SCOTUS ruling edges FTC’s noncompete rule one step closer to revival

The FTC’s Noncompete Rule may be inching back to life — whether the FTC wants it or not.

Background

As you will no doubt recall, on August 20, 2024, the United States District Court for the Northern District of Texas issued a decision on cross-summary judgment motions in Ryan v. Federal Trade Commission. In that decision, the court found that the FTC’s Noncompete Rule was unlawful. As a result, the court set aside the Noncompete Rule under section 706 of the Administrative Procedure Act and ordered the FTC not to enforce it.

That decision is on appeal, as is the preliminary injunction issued by the United States District Court for the Middle District of Florida enjoining the FTC from enforcing the Noncompete Rule against The Properties of the Villages.

Both appeals were stayed for 120 days at the FTC’s request. Those stays expire on July 10 in Ryan and on July 18 in The Properties of the Villages (POV), at which point the parties will need to provide status reports.

Until now, the POV case has been seen as largely immaterial given the Ryan decision.

But that may be changing.

What changed?

Yesterday (June 27, 2025), the Supreme Court issued a ruling in Trump v. Casa, Inc., holding that federal district courts generally lack authority to issue “universal” injunctions, meaning injunctions that prohibit the government from enforcing a law or policy against anyone — not just the plaintiff(s) in the case. The Court left open the door, however, to universal injunctions to the extent “necessary to provide complete relief to each plaintiff with standing to sue.”

Given the Trump v. Casa, Inc. decision, the the Ryan case’s universal prohibition on the FTC’s enforcement of the Noncompete Rule against anyone was almost certainly improper, as such a remedy was likely not necessary “to provide complete relief” to the plaintiffs in that case. Indeed, the party-limited injunction granted in the The Properties of the Villages case provides a clear illustration of a potentially viable alternative.

That does not, however, lead inexorably to the potential revival of the FTC’s Noncompete Rule.

There is still the question of whether setting aside the Noncompete Rule with universal effect would be considered subject to the new ban on universal injunctions. ChatGPT seems to think so. But, alas, ChatGPT seems likely to be wrong. (Yet one more example of why AI should not be relied upon for legal research.)

The status of vacatur under the APA

Although Trump v. Casa, Inc. was delivered by Justice Barrett, it was joined in by Justices Gorsuch, Kavanaugh, Roberts, Thomas, and Alito. This alignment is significant given how Justices Gorsuch, Barrett, Thomas, and Kavanaugh have come out on the related issue of whether federal district courts can set aside agency actions with universal impact.

Justice Gorsuch, in particular, has focused on whether the APA’s requirement that courts “set aside” unlawful agency actions can have universal impact — and he has done so in the context of discussing universal injunctions. For example, in 2023, in United States v. Texas, Justice Gorsuch (joined by Justices Thomas and Barrett) stated the following in a concurring opinion:

Three years ago, I reflected on the rise of the “universal injunctio[n]” and raised questions about its consistency with the separation of powers and our precedents. Department of Homeland Security v. New York, 589 U. S. ___, ___ (2020) (opinion concurring in grant of stay) (slip op., at 3). I observed, too, that “the routine issuance of universal injunctions” has proven “unworkable, sowing chaos for litigants, the government, courts, and all those affected by these [sometimes] conflicting” decrees. Ibid.

Matters have not improved with time. Universal injunctions continue to intrude on powers reserved for the elected branches. They continue to deprive other lower courts of the chance to weigh in on important questions before this Court has to decide them. They continue to encourage parties to engage in forum shopping and circumvent rules governing class-wide relief. Recent events have highlighted another problem too. Sometimes, the government may effectively submit to a universal decree running against it in order to avoid “the usual and important requirement, under the [APA], that a regulation originally promulgated using notice and comment . . . may only be repealed through notice and comment.” Arizona v. City and County of San Francisco, 596 U. S. ___, ___ (2022) (ROBERTS, C. J., concurring) (slip op., at 2). It is a strategy that amounts to little more than “‘rulemaking-by-collective-acquiescence.’” Ibid.; see also Danco Laboratories, LLC v. Alliance for Hippocratic Medicine, 598 U. S. ___, ___ (2023) (ALITO, J., dissenting from grant of application for stays) (slip op., at 3); Arizona v. Mayorkas, 598 U. S. ___, ___–___ (2023) (statement of GORSUCH, J.) (slip op., at 1–4).

