IN THE SUPREME COURT OF THE STATE OF HAWAI‘I

---o0o---

________________________________________________________________

PRUDENTIAL LOCATIONS, LLC,

Respondent/Plaintiff-Appellant,

vs.

LORNA GAGNON and PRESTIGE REALTY

GROUP LIMITED LIABILITY COMPANY,

Petitioners/Defendants/Cross-Claim Defendants-Appellees,

and

RE/MAX LLC and LORRAINE CLAWSON,

Respondents/Defendants/Cross-Claimants/

Third-Party Plaintiffs-Appellees,

and

KEVIN TENGAN,

Respondent/Third-Party Defendant-Appellee.

________________________________________________________________

SCWC-16-0000890 and SCWC-17-0000216

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS

(CAAP-16-0000890 & CAAP-17-0000216; CIV. NO. 13-1-2328)

FEBRUARY 17, 2022

McKENNA AND WILSON, JJ., AND CIRCUIT JUDGE MORIKAWA, ASSIGNED BY 

REASON OF VACANCY, WITH RECKTENWALD, C.J., CONCURRING IN PART 

AND DISSENTING IN PART, WITH WHOM NAKAYAMA, J., JOINS

OPINION OF THE COURT BY McKENNA, J. 

Electronically Filed

Supreme Court

SCWC-16-0000890

17-FEB-2022

09:22 AM

Dkt. 66 OP
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I. Introduction

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 nonsolicitation 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. 
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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.

II. Background

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
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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 
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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 
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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 Group, LLC (“Prestige”). A few

Locations real estate agents also left Locations to open 

Prestige. 

A. Circuit court proceedings

Locations filed a complaint in the circuit court against 

Gagnon and Prestige on August 23, 2013, claiming Gagnon violated 

the Non-Compete Agreement by establishing Prestige and 

soliciting Locations’ agents. 

After discovery, Locations filed a motion for partial 

summary judgment seeking enforcement of the Non-Compete 
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Agreement. Locations contended the Non-Compete Agreement was 

tailored to its legitimate business interests, and that Gagnon 

had acknowledged the reasonableness of its duration, scope, and 

geographic area by signing it. Locations asserted it had a

legitimate interest in protecting confidential business 

information and preventing “its managerial personnel from taking 

actions harmful to its business, such as forming a competing 

real estate brokerage firm and poaching Locations’ agents.” 

Locations acknowledged that: (1) pursuant to Technicolor, 

Inc. v. Traeger, 57 Haw. 113, 122, 551 P.2d 163, 170 (1976), a

non-compete clause must protect a legitimate business interest 

and be reasonable; and (2) to be reasonable, a non-compete 

clause must not: (a) be “greater than required for the 

protection of the person for whose benefit it is imposed[;]” (b) 

“impose undue hardship on the person restricted[;]” (c) have a 

“benefit to the covenantee [that] is outweighed by injury to the 

public[.]” Locations claimed enforcing the non-compete clause

against Gagnon was necessary because she had access to 

“technologies and techniques” tailored to Locations and its 

“website-related technology that provides analysis and reports 

concerning preferences of its consumers.” 

Locations also maintained the Non-Compete Agreement did not 

impose undue hardship on Gagnon because it only prevented her 

from starting a brokerage firm that would compete with 
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Locations, but it did not restrict her from working for an 

already existing firm. 

Locations also contended Gagnon violated the nonsolicitation clause, citing Gagnon’s deposition testimony 

regarding conversations in which Locations’ former agents 

expressed interest in joining Gagnon after learning she was 

leaving Locations. 

Gagnon filed a memorandum in opposition to Locations’ 

motion for partial summary judgment and a cross-motion for 

summary judgment. Gagnon contended that through the deposition 

testimony of William Chee (“Chee”) and Dan Tabori (“Tabori”), 

Locations’ President and Vice-President of Business Operations,

Locations admitted the sole purpose of the Non-Compete Agreement

was to prevent new competition, thereby restricting trade and 

commerce in violation of HRS § 480-4(a).1 Gagnon cited Chee’s 

statement that, “when someone goes out and starts their own 

firm, it provides a bigger threat to our company, which we’re 

trying to protect against,” and Tabori’s testimony that, “we

want to make sure that we don’t bring people on who learn what 

we do and then go ahead and start their own company.”

