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preliminary injunction because the EPA could not be enjoined to expend funds to administer the program after the OBBBA rescinded the program’s dedicated administrative funds; the sixth judge would have required defendant Citibank to keep funds in the plaintiffs’ accounts in place pending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.

On February 24, 2026, the en banc D.C. Circuit Court of Appeals heard oral arguments in the U.S. Environmental Protection Agency’s (EPA’s) appeal of a district court’s preliminary injunction (1) barring EPA from effectuating terminations of grants under the Inflation Reduction Act’s (IRA’s) Greenhouse Gas Reduction Fund (GGRF) and (2) requiring the disbursement of frozen funds for two GGRF programs. A split D.C. Circuit panel vacated the preliminary injunction in September 2025, and the court granted a petition for rehearing en banc in December 2025. For a discussion of the oral argument and the case’s potential outcomes, see this Climate Law Blog post. On March 9, the court ordered the parties to file supplemental briefs to address the ramifications of the repeal of the IRA’s GGRF provision by Section 60002 of the One Big Beautiful Bill Act, which occurred after the district court granted the preliminary injunction. In particular, the court asked the parties to address whether a claim of violation of the GGRF provision and/or the U.S. Constitution continued to provide a valid basis to affirm all or part of the preliminary injunction.

Two days after the oral argument, one of the plaintiffs-appellees filed a letter noting that the question of the impact of Section 60002 of the One Big Beautiful Bill Act on the grant programs "arose repeatedly" during the argument and contending that the court should order supplemental briefing to address the question, given that the issue had not been briefed because of the timing of Section 60002's enactment.

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.

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.

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

On December 17, 2025, the D.C. Circuit Court of Appeals granted petitions for rehearing en banc and vacated its September 2, 2025 decision holding that a federal district court abused its discretion when it granted nonprofit organizations’ motion for a preliminary injunction requiring the U.S. Environmental Protection Agency (EPA) and a bank that served as the U.S.’s financial agent to continue funding grants awarded to the organizations during the Biden administration under the Greenhouse Gas Reduction Fund established by the Inflation Reduction Act. The D.C. Circuit’s December 17 order provided that an April 16, 2025 partial administrative stay was in effect. The court set a schedule for new briefing to be completed on February 17, 2026 and for oral argument to be heard on February 24.

The organizations filed a petition for rehearing en banc. They argued that the panel’s decision was at odds with D.C. Circuit and Supreme Court precedent and that the panel’s evaluation of the equities “brushed aside the financially devastating consequences” for some of the organizations, ignored precedent on reputational harm, and was “tainted” or “skewed” by its erroneous legal rulings.

In a 2-1 decision, the D.C. Circuit Court of Appeals ruled that a federal district court abused its discretion when it granted nonprofit organizations’ motion for a preliminary injunction requiring the U.S. Environmental Protection Agency (EPA) and a bank that served as the U.S.’s financial agent to continue funding grants awarded to the organizations during the Biden administration under the Greenhouse Gas Reduction Fund (GGRF) established by the Inflation Reduction Act (IRA). The D.C. Circuit’s opinion—authored by Judge Rao and joined by Judge Katsas—held that pursuant to the Tucker Act the Court of Federal Claims had exclusive jurisdiction over the nonprofit organizations’ “essentially contractual” claims that the grant terminations violated regulations governing federal grantmaking and were arbitrary and capricious under the Administrative Procedure Act. The D.C. Circuit further held that the ultra vires exception to sovereign immunity for claims that federal officials exceeded their lawful authority did not apply to the organizations’ “essentially contractual” claims. Although the D.C. Circuit concluded that the district court had jurisdiction over the organization’s constitutional claim that EPA violated separation of powers by not enforcing the IRA, the D.C. Circuit found that the claim was meritless. As an initial matter, the court said the claim was “not a constitutional claim at all”; the court further found that EPA had issued the grants in accordance with any requirement in the IRA to spend funds and that EPA’s subsequent actions terminating the grant awards were “well within the Executive Branch’s authority and responsibility to manage the expenditure of funds and to ensure that money appropriated by Congress is properly spent for its intended purposes.” The D.C. Circuit also found that the organizations’ loss of grant funds during the litigation was not irreparable because any harm would be compensable through money damages and any need to suspend operations would affect only entities “created solely for the purpose of applying for and spending” the GGRF grants. The D.C. Circuit also found that 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.” Judge Pillard dissented, writing that the majority’s characterization of the nonprofit organizations’ lawsuit as involving “garden-variety contract claims against EPA’s reasonable decisions to terminate their grant awards … fails to contend with the government’s actual behavior and misapprehends” the organizations’ claims. The dissenting opinion would have found that the separation of powers violation warranted the district court’s injunction and that the injunction was “independently warranted by the arbitrary and capricious character of EPA’s actions.” The dissenting opinion also rejected the majority’s conclusion that Tucker Act precedents supported exclusive jurisdiction in the Court of Federal Claims.

On July 3, 2025, the U.S. Department of Justice (DOJ) filed a letter in the D.C. Circuit arguing that the One Big Beautiful Bill Act’s repeal of the Inflation Reduction Act (IRA) provision establishing the Greenhouse Gas Reduction Fund (GGRF) and rescinding “unobligated balances” of funding made available under that provision provided additional support for DOJ’s position that the D.C. Circuit should reverse the preliminary injunction barring EPA from terminating GGRF grants. On July 7, the plaintiffs-appellees filed a response, arguing that the OBBBA did not affect their claims that EPA’s actions violated the Constitution, the IRA, federal regulations, and the Administrative Procedure Act, given that “all their funds were and are obligated.”

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.

On April 28, 2025, the D.C. Circuit ordered that consideration of the stay motion be consolidated with consideration of the merits of the federal government’s and Citibank’s appeals of the preliminary injunction. The court set an expedited schedule for consideration of the appeals. Briefing is to be completed on May 15, and the D.C. Circuit will hear oral argument on May 19.

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

On April 16, 2025, the D.C. Circuit Court of Appeals administratively stayed the preliminary injunction insofar as it required Citibank to disburse funds and the defendants to file a status report with 24 hours. The D.C. Circuit’s order also directed that no party could “take any action, directly or indirectly, with regard to the disputed contracts, grants, awards or funds.” The D.C. Circuit stated that the administrative stay “should not be construed in any way as a ruling on the merits” of the federal governments’ emergency motion for stay pending appeal. The briefing of the emergency motion was completed on April 23.