Certified copy ISSUED, State of New York et al. v. U.S. Department of Education, No. 25-1424 (2d Cir.), Doc. 41-1 (June 20, 2025)

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An order of the U.S. Court of Appeals for the Second Circuit in State of New York et al. v. United States Department of Education, No. 25-1424, issued June 20, 2025 by Circuit Judges Michael H. Park and William J. Nardini and District Judge Stefan R. Underhill. The order denies the Government’s motion for an immediate stay of the district court’s June 3, 2025, preliminary injunction concerning the period in which the States may liquidate certain COVID-19 era grant funding. On jurisdiction, the panel states that it finds this case more analogous to Bowen than to California. It states that the ruling is on an emergency stay motion, and that Judge Park dissents.

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“Certified copy ISSUED, State of New York et al. v. U.S. Department of Education, No. 25-1424 (2d Cir.), Doc. 41-1 (June 20, 2025).” Original at storage.courtlistener.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/certified-copy-issued-state-of-new-york-et-al-v-u-s-department-of-educ-f865e4c143/, SHA-256 56f148e29d6671df7f97a7c5fb1cdf256060c6f81f838982bfdc652dc5927df4.

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(1 of 6), Page 1 of 6 Case: 25-1424, 06/20/2025, DktEntry: 41.1, Page 1 of 6

S.D.N.Y. – N.Y.C.
25-cv-2990
Ramos, J.

United States Court of Appeals
FOR THE
SECOND CIRCUIT
_________________

At a stated term of the United States Court of Appeals for the Second
Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square,
in the City of New York, on the 20th day of June, two thousand twenty-five.

Present:
Michael H. Park,
William J. Nardini,
Circuit Judges,
Stefan R. Underhill,
District Judge.*

State of New York, State of Arizona, State of
California, State of Delaware, District of Columbia,
State of Hawaii, State of Illinois, State of Maine,
State of Maryland, Commonwealth of
Massachusetts, People of the State of Michigan,
State of Minnesota, State of Nevada, State of New
Jersey, State of New Mexico, State of Oregon, Josh
Shapiro, in his official capacity as Governor of the
Commonwealth of Pennsylvania,

Plaintiffs-Appellees,

v. 25-1424

United States Department of Education, Linda
McMahon, in her official capacity as Secretary of
Education,

Defendants-Appellants.

*
U.S. District Judge Stefan R. Underhill, of the United States District Court for the District of Connecticut,
sitting by designation.

CERTIFIED COPY ISSUED ON 06/20/2025
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Defendants-Appellants United States Department of Education and Linda McMahon, in
her official capacity as Secretary of Education (collectively, the “Government”), appeal from an
order of the United States District Court for the Southern District of New York (Edgardo Ramos,
District Judge), entered on June 3, 2025, preliminarily enjoining them from modifying the period
during which the Plaintiffs-Appellees (the “States”) may liquidate certain COVID-19 era grant
funding. At a hearing held on that same date, the district court denied the Government’s motion
to stay the preliminary injunction pending appeal. On June 6, 2025, the Government sought such
a stay from this Court. For the reasons below, we deny the Government’s motion.

The States brought this action alleging that, after initially granting their requests for
additional time to liquidate education-related grant funding, the Government abruptly rescinded
those extensions on March 28, 2025. The States alleged that the rescissions were arbitrary and
capricious, and contrary to law, and therefore violated the Administrative Procedure Act (“APA”),
5 U.S.C. § 706. On May 6, 2025, the district court entered an order preliminarily enjoining the
Government from implementing the March 28 rescissions or otherwise modifying the liquidation
period without providing the States with fourteen days’ notice. On May 11, 2025, the
Government sent a letter to the States informing them that the liquidation period would end on
May 25, 2025. On June 3, 2025, the district court entered an order preliminarily enjoining the
Government from implementing the rescissions set forth in the May 11 letter or otherwise
modifying the liquidation period without providing the States with thirty days’ notice. This
interlocutory appeal followed.