Furthermore, Gagnon pointed out that of the eighteen 

coaches employed by Locations, only some were bound by non-

 

1 HRS § 480-4(a) provides: “Every contract, combination in the form of 

trust or otherwise, or conspiracy, in restraint of trade or commerce in the 

State, or in any section of this State is illegal.”
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compete agreements, and Locations’ executives, including Tabori,

were not under non-compete covenants. Gagnon argued that if 

employees and managers with similar or more access to 

confidential information than her were not restricted by noncompete agreements, then Locations had no legitimate interest in 

the Non-Compete Agreement with her. 

Gagnon alternatively argued that if there was a legitimate 

interest, the non-compete clause was unreasonable because it

encompassed the entire State of Hawai‘i, was unduly burdensome 

because her only source of income came from Prestige, and it 

limited the public’s ability to choose a provider of real estate 

services. Gagnon also maintained with respect to the nonsolicitation clause that she did not solicit any of Locations’ 

agents and, because Locations’ agents were independent 

contractors, they were not “employees” or “persons affiliated 

with” Locations under the clause.

The circuit court held a hearing on the parties’ motions 

for summary judgment on August 3, 2016.2 Locations maintained it 

had a legitimate interest in protecting its confidential 

information. However, Locations admitted the Non-Compete 

Agreement did not mention confidentiality and that it “didn’t 

move [for summary judgment] on whether Ms. Gagnon used 

 

2 The Honorable Karl K. Sakamoto presided.
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confidential material or misappropriated confidential material.”

Locations argued that, even without evidence that Gagnon used 

any of its confidential information, Gagnon violated the NonCompete Agreement.

On August 25, 2016, the circuit court issued its findings 

of fact (“FOFs”), conclusions of law (“COLs”), and orders 

denying Locations’ motion for partial summary judgment and 

granting Gagnon’s cross-motion for summary judgment. The 

circuit court’s findings included the following:

33. Locations has produced no evidence that Defendants 

were in possession of and had been using any confidential 

or proprietary information, or any trade secrets of 

Locations.

34. Locations does not contend that any of the Defendants 

are using any technology, concept, method, training or idea 

of Locations.

35. Locations does not dispute that there was no trade 

secret violation.

36. All coaches at Locations have access to the same 

information at Locations.

. . . .

39. At least six noncompete agreements were in effect at 

any one time for persons with the same access to the same 

information, with the same job description, the same 

responsibilities, and the same geographic scope. 

40. Former and current employees and managers at 

Locations, including other sales coaches, were and

currently are not bound by or party to any non-compete 

agreement. 

41. Of the 18 coaches, some were bound to one of the 6 

versions of non-compete agreements and some were not bound 

by any non-compete restriction.

. . . .

48. Ms. Gagnon could take all that she knew or learned 

while at Locations and could work independently as an 

employee or independent contractor for an existing real 

estate brokerage firm in Hawai‘i.

49. At present, Ms. Gagnon’s only means of support for 

herself and her five children “is the income, if any, that 

[she] may earn working at Prestige.”

50. Enforcement of the Noncompete Clause [] would likely 

result in the forced forfeiture of Ms. Gagnon’s real estate 

broker’s license in [Hawai‘i].
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51. Enforcement of the Noncompete Clause would require Ms. 

Gagnon to leave the State of [Hawai‘i] to find work as a 

real estate broker.

52. Enforcement of the Noncompete Clause would place an 

undue hardship on Ms. Gagnon by severely limiting her 

earning potential in the only industry in which she has 

worked in the last 27 years.

