                               UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT


                               No. 08-1651



TECHNOLOGY PARTNERS, INCORPORATED,

                Plaintiff – Appellant,

           v.

BRIAN HART,

                Defendant – Appellee.


Appeal from the United States District Court for the Western
District of North Carolina, at Charlotte.   Graham C. Mullen,
Senior District Judge. (3:08-cv-00208-GCM)


Argued:   September 23, 2008                 Decided:   November 4, 2008


Before TRAXLER, KING, and DUNCAN, Circuit Judges.


Affirmed by unpublished opinion.        Judge Duncan wrote           the
opinion, in which Judge Traxler and Judge King joined.


ARGUED: Pamela Suzanne Duffy, WISHART, NORRIS, HENNINGER &
PITTMAN, P.A., Burlington, North Carolina, for Appellant.
Virginia Whitner Hoptman, WOMBLE, CARLYLE, SANDRIDGE & RICE,
Tysons Corner, Virginia, for Appellee.      ON BRIEF: Molly A.
Orndorff,   WISHART,   NORRIS,   HENNINGER  &   PITTMAN,   P.A.,
Burlington, North Carolina, for Appellant. Kurt E. Lindquist II,
WOMBLE, CARLYLE, SANDRIDGE & RICE, Charlotte, North Carolina,
for Appellee.


Unpublished opinions are not binding precedent in this circuit.
DUNCAN, Circuit Judge:

        Technology Partners, Inc. appeals from the district court’s

refusal to issue a preliminary injunction to prevent its former

employee, Brian Hart, from working for its competitor, AMICAS.

TPI claims that such employment would breach Hart’s covenants

not to compete and result in a misappropriation of its trade

secrets.     Finding no abuse of discretion in the district court’s

denial of the motion for a preliminary injunction, we affirm.



                                                 I.

       Technology Partners, Inc. (“TPI”) is a software development

company that develops building and financial management software

for healthcare providers generally and radiology in particular.

TPI’s     flagship            product       is        called    IMAGINEradiology           (the

“Software”).

       In 2003, Hart was hired out of college by TPI as an hourly-

wage programmer.              Hart worked his way up through the ranks at

TPI and its subsidiaries.                    In January 2008, Hart accepted a

position at TPI as Vice President of Product Management.                                      At

that     time,       he       signed    a    new          employment    agreement       (“2008

Agreement”),          which      included         covenants       not     to     compete      in

paragraphs       8     and      13.         For       a     one-year     period       following

termination,          these      covenants        precluded       Hart       from     accepting

employment       at       a   “Conflicting        Organization”         or     “any    firm   or

                                                  2
corporation        engaged       in     a    venture          or    business         substantially

similar      to”    that    of    TPI.           J.A.    39-41.          The     covenants         also

included       a    geographical            restriction             preventing         Hart        from

accepting employment with a competitor in geographical areas in

which TPI had done business or was doing business as of the date

of Hart’s termination.

       Hart’s       job    responsibilities                 at     TPI   gave        him     complete

administrative        level       access         to     all      computer      systems,        server

records and databases.                 He was directly and intimately involved

in    the    development       of      TPI’s      new       products.          He    had     thorough

knowledge of TPI’s technology, as well as access to TPI’s client

list and confidential financial and business information.

       In    late     2006       and    early         2007,        AMICAS,      a     provider      of

radiology software, entered into negotiations to purchase TPI.

During the due diligence phase of AMICAS’ investigation of TPI,

AMICAS       became       familiar       with         the        financial,         business,       and

operational         underpinnings           of     TPI,          including      its        books   and

records, customers and business goals.                             Although TPI and AMICAS

did not come to terms regarding the acquisition of TPI itself,

TPI    did    agree       to     sell       AMICAS       rights,         title       and     interest

(including all inventions, intellectual property and trademarks)

in the Software for $2.3 million.                                Through an Asset Purchase

Agreement (“APA”) AMICAS became co-owner of the Software with

TPI.        The APA provided that TPI was to furnish training and

                                                  3
education      services    for     the   Software,    customer   installation

instruction and “current information and documentation about bug

issues, product roadmap and existing development plans.”                    J.A.

131, 267; Appellee Br. at 6.

     From April through September 2007, Hart was assigned by TPI

to oversee the installation of the Software at AMICAS, as well

as to conduct concurrent training in the use of the Software.

In February or March 2008, Hart was contacted by a recruiter and

subsequently     entered    into    employment   discussions     with   AMICAS.

