Climate United Fund v. Citibank, N.A.

Lawsuits challenging EPA's freezing and purported termination of funding under the Inflation Reduction Act’s Greenhouse Gas Reduction Fund.

On August 4, 2026, the en banc D.C. Circuit Court of Appeals affirmed the entirety a district court’s April 2025 preliminary injunction that barred the U.S. Environmental Protection Agency (EPA) from effectuating its March 11, 2025 notice of termination of grants under the Inflation Reduction Act’s (IRA’s) Greenhouse Gas Reduction Fund (GGRF). The preliminary injunction also restricted EPA’s ability to suspend or terminate the plaintiffs’ grant awards; restricted defendant Citibank’s ability to move funds out of accounts established in connection with the plaintiffs’ grants; prohibited EPA from influencing Citibank to limit access to funds in such accounts; and required Citibank to disburse funds “properly incurred” before the suspension of the plaintiffs’ funds. The six judges who voted to affirm the injunction were split on the injunction’s scope. Six judges voted to affirm the portion of the injunction enjoining EPA from effectuating its notice of termination because they concluded that (1) EPA’s attempt to terminate the grants and claw back disbursed funds “based solely on a policy disagreement” with Section 60103 of the IRA “likely contravened the IRA’s mandatory appropriation” and (2) EPA did not argue or show it would not still take those steps in the absence of the injunction. Five of those judges would have affirmed the entire preliminary injunction because they concluded that the One Big Beautiful Bill Act’s (OBBBA’s) repeal of Section 60103 in 2025 “likely does not affect the applicability of Section 60103 to grant funds that were obligated and disbursed” at the time of the OBBBA’s enactment. The sixth judge would have vacated portions of the preliminary injunction because the EPA could not be enjoined to expend funds to administer the program after the OBBBA rescinded the program’s dedicated administrative funds; the sixth judge would have required defendant Citibank to keep funds in the plaintiffs’ accounts in place pending district court determinations on questions regarding EPA’s plans regarding primary grantees’ grant agreements and regarding the OBBBA’s effect on sub-grantees’ funds. Four judges would have vacated the provision barring EPA from effectuating the notice of termination based on their conclusion that the plaintiffs did not establish that the injunction was warranted after the repeal of Section 60103. The en banc court was equally divided as to (1) whether following the OBBBA’s enactment, EPA’s authority to suspend or terminate the grants was limited by both IRA Section 60103 and contractual terms or only by contractual terms and (2) whether any of the district court’s remaining grounds for the preliminary injunction would provide a basis for affirmance. Additional analysis of the decision is available in this Climate Law Blog post.

The D.C. Circuit granted the government’s unopposed motion to stay the mandate and extend the partial administrative stay that had been in place since April 16, 2025. The stay—which stayed the portion of the injunction requiring the disbursement of funds—was extended through November 9, 2026. The court directed that if a petition for writ of certiorari is filed, the stay is to be extended pending the Supreme Court’s final disposition.

Lawsuits challenging EPA's freezing and purported termination of funding under the Inflation Reduction Act’s Greenhouse Gas Reduction Fund.

Lawsuits challenging EPA's freezing and purported termination of funding under the Inflation Reduction Act’s Greenhouse Gas Reduction Fund.

Lawsuits challenging EPA's freezing and purported termination of funding under the Inflation Reduction Act’s Greenhouse Gas Reduction Fund.

Two entities that were awarded funding under EPA’s Clean Communities Investment Accelerator (CCIA) program filed lawsuits in federal district court in the District of Columbia challenging EPA and Citibank actions freezing and terminating the funding. The CCIA is one of three programs through which EPA implemented the Inflation Reduction Act’s Greenhouse Gas Reduction Fund. Inclusiv, Inc.—a nonprofit certified Community Development Financial Institution that works with credit unions—asserted that EPA’s actions violated the Administrative Procedure Act because they were contrary to the Inflation Reduction Act, the Congressional Budget and Impoundment Control Act, the Anti-Deficiency Act, and EPA regulations, and were arbitrary and capricious. Inclusiv also asserted that EPA violated separation of powers (the Legislative Vesting, Spending, Appropriations, and Take Care Clauses) and the Due Process Clause of the Fifth Amendment. In addition, Inclusiv asserted that EPA’s actions were ultra vires. Against Citibank, Inclusiv asserted breach of contract, conversion, and replevin claims. The other lawsuit was brought by Justice Climate Fund—“a purpose-built, non-profit organization that was founded to apply for CCIA funding on behalf of a consortium of community lender representatives.”

