Washington, D.C. — Today, Judge Ada Brown from the US District Court for the Northern District of Texas issued a preliminary injunction against the Federal Trade Commission’s ban on noncompete agreements in the case of Ryan LLC v. FTC—a challenge joined by the US Chamber of Commerce—with a final decision on whether to permanently block the rule expected on August 30th. In response, the American Economic Liberties Project released the following statement.

“A single rogue judge in the Northern District of Texas has blocked, albeit temporarily, an immensely popular rule that would protect the ability of 30 million American workers to negotiate for better pay and working conditions,” said Lee Hepner, Senior Legal Counsel at the American Economic Liberties Project. “The Federal Trade Commission acted well within its statutory authority to issue this rule, and we look forward to a swift appeal of this misguided, if not unexpected, ruling.”

“If anyone is curious why they aren’t feeling the positive impact of this administration’s recent pro-worker economic agenda, look no further than the radical judges of the 5th Circuit,” Hepner added. “It’s time to end the disastrous practice of judge-shopping so that these hand-picked, unaccountable judges stop putting the interests of the Chamber of Commerce above working families and their pocketbooks.”

The Northern District of Texas limited the scope of its preliminary ruling to plaintiff Ryan LLC and plaintiff-intervenors the Chamber of Commerce, Business Roundtable, and Texas Association of Business. Earlier this year, a poll of small business owners showed 59% support for banning restrictive noncompete agreements. The Court indicated that it intends to issue a final merits ruling by August 30, prior to the Rule’s effective date of September 4, 2024.

Background:

Noncompete agreements are restrictive, one-sided contracts foisted upon workers across industries and income levels, from doctors to franchise workers — at least 18% of the workforce. In the final rule, the FTC relied on evidence that estimates banning noncompetes nationally would increase workers’ earnings by nearly $400-$488 billion over the next decade, lead to $74-$194 billion in reduced spending on healthcare costs over the next decade, and increase new business formation by 2.7%. Banning noncompetes is also overwhelmingly popular across the country, with an Ipsos poll finding that 61% of Americans support the FTC’s rule.

The 5th Circuit has become a popular destination for corporations seeking to unravel the Biden Administration’s economic agenda, through an informal practice of “judge-shopping.” The District Court for the Northern District of Texas, where Ryan LLC v. FTC was decided, is in the 5th Circuit, and thus its decisions are appealable to the 5th Circuit Court of Appeals. In the Dallas division, where Ryan LLC brought its challenge, 8 out of 10 judges were appointed by Republican presidents. 3 of the 10 were appointed by President Trump. Judge Ada Brown, who decided Ryan LLC v. FTC, was nominated by President Trump in 2019.

During the Biden Administration’s first term, 13 rules have been overturned by District Court judges within the 5th Circuit (* indicates Pres. Trump appointee):

• Unfair Discrimination in Banking Rule (CFPB) – blocked by E.D. Tex. Judge Barker*
• Greenhouse Gas State Tracking Rule (DOT/FHWA) – blocked by N.D. Tex. Judge Hendrix*
• DACA Extension Rule (Homeland Security) – blocked by S.D. Tex. Judge Hanan
• Expanded Student Loan Forgiveness (DOE) – blocked by N.D. Tex. Judge Pittman*
• Student Loan Forgiveness for Students Defrauded by Colleges (DOE) – upheld by W.D. Tex. Judge Pitman (Obama appointee), blocked on appeal by 5th Circuit Justice Jones (Reagan appointee)
• $15 Minimum Wage for Federal Contractors (Biden E.O.) – blocked by S.D. Tex. Judge Tipton*
• Ghost Guns Rule (ATF) – blocked by N.D. Tex. Judge O’Connor, on appeal to Supreme Court
• Abortion Pill/Mifepristone Approval (FDA) – blocked by N.D. Tex. Judge Kacsmaryk*, overturned by the Supreme Court on June 13
• Race-Based Minority Business Rule (Congress) – blocked by N.D. Tex. Judge Pittman*
• Joint Employer Rule (NLRB) – blocked by E.D. Tex. Judge Campbell Barker*
• Credit Card Late Fee Cap (CFPB) – blocked by N.D. Tex. Judge Pittman*
• Noncompete Rule (FTC) – blocked by N.D. Tex. Judge Brown*
• Expanded Overtime Eligibility Rule (DOL) – blocked as to Texas employees only by E.D. Tex. Judge Jordan*
• Airline Junk Fees Ban (DOT) – motion for stay pending before the 5th Circuit

The case is Ryan LLC v. Federal Trade Commission, N. D. Tex., Case No. 3:24-cv-00986. The Chamber of Commerce separately filed suit in the Eastern District of Texas, Case No. 6:24-cv-00148, which is on hold pending resolution of the Ryan LLC case.

The FTC Rule banning noncompetes is facing separate challenges in the Eastern District of Pennsylvania (ATS Tree Services v. FTC, Case No. 2:24-cv-01743) and the Western District of Florida (Properties of the Villages, Inc. v. FTC, Case No. 5:24-cv-00316. A decision in the E.D. Pa.-based case is expected on or before July 23, 2024.

Read Corporations v. The People to learn more.

Learn more about Economic Liberties here.

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.