The First Circuit earlier this week declined to stay a preliminary injunction that required several agencies to reinstate funding for federal grants, contracts, and awards to plaintiff-states.
The ruling in State of New York v. Trump means that the district court preliminary injunction remains in place pending further litigation. That injunction prohibited the Administration from freezing appropriated funds to the plaintiff-states "under awarded grants, executed contracts, or other executed financial obligations." It also required the Administration to re-start such funding that it previously froze.
The case arose when various agencies implemented a funding freeze based on President Trump's early executive orders and a Directive from OMB. OMB later withdrew that Directive, but the agencies' funding freeze continued. Several states sued, arguing that the freeze violated the Administrative Procedure Act, and a federal district court issued a preliminary injunction. This week the First Circuit declined to stay that injunction.
In ruling that the Administration failed to demonstrate a likelihood of success on the merits, the court rejected the Administration's claim that the PI impermissibly covered a "broad programmatic attack" (rather than discrete agency actions) on non-final agency actions. Instead, the court said that the district court addressed "the discrete final agency actions"–"the decisions by the Agency Defendants to implement broad, categorical freezes on obligated funds." The court added, "we are not aware of any supporting authority for the proposition that the APA bars a plaintiff from challenging a number of discrete final agency actions all at once," and that the "funding freezes were categorical in nature."
The court also rejected the Administration's claim that the PI impermissibly halted legal freezes, along with the illegal ones. The court noted that the district court found that "[t]he OMB Directive essentially ordered agencies to effectuate the blanket pause and then decide later which funding streams they actually had lawful authority to withhold," so that the agencies themselves didn't have a chance to sort out legal versus illegal freezes.
Finally, the court rejected the Administration's claim that the PI interferes with the President's authority to supervise federal agencies under Article II, and that the President's EOs were lawful. The court noted that the PI enjoined the agencies' "categorical funding freezes," and that "the Defendants have not demonstrated that they have a likelihood of success in demonstrating that the injunction reaches lawful conduct."