We begin by addressing the Government’s assertion that the district court lacks jurisdiction
over the States’ claims. See Merritt v. Shuttle, Inc., 187 F.3d 263, 268 (2d Cir. 1999). Relying
on the Supreme Court’s recent decision in Department of Education v. California, 604 U.S. ___,
145 S. Ct. 966, 968 (2025), the Government argues that the “APA’s waiver of sovereign immunity
applies only to claims against the United States seeking non-monetary relief, and does not apply
if any other statute waives sovereign immunity over the suit or impliedly forbids the relief sought.”
Government’s Mot. at 16–17. The Government contends that here, the States are seeking
precisely such monetary relief, and the U.S. Court of Federal Claims provides the exclusive forum
for this case because the Tucker Act grants that court jurisdiction “to render judgment upon any
claim against the United States founded . . . upon any express or implied contract with the United
States,” 28 U.S.C. § 1491(a)(1). We are not persuaded that the Supreme Court’s brief discussion
of the Tucker Act in California precludes the district court’s exercise of jurisdiction over the
States’ claims in this case.

In California, the Court held that the district court likely did not have jurisdiction under
the APA to order the Government to “pay[] . . . money” to fund certain education-related grants if
it chose to order their reinstatement. 145 S. Ct. at 968. The Court, however, did not overrule its
previous decision in Bowen v. Massachusetts, 487 U.S. 879 (1988). In Bowen, the Court held that
the Tucker Act did not preclude a district court from exercising jurisdiction over claims involving
the interaction between a state’s “administration of its responsibilities under an approved Medicaid
plan” and an agency’s interpretation of applicable regulations, even if the district court’s orders
“[we]re construed in part as orders for the payment of money by the Federal Government to the

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State.” Id. at 905, 910. Citing Bowen, the Court explained in California that “a district court’s
jurisdiction ‘is not barred by the possibility’ that an order setting aside an agency’s action may
result in the disbursement of funds,” 145 S. Ct. at 968 (quoting Bowen, 487 U.S. at 910); rather,
the Tucker Act bars district court orders that “enforce a contractual obligation to pay money,” id.
(emphasis added) (quoting Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 212
(2002)).

Although the matter is not free from doubt, we find this case more analogous to Bowen
than California. Whereas California concerned the outright termination of education-related
grants, see 145 S. Ct. at 968, the States in this case challenge the Government’s rescission of its
prior regulatory action setting timelines for liquidating grants that the Government has not
cancelled. In California, unlike the present case, “the terms and conditions of each individual
grant award [were] at issue.” California v. U.S. Dep’t of Educ., 132 F.4th 92, 96–97 (1st Cir.
2025). Here, the States assert that the Government “granted [them] extensions of time to access
hundreds of millions of dollars in funds previously awarded to them,” and then “abruptly and
arbitrarily reversed course” and rescinded those extensions. Compl., Dist. Ct. Dkt. 1, ¶¶ 1–2. At
their core, these allegations pertain to the Government’s exercise of its regulatory authority to
“approve extensions” of time for recipients to “liquidate . . . financial obligations incurred under
[a] Federal award,” 2 C.F.R. § 200.344(c), not a contractual duty to pay money to the States. Put
another way, the States here do not point to any provisions of the underlying grants as giving rise
to their claimed rights in this case. In fact, the States could not bring their claims under the Tucker
Act because they do not allege a substantive, contract-based claim concerning the Government’s
rescission of the grant liquidation extensions. See Atterbury v. U.S. Marshals Serv., 805 F.3d 398,
409 (2d Cir. 2015) (holding that a claim that is “independent of any contract with the United States
. . . does not fall within the scope of the Tucker Act”). Thus, as in Bowen, the States’ claims do
not seek enforcement of the Government’s contractual obligations for purposes of the Tucker Act.

We acknowledge, however, that neither California nor Bowen is on all fours with this case.
We do not doubt that the Supreme Court will soon provide further guidance on this difficult issue,
which has divided the Circuits and, indeed, has divided this very panel of our Court. Compare
Sustainability Inst. v. Trump, No. 25-1575, 2025 WL 1587100, at *1 (4th Cir. June 5, 2025), with
Cmty. Legal Servs. in E. Palo Alto v. U.S. Dep’t of Health & Hum. Servs., 137 F.4th 932, 939 (9th
Cir. 2025). But, until then, we are constrained to determine which precedent offers the nearest fit
with the case before us. After careful consideration, we conclude that the closest analogue is
Bowen. Accordingly, because we have determined that the Tucker Act does not preclude the
district court from exercising jurisdiction over the States’ claims, 1 we turn to the Government’s
other contentions as to why a stay of the district court’s preliminary injunction is warranted.

