In Reliable Fire Equipment Company v. Arrendondo [pdf], discussed here, the Supreme Court of Illinois dramatically altered how protectable legitimate business interests in noncompetition agreements were to be reviewed under Illinois law, clarifying what it felt were decades of misapplication.  On February 3, 2012, the first decision was issued applying Reliable Fire in a retroactive fashion, resulting in an Illinois appellate court reversing and remanding a lower court decision denying enforcement of a noncompetition agreement.

In Hafferkamp v. Llorca [pdf], the Appellate Court of Illinois, Second District, determined that the trial court applied the wrong legal theory to the case in denying the plaintiff’s request for injunctive relief.  The plaintiff, a hair salon, sought to enforce a restrictive covenant against defendant, a former employee who quit and joined a competing hair salon in violation of the terms of the restrictive covenant.  The trial court relied upon LSBZ, Inc. v. Brokis, a 1992 case also involving a noncompetition agreement executed by a hair salon and its employee, to deny the plaintiff relief.

However, the appellate court noted that LSBZ was premised on an analytical structure that has now been rejected by the Illinois Supreme Court.  Although the appellate court found that the trial court had utilized an appropriate and recognized structure at the time it denied enforcement, the appellate court found that the structure outlined in Reliable Fire should be applied retroactively, and reversed and remanded so that the trial court could apply the Reliable Fire “three-dimensional rule of reason” to the facts present in the case at hand.  To not apply Reliable Fire retroactively would, in the court’s opinion, “seriously hamper its implementation and potentially result in cases decided by the fortuity of the filing date.”

In light of the Hafferkamp decision, cases determined prior to Reliable Fire but currently on appeal now have a significant chance of being reversed and reviewed, particularly where the primary issue is the existence of a legitimate business interest.  In addition, trial courts have now been put on notice that, at least according to the Illinois Appellate Court, Second District, all restrictive covenant cases, regardless of their date of filing, should be evaluated under the structure espoused in Reliable Fire.