Last week, a federal court in Texas made a preliminary ruling that partially blocks the FTC’s rule that rendered most noncompetes in this country unenforceable (the “FTC Ban”). The FTC’s Ban was set to go into effect on September 4, 2024. Judge Ada Brown of the United States District Court for the Northern District of Texas granted a preliminary injunction postponing the effective date of the FTC’s Ban, agreeing with the plaintiffs and plaintiff-intervenors that the FTC lacked substantive rulemaking authority with respect to what they deemed to be unfair methods of competition. The Court also held the FTC Ban to be arbitrary and capricious, and that the plaintiffs were likely to succeed on the merits. The Court indicated that it planned to make its final ruling on the merits on August 30, 2024. The case could then be appealed to the United States 5^thCircuit Court of Appeals in New Orleans, which is known for its opposition to President Biden’s policies.

Although Wednesday’s order limits the delay of the enforcement of the FTC Ban to the plaintiff and plaintiff-intervenors in the case, there will be considerable efforts to convince this judge to block the FTC’s Ban nationwide when she issues her final ruling on August 30.  Additionally, another challenge to the FTC’s Ban is set to be heard at a hearing in federal court in Philadelphia on July 10. We expect there to be significant litigation in the coming months relating to the enforceability of the FTC Ban, and we will keep you apprised of further developments.