On July 3rd, Judge Ada Brown of the U.S. District Court for the Northern District of Texas issued a preliminary injunction in Ryan LLC v. Federal Trade Commission barring the FTC from enforcing its non-compete rule against the litigants and intervenors in that case. Although the immediate decision is limited in its application, the Court held as a preliminary matter that the FTC has no rulemaking authority at all under the “unfair trade practices” provisions under which it promulgated the rule and that the rule is “arbitrary and capricious” in any event. The Court signaled that it would issue its final ruling by August 30th, just 5 days before the rule is scheduled to go into effect, and the Court signaled that it will consider the appropriate breadth of application in issuing its final judgment.
A hearing in the second case challenging the rule – ATS Tree Services v FTC, which is pending in the United States District Court for the Eastern District of Pennsylvania – is scheduled for July 10th and that court promised a decision by July 23.
Although both district court case judgments likely will be appealed, there is a growing consensus among legal commentators that the rule ultimately will be struck down and that it will not be revived. The U.S. Supreme Court’s recent Loper Bright Enterprises v. Raimondo decision vacating the Chevron doctrine under which agency interpretations of their authorizing statutes were entitled to deference only increases the prospects of that ultimate result.