Epstein Becker Green Files Amicus Brief for 10 National Industry Organizations to Uphold District Court’s Order Setting Aside the FTC Noncompete Ban

The fight to resurrect the FTC’s Final Rule (the “Final Rule”) banning noncompetes continues in the U.S. Court of Appeals for the Fifth Circuit.

In August 2024, mere days before the Final Rule was to take effect, Judge Ada Brown of the U.S. District Court for the Northern District of Texas issued a memorandum opinion and order granting the plaintiffs’ motion for summary judgment which set aside the Final Rule, ruling that the ban exceeded the FTC’s congressional authority by engaging in substantive rulemaking and that, even if permitted, such rulemaking was arbitrary and capricious.

On October 24, 2024, the FTC appealed Judge Brown’s ruling to the Fifth Circuit, Case No. 24-10951, arguing that Judge Brown erred in three regards: (1) she misapplied principles of statutory construction in ruling that the FTC exceeded its statutory authority to issue substantive rulemaking surrounding unfair competition; (2) she erroneously concluded that the Final Rule was arbitrary and capricious; and (3) her order universally vacating the Final Rule was impermissibly overbroad. The FTC describes these “errors” as errors of law which are subject to de novo review by the Fifth Circuit. Neither appellee contested the standard of review. 

Since then, the plaintiff/appellees, Ryan, LLC, and intervenor-plaintiffs/appellees the Chamber of Commerce of the United States of America, Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce filed their appellate briefs. In support of the plaintiffs/appellees, EBG’s cross-office team of noncompete litigators led by Erik Weibust (Boston), including Kate Rigby (Boston), Millie Warner (New York), and Carolyn Boucek (Chicago) had the privilege of filing an amicus brief with the Fifth Circuit on behalf of ten national industry organizations coordinated by the National Retail Federation, calling attention to myriad reasons that Judge Brown correctly reasoned that the Final Rule is arbitrary and capricious.

The amicus brief builds on the arguments the amici put forth at the district court level, discussed earlier. The brief focuses on the wisdom of Judge Brown’s ruling that the Final Rule is arbitrary and capricious by explaining the inconsistencies and fallacies in the FTC’s data interpretation surrounding the effect of noncompetes on consumers, employers, and innovation, which are inapposite to the amicis’ collective experience in industry. The brief also highlights that the FTC’s new Chair, Andrew Ferguson, when acting as a Commissioner, dissented against the Final Rule, believing it to be beyond the scope of the FTC’s statutory authority, and bad policy to boot.

Looking ahead, the FTC is represented by a team of attorneys from the Department of Justice. Given that the heads of both bodies report to the President, whether the FTC will withdraw the appeal under the new Trump administration is still unclear. As it stands, the parties have requested oral argument which has yet to be scheduled.