The circuit court concluded that Locations’ sole interest 

in enforcing the non-compete clause was to prevent competition

and therefore lacked a legitimate protectible interest and was 

illegal under HRS § 480-4(a). The circuit court also 

alternatively deemed the non-compete clause unreasonable under

Traeger, 57 Haw. at 122, 551 P.2d at 170, because it: (1) was 

greater than required for Location’s protection; (2) imposed an 

undue hardship upon Gagnon; and (3) the benefit to Locations was 

outweighed by the injury to the public. The circuit court also 

found the non-solicitation clause unreasonable and an illegal 

restraint on trade and commerce. 

The circuit court issued its judgment in favor of Gagnon on 

December 9, 2016. On December 28, 2016, the circuit court also 

granted in part Gagnon and Prestige’s motion for attorney’s fees 

and costs. Locations appealed the circuit court’s decision to 

the ICA. 

B. ICA proceedings

On April 15, 2020, the ICA issued its memorandum opinion. 

Prudential Locations, LLC v. Gagnon, CAAP-16-0000890 (App. Apr. 

2020) (mem.). The ICA held that the non-compete clause was
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reasonable because its geographical scope was limited to the 

State of Hawai‘i and its one-year duration was “no longer than 

other such covenants approved by Hawai‘i courts.” Prudential 

Locations, LLC, mem. op. at 14. The ICA further ruled that the 

non-compete clause did not impose undue hardship on Gagnon and 

the benefit to Locations was not outweighed by any injury to the 

public. Id. The ICA held the non-solicitation clause valid for 

the same reasons. Prudential Locations, LLC, mem. op. at 15. 

The ICA did not, however, address whether Locations had a 

legitimate protectible interest.

The ICA vacated the circuit court’s FOFs, COLs, and orders 

on the parties’ motions for summary judgment and the circuit 

court’s award of attorney’s fees and costs. Id.

III. Standard of Review

A circuit court’s grant or denial of summary judgment is 

reviewed de novo. Ralston v. Yim, 129 Hawaiʻi 46, 55, 292 P.3d 

1276, 1285 (2013). Furthermore,

Summary judgment is appropriate if the pleadings, 

depositions, answers to interrogatories and admissions on 

file, together with the affidavits, if any, show that there 

is no genuine issue as to any material fact and that the 

moving party is entitled to judgment as a matter of law. A 

fact is material if proof of that fact would have the 

effect of establishing or refuting one of the essential 

elements of a cause of action or defense asserted by the 

parties. The evidence must be viewed in the light most 

favorable to the non-moving party. In other words, we must 

view all of the evidence and inferences drawn therefrom in 

the light most favorable to the party opposing the motion.

129 Hawaiʻi at 55-56, 292 P.3d at 1285-86 (cleaned up). 
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In sum, this court’s case law indicates that a summary 

judgment movant may satisfy their initial burden of 

production by either (1) presenting evidence negating an 

element of the non-movant’s claim, or (2) demonstrating 

that the non-movant will be unable to carry their burden of 

proof at trial. Where the movant attempts to meet their 

burden through the latter means, they must show not only 

that the non-movant has not placed proof in the record, but 

also that the movant will be unable to offer proof at 

trial. Accordingly, in general, a summary judgment movant 

cannot merely point to the non-moving party’s lack of 

evidence to support their initial burden of production if 

discovery has not concluded. (Merely asserting that the 

non-moving party has not come forward with evidence to 

support its claims is not enough.).

129 Hawaiʻi at 60-61, 292 P.3d at 1290-91 (cleaned up). 

IV. Discussion

Gagnon’s Application presents four questions:

A. Whether the ICA’s Opinion that held a Non-Compete 

Agreement whose sole admitted intent by its drafter was to 

prevent competition legal and enforceable was directly 

inconsistent with the Hawai‘i statutory and case law. 

B. Whether the ICA committed a grave error in failing to 

address the absence of any legitimate protectible interest 

in support of the Non-Compete Agreement.

C. Whether the ICA committed a grave error in its analysis 

of the “reasonableness” of the Non-Compete Agreement.

D. Whether the ICA committed a grave error in failing to 

determine the protectible interest for the Non-Solicitation 

clause and in enforcing a restriction against the 

solicitation of “employees” and “affiliates” against “real 

estate brokers.”

