FILED 

 U.S. COURT OF APPEALS

 ELEVENTH CIRCUIT 

 August 11, 2005 

 THOMAS K. KAHN 

 CLERK

Honorable Richard Mills, United States District Judge for the Central District of Illinois, *

sitting by designation.

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

________________________

No. 04-15675

________________________

D. C. Docket No.04-01996-CV-CC-1

DOUGLAS J. MACGINNITIE, 

 Plaintiff-Appellant, 

versus 

HOBBS GROUP, LLC,

HILB, ROGAL AND HOBBS COMPANY, 

Defendants-Appellees.

________________________

Appeal from the United States District Court

for the Northern District of Georgia

_________________________

(August 11, 2005)

Before TJOFLAT and KRAVITCH, Circuit Judges, and MILLS , District Judge. *

KRAVITCH, Circuit Judge:
2

In this case involving restrictive covenants in an employment contract, we

decide two questions. In a matter of first impression for our court, we hold that

our “total activities” test for a corporation’s principal place of business for

diversity jurisdiction purposes applies to determine the citizenship of a defendant

corporation which once operated in the same state as the plaintiff but has since

been purchased by and integrated into an out-of-state corporation as a holding

company. We further conclude that because the defendant corporation’s principal

place of business is in the same state as the purchasing corporation, the federal

courts have jurisdiction over a suit by a citizen of the defendant corporation’s

former home state. Second, we vacate and remand the district court’s denial of

preliminary injunctive relief.

I.

Defendant-Appellee Hobbs Group, LLC (“Hobbs”), an insurance brokerage

firm, employed Plaintiff-Appellant Douglas J. MacGinnitie as its Senior Vice

President and General Counsel in 1998. Hobbs is incorporated in the State of

Delaware, and until 2002 it undisputably had its principal place of business in the

State of Georgia. Defendant-Appellant Hilb, Rogal & Hobbs Company (“HRH”),

also an insurance brokerage firm, agreed to purchase Hobbs in 2002. HRH is

incorporated and has its principal place of business in the Commonwealth of
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Virginia.

When Hobbs first employed MacGinnitie, MacGinnitie signed a form

employment agreement which Hobbs had drafted. The agreement included

restrictive covenants which are at the heart of the present action. The employment

agreement’s non-solicitation provision prohibits MacGinnitie from engaging in

certain activities for a period of two years after termination of his employment. 

Among other things, MacGinnitie agreed not to:

[d]irectly or indirectly solicit for employment any person who is an

employee of [Hobbs], unless [Hobbs] first terminates the employment

of such employee or [Hobbs] gives its written consent to such

employment or offer of employment;

[c]all on or, directly or indirectly, solicit, divert, or take away any

insurance-related business from [Hobbs], or, directly or indirectly,

accept insurance-related business from, provide insurance related

consulting services of any kind to, or perform any of the services

offered by [Hobbs] for, any person, firm, corporation or other entity

who is a customer of [Hobbs] or who is, or during the two-year period

prior to [MacGinnitie’s] termination of employment was, a
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prospective customer of [Hobbs] with whom [MacGinnitie] had direct

contact, or, directly or indirectly, encourage any such customer to

cease doing business with [Hobbs].

The employment agreement also contained a confidentiality provision which

obliged MacGinnitie not to “make use of, divulge, or otherwise disclose, directly

or indirectly, whether during the period of [MacGinnitie’s] employment with

[Hobbs] or at any time thereafter, any Confidential Information . . . except to the

extent such use, divulgence or disclosure is made in connection with

[MacGinnitie’s] employment and for the benefit of [Hobbs].”

At the time of the acquisition of Hobbs, HRH presented MacGinnitie with

an acknowledgement agreement, under which MacGinnitie acknowledged the nonsolicitation and confidentiality provisions of the employment agreement. The new

contract also added a new paragraph to the employment agreement which provided

that 

[MacGinnitie] grants to [HRH] during the term of this Agreement the

continuous and unilateral right, upon written notice to [MacGinnitie]

of 45 days, to lessen the restrictions of any of the covenants set forth

herein by so much as [HRH] deems necessary either to make this
5

Agreement in accordance with the policy of the State of Georgia or to

fit the circumstances peculiar to [MacGinnitie].

