Where Impoundment Litigation Stands after NIH v. APHA

David Super

      For months, those challenging the Trump Administration’s massive impoundment of appropriated funds have been left to try to divine deep meanings from cryptic orders on the Supreme Court’s shadow docket.  Now, in National Institutes of Health v. American Public Health Association, we have important if incomplete answers about one important branch of impoundment litigation.  This post seeks to put NIH v. APHA into context and anticipate next steps in this kind of litigation.  I will leave the legal merits of the Court’s disposition for others to assess. 

      The Trump Administration’s impoundments can be divided into three categories.  First, it has sought to cancel or ignore legal obligations the federal government has already assumed.  Second, it has refused to obligate appropriated funds.  And third, it proposed a package of proposed rescissions to Congress under the Impoundment Control Act and received a largely favorable action under the ICA’s expedited procedures.  Although billions of dollars are at stake in each category, the second is by far the largest. 

      The impoundments in NIH v. APHA were in the first category:  already obligated funds.  The issues in the second category (funds withheld prior to obligation) are quite different and therefore will see only modest effects from this decision.

      NIH v. APHA involved a challenge to NIH’s termination of roughly $780 million in grants that it asserted involved “illegal DEI” (Diversity, Equity and Inclusion), “gender identity”, or related topics of which the Administration disapproves.  After two judges recused themselves, the case was assigned to Senior Judge William G. Young, a Ronald Reagan appointee. 

      Judge Young combined a hearing on plaintiffs’ motion for a preliminary injunction with a trial on the merits.  He “found as fact that there was pervasive racial discrimination in selecting grants for termination.”  He also found “by a fair preponderance of the evidence that the grant terminations here at issue demonstrate an unmistakable pattern of discrimination against women’s health issues.”  In addition, he made a “factual finding that there has been extensive discrimination against everyone whose lived experience of their sexuality is in any way different from the executive orthodoxy expressed in the President’s fiat” but concluded that the Supreme Court’s recent decision in U.S. v. Skrmetti precluded any legal consequences for that discrimination. 

      Judge Young invalidated the policy declarations implementing the President’s executive orders that NIH relied upon to cancel the grants.  He also ordered NIH to restore the grantees’ funding.  Both he and the First Circuit denied the Government’s motions for a stay of this order.

      At the Supreme Court, four justices (the Chief Justice and Justices Sotomayor, Kagan and Jackson) voted to deny a stay completely.  Four others (Justices Thomas, Alito, Gorsuch, and Kavanaugh) voted to grant the stay in full.  Opinions by the Chief Justice and Justice Gorsuch showed that at least six, and probably eight, justices believed that the parts of the order invalidating the guidance material and requiring the grants to be reinstated should be treated similarly. 

      The decisive vote, however, belonged to Justice Barrett, who agreed to stay the order reinstating the funding but denied a stay of the order invalidating the policy directives.  Justice Barrett concluded that the Court’s prior summary grant of a stay in Department of Education v. California settled the question that parties trying to enforce federal contracts must seek relief in the Court of Federal Claims.  She also said that the Government should not be required to make payments while litigation is pending because of the impossibility of reclaiming that money should it ultimately prevail.

      On the other hand, Justice Barrett held that the district court did have jurisdiction under the Administrative Procedure Act to invalidate unlawful policy guidance.  Although leaving open the possibility that the guidance at issue in this case might ultimately survive, she saw no reason to stay that part of the district court’s order.  She acknowledged that this might well compel challengers to sue first in district court to invalidate the Administration’s policy documents and then file a separate action in the Court of Federal Claims to collect their money but insisted that the Court had countenanced that process in prior cases.

      This ruling presents a choice to those with funding contracts that the Trump Administration is refusing to honor.  They can still sue in district court to invalidate any policy guidance on which those actions are based, but upon prevailing they will have to sue again in the Court of Federal Claims to actually obtain their funds.  This will take a very long time, which in the interim is likely to lead to layoffs at even the most robust grantees and could threaten the existence of smaller ones.  Alternatively, they could go directly to the Court of Federal Claims.  Few public interest litigators have much experience in that court.  But with the Administration having demonstrated a tepid commitment to complying even with explicit court mandates, it seems highly unlikely that it would voluntarily release withheld funds even after losing a case begun in district court about the legality of its reasons for not paying. 

      All this does not directly speak to the larger category of impoundments where the Administration is refusing to obligate funds at all.  (The two categories can overlap where the Administration refuses to honor existing obligations but also does not re-obligate the funds to other uses authorized under the relevant statute.)  Some funds the Administration has refused to obligate have clear intended beneficiaries (e.g., where a statute provides a formula for dividing up appropriated sums among the states).  In many others, however, the Administration is simply refusing to spend the funds (sometimes by refusing to take preparatory steps such as announcing the funds’ availability or convening advisory committees). 

      Where the Administration is impounding funds by refusing to obligate them, it is subject to challenge by potential grantees seeking the opportunity to compete for that money.  Standing to seek a chance to compete is well-established, and the Court seems unlikely to eliminate it as it has facilitated many attacks on affirmative action.  The relief they would seek is an order forcing the Administration to move forward with whatever process is needed to obligate the funds, which is quite different from the sort of relief commonly granted in the Court of Federal Claims. 

      On the other hand, the Administration is likely to seize on Justice Barrett’s comments about the inability to regain money should it ultimately prevail – even though those comments may be non-binding dicta – to resist complying with any orders until it has exhausted its appeals.  If suit is filed before the appropriated funds lapse, these delays should not prevent courts from deciding the merits of the impoundments.  Those delays will, however, likely prove quite devastating to the organizations that Congress sought to fund and that are capable of doing the kinds of work Congress has determined are needed.  This damage will be compounded if the Administration has to be sued first to compel it to obligate funds and then again to force it to honor those obligations.  Given its record of defying and evading orders to date, this risk is very real.

      The result, which the Administration surely intends, is to make the U.S. Government a far less attractive contracting partner for private businesses and non-profits.  A slow and bureaucratic counter-party in the best of times, the federal government’s unreliability now will require anyone contemplating contracting with it to build substantial risk premiums into their calculations. 

      For more than half a century – since Republicans came to accept the broader governmental role that the New Deal inaugurated – a key conservative position has been to shift as many functions as possible to the private sector.  The Trump Administration, and now the Supreme Court, are making such contracts far less viable and, no doubt, considerably more expensive.  This is likely to push future policy initiatives toward “big government” models.  It also will drive future non-MAGA administrations to omit contractual terms that their possible MAGA successors could hijack in bad faith to breach contracts.  Narrowing the government’s contractual rights will inevitably increase its vulnerability to genuinely bad or incompetent actors.  Then again, the whole point of a wrecking ball is to remove things from the future landscape.

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