“A stay is not a matter of right, even if irreparable injury might otherwise result.” Nken

1
We are likewise unpersuaded by the Government’s argument that its purported openness to “consider[ing]
extension requests on a project-specific basis,” Dist. Ct. Dkt. 84-1 at 5, renders its decision to modify the liquidation
period a nonfinal agency action that is unreviewable under the APA. See U.S. Army Corps of Eng’rs v. Hawkes Co.,
578 U.S. 590, 598 (2016) (explaining that an agency’s ability to revise a determination based on new information “is
a common characteristic of agency action, and does not make an otherwise definitive decision nonfinal”).
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v. Holder, 556 U.S. 418, 433 (2009) (quoting Virginian Ry. Co. v. United States, 272 U.S. 658,
672 (1926)). “It is instead an exercise of judicial discretion, and the propriety of its issue is
dependent upon the circumstances of the particular case.” Id. (alteration adopted) (citation and
internal quotation marks omitted). “The party requesting a stay bears the burden of showing that
the circumstances justify an exercise of that discretion.” Id. at 433–34. In deciding whether to
grant a stay, we consider four factors: “(1) whether the stay applicant has made a strong showing
that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured
absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested
in the proceeding; and (4) where the public interest lies.” Id. at 434 (quoting Hilton v. Braunskill,
481 U.S. 770, 776 (1987)). “The first two factors . . . are the most critical.” Id. Applying these
principles, we conclude that the Government has not borne its burden of demonstrating that a stay
is justified in this case.

At the outset, the Government has not made a strong showing that it is likely to succeed on
the merits of its appeal. “As a general rule we do not disturb a district court’s grant of a
preliminary injunction, absent an abuse of its discretion.” Fireman’s Fund Ins. Co. v. Leslie &
Elliott Co., 867 F.2d 150, 150–51 (2d Cir. 1989). Here, the Government argues that in granting
the preliminary injunction, the district court incorrectly determined that the States had shown a
likelihood of success on the merits of their claims. We are unpersuaded. Under the “change-in-
position” doctrine, “agencies are free to change their existing policies as long as they provide a
reasoned explanation for the change, display awareness that they are changing position, and
consider serious reliance interests.” Food & Drug Admin. v. Wages & White Lion Invs., L.L.C.,
604 U.S. ___, 145 S. Ct. 898, 917 (2025) (citation and internal quotation marks omitted). The
record in this case supports the proposition that the Government’s change in position with respect
to the liquidation deadline failed to meet these requirements and was therefore arbitrary and
capricious within the meaning of the APA.

First, although the Government previously granted extensions of the liquidation period on
an individualized basis by State and program, its March 28 and May 11 letters purported to rescind
all extensions for all states and programs at once, without any particularized assessment. The
May 11 letter states that this blanket rescission was justified because the COVID-19 pandemic has
been over for two years, because “the original extension letters included no explanation for the
extensions,” and because the States “have increasingly tapped [funds] in ways that are less and
less connected to direct academic services to students and the ongoing educational harms caused
by COVID.” Dist. Ct. Dkt. 84-1 at 3–4. But the Government previously conceded that “it was
implicit that the[] funds would continue to be available after the [COVID] emergency,” Dist. Ct.
Dkt. 84-2 at 33, and that it had “no reason to believe” that the original extension requests were not
carefully considered, id. at 27. The Government further conceded that it has already approved, at
least in general terms, the projects for which the States plan to use the funds, id. at 25, and it does
not suggest that those approvals were improperly granted. Accordingly, the record suggests that
the Government did not provide a reasoned explanation for its change in position.