MacGinnitie alleges that he was subsequently forced to leave HRH shortly

after the acquisition because his position was eliminated and his job duties

reassigned to attorneys working at HRH headquarters in Richmond, Virginia. 

Defendants, on the other hand, claim that they did nothing to force MacGinnitie’s

departure from the company. After MacGinnitie resigned from HRH in September

2003, he and a partner opened a new insurance brokerage business, Beecher

Carlson Risk Management, Inc.

MacGinnitie filed the present action for declaratory and injunctive relief in

Georgia state court in 2004, alleging that the language of the non-solicitation and

confidentiality provisions effectively prevents him from competing with HRH. 

The defendants filed a timely notice of removal, claiming federal jurisdiction

under the diversity statute, 28 U.S.C. § 1332. MacGinnitie filed a motion for

remand, but the district court found that diversity jurisdiction existed and denied

the motion.

 After the denial of the motion for a remand, MacGinnitie renewed his

motion for a preliminary injunction barring enforcement of the allegedly
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unenforceable covenants. The district court refused to grant the injunction on

three grounds: first, that MacGinnitie was not likely to succeed on the merits

because the covenants were not overbroad; second, that MacGinnitie would not

suffer irreparable harm because he was not licensed personally to sell insurance in

Georgia; and third, that the balance of harms weighed in HRH’s favor because it

might lose a significant number of clients and employees if the injunction were

granted. Following the ruling, MacGinnitie filed a timely appeal. 

II.

MacGinnitie contends that the district court lacked subject-matter

jurisdiction over the present case and should have remanded it to the Georgia state

court from which it was removed. We review rulings on the subject-matter

jurisdiction of a federal court de novo. Williams v. Best Buy Co., Inc., 269 F.3d

1316, 1319 (11th Cir. 2001). Factual findings regarding the citizenship of a party

are subject to a clearly erroneous standard of review. McCormick v. Aderholt,

293 F.3d 1254, 1257 (11th Cir. 2002).

MacGinnitie claims that the district court lacked subject-matter jurisdiction

over the present action because there was not complete diversity between the
The defendants claim that MacGinnitie is estopped from claiming that Hobbs is a citizen 1

of Georgia by its filing in a separate action in a Connecticut court. The law is well-settled,

however, that principles of estoppel and waiver do not apply to a federal court’s acquisition of

subject-matter jurisdiction. American Fire & Cas. Co. v. Finn, 341 U.S. 6 (1951); Hertz Corp. v.

Alamo Rent-A-Car, 16 F.3d 1126, 1130-31 (11th Cir. 1994).

7

parties at the time the complaint was filed. Complete diversity requires that no 1

defendant in a diversity action be a citizen of the same state as any plaintiff. 28

U.S.C. § 1332; Carden v. Arkoma Assocs., 494 U.S. 185, 187 (1992). For

diversity purposes, a corporation is a citizen of both the state where it is

incorporated and the state where it has its principal place of business. 28 U.S.C. §

1332(c). Citizenship for diversity purposes is determined at the time the suit is

filed. Harris v. Gardner, 216 F.3d 970, 983 (11th Cir. 2000).

We have adopted the “total activities” test to determine a corporation’s

principal place of business. See Vareka Investments, N.V. v. American

Investment Properties, Inc., 724 F.2d 901, 910 (11th Cir. 1984). This test

combines the “place of activities” test and the “nerve center” test used by other

circuits. Sweet Pea Marine, Ltd. v. APJ Marine, Inc., 411 F.3d 1242, 1247 (11th

Cir. 2005). Under the “place of activities” test, the location of the majority of the

corporation’s sales or production activities is its principal place of business. Id. 

Under the “nerve center” test, the location of the corporate offices is generally the

principal place of business. Id.
We held in Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc) 2

that all Fifth Circuit cases decided prior to the close of business on September 30, 1981, are

binding precedent in the Eleventh Circuit.

8

The total activities test requires a somewhat subjective analysis to choose

between the results of the nerve center and place of activities tests, if they differ. 

