Please note this article has been updated with the latest developments. See more here.
Late on Tuesday, January 28—at the end of an extremely turbulent day for all recipients of federal funding—a D.C. federal court judge temporarily suspended implementation of Office of Management and Budget (OMB) Memorandum M-25-13 (as clarified by a subsequent "Fact Sheet") that was to institute a pause on federal grant disbursements commencing at 5 p.m. the same day. Judge Loren AliKhan, of the U.S. District Court for the District of Columbia, issued an "administrative stay" that preserves the status quo until a more in-depth hearing occurs on Monday, February 3.
Our previous client advisories detailed the implications of OMB Memorandum M-25-13. In key part, the broadly-worded memorandum provided that "federal agencies must temporarily pause all activities related to obligation or disbursement of all federal financial assistance," causing confusion and concern about the extent of the pause—and whether it could impact all recipients of federal funding, from Head Start organizations to housing rental assistance programs to federally-funded health centers. Compounding concern, for most of the day, federal grantees whose payments are processed through the Department of Health and Human Services' Payment Management System were unable to draw down funds from the system before the anticipated pause was slated to go into effect.
What Has Happened
On Tuesday afternoon, OMB issued updated guidance, clarifying that the pause "is expressly limited to programs, projects, and activities implicated by the President's Executive Orders, such as ending DEI, the green new deal, and funding nongovernmental organizations that undermine the national interest." This clarification is helpful in that it suggests not all grants will be impacted, though the scope of affected grants remains ambiguous.
A group of nonprofit and public health organization plaintiffs—the National Council of Nonprofits, the American Public Health Association, the Main Street Alliance and SAGE, an LGBTQ advocacy organization—filed a lawsuit seeking a temporary restraining order against the funding pause. The lawsuit contends that the pause to federal funding violates the Constitution and federal law. In seeking to block the pause from taking immediate effect, plaintiffs requested that the court issue a temporary restraining order "barring the OMB and all of its officers, employees, and agents from taking any steps to implement, apply, or enforce" the memorandum while the parties more fully briefed their positions. As stated above, the court issued a brief "administrative stay" through 5 p.m. on Monday, February 3.
While the court's administrative stay may provide a short reprieve to federal grantees worried that their activities will fall under the purview of the OMB's memorandum and President Trump's Executive Orders, it is far from a panacea.
What Is Next
To succeed at Monday's upcoming hearing, plaintiffs will need to meet a high bar for emergency relief. First, they must show a "substantial likelihood of success," that is, they must show the Federal government is violating the law. Second, they must show that if the court does not act now, there will be "irreparable harm" to the plaintiffs, that is, the damage would be irreversible. These are difficult standards to meet and will require a cogent legal analysis along with specific facts that emphasize a serious threat of injury. It remains to be seen if the plaintiffs can meet these standards.
The action in federal court, along with the rapidly changing positions of the Administration, have done little to relieve the anxiety of the federal grant community. We recognize that federal grantees whose programs may be subject to the Executive Orders could be plunged back into an uncertain world following Monday's Temporary Restraining Order (TRO) hearing, and we recommend that those grantees do all that they can to prepare now.
We will, of course, continue to monitor the situation and continue to provide our views as these changes unfold. Feldesman attorneys will follow Monday's TRO hearing and track any other litigation filed relating to this issue.
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