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.

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

Climate United Fund v. Citibank, N.A.

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D.C. Circuit Vacated Injunction Requiring Continued Funding of Greenhouse Gas Reduction Fund Grants

Filed

United States of America

District of Columbia

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D.C. Circuit Vacated Injunction Requiring Continued Funding of Greenhouse Gas Reduction Fund Grants

Target

Policy instrument

Risk

Impacted group

Just transition

Renewable energy

Fossil fuel

Greenhouse gas

Economic sector

Adaptation/resilience

Finance