, prec edent is se t to guide future case s. Howeve r, “if it wer e possible to

m ak e a complete list today
, human inge nuity would rende r the list obsolete tomorrow

. ” Arthur Murray , 105 N.E.2d at 695. ¶ 41 Parties have long turned to the common law to argue for or ag ainst the enfor cea bility of noncompetition agree ments. “The re is, there fore
, an es p ecia lly well-de veloped and

s i gn i fi ca n t body of judicial decisions applying the g ener al rule of rea son *** to such promises.” Restatement (Second) of Contracts § 187 cmt. a (1981). The common law, based

on rea son and experience
, has rec og nized sever al fac tors and subfac tors within the

Anot her si de- by- si de compari son o f t he app el la te court ’s app li cat ion of the le giti m at e 3 bus ine ss int e re st te st , wit h the app li cat ion of the pro m is ee’ s le giti m at e bus ine ss int er est as a component of the rul e of re aso n, is fou nd in the m aj or i t y o pin ion and spe ci al con curre nce in A.B. Dic k , 159 I ll . App. 3d a t 7 92- 94; Id. at795 (J igant i, J ., sp eci al ly conc urr ing).

-10-component of the promisee’ s leg itimate business interest.

¶ 42 Howeve r, we hold that such fac tors are on l y n o n co n cl u s ive aids in deter mining the promisee’ s leg itimate business interest, which in turn is but one component i n the three

prong rule of rea son, g rounded in the totality of the circ umstances. “Ea ch case must be deter mined on its own particula r fac ts. [C i t at i o n s.] Reasonable ness is g aug ed not just by

some but by all of the circ umstances. [C itations.] The same identical contra ct and restra int may be rea sonable and valid under one set of c ircumstance s, and unre asonable and invalid under another set of circ umstances.” (Emphasis in orig inal.) Arthur Murray , 105 N.E.2d at 692-93. Acc ord Restatement (Second) of Contracts § 186 cmt. a, § 188 cmt. g

. We expressly observe that appellate court prec edent for the past three deca des rema ins intact, but only as nonconclusive examples of applying the promisee’ s leg itimate business interest, as a component of the three -prong rule of rea son, and not as establishing inflexi ble rules beyond the g ener al and e stablished three -prongrule of r eason. ¶ 43 In sum, the leg itimate business interest test is still a viable test to be employed as part of the three -prong rule of rea son to deter mine the enfor cea

bility of a restric tive covena nt not to compete. Howeve r, the two-fa ctor test cre ated in Kolar
, in which a near -per manent customer relationship and the employ ee’ s acquisition o f confide ntial information throug h his employ ment are deter

minative, is no longe r valid. Rather
, we adopt the pos ition of J ustice Hudson ’ s s p e c ial concur

renc e, which is: whether a leg itimate business interest exis ts is based

on the totality of the fac ts and circ umstances of the individual case

. Fa ctors to be considere d in this analy sis include, but are n o t l i m i t ed to, the near -per manenc e of customer relationships, the employ ee’ s acquisition of confide ntial information t h rough his employ ment, and time and place restric tions. No fac tor car ries an y m ore weight than any other, but rathe r its importance will depend on the specific fac ts and circ umst an ce s o f the individual case.

¶ 44 D. Remand ¶ 45 Be fore this court, Reliable rea sons: “I f the circ uit court applied the wrong leg al standard to the fac ts of the case , then rema nd is the proper reme dy to g ive the court an opportunity to apply the cor

rec t test.” The c ircuit court r uled that the noncompetition r estrictive covena nt

was unenfor cea

ble. The appellate court specia l concur renc e agree d with the lead opinion that the circ uit court ruling shoul d b e upheld, but based on the totality of the circ umstances prese nted in the rec ord. 405 I ll. App. 3d at 752 (Hudson, J ., specia lly concur ring ). Whil e the dissent agree d with the specia l concur renc e’s view of the prom i s ee ’s leg itimate business interest, he would have reve rsed and rema nded for further proce eding s. Id. at 759 (O’Ma lley
, J ., dissenting)

. ¶ 46 “When a case is tried under an incorre ct theory of law the appropr iate action is to reve rse the judgme nt and rema

nd for a new trial.” Sparling v. Peabody Coal Co. , 59 I ll. 2d 491, 496 (1974). In the prese nt case , the parties pres e n te d th e ir evidenc e and fashioned their arguments based on the appellate court’s rig id and prec lusive leg itimate business interest test. The circ uit court conscie ntiously applied t h i s t es t in ruling that the noncompetition restric tive

covena nt was u n en fo rc eable

. “Particula rly wher e, as here
, the ultimate issue–the

-11-rea sonablene ss of the agree men t s –turns upon the totality of the fac ts and circ umstances

surrounding them, the parties must be g iven a full opportuni t y t o develop the nece ssary evidentiar y r e c o r d

. ” R ollins Burdick Hunter of W isconsin, Inc. v. Hamilton
, 304 N.W.2d 752, 757 (Wis. 1981). We observe that the circuit need not c onduct an e ntirely new e videntiary hearing, but rathe r may allow the parties to supple m ent the exis ting rec ord with any additional evidenc e and a rgument perta ining to the totality of the c ircumstance s.

¶ 47 I I I . CONCLUSI ON ¶ 48 For the fore g oing rea sons, the judgme nt of the appellate court and the order of the circ uit

co urt of Du Pag e County are reve rsed, and the cause is rema nded to the circ uit court for further proce eding s consistent with this opi nion.

¶ 49 J udgments reve rsed; ¶ 50 cause rema

nded.

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