Reliable Fire Equipment Co. v. Arredondo, 2011 IL 111871

Reliable filed suit against Arredondo, Garcia, and High Rise for breach of a noncompetition covenant; circuit court ruled covenant unenforceable; appellate court affirmed; Illinois Supreme Court granted review and reversed, remanding for proceedings consistent with the opinion.
Reliable and the individual defendants signed post-employment covenants restricting competition and solicitation; covenants lasted one year and covered Illinois, Indiana, and Wisconsin.
High Rise, formed in 2004 with Arredondo and Garcia as managers, engaged in competing business in the Chicago area; evidence suggested potential competitive activity post-employment.
The court rejects Sunbelt Rentals’ “legitimate-business-interest” test as exclusive and adopts a three-prong reasonableness framework with a focus on the promisee’s legitimate business interest.
The decision centers on whether a legitimate business interest exists and is to be evaluated under the totality of the circumstances, remanding for further evidence-focused proceedings to apply the correct standard.
The judgment of the appellate court and circuit court are reversed and the case is remanded for further proceedings.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the employer’s legitimate business interest is required and how it is applied	Reliable contends the covenant rests on a proper legitimate business interest	Arredondo/Garcia contend under Sunbelt approach or lack of interest	Yes; legitimate business interest is required and considered under totality of circumstances
Whether the three-prong reasonableness test should include the promisee’s legitimate business interest	Reliable argues three-prong test with legitimate interest remains valid	Defendants argue for narrower application	Yes; three-prong reasonableness test remains viable with legitimate business interest as a component
Whether Sunbelt Rentals (legitimate-business-interest test) was wrongly adopted	Prevailing Illinois authority supports legitimate business interest	Sunbelt misreads Mohanty and should be overruled	Overruled; Sunbelt rejected; adopt totality-of-facts approach

Hursen v. Gavin, 162 Ill. 377 (1896) (partial restraint valid if reasonable and supported by consideration; protects promisor's interests)
Storer v. Brock, 351 Ill. 643 (1933) (restraint reasonable if necessary to protect the promisee; duration and scope must be reasonable)
Bauer v. Sawyer, 8 Ill.2d 351 (1956) (three elements: public injury, undue hardship, and necessity of restraint; reasonableness of time/place)
House of Vision, Inc. v. Hiyane, 37 Ill.2d 32 (1967) (employer interest in customers; consideration of time/territory after establishing interest)
Cockerill v. Wilson, 51 Ill.2d 179 (1972) (three components of reasonableness; interest in clients present)
Kolar v. Nationwide Advertising Service, 28 Ill.App.3d 671 (1975) (proprietary interest in customers requires specific factors; near-permanence and confidential information considered)
Mohanty v. St. John Heart Clinic, S.C., 225 Ill.2d 52 (2006) (recognizes legitimate business interest as part of the three-prong test; rejects rigid templates)
Sunbelt Rentals, Inc. v. Ehlers, 394 Ill.App.3d 421 (2009) (appellate court rejected legitimate-business-interest as standalone; later overruled)