On August 20, 2024, the federal district court for the Northern District of Texas, in Ryan LLC v. Federal Trade Commission [FTC] (opinion found here), “set aside” with nationwide effect, the FTC “Non-Compete Rule.” The federal district court held that the FTC exceeded its statutory authority in promulgating the Non-Compete Rule, concluding “the text and the structure of the FTC Act reveal the FTC lacks substantive rulemaking authority with respect to unfair methods of compensation….”
The court also concluded that the Non-Compete Rule is “arbitrary and capricious because it is unreasonably overbroad without a reasonable explanation.” The court further found in support of its conclusion that the rule is arbitrary and capricious that the “FTC failed to sufficiently address alternatives to issuing the Rule.”
The court determined that the “FTC’s promulgation of the Rule is an unlawful agency action” and thereby “set aside” the Rule. The court denied the FTC’s argument that relief should be limited to the named plaintiffs, noting that the Fifth Circuit had recently held in Braidwood Mgmt., Inc. v. Becerra, 104 F.4th 930, 951 (5th Cir. 2024) that “setting aside agency action…has ‘nationwide effect’, is ‘not party-restricted,’ and ‘affects persons in all judicial districts equally.’”