Hart gave written notice of resignation to TPI on March 19,

2008, stating that his last day at TPI would be April 4, 2008.

Because   of    some   last-minute       employment   negotiations   with    TPI

(concerning whether TPI would match or surpass AMICAS’ offer),

Hart actually resigned from TPI on April 8, 2008.

     Approximately three weeks later, on April 28, 2008, TPI

filed a motion for a preliminary injunction to prevent Hart from

working for AMICAS.         TPI claimed that Hart’s employment with

AMICAS would both breach his covenants not to compete and result

in a misappropriation of its trade secrets.                 On May 6, 2008,

Hart removed the case to federal court on the basis of diversity

because Hart is a citizen and resident of South Carolina while

TPI is a corporation organized in, and principally operating in,

North Carolina.        On May 21, 2008, the district court denied

TPI’s motion for a preliminary injunction.             TPI timely appealed.

                                          4
                                       II.

      This court reviews the grant or denial of a preliminary

injunction        for    abuse   of    discretion,      “recognizing     that

preliminary injunctions are extraordinary remedies . . . to be

granted only sparingly and in limited circumstances.”                   Micro

Strategy, Inc. v. Motorola, Inc., 245 F.3d 335, 339 (4th Cir.

2001) (citations omitted).          A court abuses its discretion if its

conclusion is guided by erroneous legal principles or rests upon

clearly erroneous factual findings.          Westberry v. Gislaved Gummi

A.B., 178 F.3d 257, 261 (4th Cir. 1999).                Under the abuse of

discretion standard, this court may not substitute its judgment

for   that   of    the   district   court,   “rather,   we   must   determine

whether the court’s exercise of discretion, considering the law

and the facts, was arbitrary or capricious.”              United States v.

Mason, 52 F.3d 1286, 1289 (4th Cir. 1995).

      The grant or denial of a preliminary injunction is governed

by the so-called Blackwelder analysis, which has three steps.

Blackwelder Furniture Co. of Statesville, Inc. v. Seilig Mfg.

Co., Inc., 550 F.2d 189 (4th Cir. 1977).             First, the court must

“balance the ‘likelihood’ of irreparable harm to the plaintiff

[if the injunction is denied] against the ‘likelihood’ of harm

to the defendant [if the injunction is granted].”               Id. at 195.

Second, the court must determine whether the plaintiff is likely

to succeed on the merits.           Id. at 196.   However, if the balance

                                        5
in the first step is struck in favor of the plaintiff and there

are grave or serious questions presented, the plaintiff need not

also show likely success on the merits.                    Id.     The importance of

showing likelihood of success increases as the probability of

irreparable harm diminishes.                Id. at 195.       The third step of the

analysis    is    the    court’s       determination       of    where       the   “public

interest”    lies       with    regard      to    the   grant    or     denial     of    the

preliminary       injunction.          Id.       at   196-97.         Blackwelder       also

teaches that the steps of the analysis are intertwined and each

can affect the other.           Id. at 196.



     A. Covenants not to compete

     In    its    determination        of    whether     to     grant    a   preliminary

injunction       on   the      basis   of    TPI’s      claim    of     breach     of    the

covenants not to compete, the district court began its analysis

with the first Blackwelder step, balancing the potential harm to

TPI against the potential harm to Hart.                    After considering live

argument by the parties, the APA, and the submitted affidavits, 1


     1
        These affidavits included an affidavit by Charles Kauffman,
which detailed the specific technology that pre-dated or post-
dated the March 2007 APA.      J.A. 351-56.  TPI, in live argument
before the district court, proffered Kauffman as a witness on
this issue.      The district court declined to hear Kauffman’s
testimony, apparently relying instead on his affidavit.         TPI
asserts this was an error. See, e.g., Reply Br. at 5-7. TPI,
subsequent to the live argument, submitted a second affidavit by
Kaufman on this issue.      J.A. 364-67.  Because the record shows
(Continued)
                                             6
the court found that the harm to TPI if the injunction was

denied (thereby allowing Hart work for AMICAS) was mitigated

because       “there’s    a    significant       possibility      that    Technology

