Court schedules briefing on FTC’s noncompete rule

Of the three cases challenging the FTC’s rule to ban noncompetes, the U.S. Chamber of Commerce’s lawsuit is moving the fastest.

Yesterday, the Court scheduled briefing on the Chamber’s motion to stay or enjoin enforcement of the FTC’s noncompete rule.

But the Court took a quick turn that could either divest the Court of jurisdiction or lead to a final hearing (summary judgement or trial) in or after June.

First, the Court explained the context:

Three associations challenge a final rule issued by the Federal Trade Commission on April 23, 2024, that broadly prohibits, as an unfair method of competition, contractual provisions often referred to as non-compete clauses. Invoking associational standing, plaintiffs allege that the final rule violates the Administrative Procedure Act as (1) outside the FTC’s rulemaking authority; (2) premised on a legally erroneous understanding of “unfair methods of competition”; (3) if statutorily authorized, then resting on an unconstitutional delegation of authority to the agency; (4) unlawfully retroactive; (5) not rationally connected to economic data; and (6) arbitrarily chosen without duly considering alternatives. 

Next, the Court noted that the “Fifth Circuit has directed that any forum disputes should be the ‘top priority’ in handling a case.” As a result, the Court set a very tight schedule “for early presentation of any forum-related matters,” with deadlines starting Monday, April 29, and wrapping up on Friday, May 2.

A hearing will be held telephonically, if one is needed.

Finally, the Court turned to the heart of the issue, prefacing the order as follows, “It appears to the court that plaintiffs’ complaint presents only legal disputes about agency action and is thus ‘an action for review on an administrative record’ exempt from initial disclosures.” The Court went on to observe that “no other discovery is necessarily occasioned by plaintiffs’ complaint, for any data underlying the agency’s decision and not appearing in the Federal Register publication of the final rule or public comments available in the rulemaking’s online docket would be immaterial to plaintiffs’ legal-authority challenges and to plaintiffs’ arbitrary-or-capricious challenges, which turn on the agency’s published rationale and consideration of alternatives.”

Of course, that led to the Court to conclude that it can decide the outstanding motion for preliminary relief simultaneously with considering the entire case on the merits, whether through summary judgment or a trial.

To accomplish that, the Court set the following schedule:

  • Plaintiffs have until May 10 “to supplement their motion with additional briefing and attachments pertinent to summary judgment, including any ‘parts of [the administrative record] cited by’ plaintiffs in support of judgment in their favor.” The brief is limited to 45 pages.
  • Defendants then have until May 31 “to file briefing on the matters of plaintiffs’ request for preliminary relief and summary judgment in favor of either party.” That brief is also limited to 45 pages.
  • Plaintiffs then have until June 12 to respond to that filing. The response is limited to 20 pages.
  • And finally, Defendants have until June 19 “to file any reply in support of summary judgment in their favor, which also must not exceed 20 pages.”

As the Court explained, “The court will set a hearing on preliminary relief and summary judgment, and if necessary a consolidated bench trial, on a date close to completion of that briefing.”

Mark your calendars for May 10, May 31, June 12, and June 19! 

We’ll let you know once the hearing on FTC’s noncompete rule is scheduled, but it’s looking like it should be in late June/early July. 

In the meantime, don’t forget to use this time to make sure your agreements, policies, and procedures comply with existing laws, upcoming changes (in particular in Washington), and are coupled with appropriate training, especially at on-boarding and off-boarding.

And, if you are an employee making a job change, make sure you leave with nothing and start your new job in compliance with existing obligations.