Toms v. Country Quality Meats, Inc., 610 F.2d 313, 315 (5th Cir. 1980). We 2

provided guidance as to how the district courts should balance the two tests in

Sweet Pea Marine. Where a company’s activities are not concentrated in one

place, a district court is entitled “to give these ‘nerve-center’-related facts greater

significance” in determining principal place of business. Sweet Pea Marine, 411

F.3d at 1247.

According to MacGinnitie, Hobbs’ principal place of business was in

Georgia at the time the suit was filed, because the principal place of business of an

“inactive” corporation remains the same as its last principal place of business

while the corporation was still active. 

The question of the principal place of business of an “inactive” corporation

is one of first impression in this circuit. We need not, however, reach that issue,

because our existing total activities test is sufficient to resolve the question before

us. The district court found that at the time the suit was filed

Hobbs continued to exist only as an active corporate holding
9

company . . . that was directed and controlled from HRH’s corporate

headquarters in Virginia. Every decision necessary to realize the

strategic advantage offered by Hobbs’ continued, passive existence

was and continues to be made in HRH’s Virginia corporate

headquarters by HRH officers. Thus, at the time [MacGinnitie] filed

[his] complaint, the “nerve center” of Hobbs, for purposes of

determining diversity, could only be in Virginia.

The plaintiff has offered no evidence which suggests that the district court clearly

erred in making these factual findings regarding the nerve center of Hobbs.

Furthermore, Hobbs is not an “inactive” corporation in the sense in which other

circuits have used that term. MacGinnitie cites two lines of cases from other

courts in support of his inactive corporation argument. The Second Circuit has

taken the view that an inactive corporation is, as a matter of law, a citizen of the

state where it “last transacted business.” See, e.g., Pinnacle Consultants, Ltd. v.

Leucadia Nat’l Corp., 101 F.3d 900, 907 (2nd Cir. 1996) (citing other cases). The

Pinnacle court employed this test in dicta, however, using it to show that the

outcome of the case would not change based on which test was applied. Id. The

Pinnacle court actually decided the case based on the “nerve center” test. Id.

MacGinnitie also points out that the Fourth and Fifth Circuits have held that

a corporation is a citizen of the state of its last place of business unless “a

substantial amount of time”—apparently, about 3 years—has passed since it

became inactive. Athena Automotive, Inc. v. Digregorio, 166 F.3d 288, 291 (4th
10

Cir. 1999); Harris v. Black Clawson Co., 961 F.2d 547, 551 (5th Cir. 1992). In

these two cases, however, the “inactive” corporations engaged in no activity

whatsoever, and had not done so for several years. See Athena Automotive, 166

F.3d at 289 (the corporation “ceased all operations” three years prior to the

litigation, which litigation was its “only other activity” since then); Harris, 961

F.2d at 549-550 (the corporation’s total activities “were zero: it had no business

office, no employees or service personnel, and no other ongoing business

activities”). In the present case, Hobbs’ activity in Georgia has ceased, but it has

been engaged in other business activity, under HRH’s direction, in Virginia. Even

more relevant here, Hobbs was under HRH’s direction, from Virginia, at the time

this suit was filed.

Because Hobbs was thus a citizen of Virginia, not of Georgia, at the time

this action began, we affirm the district court’s denial of MacGinnitie’s motion to

remand this case to Georgia state court for lack of subject matter jurisdiction.

III.

MacGinnitie also appeals the district court’s denial of his motion for a

preliminary injunction barring enforcement of the restrictive covenants. To be

entitled to a preliminary injunction, MacGinnitie must show: (1) a substantial

likelihood of success on the merits; (2) irreparable harm to the plaintiff unless the
11

injunction issues; (3) that the threatened injury to the plaintiff outweighs the harm

to the defendant if the injunction issues; and (4) that the injunction will not

disserve the public interest. Bryan v. Hall Chemical Co., 993 F.2d 831 (11th Cir.

1993). The district court found that MacGinnitie failed to show the presence of

the first three elements. As to the fourth element, the defendants acknowledged

before the district court that the injunction would not disserve the public interest.

