Pennsylvania Plaintiff That Failed in Effort To Block FTC Noncompete Ban Drops Lawsuit

Last week, employers who use noncompetes got more good news with respect to the Federal Trade Commission’s proposed noncompete ban.

As readers of this blog are probably aware, back in August, the FTC’s noncompete ban was blocked when the United States District Court for the Northern District of Texas issued a memorandum opinion and order in Ryan LLC v. Federal Trade Comm’n, Case No. 3:24-cv-00986-E, granting the plaintiff’s motion for summary judgment and setting aside nationwide the FTC’s noncompete ban that was scheduled to go into effect on September 4, 2024.

Employers who use noncompetes may have breathed a sigh of relief with the Texas Court’s ruling, but a small doubt of uncertainty lingered.  Could another court reach the opposite decision and rule that the FTC noncompete ban may go into effect?

Two other federal lawsuits (one in Pennsylvania and one in Florida) challenging the FTC noncompete ban remained pending, and each had ruled upon a motion for a preliminary injunction regarding the FTC noncompete ban.  Like the Court in Texas, in Properties of the Villages, Inc. v. Federal Trade Commission, Case No. 5:24-cv-316 (M.D. Fla.), the Florida Court granted the plaintiff’s motion for a preliminary injunction (although limited in scope only to the plaintiff), and seemed likely to reach a final decision on the merits in line with the Texas Court. 

But the Pennsylvania Court reached the opposite conclusion: in  ATS Tree Services, LLC v. FTC, Case No. 2:24-cv-01743-KBH (E.D. Pa.), the Court denied the plaintiff’s motion for a preliminary injunction to enjoin the FTC noncompete ban.  After the Texas Court’s August memorandum opinion and order, the Pennsylvania Court had yet to make a final decision on the merits, but it seemed likely that when it did so, that decision would be diametrically opposed to the Texas Court’s ruling, perhaps reviving the FTC noncompete ban.  The question for employers then would become: would they need to comply with the FTC noncompete ban or not?

Happily, on October 4, 2024, the plaintiff in the Pennsylvania lawsuit opted to dismiss that lawsuit, removing the chance of a conflict between two U.S. District Courts (and, eventually, two U.S. Circuit Courts of Appeals).  The Texas Court’s memorandum opinion and order may yet be appealed by the FTC, to the U.S. Court of Appeals for the Fifth Circuit.  The deadline for doing so is October 19, 2024.  The Fifth Circuit and, if it comes to it, the U.S Supreme Court are seen as likely to rule the same way the Texas Court did: blocking the FTC noncompete ban. 

The story of the FTC noncompete ban is not over yet, but at this point, with the dismissal of the Pennsylvania lawsuit, the odds are small that the FTC’s proposed ban will ever come into effect.