Partners was required by the terms of [the APA] to transfer

substantial chunks of what they now claim are trade secrets over

to somebody that paid them . . .                 Certainly enough of the stuff

that they were required to transfer and the training they were

required to do would clearly have suggested a lot of the issues

that they now say are trade secrets.”                      J.A. 199.           In other

words, according to the district court, TPI’s earlier decision

to    sell    the   source     code   to   the   Software    to   AMICAS,       and    to

continue to service the Software, significantly undermined its

current claim that the denial of a preliminary injunction would

irreparably harm TPI.           As to Hart, the district court found that

the    harm    to   him   if    the   injunction     was    granted      was    readily

ascertainable, consisting of loss of his increased compensation

at AMICAS 2 and the covenants’ requirement to stay outside the

market for a “fairly extended period of time.”                     J.A. 199.          The



that the district court had a reasonable basis for declining to
hear Kaufman’s live testimony (i.e., Kaufman’s affidavit on the
issue was already in the court’s possession), the court did not
abuse its discretion in this regard.
       2
      Hart’s job with AMICAS represented a 67% pay raise
($150,000 versus $90,000) with added incentive bonuses of
$90,000.    It was unlikely to be matched by any alternative
offer. J.A. 183; J.A. 199.


                                           7
district court ultimately concluded that the balance of harms

did not decidedly tip in favor of either of the parties.

       TPI maintains that the district court erred in not finding

that the harm to TPI outweighed the harm to Hart.                   TPI asserts

that the harm it would suffer flowed from the fact of Hart’s

significant exposure to both its clients and its confidential

development activities.         TPI describes the loss to Hart as a

fairly minimal restriction of his employment opportunities.

       Both characterizations miss the mark.              The district court

appropriately recognized and weighed both competing harms.                     As

to the harm to TPI, the record reflected a strong possibility

that AMICAS had already learned much of the information at issue

independently of Hart, either through its due diligence during

earlier negotiations with TPI or through the APA.               Although TPI

contended at oral argument that the district court’s recognition

that   not   all    valuable   information   had   been    passed    to   AMICAS

compelled a decision in its favor, this misstates the function

of the Blackwelder analysis.         The fact that the district court

conceded that there may be some harm to TPI does not undermine

its conclusion regarding the balance of harms.               Similarly, with

respect to the harm to Hart, the district court appropriately

evaluated    both    the   geographical   and   temporal     breadth      of   the

covenants in concluding that the balance of harms tipped neither

way.

                                      8
        Having found the balancing test inconclusive, the district

court proceeded to the second step of Blackwelder, analyzing

whether TPI was likely to succeed on the merits.                              This step

entails an analysis of whether the covenants not to compete were

likely to be enforceable.                  If the covenants were enforceable,

TPI would be likely to succeed on the merits of its breach of

covenants claim.           The district court, however, found that there

were serious doubts about the enforceability of the covenants

not     to   compete,       both     because      it    was    unclear   whether        new

consideration        was    given     to   support      them   and    because     of    the

covenants’ breadth.

      Conflicting claims were presented as to consideration.                            On

the   one    hand,    Hart     contended         that    the   change    of   positions

accompanying     the        2008     Agreement     was    a    mere    formality       that

followed on the dissolution and merger into TPI of a former

subsidiary for which Hart had been working.                     Hart argued that no

change in pay or substantive responsibilities occurred.                           On the

other hand, TPI maintained that its subsidiary was never merged

into TPI and that Hart was given new responsibilities, although

it acknowledged that his compensation was not increased.                           Given

the reasonable ground for doubt, we cannot conclude that the

district court’s finding was clearly erroneous.

      As to the breadth of the covenants, TPI argues the district

court    erred   in        failing    to    exercise      North      Carolina’s    “blue

                                             9
pencil” rule to strike the offending portions and then enforce

the remainder.       North Carolina’s “blue pencil” rule, however, is

narrow and its employment by the courts is discretionary. 3                     When

the language of a non-compete agreement is overly broad, “North

Carolina’s ‘blue pencil’ rule severely limits what the court may

do to alter the covenant.           A court at most may choose not to

enforce a distinctly separable part of a covenant in order to

render the provision reasonable.”              Hartman, 450 S.E.2d at 920;

see also Whittaker Gen. Medical Corp. v. Daniel, 379 S.E.2d 824,

828 (N.C. 2001).         The court may not otherwise revise or rewrite

the covenant.

