On October 18, 2024, the Federal Trade Commission (FTC) appealed to the Fifth Circuit a Texas federal court’s decision to strike down the FTC’s nationwide noncompete ban. This comes hot on the heels of the FTC’s September 24, 2024, appeal to the Eleventh Circuit of a Florida federal court’s preliminary injunction of the ban as to the plaintiff in that case.
These appeals are the latest developments in court challenges since the FTC voted to approve the ban in April 2024.
In Ryan LLC v. Federal Trade Commission, on August 20, 2024, the United States District Court for the Northern District of Texas held that the FTC had exceeded its authority in promulgating the ban and that it was arbitrary and capricious. Because the Administrative Procedure Act calls for a court to “set aside” a rule in such circumstances, the Court’s decision necessarily prevented the ban from taking effect across the country, as it had been scheduled to do on September 4, 2024. Our Firm wrote about the Court’s decision at that time.
In Properties of the Villages, Inc. v. Federal Trade Commission, on August 14, 2024, the United States District Court for the Middle District of Florida preliminarily enjoined the FTC from enforcing its noncompete ban against the plaintiff. As in Ryan, the Court held that the FTC exceeded its authority in adopting the noncompete ban.
The FTC will pursue its appeal of the Ryan decision in the Fifth Circuit, a court increasingly recognized as hostile territory for federal agencies trying to enforce new regulations. The FTC’s appeal in Properties of the Villages, Inc. to the Eleventh Circuit—while not exactly friendly territory—could potentially yield a reversal and create a circuit split about the FTC’s authority to promulgate its noncompete ban. Such a split, in turn, would increase the likelihood of the United States Supreme Court potentially reviewing the issue.
Briefing schedules remain forthcoming in both appeals. We will be monitoring the dockets for updates.
