Supreme Court Blocks Use of Administrative Procedure Act to Halt Education Grant Terminations

Federal grantees facing the termination of their grants by the new administration have challenged those terminations by filing suits under the Administrative Procedure Act (APA) in federal district courts. In about a half a dozen cases, district courts have issued temporary restraining orders (TROs) enjoining a grant termination. However, the applicability of the APA to grant terminations is an evolving area of law. On April 4, 2025, the U.S. Supreme Court stayed a temporary restraining order that had been issued by a district court in Massachusetts and upheld by the U.S. Court of Appeals for the First Circuit. The Court ruled that it was "likely" that the district court lacked jurisdiction because the APA does not apply to claims that seek to "enforce a contractual obligation to pay money."¹ The Court indicated that such claims must instead be brought in the U.S. Court of Federal Claims (CFC) under the Tucker Act, 28 U.S.C. § 1491. The CFC can award money damages but lacks any general authority to grant equitable (injunctive) relief, such as halting a termination.  

The APA, by its terms, can be invoked only where a plaintiff has no other adequate remedy. The federal courts of appeals have held that the Tucker Act and Contract Disputes Act provide an adequate remedy for contract disputes with the government and, thus, impliedly forbid an APA action in federal district court that is based on contractual claims. However, federal circuit courts have ruled that "litigants may bring statutory and constitutional claims in federal district court [under the APA] even when the claims depend on the existence and terms of a contract with the government," and "even where the relief sought is ... specific performance" of the contract.² They upheld APA suits if the claim was based on a statute or the constitution, rather than the contract itself, and if prospective relief was sought.

In the case before the Supreme Court, the First Circuit ruled that APA claims were proper because "if the Department [of Education] breached any contract, it did so by violating the APA" and the relief sought was not damages for past wrongs but a restoration of funding.³ However, the Supreme Court did not focus on the source of the claim being asserted but instead on the relief being sought. The Court ignored the First Circuit's distinction between "damages" and "a restoration of funding." The Court reasoned that the relief being sought was enforcement of a contractual obligation to pay money and that this rendered the APA inapplicable. The Court asserted that such suits belong in the CFC under the Tucker Act.

Because the case is in a preliminary posture, the Court's discussion is phrased in terms of what the ultimate legal rulings "likely" will be. It ruled that "the Government is likely to succeed in showing the District Court lacked jurisdiction to order the payment of money under the APA."⁴

It remains to be seen how broadly the Court's decision will be applied by lower courts. Notably, this same issue came before the Court in March 2025 in another case involving the termination of foreign aid grants by the U.S. Agency for International Development (USAID). In this case, the Court, without opinion, let stand a TRO halting the terminations, but four justices issued a written dissent articulating the argument that the district court lacked jurisdiction under the APA.⁵ When the issue recurred in the current case, Justice Amy Coney Barrett joined the four USAID dissenters to create a majority of the Court.

Implications of the Court's Ruling

The government will contend that this ruling applies to all federal grant terminations. If the lower courts agree, a federal grantee will be unable to obtain injunctive relief to halt a grant termination and can only file a claim for damages in the CFC.

The amount of damages that the grantee can recover may be affected by whether the agency breached the grant by terminating it. The government will likely take the position in most cases that it did not breach the grant because the Uniform Grant Regulations, as amended in 2020, allow it to terminate a grant "to the extent authorized by law, if an award no longer effectuates the program goals or agency priorities." 2 C.F.R. § 200.340(a)(4). The government will assert that an agency can terminate a grant whenever its priorities change, just as it can terminate federal contracts under "termination for convenience" provisions whenever it chooses to do so. But the extent of an agency's authority to terminate a grant on this basis remains an unresolved question at this time, especially when other grant or regulatory provisions limit the agency's ability to terminate a grant. The question of whether the "new priorities" provision can be invoked in a particular case will be subject to dispute.

Even if the agency had a right to terminate the grant, a grantee is entitled to be fairly compensated and made whole for the costs incurred in connection with the terminated work.⁶ As the Federal Circuit has stated, "[a] contractor is not supposed to suffer as the result of a termination for convenience of the Government, nor to underwrite the Government's decision to terminate."⁷

For a more detailed discussion of what steps a grantee should take after receiving a termination notice, see Holland & Knight's previous alert "What Recipients Need to Know if a Federal Grant Is Terminated by the Government," April 4, 2025.

Notes

¹ See Department of Education v. California, --- S.Ct. ----, 2025 WL 1008354.

² Transohio Sav. Bank v. Director, Off. of Thrift Supervision, 967 F.2d 598, 610 (D.C. Cir. 1992).

³ California v. U.S. Department of Education, --- F.4th ----, 2025 WL 878431, at *2. 

⁴ 2025 WL 1008354, at *1.

⁵ See Department of State v. AIDs Vaccine Advocacy Coalition, 604 U.S. ----, 2025 WL 698083 (March 5, 2025).

⁶ See Nicon, Inc. v. United States, 331 F.3d 878, 885 (Fed. Cir. 2003).

⁷ See Jacobs Eng'g Grp. v. United States, 434 F.3d 1378, 1381 (Fed. Cir. 2006) (quoting Kasler Elec. Co., DOTCAB 1425, 84-2 BCA ¶ 17,374).

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