Memorandum of Law in Opposition to Stay — State of New York v. U.S. Department of Education (2d Cir., Doc. 28)
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A memorandum of law in opposition to a motion for a stay pending appeal, dated June 12, 2025, Doc. 28, in State of New York, et al. v. United States Department of Education, et al., No. 25-1424, in the U.S. Court of Appeals for the Second Circuit, on appeal from the Southern District of New York. It is submitted by the Attorney General of the State of New York for plaintiffs-appellees. Its table of contents argues that plaintiffs are exceedingly likely to succeed because the district court has jurisdiction, the May 11 rescission letter constitutes final agency action, and the rescission of extensions was arbitrary and capricious and contrary to law. It argues the balance of equities weighs dispositively in plaintiffs' favor. A certificate states that the document contains 5,196 words.
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Cite this document
“Memorandum of Law in Opposition to Stay — State of New York v. U.S. Department of Education (2d Cir., Doc. 28).”
Original at storage.courtlistener.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/document-state-of-new-york-et-al-v-u-s-department-of-education-no-25-1-ac0587d70f/
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25-1424
United States Court of Appeals
for the Second Circuit
STATE OF NEW YORK, et al.,
Plaintiffs-Appellees,
v.
UNITED STATES DEPARTMENT OF EDUCATION, et al.,
Defendants-Appellants.
On Appeal from the United States District Court
for the Southern District of New York
MEMORANDUM OF LAW IN OPPOSITION TO
MOTION FOR A STAY PENDING APPEAL
LETITIA JAMES
Attorney General
BARBARA D. UNDERWOOD State of New York
Solicitor General Attorney for Plaintiffs-Appellees
JUDITH N. VALE 28 Liberty Street
Deputy Solicitor General New York, New York 10005
STEPHEN J. YANNI (212) 416-6184
Assistant Solicitor General
of Counsel
(Counsel listing continues on signature pages.) Dated: June 12, 2025
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TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES ...................................................................... ii
PRELIMINARY STATEMENT ................................................................. 1
BACKGROUND ........................................................................................ 4
ARGUMENT ........................................................................................... 12
THIS COURT SHOULD DENY A STAY PENDING APPEAL........................... 12
A. Plaintiffs, Not Defendants, Are Exceedingly
Likely to Succeed on the Merits. ............................................ 12
1. The district court has jurisdiction. .................................. 12
2. The May 11 rescission letter constitutes
final agency action. .......................................................... 18
3. Defendants’ rescission of the previously approved
extensions was arbitrary and capricious. ....................... 19
a. Defendants failed to provide a reasoned
explanation for their change in position. ................. 20
b. Defendants failed to consider plaintiffs’
reliance interests. ..................................................... 23
4. Defendants’ rescission of the previously
approved extensions was contrary to law. ...................... 24
B. The Balance of Equities Weighs Dispositively
in Plaintiffs’ Favor. ................................................................. 25
CONCLUSION ........................................................................................ 29
i
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TABLE OF AUTHORITIES
Cases Page(s)
Aetna Cas. & Sur. Co. v. United States,
71 F.3d 475 (2d Cir. 1995) .................................................................. 13
Bennett v. Spear,
520 U.S. 154 (1997) ........................................................................ 18-19
Boaz Hous. Auth. v. United States,
994 F.3d 1359 (Fed. Cir. 2021) ........................................................... 16
Bowen v. Massachusetts,
487 U.S. 879 (1988) ........................................................................ 14-15
City of Arlington v. FCC,
569 U.S. 290 (2013) ............................................................................. 21
Columbus Reg’l Hosp. v. United States,
990 F.3d 1330 (Fed. Cir. 2021) ........................................................... 16
Community Legal Servs. in E. Palo Alto v. U.S. Dep’t of Health
& Hum. Servs.,
No. 25-2808, 2025 WL 1393876 (9th Cir. May 14, 2025) ............. 16, 27
Department of Educ. v. California,
145 S. Ct. 966 (2025) ........................................................................... 18
FDA v. Wages & White Lion Invs., L.L.C.,
145 S. Ct. 898 (2025) ...................................................................... 19-20
In re World Trade Ctr. Disaster Site Litig.,
503 F.3d 167 (2d Cir. 2007) ................................................................ 12
League of Women Voters of U.S. v. Newby,
838 F.3d 1 (D.C. Cir. 2016) ................................................................. 26
Linea Area Nacional de Chile S.A. v. Meissner,
65 F.3d 1034 (2d Cir. 1995) ................................................................ 14
ii
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Cases Page(s)
Maine Cmty. Health Options v. United States,
590 U.S. 296 (2020) .................................................................. 13, 15-16
Polanco v. U.S. Drug Enf’t Admin.,
158 F.3d 647 (2d Cir. 1998) .......................................................... 13, 15
San Juan City Coll. v. United States,
391 F.3d 1357 (Fed. Cir. 2004) ........................................................... 16
Sustainability Inst. v. Trump,
No. 25-1575, 2025 WL 1587100 (4th Cir. June 5, 2025) .................... 17
U.S. Fish & Wildlife Serv. v. Sierra Club, Inc.,
592 U.S. 261 (2021) ............................................................................. 19
Statutes
American Rescue Plan Act of 2021, Pub. L. No. 117-2
§ 2001 ..................................................................................... 4-5, 20, 27
§ 9402 .................................................................................................. 24
§ 9811 .................................................................................................. 24
Fiscal Responsibility Act of 2023, Pub. L. No. 118-5 .............................. 24