The Justices’ concurrence went on to discuss the impact of setting aside an agency action under the APA, stating:

[F]rom those two words alone [( i.e., “set aside”)], the district court thought the power to nullify the Guidelines with respect to anyone anywhere surely follows. See 606 F. Supp. 3d, at 498–500. Color me skeptical.

If the Congress that unanimously passed the APA in 1946 meant to overthrow the “bedrock practice of case-by-case judgments with respect to the parties in each case” and vest courts with a “new and far-reaching” remedial power, it surely chose an obscure way to do it. Arizona v. Biden, 40 F. 4th 375, 396 (CA6 2022) (Sutton, C. J., concurring).

While the concurrence discusses both sides of the argument and refrains from deciding the issue at that time, the Justices’ viewpoint was quite apparent.

Despite the skepticism of those Justices, Justice Kavanaugh has expressed a very different perspective — even rejecting the similarity of universal injunctions to vacatur under the APA. Specifically, last year (2024), Justice Kavanaugh authored a concurring opinion in Corner Post, Inc. v. Board of Governors of the Federal Reserve System, stating as follows:

The APA empowers federal courts to “hold unlawful and set aside agency action” that, as relevant here, is arbitrary and capricious or is contrary to law. 5 U. S. C. § 706(2). The Federal Government and the federal courts have long understood § 706(2) to authorize vacatur of unlawful agency rules, including in suits by unregulated plaintiffs who are adversely affected by an agency’s regulation of others.

Recently, the Government has advanced a far-reaching argument that the APA does not allow vacatur. See Brief for Respondent 42; Brief for United States in United States v. Texas, O. T. 2022, No. 22–58, pp. 40–44. Invoking a few law review articles, the Government contends that the APA’s authorization to “set aside” agency action does not allow vacatur, but instead permits a court only to enjoin an agency from enforcing a rule against the plaintiff.

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The Government’s position would revolutionize long-settled administrative law—shutting the door on entire classes of everyday administrative law cases. The Government’s newly minted position is both novel and wrong. It “disregards a lot of history and a lot of law.” M. Sohoni, The Past and Future of Universal Vacatur, 133 Yale L. J. 2305, 2311 (2024).

The APA authorizes vacatur of agency rules . . . .

* * *

The text and history of the APA authorize vacatur. The text directs courts to “set aside” unlawful agency actions. 5 U. S. C. § 706(2)(A). When Congress enacted the APA in 1946, the phrase “set aside” meant “cancel, annul, or revoke.” Black’s Law Dictionary 1612 (3d ed. 1933); see also Black’s Law Dictionary 1537 (4th ed. 1951) (same); Bouvier’s Law Dictionary 1103 (W. Baldwin ed. 1926) (“To annul; to make void; as, to set aside an award”). At that time, it was common for an appellate court that reversed the decision of a lower court to direct that the lower court’s “judgment” be “set aside,” meaning vacated. E.g., Shawkee Mfg. Co. v. Hartford-Empire Co., 322 U. S. 271, 274 (1944). Likewise, Congress used the phrase “set aside” in many pre-APA statutes that plainly contemplated the vacatur of agency actions.

The APA incorporated that common and contemporaneous meaning of “set aside.” When a federal court sets aside an agency action, the federal court vacates that order—in much the same way that an appellate court vacates the judgment of a trial court.

