The EPA Can Terminate Climate Change Grants to Nonprofits
A divided panel of the U.S. Court of Appeals for the D.C. Circuit vacates a district court injunction barring clawback of climate grants.
This morning a divided panel of the U.S. Court of Appeals for the D.C. Circuit vacated a district court injunction preventing the Environmental Protection Agency from terminating grants given to non-profit organizations by the Biden Administration to promote greenhouse gas reductions and other climate policies. I suspect a petition for rehearing en banc is likely to follow (as might an appeal to the Supreme Court should the en banc D.C. Circuit intervene).
Judge Rao wrote for the panel in Climate United Fund v. Citibank, joined by Judge Katsas. Judge Pillard dissented.
Judge Rao summarizes her opinion as follows:
The Environmental Protection Agency awarded grants worth $16 billion to five nonprofits to promote the reduction of greenhouse gas emissions. Citing concerns about conflicts of interest and lack of oversight, EPA terminated the grants in March 2025. The grantees sued, and the district court entered a preliminary injunction ordering EPA and Citibank to continue funding the grants.
We conclude the district court abused its discretion in issuing the injunction. The grantees are not likely to succeed on the merits because their claims are essentially contractual, and therefore jurisdiction lies exclusively in the Court of Federal Claims. And while the district court had jurisdiction over the grantees' constitutional claim, that claim is meritless. Moreover, the equities strongly favor the government, which on behalf of the public must ensure the proper oversight and management of this multi-billion-dollar fund. Accordingly, we vacate the injunction.
Her opinion seems quite in line with the way the Supreme Court has been handling cases in which district courts have considered questions Congress has directed to the Court of Federal Claims or administrative entities. While a majority of the D.C. Circuit may disagree with this approach, I doubt a majority of the Supreme Court would. See, for instance, the Court's handling of NIH v. APHA, another case involving grants (and upon which Judge Rao relies).
As noted, Judge Pillard dissents--and at some length. (Her opinion is over twice as long as Judge Rao's opinion for the panel.) From the intro to her 62-page dissent:
On the majority's telling, Plaintiffs bring garden-variety contract claims against EPA's reasonable decisions to terminate their grant awards. That version of events fails to contend with the government's actual behavior and misapprehends Plaintiffs' claims, leading the majority to the wrong conclusion at every step of its review of the district court's preliminary injunction. . . .
In characterizing this case as merely a contract dispute subject to the Tucker Act's jurisdictional bar, the majority baselessly strips the district court of authority to decide these important claims. The majority holds that a plaintiff cannot bring an arbitrary and capricious challenge to any government action that affects something of value that was originally obtained by contract. Maj. Op. 16-18. Doing so undercuts the Constitution's and the APA's checks on the Executive's illegitimate seizure of Plaintiffs' funds and subversion of Congress's will. The government's Tucker Act defense is especially pernicious here. Dismissal of this case presumably will enable the government to carry out its announced plan to immediately and irrevocably seize Plaintiffs' funds. At best, in the unlikely event the government refrains from immediately draining Plaintiffs' frozen accounts, the further delay involved in reinitiating litigation in the Court of Federal Claims will itself irreparably harm the infrastructure projects that cannot move forward and may fail without funding. In these circumstances, "[i]t is no overstatement to say that our constitutional system of separation of powers w[ill] be significantly altered" by "allow[ing] executive . . . agencies to disregard federal law in the manner asserted in this case." Aiken Cnty., 725 F.3d at 267.