Trade Secrets & Employee Mobility

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. 

Ten days ahead of her self-imposed deadline, Judge Ada Brown of the Northern District of Texas issued a memorandum opinion and order granting the plaintiffs’ motions for summary judgment, setting aside the Federal Trade Commission’s forthcoming Noncompete Ban nationwide, which was set to go into effect on September 4, 2024. In other words, as we predicted, the FTC’s Noncompete Ban is dead nationwide unless and until a Circuit Court of Appeals or the Supreme Court of the United States revives it.  

Judge Brown granted plaintiffs’ summary judgment motion as to every claim under the Administrative Procedures Act (APA) and the Declaratory Judgment Act (DJA), ruling that the FTC exceeded its statutory authority when it issued the Noncompete Ban and that the Noncompete Ban is arbitrary and capricious.

Judge Brown set the tone for her decision by quoting the Supreme Court’s recent opinion in Loper Bright Enters. v. Raimondo, 144 S.Ct. 2244, 2261 (2024), where the Court overruled the principle of Chevron deference established in Chevron U.S.A., Inc. v. Nat’l Res. Def. Council, Inc. (1984), stating: “Congress in 1946 enacted the APA as a check upon administrators whose zeal might otherwise have carried them to excesses not contemplated in legislation creating their offices.”

As we have previously written, on April 23, 2024, the Federal Trade Commission (FTC) issued a sweeping final rule (“the Rule”) that purports to ban virtually all post-employment noncompete agreements in the United States. The Rule was formally published in the Federal Register on May 7, 2024, and will go into effect 120 days later, on September 4, 2024--if it survives the legal challenges that were filed in quick response.

While justice may not always be swift, the news about the Rule and challenges to it have developed at breakneck speed by many litigators’ standards over the ...

On March 16, 2021, the U.S. Court of Appeals for the D.C. Circuit affirmed defendant Shan Shi’s conviction for conspiracy to commit theft of trade secrets. Given recent efforts at the state and now federal level to ban non-competes, employers may be more likely to consider partnering with law enforcement to remedy trade secret theft.

The Court’s opinion begins with the statement, “We can’t always get what we want, but, sometimes, we get what we need.” Unfortunately, the Court’s opinion continues, what Shi’s company needed were seven documents containing a ...

The Court of Appeals for the Sixth Appellate District of Texas at Texarkana issued an opinion on November 24, 2020 in Titan Oil & Gas Consultants LLC v. David W. Willis and RIGUP, Inc., a case addressing application of a non-competition provision in the independent contractor context in the oil and gas drilling and production industry in the Permian Basin and elsewhere. Titan addressed non-competition claims of interest both to those focused on the Texas arcana of the state’s restrictive covenant statute and jurisprudence and to those more generally interested in applying ...

The United States Court of Appeals for the Fifth Circuit opened its October 29th opinion in Cardoni v. Prosperity Bank by noting that “[i]n addition to their well-known disagreements over boundaries and football” known as the Red River Rivalry, “Texas and Oklahoma do not see eye to eye on a less prominent issue: covenants not to compete.”   As the Court went on to note, “Texas generally allows them so long as they are limited both geographically and temporally… Oklahoma generally does not.”  “These different policy choices—Texas's view which prioritizes parties ...