Judge Halts Chamber's Suit Challenging FTC's Noncompete Ban (1)

A federal judge halted the US Chamber of Commerce’s lawsuit over the Federal Trade Commission’s noncompete ban, allowing the Chamber to join a similar case filed earlier in a separate Texas court.

Business groups led by the nation’s largest business lobby sued the FTC last month in the US District Court for the Eastern District of Texas, the day after the antitrust agency finalized a rule outlawing noncompete provisions that prohibit workers from switching jobs within an industry. The ban would increase US earnings by at least $400 billion over the next 10 years, the FTC estimated.

But Ryan LLC, a Dallas-based tax services provider, beat the Chamber to file the first legal challenge to the noncompete rule. Judge J. Campbell Barker sided with the FTC on Friday and suspended the Chamber’s lawsuit, citing the first-to-file doctrine—a rule that allows a district court to transfer, stay, or dismiss an action when a similar complaint has already been filed in another federal court.

“Application of the first-to-file rule may diminish these plaintiffs’ choice among venues, which is never done lightly,” Barker said in his written order. “But the principle of comity so requires.”

Ryan is also a member of the Texas Association of Business, a co-plaintiff in the Chamber’s suit. Keeping the lawsuits separate leaves open the possibility of “inconsistent judgments” in the two cases, Barker added.

Plaintiffs in both lawsuits allege the FTC lacks clear congressional authority to issue the noncompete rule. But the agency’s Democratic commissioners maintain the FTC does have the power to issue rules defining unfair methods of competition, arguing the authority has been upheld by courts and reaffirmed by Congress.

The Chamber and its co-plaintiffs can intervene in or join Ryan’s case, which is pending in the US District Court for the Northern District of Texas. The Chamber didn’t immediately respond to a request for comment on its next steps.

Federal civil procedure rules “easily accommodate the addition of plaintiffs here to the earlier-filed Ryan action,” Barker said in his order.

The case filed by Ryan is assigned to Judge Ada Brown, an appointee of former President Donald Trump. Ryan’s legal team includes Eugene Scalia, former US Secretary of Labor during the Trump administration and a Gibson, Dunn & Crutcher LLP attorney. Ryan declined to comment.

An FTC spokesperson declined to comment on the court’s decision to pause the Chamber’s suit.

Sullivan & Cromwell LLP represents the industry plaintiffs.

The case is Chamber of Com. of the U.S. v. FTC, E.D. Tex., No. 6:24-cv-00148, 5/3/24.