A. Summary judgment was properly granted in favor of Gagnon as

to the non-compete clause 

1. The enforceability of non-compete covenants in Hawai‘i 

and other states

Under the common law, restrictive covenants in employment 

agreements were considered valid as long as they were 

reasonable. Edwards v. Arthur Andersen, LLP, 189 P.3d 285, 290 
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(Cal. 2008). The more recent trend in the United States has 

been toward restricting the enforceability of non-compete 

covenants. See Rachel Arnow-Richman, The New Enforcement 

Regime: Revisiting the Law of Employee Competition (And the 

Scholarship of Professor Charles Sullivan) With 2020 Vision, 50 

Seton Hall L. Rev. 1223 (2020) (discussing different states’ 

approaches to non-competition covenants). 

While the majority of states continue to apply some form of

the common law reasonableness analysis, others have moved toward 

bans on all or specific types of non-compete covenants. For 

example, California law provides that “every contract by which 

anyone is restrained from engaging in a lawful profession, 

trade, or business of any kind is to that extent void[,]” with 

statutory exceptions for non-compete agreements related to the 

sale and dissolution of corporations, partnerships, and limited 

liability corporations. CAL. CIVIL CODE § 16600 (West through Ch. 

19 of 2021 Reg. Sess.); Edwards, 189 P.3d at 291 (“[O]ur courts 

have consistently affirmed that section 16600 evinces a settled 

legislative policy in favor of open competition and employee 

mobility.”).3

 

3 North Dakota, Oklahoma, and Washington D.C. have also passed 

legislation generally prohibiting non-compete covenants. N.D. CENT. CODE § 9-

08-06 (2019); OKLA. STAT. tit. 15, § 217 (2001); D.C. CODE § 32-581.02 (2021). 

Other states have prohibited non-compete covenants for certain categories of 

employees. For instance, Illinois, Maine, Maryland, Massachusetts, New 

Hampshire, Rhode Island, and Washington have enacted legislation prohibiting 
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Under Hawaiʻi law, pursuant to HRS § 480-4(a), “Every 

contract, combination in the form of trust or otherwise, or 

conspiracy, in restraint of trade or commerce in the State, or 

in any section of this State is illegal.” HRS § 480-4(c) then

enumerates several types of restrictive covenants that may be 

lawfully entered into “ancillary to a legitimate purpose not 

violative of this chapter.”4 (Emphasis added.) 

 

employers from entering into non-compete covenants with employees below 

certain income levels. 820 ILL. COMP. STAT. 90/10 (2017); ME. STAT. tit. 26, § 

599-A (2019); MD. CODE ANN., LAB. & EMPLY. § 3-716 (2019); MASS. GEN. LAWS ch. 149, 

§ 24L (2021); N.H. REV. STAT. ANN. § 275:70 (2019); 28 R.I. GEN. LAWS § 28-59-3 

(2020); WASH. REV. CODE § 49.62.020 (2020). 

4 HRS § 480-4(c) provides:

Notwithstanding subsection (b) and without limiting the 

application of subsection (a), it shall be lawful for a 

person to enter into any of the following restrictive 

covenants or agreements ancillary to a legitimate purpose 

not violative of this chapter, unless the effect thereof 

may be substantially to lessen competition or to tend to 

create a monopoly in any line of commerce in any section of 

the State:

(1) A covenant or agreement by the transferor 

of a business not to compete within a 

reasonable area and within a reasonable period 

of time in connection with the sale of the 

business;

(2) A covenant or agreement between partners 

not to compete with the partnership within a 

reasonable area and for a reasonable period of 

time upon the withdrawal of a partner from the 

partnership;

(3) A covenant or agreement of the lessee to be 

restricted in the use of the leased premises to 

certain business or agricultural uses, or 

covenant or agreement of the lessee to be 

restricted in the use of the leased premises to 

certain business uses and of the lessor to be 

restricted in the use of premises reasonably 

proximate to any such leased premises to 

certain business uses;

