In 2025, the government has canceled or discontinued billions of dollars in federal grants. Entities seeking to challenge these terminations have faced uncertainty as to which forum is appropriate for such claims. A federal judge in the Western District of Washington recently held that the district court—not the Court of Federal Claims (COFC)—had jurisdiction to review claims by several states over the way the Department of Education (DOE) discontinued their grants.

This latest development provides insight for grant recipients who have been affected by the Administration’s termination of grants or suspension of grant funding on the best place to pursue legal action. As we discuss below, while the district court found it had jurisdiction over the states’ claims, the district court also suggested that COFC is the correct venue for most recipients of federal grant awards seeking to reinstate terminated or suspended grants.

Background

In April of 2025, the DOE informed recipients of the Mental Health Service Professional Demonstration Grant Program (MHSP) that it made a “noncontinuation decision” regarding funding for mental health services in school districts. The DOE explained that the MHSP did not align with the Administration’s new priorities and no longer served the country’s best interests. The school districts’ funds would not be continued after the end of the budget period ending in December 2025. The decision language mirrored language used in agency termination and suspension decisions and by the Administration in general regarding its overhaul of federal grant-making procedures. The MHSP program awarded grants for five-year periods, with annual decisions made to continue funding following the regulatory procedure laid out at 34 CFR § 75.253.

A coalition of sixteen states filed a lawsuit, alleging the DOE had violated the Constitution’s Spending Clause and established separation of powers principles, the Administrative Procedure Act (APA), and the DOE’s regulations regarding continuation decision-making. In arguing that the case should be dismissed, the DOE alleged that the district court lacked subject matter jurisdiction, and that the plaintiffs’ APA claim was a disguised contractual claim to compel the DOE to continue funding the grants. According to DOE, such a contractual claim would have to be brought before COFC under the Tucker Act.

Did The District Court Have Subject Matter Jurisdiction?

The Court denied the government’s motion to dismiss and found it had subject matter jurisdiction. The Court based its decision in part on the fact that plaintiffs alleged a violation of DOE’s regulations governing continuation decisions, arguing that the government failed to follow the proper regulatory process in its decision-making. The Court noted that the plaintiffs continuously stated that “their injury arises from violations of statutes, regulations, and the Constitution, rather than any breach of the Grant terms,” and they sought a “procedural rather than a contractual remedy.” The Court also noted that the plaintiffs’ claims did not reference the grant terms, and they did not seek any monetary relief.

In its analysis, the Court distinguished two cases cited by the government where courts in other jurisdictions found that plaintiffs’ APA claims were contractual and belonged at COFC under the Tucker Act: Climate United Fund v. Citibank, N.A., No. 25-5122, 2025 WL 2502881 (D.C. Cir. Sept. 2, 2025) and Sustainability Institute. v. Trump, 2025 WL 1587100 (4th Cir. June 5, 2025). The Court noted that those cases were not binding on the Ninth Circuit and that they involved terminated grants that the plaintiffs sought to reinstate, rather than future discontinuances the plaintiffs sought to set aside. The Court found that the plaintiffs before it asked for a “process correction,” whereas the plaintiffs in the other cases requested “payment directions.”

The Court reasoned that even if the state plaintiffs ultimately hoped for continued funding, i.e. money from the government, that did not transform their claims into money damages claims. The Court pointed out that the state plaintiffs were still receiving federal funding under the current budget period and only asked the government to issue new continuation decisions consistent with their statutory, regulatory, and constitutional obligations. They were not asking the judge to force the government to issue a continuation decision in their favor.

Implications for Federal Award Recipients: Where should a legal claim to recover costs for suspended or terminated grants be filed?

The Court’s decision reinforces the holdings in Climate United Fund and Sustainability Institute that private grant recipients seeking to reinstate or recover costs for terminated or suspended grants should almost always file a claim for money damages under the Tucker Act at COFC. Although the Western District of Washington found jurisdiction to hear this dispute, this case presented a challenge to agency-specific regulations rather than grant terms or the non-binding OMB Uniform Guidance, 2 CFR Part 200, that shapes federal grant practice generally.

The OMB’s Uniform Guidance is just that: guidance. While the Uniform Guidance is set forth in regulations, courts have held that those regulations cannot form the basis to challenge agency action absent incorporation into a grant or other binding contract, which would make the challenge a contractual one. See Climate United Fund at *5-6. The DOE has numerous regulations that go beyond the Uniform Guidance, such as the requirements challenged here. Many other agencies do not have such extensive supplements governing grant procedure. Thus, most grantees seeking to reinstate their grants will likely have to refer to their grant terms and conditions, which places their claims within the Tucker Act jurisdiction of the COFC.

As the Western District of Washington Court noted, both the Fourth Circuit and D.C. Circuit have found plaintiffs’ claims seeking to reinstate terminated grants to be monetary claims that belonged at COFC. In addition, the Supreme Court has recently noted that the APA’s “limited” waiver of sovereign immunity does not provide district courts jurisdiction to hear claims based on plaintiffs’ grants “or to order relief designed to enforce any obligation to pay money pursuant to those grants.” National Institutes of Health v. American Public Health Association, 145 S. Ct. 2658 (Aug. 21, 2025).  

Takeaways and Considerations

As discussed above, the outlook for federal grants is both unclear and dynamic. Absent some violation of binding agency grant regulations, the best option for recipients seeking to recover costs that were not reimbursed as termination or closeout costs (see 2 CFR § 200.472) is to file a claim for money damages under the Tucker Act at COFC.

The timing of filing a Tucker Act claim is also an important consideration. The Tucker Act provides claimants a period of six years “after such claim first accrues” to file it with COFC. 25 U.S.C. § 2501. Given the current Administration’s actions to make federal grant spending consistent with its priorities, grant recipients must make tactical decisions regarding when to file their claims. Clients should work with counsel to make those decisions.

Moreover, the changing landscape of federal grants means that even if a recipient succeeds in getting its grant reinstated, the government may find another way to terminate the grant on the basis that it is not in line with Administration priorities. Indeed, a recent August 7, 2025 executive order on federal grantmaking directs federal agencies to take steps to amend current grants to give the agency greater termination rights.

Notably, agencies have already taken steps to disincentivize or disallow internal appeals of termination decisions. For example, the State Department amended its federal awards appeal process to explicitly disallow appealing any termination other than for cause for failing to follow the grant terms and conditions.