Grantees Must File Separate Cases in U.S. District Court and the Court of Federal Claims

The new Administration has rolled out executive orders directing federal agencies to review and terminate grants deemed unlawful promotion of Diversity, Equity and Inclusion (“DEI”) or gender identity, and other topics the Administration declares not in line with program goals or agency priorities. In response to these directives, the National Institutes of Health (“NIH”) terminated hundreds of grants totaling over $780 Million.

Grantees filed actions in federal court to stop NIH from terminating their grants and secured early victories in the U.S. District Court for the District of Massachusetts and the U.S. Court of Appeals for the First Circuit. These courts agreed that NIH acted unlawfully by implementing new program guidance to defund and terminate awards on DEI or gender identity grounds and ordered the government to reinstate the grants.

However, the Government filed an emergency stay application asking the Supreme Court to stay the lower courts’ command to reinstate those NIH awards and, in a by now familiar plot twist, the Supreme Court found, yet again, in National Institutes of Health v. American Public Health Association, 606 U.S. __ (2025), that grantees facing award terminations must pursue a bifurcated, “[t]wo-track” litigation approach: challenge in District Court, as “arbitrary and capricious” agency action under the Administrative Procedure Act (“APA”), new agency policies that underlie grant terminations and, when appropriate, file an action to challenge grant termination in the U.S. Court of Federal Claims. Consequently, the Court handed the government an early win that means NIH may terminate the awards in question now, while plaintiffs’ cases make their way through merits adjudication through the ordinary judicial process later.

In other words, the Supreme Court found, in this latest round of litigation over arguably illegal grant terminations, on a Government’s emergency application for a stay, resolved without full-briefing or oral argument, that the District Court had jurisdiction only to review the challenge to the NIH guidance that prompted the agency to terminate grants but not to address plaintiff grantees’ key contention: the remedy for illegal termination of awards is restatement of the awards themselves. The Supreme Court held that the appropriate forum to challenge grant terminations and to seek reinstatement of an illegally-terminated award is not the District Court but the Court of Federal Claims (“CFC”).

In concurring with this confusing result, Justice Barrett stated: “[t]he claims are legally distinct. And if the CFC has exclusive jurisdiction over the grant terminations, see California, 604 U. S., at___ (slip op., at 2), the plaintiffs cannot end-run that limit simply by packaging them with a challenge to agency guidance. Two-track litigation results from ‘[t]he jurisdictional scheme governing actions against the United States,’ which ‘often requires . . . plaintiffs to file two actions in different courts to obtain complete relief in connection with one set of facts’…. we have previously explained that the statutory scheme puts plaintiffs to precisely this choice… and we have rejected the argument that it is unfair to require plaintiffs ‘to choose between partial remedies available in different courts… Suits against the United States are ‘available by grace and not by right,’ and the relief available is subject to the conditions Congress sets.” NIH v. APHA (slip op. at 4-5) (Barrett, J. concurring).

In dissent, Justice Jackson noted: “At a time when the Executive Branch is racing to terminate federal grants on a mass scale—and, according to too many courts to count, often unlawfully—this Court has now constructed a deeply inefficient and likely impotent scheme of judicial review for grant-related APA claims (at least until plenary review forces reconsideration). It has done so without bothering to assess whether Congress intended such a scheme, and in a manner that requires second-guessing the District Court’s unchallenged factual findings, muddying basic legal principles, and unraveling valuable scientific research.” Id., at ___ (slip op. at 20-21) (Jackson, J. concurring in part and dissenting in part).

This latest decision by the Supreme Court erects substantial barriers to grantees’ access to immediate, meaningful judicial protection in disputes over grant terminations.

Feldesman will continue to monitor ongoing litigation challenging mass grant terminations in NIH and other federal agencies and to share insight on the impact of Court rulings in this evolving area of federal grant law.

For updates, join Feldesman’s Monthly Briefings for Federal Grantees: Key Updates and Developments webinar. The next session in this series will be held on September 16, 2025 at 1 p.m. ET. For questions, please contact Phillip A. Escoriaza.