We previously reported that the U.S. District Court for the Northern District of Texas in Ryan LLC v. Federal Trade Comm’n, Case No. 3:24-cv-00986-E, granted a preliminary injunction staying the Federal Trade Commission’s (“FTC”) final rule banning almost all post-employment noncompetes (the “Noncompete Rule”), but limited the scope of its ruling to only those parties in that case.
Following that ruling, on July 10, 2024, the Plaintiff and Plaintiff-intervenors (“Plaintiffs”) filed an Expedited Motion for Limited Reconsideration of the Scope of Preliminary Relief on the issue of associational standing.
On July 11, the court promptly denied Plaintiffs’ motion. In a one-paragraph order, the court held that Plaintiffs had “not shown themselves entitled to the respective relief requested.” Separately, the court entered an “amended briefing schedule for the merits disposition” (the “Briefing Schedule”) that will likely address many of the issues argued in Plaintiffs’ motion for reconsideration. The Briefing Schedule requires that the matter be fully briefed by August 16, 2024, and the court is scheduled to issue a disposition on the merits by August 30, 2024.
Although the court denied Plaintiffs’ reconsideration motion, Plaintiffs’ arguments are likely a preview of issues to be decided by the court in its merits disposition. First, relying on Supreme Court and Fifth Circuit precedent, Plaintiffs argued that a preliminary injunction staying an unlawful rule under the Administrative Procedure Act (APA) does not need to be “party-restricted.” Relying on the court’s finding that the FTC violated the APA in “promulgating the Noncompete Rule,” Plaintiffs argued (and will likely argue again) that the scope of relief should be expanded nationwide, to all entities affected by the rule.
Plaintiffs alternatively argued that even if the court does not issue a nationwide injunction, it should apply the principles of “associational standing” to extend relief to those members of the Plaintiff-intervenors, including members of the U.S. Chamber of Commerce. Plaintiffs argued that associational standing was met because the intervenors established that they: (1) are committed to protecting the interests of their members and regularly advocate for reforms that reduce their members’ regulatory burdens; and (2) demonstrated that their members will suffer concrete harms as a result of the Noncompete Rule, including the costs of complying with the Noncompete Rule.
As we previously reported, the focus now will shift to ATS Tree Servs., LLC v. FTC, Case No. 2:24-cv-01743-KBH, in the U.S. District Court for the Eastern District of Pennsylvania. On July 10, 2024, the court held a hearing on the plaintiff’s motion to stay the Noncompete Rule and enjoin its enforcement. The court has promised a ruling on that motion by July 23, 2024. It remains unclear whether the Eastern District of Pennsylvania – and a judge appointed by President Biden (who has announced that noncompete regulation is part of his administration’s agenda) – will find the Noncompete Rule unenforceable, and if so, order a nationwide injunction.
We will continue to analyze the Noncompete Rule and further developments in the courts.
Gianna Dano, a Summer Associate in Epstein Becker Green’s Newark office (not admitted to practice) contributed to the preparation of this piece.
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