Trade Secrets & Employee Mobility

After what must have been a grueling two-hour and 52-minute oral argument on the merits of a challenge to the FTC’s Final Rule banning noncompetes, Judge Timothy Corrigan of the United States Court for the Middle District of Florida issued a ruling from the bench in Properties of the Villages, Inc. v. Federal Trade Commission, Case No. 5:24-cv-316 granting the plaintiff’s Motion for Stay of Effective Date and Preliminary Injunction.  Importantly, as with the decision in the Northern District of Texas, the court limited the scope of the preliminary injunction to the named plaintiff only.

Judge Corrigan’s swift ruling granting the motion to stay at the completion of the hearing is a welcome decision given the looming September 4, 2024 effective date of the FTC’s noncompete ban. While the court rejected two of plaintiff’s arguments as to success on the merits, the court held that the FTC exceeded its authority under the major questions doctrine.

In particular, the court quoted Supreme Court precedent that “common sense, informed by constitutional structure, tells us that Congress normally intends to make major policy decisions itself, not leave those decisions to agencies[.]”  Judge Corrigan considered the “huge economic impact” the Final Rule would have in transferring value from employers to employees, along with the Final Rule’s political significance preempting state competition laws.  In finding that the plaintiff established a likelihood of success on the major questions doctrine, the Florida court has established a split from the Eastern District of Pennsylvania, which ruled in July that the FTC’s issuance of the Final Rule did not implicate the major questions doctrine.   

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.