On August 13, a panel of the U.S. Court of Appeals for the District of Columbia Circuit handed down an opinion on President Trump’s impoundment of foreign assistance funds. This case is significant because it is the first one squarely raising the legality of impoundments per se, as opposed to deficient reasons for impoundment, to reach an appellate court. Unfortunately, the case arrived in a rather confused posture, and the panel’s opinion added considerably to that confusion. Because this case is likely to draw considerable attention, it merits close analysis.
Two sets of plaintiffs sued to overturn the President’s impoundment of billions of dollars of foreign assistance funds. Between them, the plaintiffs raised ten claims, no two of which are truly duplicative. As is commonly true in such cases, some of these claims were much stronger than others. The district court chose to engage with, and grant preliminary relief on, some of these claims while declining to address the others as unnecessary to support its order. Unfortunately, the claims with which the district court engaged were not the best.
The case therefore arrived in the D.C. Circuit with the better claims against impoundment not clearly presented for decision. The Government threw in some theories for the first time in its reply brief, which the court allowed, and then the court itself added to confusion by saying it was going to analyze one claim and then proceeding to analyze another, far weaker, one. The result is so tangled that future courts and litigants will likely be able to secure scant guidance from the panel’s opinion (or, indeed, from the dissent, which is confined by the same tangled framing).
Litigators and judges alike are comfortable applying the Administrative Procedure Act’s (APA’s) familiar prohibition on actions that are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law”. They are, understandably, far less comfortable parsing the complexities of Appropriations Law. Unsurprisingly, then, the district court ruled that plaintiffs were likely to prevail on their claim that USAID and the State Department lacked a coherent rationale for its initial freeze on foreign assistance. When the Administration claimed that it had subsequently cancelled thousands of agreements with overseas partners within two weeks based on careful, individualized reviews, the district court held that plaintiffs had not quite established that they were likely to prevail on their arguments that these actions were infected with the same irrationality. (This finding also helped the district court avoid having to consider whether the Administration acted in contempt of its temporary restraining order.)
The district court also found that the plaintiffs were likely to prevail on their claims that the President violated the Separation of Powers by impounding funds without following the procedures set out in the Impoundment Control Act (ICA).
On appeal, Judge Henderson (writing for herself and Judge Katsas) reversed and remanded. The court held that withholdings of appropriated funds were governed by the ICA and that the ICA, by granting the Comptroller General the right to bring suit to enforce its provisions, precluded review of agencies’ actions under the APA.
The court further held plaintiffs’ arguments that the Administration violated the Separattion of Powers did not state a genuine constitutional claim but rather were just a reframing of their statutory claims and hence also unreviewable under the APA. For this point, the court relied heavily on Dalton v. Specter. This may have surprised the Justice Department, which did not bother to raise Dalton until its reply brief. (The court conceded that this “oversight is hard to understand.”) The court said essentially the same thing about plaintiffs’ claim that the Administration acted ultra vires (i.e., beyond the scope of its statutory authority).
Both the district court and the court of appeals fundamentally misunderstood the basic nature of the ICA and hence drew confused and incorrect conclusions about its role in impoundment litigation – which, despite its name, is minimal at best. The ICA was passed as part of the Congressional Budget and Impoundment Control Act of 1974, a response to President Nixon’s fiscal struggles with Congress. The Congressional Budget Act is manifestly a procedural statute governing Congress’s consideration of fiscal legislation. No serious attorney would seek to enforce its provisions in federal court. For some reason, however, lawyers, judges, reporters, and others refuse to accept that the ICA is also a procedural statute rather than one allocating substantive rights. Were they to look, the ICA makes that abundantly clear, stating that “[n]othing contained in this Act, or in any amendments made by this Act, shall be construed as…affecting in any way the claims or defenses of any party to litigation concerning any impoundment”.