      One need only attempt to apply the blue pencil rule to the

covenants at issue to demonstrate how unworkable such an option

would     have   been.     For   example,     had    the    district   court    been

willing to strike the time limitations, the action would have

voided     the    covenants   because    there      would    have   been   no   time

constraints and the court would not have been free to substitute

a   period   it    found   acceptable.       Similarly,      no   amount   of   blue

penciling could have addressed the breadth or ambiguity of the

terms     “conflicting     organizations”       or    “business     substantially


      3
      The language in Hartman v. Odell, 450 S.E.2d 912 (N.C. Ct.
App. 1994) regarding a court’s decision of whether or not to
“blue line” ( “may do,” “may choose”) indicates that an overly
broad covenant is subject to an abuse of discretion standard.
TPI agrees. See Appellant Br. at 20-21.


                                        10
similar.”        Any   attempt     to     do    so   would    simply     eliminate       the

reference to any organization for which Hart could not work. 4

Consequently, TPI has provided no basis for assigning error to

the district court’s decision not to blue pencil the covenants

not to compete, and the court properly exercised its discretion

in this regard.         Further, since the court’s doubt about TPI’s

likelihood of success on the merits is amply supported by the

record, there was no error in the court’s finding on this issue.

       With respect to the third step of the Blackwelder analysis,

the    district      court    found     that        the   public    interest        weighed

against granting a preliminary injunction.                      The court concluded

that in sharply disputed cases like this, the public interest is

best served if the parties are subject to the normal litigation

process.        In   light    of    the    court’s        earlier    findings       on   the

balance of harm and the probability of success on the merits,

this       determination     of   the   public       interest      was   not   in    error.

Just as it is a matter of public interest to enforce valid non-

compete agreements, similarly it is a matter of public interest

to see that non-compete agreements that are likely invalid do


       4
      TPI’s argument about blue penciling also seems to neglect
the   context   of  the   district  court’s   ruling,  i.e.,   a
determination of TPI’s likelihood of succeeding on the merits.
Since the court was not actually determining the validity of the
covenants on the merits, the employment of blue penciling by the
district court to try to ensure their validity would not have
been appropriate.


                                               11
not         receive    the     extraordinary    relief    of    a    preliminary

injunction.           Since the district court employed the proper legal

standards and its factual findings were not clearly erroneous,

the district court did not abuse its discretion in denying TPI’s

motion for a preliminary injunction on the basis of the breach

of covenants claim.



        B. Trade secrets

        In determining whether to grant a preliminary injunction on

the basis of TPI’s trade secrets claim, the first step in the

district court’s Blackwelder analysis encompassed the second. 5

In balancing the harms, the court found, as we have noted, that

much of what TPI was claiming as trade secrets probably already

had been, or was required to be, disclosed to AMICAS under the

APA, and that this voluntary transfer significantly mitigated

any potential harm to TPI.            Although TPI argues that there could

be no harm to Hart in not disclosing the trade secrets, this

argument ignores the fact that the injunctive relief TPI seeks

would        prevent    Hart   from   working   for   AMICAS.       The   district

court’s analysis in this regard was not erroneous.



        5
      Also, to a considerable extent, the district court’s
Blackwelder analysis of TPI’s trade secrets claim was embedded
within its analysis of TPI’s breach of covenants claim.



                                         12
       In balancing the competing harms, the district court was

also considering the likelihood of TPI’s success.                        By finding

that “there’s a significant possibility that Technology Partners

was required by the terms of [the APA] to transfer substantial

chunks of what they now claim are trade secrets over to somebody

that paid them,” the district court was simultaneously finding

that TPI had not made a showing that it would likely succeed on

its trade secrets claim.             At oral argument, TPI maintained that

the district court had impermissibly muddled the steps of the

Blackwelder analysis.            However, while Blackwelder held that if

the plaintiff could show irreparable harm then the plaintiff did

not    need     also    show     likelihood      of    success    on    the   merits,

Blackwelder did not hold that the consideration of the two steps

must   be     strictly   segregated.            Indeed,    Blackwelder    recognized

that the steps of the analysis are frequently intertwined.                         550

F.2d    at    196.       Since      TPI    failed     to   make   the    showing    of

irreparable harm, the district court here needed to proceed to

the    second    step    but   it    was    under     no   obligation    to   rigidly

compartmentalize its analysis of the two.                    The district court’s

finding that the first two steps of the Blackwelder analysis

weighed against granting TPI injunctive relief on the basis of

its trade secrets claim was not in error.




                                           13
     The   third   step   of   the   district   court’s   analysis   –   the

determination of the public interest – is identical for both

TPI’s claims and has been articulated above.



                                     III.

     Because the district court did not abuse its discretion in

denying TPI’s motion for a preliminary injunction, the district

court’s order is

                                                                AFFIRMED.




                                      14