We review the district court’s ruling on preliminary injunctive relief for

abuse of discretion. McDonald’s Corp. v. Robertson, 147 F.3d 1301 (11th Cir.

1988).

1. Likelihood of Success on the Merits

MacGinnitie claims that the district court misread the language of the

restrictive covenants, ignored other unenforceable covenants, and failed to apply

Georgia law correctly. As a threshold matter in evaluating MacGinnitie’s claim,

we agree with the district court that we must apply “strict scrutiny” to our review

of the restrictive covenants, and that such covenants may not therefore be “bluepenciled”; i.e., severed. See Habif, Arogeti & Wynne, P.C. v. Baggett, 231 Ga.

App. 289, 290, 498 S.E.2d 346, 349 (1998); Carroll v. Ralston & Assocs., P.C.,

224 Ga. App. 862, 481 S.E.2d 900 (1997). The defendants argue that because the

case involves the sale of a business, a lower standard applies. Georgia law is
12

clear, however, that even when an employment dispute is part of the sale of a

business, if the dispute itself pertains to a contract of employment then the

contract must be interpreted under the law governing such contracts. Arnall Ins.

Agency v. Arnall, 196 Ga. App. 414, 396 S.E. 2d 257 (1990). We therefore apply

strict scrutiny in our review of the restrictive covenants.

The district court held that even under strict scrutiny the non-solicitation

covenant is not overbroad because it “only prohibits MacGinnitie from soliciting

those clients of HRH and Hobbs with whom he had direct contact during his last

two years of employment with defendants.”

We disagree and hold that, when properly interpreted, several provisions of

the employment agreement are overbroad and unenforceable. One provision states

that MacGinnitie may not “accept insurance-related business from . . . any person,

firm, corporation or other entity who is a customer of [Hobbs].” A Georgia court

held contractual provisions which prevent employees from accepting business

from unsolicited former clients to be overbroad in Pregler v. C & Z, Inc., 259 Ga.

App. 149, 575 S.E.2d 915 (2003). The Pregler court found that such provisions

were overprotective of the former employer and had an unreasonable impact on

both the employee’s and the public’s ability to choose its preferred professional

services. Id. This is in keeping with the principle of Georgia law which provides
The full provision is that MacGinnitie may not: 3

[c]all on or, directly or indirectly, solicit, divert, or take away any insurancerelated business from [Hobbs], or, directly or indirectly, accept insurance-related

business from, provide insurance related consulting services of any kind to, or

perform any of the services offered by [Hobbs] for, any person, firm, corporation

or other entity who is a customer of [Hobbs] or who is, or during the two-year

period prior to [MacGinnitie’s] termination of employment was, a prospective

customer of [Hobbs] with whom [MacGinnitie] had direct contact, or, directly or

indirectly, encourage any such customer to cease doing business with [Hobbs].

13

that to be enforceable, a customer non-solicitation covenant must either have a

specific territory contiguous with the area serviced by the employee, or be limited

to only those customers with whom the employee had a business relationship

during some period of the employment. W.R. Grace v. Mouyal, 262 Ga. 464, 467,

422 S.E.2d 529 (1992).

We also disagree with the district court’s reading of the non-solicitation

provision governing Hobbs customers. Applying strict scrutiny, and resolving

ambiguities in favor of MacGinnitie, the clause must be read to prohibit him from

dealing with “any person, firm, corporation or other entity who is a customer of

[Hobbs],” whether MacGinnitie had prior contact with the customer or not. The

provision does contain the limiting words “with whom [MacGinnitie] had direct

contact,” but a careful reading suggests that this limiting language does not modify

the portion of the clause which pertains to MacGinnitie’s dealings with actual

Hobbs customers, but rather, only the portion pertaining to prospective customers.3
14

The district court also failed to consider two other restrictive covenants

which are also unenforceable under Georgia law, as MacGinnitie pointed out

before the district court and again to this court. The first is the employee nonsolicitation provision, which sets no geographical or relationship restriction, but

rather prohibits MacGinnitie from soliciting any Hobbs or HRH employee,

regardless of place or prior relationship to him. The Georgia courts have refused

to enforce such provisions. See, e.g., Hulcher Svcs., Inc. v. R.J. Corman RR Co.,

