Plaintiffs Ask to Reconsider Injunction on FTC Non-Compete Rule

Plaintiffs Ask to Reconsider Injunction on FTC Non-Compete Rule

Posted: July 11, 2024

Last week a judge blocked the Federal Trade Commission's (FTC) comprehensive ban on noncompetes - but only for the plaintiffs in the lawsuit.

For now, your business must comply with the FTC's Non-Compete Rule.

On July 10, the plaintiffs had asked the court to reconsider its earlier ruling and extend the ban nationwide.

Judges rarely grant motions for reconsideration. Why is that? Because a party filing that motion generally prevails only if the court overlooked facts or controlling law when issuing its initial ruling.

Why a second bite at the apple?

So why would the plaintiffs here have any better luck? Technically, the Federal Rules of Civil Procedure allow a court to reconsider and reverse an earlier decision for any reason it deems sufficient, even without new evidence or clarification of substantive law.

The plaintiffs argue that expanding the injunction from just the parties to the lawsuit to all businesses nationwide is appropriate under controlling law in the Fifth Circuit, which covers the Northern District of Texas, where the lawsuit is pending. Specifically, the Administrative Procedure Act (APA) authorizes a district court, like the one here, to "postpone the effective date of an agency action."

Indeed, the Fifth Circuit has previously ruled that "the scope of relief" for successful APA claims, like the one here, "is not party restricted." Of course, that does not mean that a district judge must enter a nationwide injunction. However, the plaintiffs also point out that "another district court considering this very issue determined that nationwide relief would be necessary if plaintiff-intervenors' claims challenging the Non-Compete Rule were successful." Further, in another unrelated APA challenge earlier this year, the Fifth Circuit concluded that its ruling would apply nationwide if the plaintiffs prevailed.

Ultimately, as this court has already recognized the ongoing harms to employer-members of the business associations representing their interests as plaintiff-intervenors in this lawsuit, and because Supreme Court and Fifth Circuit precedent support expanded relief, the plaintiff intervenors request that the court expand the scope of the preliminary relief to a nationwide injunction.

Even if the court does not grant the motion for reconsideration, it plans to rule on the merits of the lawsuit by the end of August, just before the FTC Rule takes effect in early September.

Posted In:Non-Compete Clause (Restrictive Covenant), Non-Disclosure Agreement (NDA)

Want to know more? Read the full article by Eric B. Meyerat HR Morning

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