FTC Non-Compete Ban Lawsuits Update: Eastern District of Texas Stays Chamber of Commerce Suit in Favor of Ryan LLC as First-to-File | Seyfarth Shaw LLP
On May 3, 2024, the United States District Court for the Eastern District of Texas entered an Order staying the proceedings in Chamber of Commerce v. FTC by granting the FTC’s motion to apply the first-to-file doctrine, in which a district court should generally order “stay, transfer, or dismissal” of a second-filed action that substantially overlaps with a pending, first-filed action—in this case, Ryan, LLC v. FTC.
The Court’s Order found that the first-to-file rule required the Eastern District’s deference to the Northern District’s action in Ryan because the two cases’ procedural postures were roughly the same, “the substantial overlap between the cases and the comity factors support consolidation, and Ryan is the first-filed case.”
Although the Court found a transfer or consolidation of the two pending cases would avoid duplication of judicial effort, potentially inconsistent judgments, and piecemeal litigation, it nonetheless questioned its authority to do so. Therefore, the Eastern District elected to stay proceedings in the Chambers case to allow the Chamber of Commerce to seek either intervention or addition as parties in the Ryan case, which we expect to occur.
As a result, the remaining unexpired deadlines in the Court’s briefing schedule are lifted, and the proceedings are currently stayed. The Order also requires the Chamber of Commerce to notify the Court if its claims are accepted in Ryan, or denied.
The Northern District of Texas, meanwhile, entered an Order on May 2, 2024, requiring the FTC respond by 5:00 p.m. CT on May 7th to the Ryan Plaintiff’s emergency motion for an expedited briefing schedule for its request for a preliminary injunction and stay of the Non-Compete Rule. The FTC had previously requested 21 days to respond to Plaintiff’s motion to expedite briefing . The Ryan Plaintiff also recently amended its pleadings to elaborate on its arbitrary-and-capricious claim and seek an order vacating the Non-Compete Rule under the Administrative Procedure Act (APA), which would apply a vacatur of the Non-Compete Rule to parties and non-parties alike, if granted.
As it currently stands, we should see the FTC’s response to the Ryan Plaintiff’s motion by Tuesday, May 7, 2024, in addition to the Chamber of Commerce’s efforts to join the Ryan suit, with the Court’s schedule on Plaintiff’s request for a preliminary injunction to shortly follow.