(4) A covenant or agreement by an employee or 

agent not to use the trade secrets of the 
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In Traeger, 57 Haw. 113, 551 P.2d 163, we considered 

whether the permissible restrictive covenant exceptions in 

HRS 480-4(c)5 are exclusive. We held “the restrictive covenants 

and agreements enumerated under [HRS §] 480-4(c) were not meant 

to be exclusive in their respective fields.” 57 Haw. at 121, 

551 P.3d at 170. We noted the drafters of HRS § 480-4(c) 

“intended to have courts analyze all restrictive covenants that 

are not listed as ‘per se violations,’ and determine their 

validity” based on whether the covenant was “reasonable” as a 

matter of law. Id. We held that a restrictive covenant is 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[.]”6 Traeger, 57 Haw. at 122, 551 P.3d at 170 (cleaned 

up). 

 

employer or principal in competition with the 

employee's or agent's employer or principal, 

during the term of the agency or thereafter, or 

after the termination of employment, within 

such time as may be reasonably necessary for 

the protection of the employer or principal, 

without imposing undue hardship on the employee 

or agent.

5 See supra note 4.

6 Traeger upheld the non-compete clause in question as reasonable, 

concluding there was “ample evidence as to these factors and other 

facts necessary for the court to have made its ‘reasonableness 

analysis.’” Traeger, 57 Haw. at 122, 551 P.2d at 170. But see Hazel 

G. Beh & H. Ramsey Ross, Non-Compete Clauses in Physician Employment 
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Then in 7’s Enterprises, Inc. v. Del Rosario, 111 Hawaiʻi 

484, 493 143 P.3d 23, 32 (2006), we held in relevant part that, 

while not exhaustive, “training that provides skills beyond 

those of a general nature is a legitimate interest which may be 

considered in weighing the reasonableness of a non-competition 

covenant, when combined with other factors weighing in favor of 

a protectible business interest such as trade secrets, 

confidential information, or special customer relationships.” 

Hence, although the permissible restrictive covenant exceptions 

provided in HRS 480-4(c) are not exclusive, HRS § 480-4(c) 

requires that a restrictive covenant or agreement in restraint 

of commerce or trade be “ancillary to a legitimate purpose not 

violative of [Chapter 480].” Even if a restrictive covenant 

otherwise satisfies the Traeger three-factor reasonableness 

test, it is unenforceable unless it is ancillary to a legitimate 

purpose not violative of Chapter 480.7

 

Contracts Are Bad for Our Health, 14 HAW. B.J. 79, 83-85 (2011) 

(criticizing Traeger’s analysis and the “modern trend among 

jurisdictions that is deferential to employers and elevates freedom of 

contract principles above the traditional judicial stance that rendered 

them suspect”). 

7 In 2015, Hawaiʻi joined the trend toward restricting the enforceability 

of non-compete agreements. HRS § 480-4 was amended to preclude non-compete 

and non-solicitation clauses in the technology industry. The new HRS § 480-

4(d) (Supp. 2015) provides in relevant part: 

Except as provided in subsection (c)(4), it shall be 

prohibited to include a noncompete clause or a nonsolicit

clause in any employment contract relating to an employee 

of a technology business. The clause shall be void and of 

no force and effect.
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2. The non-compete clause was not ancillary to a legitimate 

purpose

The ICA did not address whether the non-compete and nonsolicitation clauses within this Non-Compete Agreement were 

“ancillary to a legitimate purpose” as required by 

HRS § 480-4(c).

Locations argues its legitimate purpose was to prevent 

Gagnon from using proprietary information obtained as a sales 

coach, from forming a competing firm, and from “poaching” its 

agents.

Locations argued it had an interest in “protecting . . . 

its proprietary systems, its customer management, the training 

modules it’s developed over 40 years, the information that was 

provided on a system-wide basis, including managerial reports to 

Ms. Gagnon about how to optimize the success of its sales 

 

In enacting this amendment, the legislature noted that “Hawai[ʻ]i has a 

strong public policy to promote the growth of new businesses in the economy, 

and academic studies have concluded that embracing employee mobility is a 

superior strategy for nurturing an innovation-based economy.” 2015 Haw. 

