A lot has happened since we updated you on the FTC’s rule banning noncompetes and what it might mean for employers.
Litigation challenging the rule has been moving swiftly, with interesting procedural twists.
The following summarizes the developments in the litigation challenging the rule:
- A tax services and software provider named Ryan, LLC filed the first lawsuit challenging the FTC’s rule. Ryan’s suit was filed in the Northern District of Texas.
- The U.S. Chamber of Commerce and several other similar local business groups filed the second lawsuit in the Eastern District of Texas.
- A tree service company also filed a challenge in the Eastern District of Pennsylvania.
- The U.S. Chamber of Commerce filed a motion for preliminary injunction asking the court to stay the effective date of the FTC’s rule and to enjoin its enforcement.
- The Judge in the U.S. Chamber case initially set an aggressive briefing schedule. That schedule was designed to ensure a decision would be issued well in advance of the rule’s effective date.
- However, because Ryan was a member of one of the local Texas business groups that had joined the U.S. Chamber of Commerce as a plaintiff, the FTC filed a motion in the U.S. Chamber case seeking to limit the relief in the lawsuit to only the identified members of the plaintiff-organizations. The FTC alternatively asked the court to transfer the case to the Northern District of Texas, where the first-filed Ryan lawsuit was pending.
- In the meantime, Ryan filed its motion seeking injunctive relief to stay the effective date of the rule and to enjoin its enforcement.
- The Judge in the U.S. Chamber of Commerce case stayed that case in favor of the first-filed Ryan case. The Judge also declined to transfer the U.S. Chamber case to the Northern District of Texas where the Ryan case is pending.
- The judge in the Ryan case set a briefing schedule on Ryan’s injunction motion. The Judge also indicated she would rule by July 3. This is several months in advance of the FTC rule’s effective date. (Sidenote: Judge Brown who is overseeing the Ryan case is a fellow Emory Law alum!).
- Finally, the U.S. Chamber of Commerce has filed an unopposed motion to intervene in the Ryan lawsuit.
The litigation dust thus seems to have largely settled, and it appears Judge Brown in Ryan is likely poised to decide the validity of the FTC’s rule within a few months.
Stay tuned for more updates, and please reach out if you have questions.
Neal Weinrich knows noncompetes and trade secrets inside and out. A shareholder at Berman Fink Van Horn, Neal counsels clients in all industries on matters involving restrictive covenants, trade secrets and other competition-related issues.
