With everyone’s attention focused on the preliminary injunction ruling in Ryan, LLC v. FTC and the preliminary injunction hearing in ATS Tree Services, LLC v. FTC, few noticed that another challenge to the FTC’s noncompete rule was filed recently.
The new challenge is a case filed on June 21, 2024 in the United States District Court for the Middle District in Florida: Properties of the Villages, Inc. v. FTC.
On July 2, 2024, the plaintiff filed a motion to stay the effective date and preliminary injunction. Not surprisingly, the challenges are similar to those in the other cases, focusing on the FTC’s lack of authority and abuse of any authority it might have.
The court gave the FTC until July 25 to oppose the motion.
Of course, by that point, in addition to the preliminary injunction ruling in Ryan, LLC v. FTC, we will have the court’s ruling on ATS Tree Services’ motion for preliminary injunction, which is due out by July 23.
We’ll keep you posted.
Would a wave of lawsuits force the FTC to suspend the noncompete rule?
In the meantime, the filing of this case made me wonder what would happen if companies around the country were all to independently sue the FTC to invalidate the rule. The odds of a judge granting a nationwide injunction would obviously increase with each case.
That aside, given the FTC’s existing funding constraints, I could envision a scenario in which, overwhelmed by a tidal wave of lawsuits and preliminary injunction motions, the FTC might choose to voluntarily suspend the effective date of the noncompete rule (as it has been requested to do). Such a suspension would provide the necessary time for a final and orderly resolution in the courts, and for companies to adjust and comply with any eventual ruling.
That said, it seems like maybe the FTC is anticipating more challenges, given its recent job posting:
@FTC is hiring for two senior roles in the general counsel’s office: Deputy general counsel for litigation, overseeing high-stakes litigation including appeals and defending rulemakings. Apply by 7/22/24.
Or maybe this just reflects the FTC’s need to strengthen its support for its current cases.
Regardless, companies considering suing will need to act quickly and on masse (though individually).
Curious what others think. Let me know at @russellbesq.
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*Thank you Justin Wise for bringing the Properties of the Village case to my attention.