Sess. Laws Act 158, § 1. It also found that “restrictive employment 

covenants impede the development of technology businesses within the State by 

driving skilled workers to other jurisdictions and by requiring local 

technology businesses to solicit skilled workers from out of the State.” Id. 

The legislature acknowledged Traeger’s holding that non-compete agreements 

can be enforced if they are reasonable. Id. However, the legislature then 

stated, “[e]mployer trade secrets are already protected under the federal 

Uniform Trade Secrets Act and under section 480-4(c)(4), [HRS]; therefore, 

the benefits to the employer from noncompete or nonsolicit agreements are 

duplicative and overreaching protections that may unreasonably impose undue 

hardship upon employees of technology businesses and the Hawai‘i economy.” 

Id. While Act 158 of 2015 bans non-compete agreements in the technology 

industry only, the legislature stressed Hawai‘i’s strong public policy in 

promoting the growth of new businesses.
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force,” as well as Gagnon’s “access to confidential materials, 

proprietary materials that were the secret sauce, if you will, 

of why Locations is one of, if not the most, successful local 

real estate companies in Hawaii.” Locations argued that it 

sought to protection against unfair competition, which it 

contended was knowledge and skills Gagnon allegedly acquired as 

a Locations employee: 

She had been an entrepreneur running her own franchise in 

New Hampshire for four years. What she didn't know was how 

to be a real estate again in this market. She came to 

Hawaii. We paid her hundreds of thousands of dollars to 

learn our systems and train our sales agents, and then she 

left.

(Emphasis added).

Even if non-trade-secret, confidential business information 

constitutes a “legitimate business interest” for purposes of a 

non-compete agreement under Hawaiʻi law, the record in this case 

does not reflect a genuine issue of material fact as to the 

existence of such non-trade-secret, confidential business 

information. Contrary to the dissent, the information that 

Locations asserts constitutes a protectible legitimate purposes 

was not actually “confidential.” As noted by the circuit court, 

other Locations employees and managers with similar or more 

access to the allegedly confidential information were not 

restricted by non-compete agreements.8 For example, only some of 

 

8 As indicated in the circuit court’s FOF 43 quoted above, two coaches 

hired after Gagnon had no-post employment restriction agreements. Also, as 
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the eighteen sales coaches employed by Locations were subject to 

non-compete agreements. Further, despite Locations’ purported 

confidentiality concerns, the non-compete clause only prohibited 

Gagnon from starting her own firm, but permitted her to work for 

an existing brokerage firm even within one year of leaving 

Locations. In addition, Locations did not produce any evidence 

of and did not dispute that there was no trade secret violation.9 

Locations also argued that a protectible “legitimate 

purpose” was to prevent Gagnon from forming a competing firm. 

Tabori stated during his deposition that preventing competition 

from new firms was a purpose of the non-compete agreement: 

Q. You said that the rationale for having a noncompete 

that prevents someone from forming a new entity such as Ms. 

Gagnon’s restrictive covenant is that you don’t want 

 

indicated in FOFs 37 and 40, the supervisor of the sales coaches as well as 

former or current employees were not bound by any non-compete agreements. 

The record does not reflect that Gagnon was provided with any unique or 

specialized training by Locations. Gagnon actually brought with her to 

Locations twenty-five years of prior experience in the real estate industry 

and was hired as a “sales coach.” Moreover, Locations held monthly corporate 

sales meetings, open to real estate agents from other brokerage firms, where 

training materials were shown via a PowerPoint presentation to all attendees, 

including real estate agents from other firms.

9 Under Hawaiʻi law:

“‘Trade secret’ means information, including a formula, 

pattern, compilation, program device, method, technique, or 

process that:

(1) Derives independent economic value, actual or 

potential, from not being generally known to, and 

not being readily ascertainable by proper means 

by, other persons who can obtain economic value 

from its disclosure or use; and

(2) Is the subject of efforts that are reasonable 

under the circumstances to maintain its secrecy.

