On May 25, 2026, the U.S. Court of Appeals for the Ninth Circuit ordered the National Endowment for the Humanities (NEH), the National Science Foundation (NSF), and the Environmental Protection Agency (EPA) (collectively, the “Agencies”) to reinstate approximately $324 million in research grants awarded to University of California faculty members. See Thakur v. Trump, No. 25-4249 (9th Cir., May 26, 2026)

Background

Six University of California researchers filed suit in the U.S. District Court for the Northern District of California after the Agencies terminated their research grants pursuant to Executive Orders targeting diversity, equity, inclusion, accessibility (DEI) and environmental justice initiatives.

In June 2025, the District Court ordered the Agencies to reinstate the grants and provisionally certified two classes of plaintiffs: 

1. Researchers whose grants were terminated by form letter without grant-specific explanation (Form Termination Class)
2. Researchers whose grants were terminated due to DEI Executive Orders (DEI Termination Class). 

The Agencies appealed the decision to the Ninth Circuit.

Ninth Circuit Holds DEI-Based Grant Terminations Likely Constitute Unconstitutional Viewpoint Discrimination

The Ninth Circuit agreed with plaintiff researchers that the First Amendment’s protection of freedom of speech prohibits federal agencies from terminating grants based on perceived viewpoints. In affirming the preliminary injunction, the court emphasized several key considerations:

• The Agencies selected grants for termination based solely on recipients’ perceived support for DEI or environmental justice initiatives
• The Agencies’ actions appeared aimed at suppressing disfavored viewpoints rather than enforcing neutral programmatic limitations
• The Agencies made termination decisions without regard to the underlying grant programs, focusing instead on the ideological content associated with the research or recipients

The court concluded that the plaintiffs were likely to succeed on their claim that the grant terminations constituted unconstitutional viewpoint discrimination.

Contract-Based Claims Must Proceed in the Court of Federal Claims

Consistent with recent Supreme Court decisions, including National Institutes of Health v. American Public Health Association, 145 S. Ct. 2658 (2025), the Ninth Circuit distinguished constitutional claims from claims seeking enforcement of grant agreements as contracts.

The court held that claims seeking monetary relief or enforcement of grant obligations as contractual rights must only be brought in the U.S. Court of Federal Claims (“COFC”).

Broader Implications

The decision marks the first major federal appellate ruling ordering reinstatement of terminated federal grants following the Supreme Court’s NIH decision, which established two distinct litigation tracks for grant disputes:

• Claims to restore grants as a contract right, or to award damages, must go to COFC
• Claims based on unconstitutional or illegal action by the government can be prosecuted in the District Court

Given the relatively new two-track litigation framework governing federal grant disputes, courts are likely to continue grappling with questions regarding the proper forum for such claims and the remedies available to grant recipients.

Feldesman’s federal grant attorneys are closely monitoring developments in litigation involving the restoration of federal grants and the broader implications of these emerging precedents for recipients of federal funding. If you have questions about how these developments may affect your organization, please contact Phillip Escoriaza or Adam Oppenheim.