Yesterday, the U.S. Supreme Court issued a slip opinion in a widely publicized case, Department of State v. AIDS Vaccine Advocacy Coalition, 604 U.S. ___ (2025). In the opinion, a five-justice majority effectively denied the U.S. government’s request for the Supreme Court to continue to block enforcement of, and ultimately review, the temporary restraining order (TRO) of a federal district court judge that ordered the government to release and pay roughly $2 billion in draw down grant and contractual funds to grantees and contractors of the U.S. Agency for International Development (USAID) and the Department of State respectively.

The majority opinion consists of one unsigned paragraph, but is joined by Chief Justice Roberts and Associate Justices Barrett, Jackson, Kagan, and Sotomayor. It simply denies the government’s application for stay of the District Court’s order and directs that “the District Court should clarify what obligations the Government must fulfill to ensure compliance with the temporary restraining order, with due regard for the feasibility of any compliance timelines.” AIDS Vaccine Adv. Coal., 604 U.S. ___, Slip Op. at 1 (2025). Importantly, the decision means that a federal court can order payments on federal grants and contracts that have been “paused” for unlawful reasons.

In dissent, four justices asserted that the plaintiffs filed their case in the wrong court. They should have filed, so the dissent goes, in the U.S. Court of Federal Claims. Under that theory, the Executive Branch can only be sued for damages when grant or contract payments are not made timely. If the dissent’s view had prevailed, it would have been devastating to the world of federal grants.

A fundamental element of the federal grants system is advance payments. The grants world, where interest on working capital lines of credit and similar funding instruments for businesses is unallowable, is not structured to finance grant operations like the federal contract world. If federal courts did not have the ability to direct compliance with the advance payment requirements of the Uniform Guidance, a federal agency could merely “pause” payments and slowly strangle the grant program in question.

In such a situation, per the dissent, a grantee would have to file a suit for damages in the Court of Federal Claims. As the Court does not have general injunctive authority, the grantee would have to wait for years to prevail on its damage claim. In the meantime, the program in question would be effectively ended unless the grantee was willing to finance the program on its own with little possibility to recover interest, legal fees and other costs.

If the dissent had prevailed, the result would have been to further shift power away from Congress and towards the Executive Branch, unless and until Congress passed laws providing grantees with greater legal protections like prompt payment laws that are already the norm in the contracts world.

For inquiries related to the Executive Orders, Administration actions, or other federal grants or contracts matters, please contact Feldesman attorneys Ted Waters or Stephen Kuperberg.