HRS § 482B-2 (2008). 
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someone to start up a new competing enterprise against you, 

essentially with your stuff. Fair? 

A. That would be the reason to put that language into the 

noncompete that Lorna Gagnon signed, fair.

Preventing competition, however, is not a legitimate ancillary 

purpose under HRS § 480-4(a). The plain language purpose of 

HRS § 480-4(A) is to prohibit contracts in restraint of commerce 

or trade in the State.

Hence, although based on different reasoning than the 

circuit court, we hold that summary judgment was properly 

granted in favor of Gagnon with respect to the non-compete 

clause. See Kahaikupuna v. State, 109 Hawaiʻi 230, 233–34, 124 

P.3d 975, 978–79 (2005) (affirming summary judgment on different 

grounds than the trial court and explaining that an appellate 

court may affirm a grant of summary judgment on any ground 

appearing in the record) (cleaned up).10

 

10 We note that as part of the reasonableness analysis, Gagnon had argued 

that consumers should be able to choose their own providers of real estate 

services. With respect to non-competes in professional services contracts 

generally, the Washington Court of Appeals has stated, “public policy 

requires [a court] to carefully examine covenants not to compete, even when 

protection of a legitimate business interest is demonstrated, because of 

equally competing concerns of freedom of employment and free access of the 

public to professional services.” See Knight, Vale & Gregory v. McDaniel, 37 

Wash. App. 366, 370, 680 P.2d 448, 452 (Wash Ct. App. 1984). See also

Professor Beh’s article with respect to medical professionals, supra note 6. 

We also note that Rule 5.6 of the Hawaiʻi Rules of Professional Conduct 

provides:

A lawyer shall not participate in offering or making:

 (a) a partnership, shareholders, operating, 

employment, or other similar type of agreement that 

restricts the right of a lawyer to practice after 

termination of the relationship, except an agreement 

concerning benefits upon retirement or as permitted by Rule 

1.17 of these Rules; or
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B. A genuine issue of material fact exists as to one agent 

with respect to the non-solicitation clause 

1. Non-solicitation clauses also require a legitimate

ancillary purpose

Gagnon also asserts the ICA “failed to address the 

independent legality of the non-solicitation clause.”11

Solicitation clauses are also contracts in restraint of 

trade or commerce that require a legitimate ancillary purpose 

under HRS § 480-4(a). As explained above, preventing 

competition is not a legitimate ancillary purpose, and the 

alleged purpose of protecting confidentiality lacks merit in 

this case. 

Workforce stability and customer relationships can, 

however, be legitimate ancillary interests for an agreement 

prohibiting the solicitation of employees. See, e.g., Arpac 

Corp. v. Murray, 589 N.E.2d 640, 649-50 (Ill. App. Ct. 1992) 

(holding that a non-solicitation agreement was “enforceable and 

not void” because it “was reasonably calculated to protect [the 

employer’s] interest in maintaining a stable work force”); 

 

 (b) an agreement in which a restriction on the 

lawyer’s right to practice is part of the settlement of a 

client controversy.

Thus, the Hawaiʻi legal profession does not allow non-compete 

agreements.

11 Gagnon also maintains that real estate agents are not “employees” or 

“affiliates” covered by the non-solicitation clause, and that the nonsolicitation clause was unreasonable if it applied to the solicitation of 

agents. These arguments lack merit and we do not address them further.
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Genesee Valley Tr. Co. v. Waterford Grp., 14 N.Y.S.3d 605, 609 

(N.Y. App. Div. 2015) (“A covenant not to solicit employees is 

inherently more reasonable and less restrictive than a covenant 

not to compete, and an employer has a legitimate interest in 

preventing an employee from leaving to work for a competitor if 

the employee has cultivated personal relationships with clients 

through the use of the employer's resources.”) (citations and 

quotations omitted).