Nonetheless, the district court insists that the ICA “explicitly prohibits the President from impounding appropriated funds without following certain procedures”. A better statement would be that the ICA provides expedited procedures the President may follow to gain congressional approval for impoundments that would otherwise violate the statutes authorizing and appropriating money for those programs. Because the President did not follow those procedures when withholding the funds at issue in this litigation, his subordinates are left without a defense to litigation under those statutes.
The court of appeals, in turn, misconstrues the nature of the claims that the Comptroller General might bring under the ICA. This mistake is made more understandable as the Comptroller General has never brought such a claim. The Comptroller General may sue to force the obligation of funds only when “under this Act, budget authority is required to be made available for obligation and such budget authority is not made available for obligation”. Yet only one provision in the ICA requires budget authority to be made available: section 1012(b), which governs situations where Congress has declined to approve a rescission that the President formally proposed.
Given the ICA’s name, it is natural to assume that it must contain some general prohibition on impoundments. But it does not. When Congress wrote the ICA, numerous federal courts had been striking down President Nixon’s impoundments on the basis of the authorizing and appropriations statutes for the programs in question. No new prohibition appeared to be needed, and none was provided. Therefore, even if the court of appeals is correct that the ICA’s authorization of Comptroller General’s suits precludes APA review, it would only do so in cases where the President sought and was denied congressional approval. That is not what is happening in any current impoundments. In effect, the court of appeals is rewarding the President for disregarding the ICA’s procedures by preventing grantees from suing under other laws when the Comptroller General is also unable to sue under the ICA. It is difficult to believe that a fervently anti-impoundment Congress wished to reward future presidents for ignoring the orderly dispute-resolution mechanism it was creating.
The difference between the ICA’s procedural requirements and the substantive requirements of individual programs’ authorizing or appropriations acts is fundamental to impoundment litigation. Yet the D.C. Circuit’s panel seems confused about it. The panel first states that plaintiffs’ counsel declared a desire to “enforce the alleged statutory violations if their constitutional claim falls under Dalton, asserting instead that they would then be enforcing the 2024 Appropriations Act. Thus, we proceed to this alternative cause of action.” But the ensuing analysis is not of enforcement of the 2024 Appropriations Act but rather of a suit under the ICA.
The panel acknowledges that the ICA specifically states that “[n]othing contained in this Act, or in any amendments made by this Act, shall be construed as…superseding any provision of law which requires the obligation of budget authority or the making of outlays thereunder.” This would seem to rule out any argument that the ICA bars litigation against impoundments of the kind that President Nixon was then having rejected in courts all over the country. The panel, however, asserts – with no textual support – that some vague legislative history implies that this disclaimer applies only to litigation pending at that time. Leaving aside the fact that Congress has repeatedly shown itself entirely capable of limiting rules to current litigation when it so desires, this interpretation would turn the “Impoundment Control Act” into the “Impoundment Promotion Act”, a result that could not be farther from the bipartisan congressional intent in 1974.
Finally, the panel raises questions about whether plaintiff grantees established that the funding cut-offs would cause them irreparable harm. This is curious in that quite a number of non-profit organizations have permanently closed their doors in response to the cut-off of U.S. funds. The court couches this discussion in terms of the insufficiencies of the record below, but if confirmed its reasoning could threaten the availability of preliminary relief in impoundment cases generally. That would go a long way toward immunizing unlawful impoundments going forward.
Plaintiffs’ counsel are not to be envied here. This opinion rests on so much confusion about how Administrative Law and Appropriations Law interact, and about the relative places of the procedural ICA and the substantive laws creating and funding government programs, that it would be difficult not to seek rehearing en banc. Yet the framing of the case is so mangled at this point that it is hard to imagine that a far better appellate opinion, even one affirmed by the Supreme Court, could resolve the matter. It would be tempting to accept the remand and argue that the impoundments are unlawful under the appropriations acts, but as the court of appeals claims to have analyzed such claims – even though it did not – the district court may be reluctant to hear plaintiffs out.
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