Two entities that were awarded funding under EPA’s Clean Communities Investment Accelerator (CCIA) program filed lawsuits in federal district court in the District of Columbia challenging EPA and Citibank actions freezing and terminating the funding. The CCIA is one of three programs through which EPA implemented the Inflation Reduction Act’s Greenhouse Gas Reduction Fund. Justice Climate Fund (JCF)—“a purpose-built, non-profit organization that was founded to apply for CCIA funding on behalf of a consortium of community lender representatives”—asserted that EPA’s actions violated the Administrative Procedure Act because the termination of the award was arbitrary and capricious and violated federal grant regulations and the Inflation Reduction Act. JCF asserted that EPA’s actions effectively suspending its award also violated the Administrative Procedure Act. In addition, JCF asserted violations of the Appropriations Clause and Due Process Clause. JCF also asserted breach of contract claims against Citibank. The other lawsuit was filed by Inclusiv, Inc., a nonprofit certified Community Development Financial Institution that works with credit unions.

Lawsuits challenging EPA's freezing and purported termination of funding under the Inflation Reduction Act’s Greenhouse Gas Reduction Fund.

Four state “green banks” that were subawardees supported by Coalition for Green Capital’s grant under the Greenhouse Gas Reduction Fund filed a lawsuit against the U.S. Environmental Protection Agency (EPA), the EPA Administrator, an EPA Acting Deputy Administrator, and Citibank, N.A. in the federal district court for the District of Columbia on March 19. The lawsuit challenged "EPA's unlawful efforts to impede the flow of billions of dollars in duly appropriated, awarded, and disbursed funds." On March 25, the court consolidated this case with three cases brought by nonprofit financial institutions that also were recipients of funds. The state green banks asserted that the Trump administration’s actions violated the Administrative Procedure Act because they were contrary to law under the Inflation Reduction Act and the Impoundment Control Act and were ultra vires, were contrary to the Uniform Grant Guidance regulations, and were arbitrary and capricious. In addition, the green banks asserted an equitable ultra vires claim to enjoin the federal agency defendants from taking actions outside their authority. They also asserted separation of powers claims, alleging that the defendants’ conduct usurped legislative functions and violated the Appropriations Clause, Spending Clause, Legislative Vesting Clause, and Take Care Clause. They also alleged that the defendants’ actions to freeze the state green banks’ accounts violated the Spending Clause and the Tenth Amendment. Against Citibank they asserted breach of contract, specific performance, conversion, and replevin claims.

Lawsuits challenging EPA's freezing and purported termination of funding under the Inflation Reduction Act’s Greenhouse Gas Reduction Fund.

Lawsuits challenging EPA's freezing and purported termination of funding under the Inflation Reduction Act’s Greenhouse Gas Reduction Fund.

Lawsuits challenging EPA's freezing and purported termination of funding under the Inflation Reduction Act’s Greenhouse Gas Reduction Fund.

Lawsuits challenging EPA's freezing and purported termination of funding under the Inflation Reduction Act’s Greenhouse Gas Reduction Fund.

Lawsuits challenging EPA's freezing and purported termination of funding under the Inflation Reduction Act’s Greenhouse Gas Reduction Fund.

Lawsuits challenging EPA's freezing and purported termination of funding under the Inflation Reduction Act’s Greenhouse Gas Reduction Fund.

Lawsuits challenging EPA's freezing and purported termination of funding under the Inflation Reduction Act’s Greenhouse Gas Reduction Fund.

In the April 16 memorandum opinion supporting the April 15 preliminary injunction order, the district court first concluded that the plaintiffs—both grantees and their subgrantees—had demonstrated standing. The district court also again concluded that it—and not the Court of Federal Claims—had jurisdiction over the plaintiffs’ claims. The district court distinguished the case from Department of Education v. California, in which the Supreme Court on April 4 stayed a district court’s temporary restraining order blocking the termination of education-related grants and requiring the payment of grant obligations. The court noted that although the Supreme Court had stated that “the [Administrative Procedure Act’s (APA’s)] waiver of sovereign immunity does not apply to claims seeking money damages or to orders ‘to enforce a contractual obligation to pay money,’” the Court had further stated that “a district court’s jurisdiction ‘is not barred by the possibility’ that an order setting aside an agency’s action may result in the disbursement of funds.” The district court went on to characterize the relief sought by the plaintiffs in these cases as “equitable relief” that included “reinstatement of their grants and the recovery of specific money.” The court also rejected the contention that the plaintiffs were improperly challenging funding decisions that were committed to agency discretion by law and not subject to review under the APA. The court further found that the plaintiffs were likely to succeed on the merits of their APA claims that EPA acted arbitrarily and capriciously by failing to explain its reasoning and acting contrary to its regulations when it suspended and terminated the plaintiffs’ grants. In addition, the court found that the plaintiffs were likely to succeed on their constitutional claims because EPA lacked the authority “to effectively unilaterally dismantle a program that Congress established.” The court also found that the plaintiffs made a sufficient showing of imminent and irreparable harm without release of the grant funds and that the balance of the equities and public interest favored an injunction. The court did not impose a bond on the plaintiffs.