The APA prescribes the same “set aside” remedy for all categories of “agency action,” including agency adjudicative orders and agency rules. §§ 551(13), 706(2). When a federal court concludes that an agency adjudicative order is unlawful, the court must vacate that order. Around the time when Congress enacted the APA, the phrase “set aside” the agency order meant vacate that order. See, e.g., United States v. L. A. Tucker Truck Lines, Inc., 344 U. S. 33, 38 (1952). And because federal courts must “set aside” agency rules in the same way that they set aside agency orders, successful challenges to agency rules must award the same remedy. See M. Sohoni, The Power To Vacate a Rule, 88 Geo. Wash. L. Rev. 1121, 1131–1134 (2020). In short, to “set aside” a rule is to vacate it.

Longstanding precedent reinforces the text. Over the decades, this Court has affirmed countless decisions that vacated agency actions, including agency rules. See, e.g., Department of Homeland Security v. Regents of Univ. of Cal., 591 U. S. 1, 36, and n. 7 (2020); Whitman v. American Trucking Assns., Inc., 531 U. S. 457, 486 (2001); Board of Governors, FRS v. Dimension Financial Corp., 474 U. S. 361, 364–365 (1986). Those decisions vacated the challenged agency rules rather than merely providing injunctive relief that enjoined enforcement of the rules against the specific plaintiffs. See, e.g., Regents of Univ. of Cal., 591 U. S., at 9 (holding that the rescission of a major federal program “must be vacated”).

* * *

[T]he Government says that vacatur of a federal rule is akin to a nationwide injunction—in other words, an injunction that prohibits the Government from enforcing a law against anyone, not just the parties in a specific case. The Government has contended that equitable relief is ordinarily limited to the parties in a specific case. Therefore, nationwide injunctions would be permissible only if Congress authorized them.

But in the APA, Congress did in fact depart from that baseline and authorize vacatur. As noted above, the text of the APA expressly authorizes federal courts to “set aside” agency action. 5 U. S. C. §706(2). “Unlike judicial review of statutes, in which courts enter judgments and decrees only against litigants, the APA” and related statutory review provisions “go further by empowering the judiciary to act directly against the challenged agency action.” J. Mitchell, The Writ-of-Erasure Fallacy, 104 Va. L. Rev. 933, 1012 (2018). The text of §706(2) directs federal courts to vacate agency actions in the same way that appellate courts vacate the judgments of trial courts. See M. Sohoni, The Power To Vacate a Rule, 88 Geo. Wash. L. Rev. 1121, 1131– 1134 (2020). The text of the APA therefore authorizes vacatur of agency rules. By contrast, Congress has rarely authorized courts to act directly on federal statutes or to prohibit their enforcement against nonparties. As a result, background equitable principles may control in those non-APA cases.

While Justice Kavanaugh’s argument relies on the congressional grant of authority under the APA, Justice Gorsuch would no doubt contend that such a grant was unconstitutional. See United States v. Texas (Gorsuch, J. (concurring) (“More importantly still, universal relief, whether by way of injunction or vacatur, strains our separation of powers. It exaggerates the role of the Judiciary in our constitutional order, allowing individual judges to act more like a legislature by decreeing the rights and duties of people nationwide.”)).

Instructively, the Court in Trump v. Casa, Inc. expressly preserved this issue for later resolution: “Nothing we say today resolves the distinct question whether the Administrative Procedure Act authorizes federal courts to vacate federal agency action. See 5 U. S. C. § 706(2) (authorizing courts to ‘hold unlawful and set aside agency action’).”

Accordingly, for now it seems, the Ryan court’s decision universally setting aside the Noncompete Rule survives.

But what does the future look like?

Unclear.

Now what? 

At this point, the FTC’s noncompete rule remains vacated¹ and unenforceable nationwide. But the Supreme Court’s decision limiting universal injunctions casts serious doubt on whether “setting aside” a rule under the APA with universal effect will be the next limitation on the lower courts’ equitable powers.

So, for now, there is nothing to do other than to continue to monitor these cases and make sure you have a strategy if universal vacatur goes away.