The record also suggests that the Government did not meaningfully consider the reliance
interests at stake. The record contains several declarations of state and local education officials

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discussing the States’ reliance on the original extensions, as well as the likely consequences of
rescinding those extensions. Such consequences include disruptions to student services, Dist. Ct.
Dkt. 14 at 6–7, employee layoffs, Dist. Ct. Dkt. 12 at 6–7, and delays in ongoing renovation
projects, Dist. Ct. Dkt. 20 at 5–7. See generally Dist. Ct. Dkt. 21. One declaration states, for
example, that at least $5 million in grant funding for the Baltimore City Public Schools has been
allocated to construction renovation projects that have already commenced, and that “[h]alting a
construction project that is in progress would significantly disrupt school operations,” including
by potentially restricting access to restrooms and school health suites. Dist. Ct. Dkt. 20 at 5–7.
Nonetheless, the Government’s May 11 letter categorically states that “no valid reliance interests
exist,” and that, to the extent the States have reliance interests, they “now have 14 days to liquidate
expenses as they wind down their [grant]-funded programs.” Dist. Ct. Dkt. 84-1 at 5. Given the
types of projects the States initiated with grant funding, including projects involving longer-term
construction contracts, see Dist. Ct. Dkt. 20 at 5, it seems implausible that the States would be able
to liquidate all funds in just fourteen days. Thus, the record suggests that the Government did not
seriously consider the States’ reliance interests before rescinding the original extensions.

Next, the Government has not shown that it will be irreparably harmed in the absence of a
stay. Unless there is “evidence of damage that cannot be rectified by financial compensation,”
“[m]onetary loss alone will generally not amount to irreparable harm.” Borey v. Nat’l Union Fire
Ins. Co. of Pittsburgh, 934 F.2d 30, 34 (2d Cir. 1991) (citation and internal quotation marks
omitted). Here, the Government has not represented that it will be unable to fund other programs
if it does not have access to the funds at issue in this litigation while this appeal is pending. Nor
does the Government offer any evidentiary support for its assertion that it will be unable to recover
disbursed funds if it prevails in this litigation. To the contrary, the Government conceded at oral
argument that the district court could order the States to return improperly disbursed funds, and
that there is no reason to believe that the States would not repay those funds if ordered to do so.
Oral Arg. Rec. at 8:01–8:11. Thus, unlike in California, there has been no unrefuted
representation that the Government will be “unlikely to recover the grant funds once they are
disbursed,” 145 S. Ct. at 968–69. Moreover, although the Government maintains that it is
“typically . . . very difficult to recover [grant funds] from states,” Oral Arg. Rec. at 6:08–6:17, the
mere fact that recovering funds might be difficult does not come close to rendering a loss
irreparable, see Nken, 556 U.S. at 434–35 (stating that “some possibility of irreparable injury” is
insufficient (citation and internal quotation marks omitted)).

The States, on the other hand, have shown that they will be substantially injured by a stay.
As discussed, the States have presented declarations indicating that permitting rescission of the
original extensions would, in the near term, significantly disrupt the provision of student services
and other school operations, cause layoffs, and delay ongoing construction projects. Indeed, the
record indicates that some of these effects have already occurred. See Dist. Ct. Dkt. 14 at 6.
Given the nature of these consequences, collecting funds at the end of this litigation would not
undo these disruptions and therefore would not suffice to make the States whole.

Finally, given the detrimental effects a stay would have on the States and their school
systems, and given the Government’s failure to show irreparable harm, the public interest weighs

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against granting a stay.

We conclude by pointing out the obvious: This is a ruling on an emergency stay motion.
The Court has been obliged to consider the parties’ arguments on a short time frame, and against
the background of the Supreme Court’s developing case law. The Government’s appeal will
proceed in due course for a full merits consideration before a three-judge panel, which will not be
bound by this panel’s necessarily preliminary assessment of the issues discussed in this order.
The parties are free to move for expedited briefing and consideration of the merits.

For these reasons, it is hereby ORDERED that the Government’s motion for an immediate
stay of the district court’s June 3, 2025, preliminary injunction is DENIED. Judge Park dissents
from the denial of the motion for a stay pending appeal.

FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court

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