2. “Solicitation” requires an active initiation of contact 

In this case, the non-solicitation clause prohibited Gagnon 

from soliciting other persons employed or affiliated with

Locations by “induc[ing] or encourage[ing] [them] to terminate 

their relationship with the Company.”12 Three agents, including 

Sherrie Au (“Au”), joined Gagnon at Prestige after learning she

was leaving Locations. These agents’ termination of their 

employment with Locations and subsequent employment with 

Prestige do not automatically demonstrate a violation of the 

non-solicitation clause. 

Our law does not clearly define “solicitation.” We agree 

with reasoned opinions from other jurisdictions and now hold 

that “solicitation” requires an active initiation of contact.

Thus, to withstand summary judgment for a violation of the non-

 

12 Merely “encouraging” someone to leave employment cannot 

constitute “solicitation”; employees are “encouraged” by family and 

friends to switch employers for various reasons.
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solicitation clause, evidence indicating that Gagnon actively 

initiated contact with the agents that joined her must have 

existed. See UARCO Inc. v. Lam, 18 F. Supp. 2d 1116, 1121 (D. 

Haw. 1998) (holding a non-solicitation agreement enforceable 

where the former employees’ admitted to calling company’s 

customers and informing them of their new employment); Prosonic 

Corp. v. Stafford, 539 F. Supp. 2d 999, 1004 (S.D. Ohio 2008)

(holding that employer’s claim that a former employee solicited 

other employees was “mere speculation” because employer failed 

to produce evidence that former employee personally induced

employees to leave the company); Atmel Corp. v. Vitesse 

Semiconductor Corp., 30 P.3d 789, 793 (Colo. App. 2001)

(interpreting “solicitation” to require actively initiated 

contact).

Here, the record reflects a genuine issue of material fact 

with respect to Gagnon’s active initiation of contact only with 

respect to Au. The conversations Gagnon had with the subject 

agents to inform them that she was leaving Locations do not, by 

themselves, constitute active initiation of contact or 

“solicitation.” With respect to Au, however, on July 2, 2013, 

about one month before her last day at Locations, Gagnon emailed 

Au, saying “Any chance you have Friday this week open? There is 

something I want to discuss with you and it cannot wait till 

next week as planned.” Three days later, Gagnon and Au met for 
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lunch. Regarding her conversation with Au, Gagnon provided the 

following declaration:

On July 5, 2014, I had lunch with Sherrie Au. During 

lunch, I informed Sherri of my decision to leave Prudential 

and my plans for opening up a RE/MAX franchise. I 

explained to her my plans. Sherrie stated that she always 

said that she would go with me if I left Locations. I 

responded by stating that Kevin and I could not think of 

any other person we would rather have be our partner. 

Sherrie and I did not at that time discuss any 

organizational structure of a new company. There was no 

understanding at the time as to what role Sherrie would 

have or if she would even join me in the new company. 

Sherrie then sent me a set of points and questions that she 

wanted answered by me before she reached any decision. 

(Emphasis added.) Although Au attested she left Locations on 

her own volition and that Gagnon did not solicit her to leave, 

the record reflected possible active initiation of contact of Au 

by Gagnon, precluding summary judgment. Thus, this case is 

remanded to the circuit court only with respect to the alleged 

violation of the solicitation clause as to Au.

V. Conclusion

For these reasons, we vacate the ICA’s July 2, 2020 

judgment on appeal and the circuit court’s December 9, 2016 

final judgment in favor of Gagnon only with respect to the 

alleged breach of the solicitation clause as to Au and remand to 
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26

the circuit court as to that claim. We otherwise affirm the 

judgments of the ICA and the circuit court.

Matt A. Tsukazaki /s/ Sabrina S. McKenna

for petitioners/defendants-appellees

/s/ Michael D. Wilson

William J. Kelly III, pro hac vice

(Jamie C. S. Madriaga and /s/ Trish K. Morikawa

Duane R. Miyashiro, 

with him on the briefs)

for respondents/defendants-appellees

John Rhee

(Paul Alston and Kristin L. Holland,

with him on the briefs)

for respondent/plaintiff-appellant

Joseph A. Ernst 

for amicus curiae

Chamber of Commerce Hawaii