Order on the FTC’s noncompete rule may only benefit plaintiffs’ disclosed members

We’ve had some developments in the U.S. Chamber of Commerce’s lawsuit challenging the FTC’s noncompete rule. Most interesting is whether an order on the FTC’s noncompete rule would benefit only disclosed members of the plaintiff associations.

Here’s what happened…

On April 29, as required by applicable rules and the Court’s April 26 scheduling order, the U.S. Chamber of Commerce, Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce filed a Notice of Related Cases, identifying the other two pending challenges we knew about:

  • Ryan, LLC v. FTC, pending before Judge Brown in the United States District Court for the Northern District of Texas; and
  • ATS Tree Services, LLC v. FTC, pending before Judge Hodge in the United States District Court for the Eastern District of Pennsylvania.

The Notice then asked the Court to excuse the plaintiffs from complying with “the portion of the Court’s order requiring the ‘disclosure of whether any party in a related case is a member of any plaintiff association . . . .’”

The U.S. Chamber and Texas Bar Association argued that they “ordinarily keep their membership confidential, consistent with their (and their members’) associational right under the First Amendment to represent their members’ interests without disclosing their identities.”

They were, however, able to disclose that Ryan, LLC was a member of the Texas Bar Association and that ATS Tree Services, LLC “consented to plaintiffs disclosing that it is not a member of any of the plaintiff organizations.” Plaintiffs also previously disclosed in their motion for a stay of the effective date of the rule and a preliminary injunction preventing enforcement of the rule that Highland Landscaping, LLC and Alloy Precision Technologies, Inc. are members of the U.S. Chamber.

The plaintiffs pointed out that “[i]f the Court is concerned about the possibility that, by bringing their own suits, other parties could have two opportunities to secure judicial relief,” the Court can consider that issue later when it “considers the scope of relief in the event that plaintiffs prevail on the merits.” They also informed the Court that Ryan “will not seek to enforce any remedy in this suit that is limited to the members of the plaintiff organizations.”

This of course begs the question: Why should an order enjoining the FTC from enforcing a rule be limited? This is not a typical case involving two private parties and the rights between them. This is an issue of the FTC’s authorization to issue the rule. Either the FTC can enforce its rule or it cannot.

Yet this limitation is precisely what the FTC is now arguing.

On April 30, the FTC filed a Motion To Limit Relief To Plaintiffs’ Identified Members, Or In The Alternative, Transfer Venue Under The First-To-File Rule.

In that Motion, the FTC argues that the plaintiffs “may litigate this case on behalf of only those members whom they have specifically identified and who have given them authority to do so. Alternatively, if this Court determines that Plaintiffs may proceed as associational entities and that any ultimate relief would flow to all of their members, Plaintiffs cannot pick and choose throughout the litigation which of those members would or would not be the beneficiary of that potential relief.”

The FTC also argues that if the court allows the plaintiffs to proceed in their representative capacities, then Ryan, LLC would get two bites at the apple with the possibility of inconsistent results. Accordingly, the FTC argues that because Ryan filed its lawsuit first, that case should proceed and this case should be stayed in the meantime.

The U.S. Chamber and Texas Association of Business will no doubt oppose this motion.

Depending on what happens, if your company is not a member of one of the plaintiff organizations, it may want to join.

Stay tuned.