Kristoffer Tripplaar/Sipa USA via AP Images
Dallas-based Ryan LLC is owned by G. Brint Ryan, who has ambitions of his company becoming “the Amazon of tax.”
A company owned by a Republican megadonor and tax adviser to Donald Trump has filed suit to block the Federal Trade Commission’s noncompete rule, just hours after it was finalized.
Ryan LLC is a Dallas-based business tax firm known for aggressively working the tax code to lower payments for corporate clients, mostly in the states. The company’s website describes its mission as “liberating our clients from the burden of being overtaxed.”
It specializes in “reverse audits,” finding taxes that they believe companies shouldn’t owe, and pitching other companies on making the same claims, while asking for as much as 30 percent of the proceeds. Ryan has even sued its own clients if they decline to go after certain refunds.
A 2022 USA Today profile describes Ryan LLC’s style as a combination of belligerence toward state tax officials and overwhelming them with refund claims. Officials in North Dakota complained internally that Ryan burdened and antagonized tax officials there, by “throwing stuff at the wall to see what sticks with little to no effort on their part to provide meaningful documentation.”
That is a good description of Ryan’s lawsuit against the FTC, which claims that the agency has no authority to write a rule to ban noncompete agreements, and even if it did, the rule would be an unconstitutional delegation of legislative powers to the executive branch, or a violation of the so-called “major questions doctrine,” because it affects so many workers. For good measure, the complaint also suggests that the FTC is unconstitutional.
“It’s just a standard set of right-wing arguments against both doing something against noncompetes, and the administrative state in general,” said Sandeep Vaheesan, legal director at the Open Markets Institute, who has been at the forefront of arguing for FTC rulemaking to tackle unfair methods of competition.
The lead counsel on the case is Eugene Scalia, Trump’s former labor secretary and the son of the late Supreme Court justice, who during the Obama administration was a hired gun for business interests that wanted to knock out rules that might affect their bottom line. It was filed in the Northern District of Texas, a notorious haven for conservative litigants, because the handful of federal judges are nearly all Republican appointees.
A Trump-appointed judge, Ada Brown, received the case. Appeals would go to the similarly conservative Fifth Circuit, and potentially the Supreme Court. The U.S. Chamber of Commerce is also expected to file suit against the noncompete rule as soon as today, probably by judge shopping in Texas as well.
Ryan LLC is owned by G. Brint Ryan, who visited Donald Trump in Beverly Hills during the 2016 presidential campaign to discuss tax policy, according to Politico. Ryan LLC gave $275,000 to pay for Trump’s inauguration in 2017. Ryan and members of his firm have contributed to several top tax writers in Congress, including House Ways and Means Committee chair Jason Smith.
Ryan’s lawsuit against the FTC claims that the agency has no authority to write a rule to ban noncompete agreements, and even if it did, the rule would be unconstitutional.
Ryan gave $730,930 to federal candidates in the last two presidential election cycles (2016 and 2020), only $2,800 of it to Democrats, according to Open Secrets. He also gave $250,000 to a Republican super PAC in 2016, $96,500 to the key House and Senate Republican campaign committees since 2010, and $317,500 to the Republican National Committee since 2011, according to the public interest group Accountable.
Ryan has ambitions of his company becoming “the Amazon of tax,” according to a 2021 profile in D Magazine, a Dallas lifestyle publication. Using millions of dollars in campaign donations to influence tax policy is so commonplace at Ryan LLC that a company brochure once said: “We don’t just react to Texas tax changes. We engineer them.”
As part of the engineering, Ryan hired a former Texas state comptroller, John Sharp. Also on the payroll as a principal is Jeff Miller, a leading corporate lobbyist and political adviser to former House Speaker Kevin McCarthy. Miller has numerous corporate clients as a lobbyist, including Apple, Anheuser-Busch InBev, Dow, General Electric, Blackstone, Occidental Petroleum, and PhRMA, the trade group for the prescription drug industry.
The company has roughly 200 principals who are shareholders. According to the lawsuit, the principals all have post-employment noncompete agreements, and most of its other 4,000 employees do not (outside of a handful with “access to particularly sensitive business information”). Under the FTC’s rule, existing noncompete agreements on senior executives like principals would still be enforceable. But future agreements with senior executives would be prohibited.
The lawsuit claims that the FTC Act, under Section 6(g), only allows the agency to make “procedural” rules to aid its investigative authority, not substantive ones to ban unfair methods of competition. The suit at one point truncates the language of Section 6(g), which says the FTC can “make rules and regulations for the purpose of carrying out the provisions of this subchapter,” the subchapter being the FTC Act.
The FTC has made substantive rules on unfair methods of competition going back to 1962, and the D.C. Circuit Court of Appeals upheld this rulemaking authority in 1973. The lawsuit explains this away by saying that decision “was controversial at the time and has not aged well,” mainly citing conservative law review articles.
The lawsuit adds that the Magnuson-Moss Act added rulemaking for consumer protection but not for unfair methods of competition, therefore “proving” that the agency didn’t have authority for that purpose. (This appears to be a misreading of the law; Magnuson-Moss merely set up special procedures for consumer protection rules. Congress even rejected an amendment during that debate to prohibit unfair methods of competition rules.)
“I’ve looked at the relevant text 50 times now, I don’t see anything in there limiting authority to procedural rules,” Vaheesan said. He noted that the FTC in the neoliberal era essentially abandoned this rulemaking authority. “But just because they haven’t done any recently doesn’t mean this authority atrophies,” he said.
The lawsuit then reverses course, saying that even if the FTC has this authority, they can’t use it “to decide the major question of whether non-compete agreements are categorically unfair and anticompetitive,” because it affects tens of millions of workers and hundreds of billions of dollars. “If ever a federal agency attempted to pull an elephant out of a mousehole, this is it,” the lawsuit says, with Eugene Scalia literally quoting his own father.
This is clearly aimed at the major questions doctrine, which the Supreme Court has used to invalidate environmental rules and the Biden administration’s student debt relief program. But the FTC was established to tackle major questions, Vaheesan noted. The FTC Act was put into place because Congress believed the Sherman Act was too slow to catch up to innovations in business, and that a regulatory agency was needed to go beyond antitrust and use its expertise to define unfair methods of competition.
As if that weren’t enough, to cover all bases, the lawsuit says that the FTC is unconstitutional because it doesn’t give the president enough authority to remove commissioners. The FTC has carried out its duties for 110 years.
The case, and a potential companion suit from the Chamber of Commerce, is a critical test as to whether the FTC will be sanctioned to promulgate unfair methods of competition rules. That could lead to rulemaking in a host of other areas, like bans on exclusive dealing or even limits on tech platform self-preferencing of their own products. “If they get judicial validation over their basic authority then we should see other rules,” Vaheesan said.
But that validation will come down to a series of hand-picked judges who have shown antipathy to the government being able to act to protect or benefit large groups of citizens. What the FTC has going for it in the lawsuit is the popular concept of giving workers the economic liberty to change jobs without being locked out of pursuing their skills and talents.
The lawsuit is so partisan—bringing together Trump donors, advisers, lobbyists, and former Cabinet members on behalf of big business—that it puts conservatives firmly on the unpopular side of the noncompete question. Whether that will sway judges, who have courted unpopularity recently to the detriment of the Republican Party in elections, remains to be seen.
This article has been updated to accurately reflect the amount of money given by G. Brint Ryan to federal candidates in 2016 and 2020. An earlier version said $733,430 was donated; the accurate number according to Open Secrets is $730,930. And while it said that all but $2,800 went to Democrats, in actuality, only $2,800 went to Democrats. We regret the error.
