Sneak Preview: Terminations, Certification Issues Alarm Grantees, Attorneys Say
(The following was excerpted from a recent Thompson Grants Compliance Expert article.) Ongoing cases nationwide addressing award terminations and federal agency certification requirements are creating confusion and anxiety among grant recipients as courts deliberate the legal implications these issues have on federal funding, a panel of attorneys told attendees at the National Grants Management Association’s recent Annual Grants Training conference.
Discussing grant terminations, Melissa Prusock, government contract and grants attorney at Greenberg Traurig LLP, mentioned New Jersey v. Office of Management and Budget. This is an ongoing case filed in the Massachusetts District Court in June 2025 by a coalition of Democratic-leaning states against the Trump administration for allegedly illegally freezing billions in federal grants. The suit challenges OMB’s use of language in the 2024 revisions of the uniform guidance that allow a grant termination if, in the agency’s view, an award no longer effectuates the program goals or agency priorities (§200.340(a)(4)), to the extent authorized by law.
Although the 2024 revisions clarify that this provision must be included in the terms and conditions of an entity’s federal award for an agency to invoke it, Prusock said there continues to be confusion as to what this provision actually means. “The administration has taken some action contending that it doesn’t need to be incorporated into the award, while also invoking [Executive Order 14332 (see ¶101 in the Federal Grants Management Module)] directing agencies to modify awards if this language is not included. The question is what does ‘by the extent authorized by law’ mean?”
Prusock said that states are arguing that agencies (1) cannot include this modification to terminate a grant based on new priorities that did not exist at the start of the award; (2) are disregarding congressional legislation that duly appropriated these funds; and (3) cannot terminate the grant if the provision is not included in the award terms and conditions. In response, OMB is arguing that the states are not challenging a specific determination so there’s no injury that can be addressed by the court, adding that a challenge to a specific termination must go to the court of federal claims. Prusock noted that a further hearing on this case is scheduled for May 6.
Isaac Natter, government contracts counsel at consulting firm Fluet, added that the federal government is positioning this case so that terminations cannot be reviewable in court. “On the one hand, [the federal government] is saying that you can’t challenge this because you are not challenging a specific grant award, but it is also saying that you can’t challenge the specific merits in district courts, you have to go to the court of federal claims, which doesn’t have jurisdiction over the policymaking. The court of federal claims only has jurisdiction over a specific individual grant or contract award. The court of federal claims could grant monetary relief.”
Prusock agreed, noting that under the Administrative Procedures Act (APA), the court can find that a federal action was arbitrary and capricious or contrary to law and issue injunction relief. The court of federal claims does not have the ability to award injunction relief. “If you are challenging the agency’s policies, you can go to the district court under APA, but if you are seeking a reinstatement of a terminated award, that requires a claim for monetary damages in the court of federal claims,” she said.
Prusock added that a complicating factor with this “two-track approach” is that the court of federal claims is deprived of jurisdiction if an entity has another suit pending in federal courts. “If you first file an APA action in district court, and then subsequently file in the court of federal claims while the district court case is still pending, the court of federal claims is not going to have jurisdiction” and cannot issue a ruling, she said. “Therefore, you will either have to file first in the court of federal claims and then file in district court, or you have to take your APA action all the way through until a final ruling, and then file your action in the court of federal claims. You may need to do [so], to have the injunctive relief that serves as the basis of your termination claim against the government, but there is a six-year statute of limitations on that claim so you have to keep track of that.”
(The full version of this story has now been made available to all for a limited time here.)
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