Philadelphia Court Sides with Federal Trade Commission and Refuses to Enjoin FTC’s Ban on Non-Competes

On July 23, 2024, the U.S. District Court for the Eastern District of Pennsylvania considered another challenge to the Federal Trade Commission’s (“FTC”) Non-Compete Rule (the “Rule”) banning the vast majority of non-compete agreements. In ATS Tree Services, LLC v Federal Trade Commission, District Judge Kelley Brisbon Hodge refused to temporarily block the FTC’s Rule. The ATS Court is now the second court to consider the validity and enforceability of the FTC’s Rule.

In denying plaintiff ATS’s application, unlike the U.S. District Court for the Northern District of Texas in Ryan LLC v. Federal Trade Commission, the ATS court found that the FTC did in fact have the authority to issue “procedural and substantival rules as is necessary to prevent unfair methods of competition” and so concluded that ATS could not likely succeed on the merits of its claim that the FTC lacked the authority to enact the Rule. The ATS court also found that ATS could not establish the requisite “irreparable harm” needed for injunctive relief.

As a reminder, the Ryan court, which as we previously reported temporarily enjoined the Rule as to the parties on July 3, 2024, promised a final ruling on the merits of that case by August 30, 2024, setting up a potential circuit split. Absent further judicial action, the FTC Rule is set to go into effect nationwide on September 4, 2024.