LLC, 247 Ga. App. 486, 543 S.E.2d 461 (2000). The second is the confidentiality

provision, which contains no time restriction and, MacGinnitie argues, protects

information which is publicly available from other sources. Both these

deficiencies render a restrictive covenant regarding information unenforceable

under Georgia law. Howard Schultz & Assoc. of the Southeast, Inc. v. Broniec,

239 Ga. 181, 188, 236 S.E.2d 265, 270 (1977) (time restriction); Nasco, Inc. v.

Gimbert, 239 Ga. 675, 676, 238 S.E.2d 368, 369 (1977) (publicly available

information).

Because none of these clauses may be blue-penciled, they are all

unenforceable. We therefore conclude that the district court abused its discretion

in ruling that MacGinnitie failed to show a substantial likelihood of success on the

merits.
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2. Irreparable Harm

The district court held that because MacGinnitie is not licensed to sell

insurance in the State of Georgia, he has not established how he will be irreparably

harmed absent injunctive relief. The defendants claim that MacGinnitie’s injuries

are not irreparable because they can “be undone through monetary remedies.” T.J.

Cunningham v. Adams, 808 F.2d 815, 821 (11th Cir. 1987). We disagree, and

hold that MacGinnitie has demonstrated that irreparable harm will occur if the

injunction does not issue. 

Under Georgia law, MacGinnitie does not need a license to sell insurance

himself in order to operate an insurance brokerage business and hire others to

carry out insurance sales. See O.C.G.A. § 33-23-4(h)(2). The district court’s

holding to the contrary was an error of law.

 Furthermore, MacGinnitie has shown irreparable harm which cannot be

undone through monetary remedies, in the form of unenforceable restrictions on

his access to customers, employees, and information. These injuries are in the

form of lost opportunities, which are difficult, if not impossible, to quantify. 

Georgia public policy is clear that restrictive covenants in employment contracts

are disfavored as potential restraints of trade which tend to lessen competition. 

See generally Mouyal, 262 Ga. at 465; Ga. Const. Art. III, § VI, para. V(c);
16

O.C.G.A. §13-8-2. Because of this public policy, the Georgia courts and this court

have not hesitated to find irreparable harm in cases involving covenants not to

compete. See, e.g., Keener v. Convergys Corp., 342 F.3d 1264 (11th Cir. 2003);

Enron Capital & Trade Resources Corp. v. Pokalsky, 227 Ga. App. 727, 729, 460

S.E.2d 136, 138 (1997).

We therefore hold that the district court abused its discretion in ruling that

MacGinnitie failed to show irreparable harm.

3. Balance of the Harms

The district court found that the balance of the harms tipped in favor of the

defendants. It held that the defendants may suffer significant injury in lost

customers and employees if the injunction issued, while MacGinnitie only loses

the ability to compete for a few customers and employees out of all the customers

and employees available in the market. We conclude that the district court abused

its discretion in ruling that the balance of the harms tipped in the defendants’

favor.

The public policy considerations behind Georgia law governing restrictive

covenants compel our conclusion. The defendants’ argument is, in essence, that

they are entitled to protection from competition for customers and employees. 

Such competition is part and parcel of a competitive economy. MacGinnitie, on
17

the other hand, is harmed by restrictive covenants which are against Georgia

public policy because of their negative effect on competition. In purchasing

Hobbs, HRH did not purchase the ability to make consumers’ and employees’

economic decisions for them. Loss of business due to free and fair competition is

not a harm; violation of legal rules designed to promote such competition is a

harm.

The district court erred in its determination of the first three elements of a

preliminary injunction, and the defendants conceded the fourth element before the

district court. We therefore find that the district court abused its discretion in

denying preliminary injunctive relief in favor of MacGinnitie.

IV.

For the foregoing reasons, the district court’s denial of the plaintiff’s motion

to remand this case to state court is AFFIRMED. The district court’s denial of

the plaintiff’s motion for a preliminary injunction is VACATED and this case is

REMANDED for further proceedings consistent with this opinion.