5 U.S.C.
§ 702 .................................................................................................... 12
§ 704 .................................................................................................... 18
20 U.S.C. § 1225 ........................................................................................ 5
28 U.S.C. § 1491 ................................................................................. 12-13
Regulations
2 C.F.R. § 200.344 ...................................................................... 5-6, 16, 22
FEMA, Major Disaster Declarations and Related Determinations:
Expiration of COVID–19-Related Measures, 88 Fed. Reg.
8884 (Feb. 10, 2023) .............................................................................. 6
iii
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Miscellaneous Authorities Page(s)
Letter from Adam Schott, U.S. Dep’t of Educ., to Grantees (Jan.
9, 2024), https://www.ed.gov/sites/ed/files/2024/01/ARP-
Liquidation-Extension-Letter-1.9.24-final-for-signature-
v3.pdf ..................................................................................................... 6
Letter from Miguel A. Cardona, U.S. Sec’y of Educ., to Betty
Rosa, N.Y. State Comm’r of Educ. 1 (Aug. 5, 2021),
https://www.nysed.gov/sites/default/files/programs/federal-
education-covid-response-funding/nysed-arp-esser-plan-
usde-approval-letter.pdf ....................................................................... 5
N.Y. State Educ. Dep’t, American Rescue Plan (ARP):
Elementary and Secondary School Emergency Relief
(ESSER) State Plan (June 7, 2021),
https://www.nysed.gov/sites/default/files/programs/federal-
education-covid-response-funding/nysed-arp-esser-plan.pdf............... 5
S. Rep. No. 118-84 (2023) .................................................................... 6, 20
U.S. Dep’t of Educ., Frequently Asked Questions: Elementary
and Secondary School Emergency Relief Programs (Dec. 7,
2022 update),
https://www.ed.gov/sites/ed/files/2022/12/ESSER-and-GEER-
Use-of-Funds-FAQs-December-7-2022-Update-1.pdf .......................... 4
iv
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PRELIMINARY STATEMENT
Beginning in 2021, the U.S. Department of Education awarded
plaintiffs-appellees 1 billions of dollars in congressionally appropriated
funds to respond to the profound, lingering impacts of the COVID-19
pandemic on K–12 education. The governing regulations allowed plaintiffs
to seek reimbursement for eligible projects during a set liquidation period.
In 2024 and early 2025, the Department exercised its regulatory authority
to grant plaintiffs’ requests to extend their liquidation periods through
March 2026. In reliance on those extensions, plaintiffs implemented
educational programming, infrastructure projects, and hiring plans, for
which they could submit reimbursement requests throughout the extended
liquidation periods.
On March 28, 2025, the Department abruptly rescinded its prior
regulatory approvals of plaintiffs’ extensions and terminated their liquida-
tion periods effective immediately—reasoning that the extensions were
unnecessary because the pandemic had ended. As a result, plaintiffs
1 Plaintiffs-appellees are the States of New York, Arizona, California,
Delaware, Hawai‘i, Illinois, Maine, Maryland, Massachusetts, Minnesota,
Nevada, New Jersey, New Mexico, and Oregon; People of the State of
Michigan; District of Columbia; and Pennsylvania Governor Josh Shapiro.
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could no longer submit timely reimbursement requests to access over one
billion dollars in unliquidated funds.
Plaintiffs brought this action in the U.S. District Court for the
Southern District of New York against the Department and Secretary
Linda McMahon challenging the rescission under the Administrative
Procedure Act (APA), 5 U.S.C. § 706. Five days after the district court
(Ramos, J.) preliminarily enjoined defendants from implementing the
March 28 rescission, the Department issued a second letter on May 11
again terminating the liquidation periods. The court preliminarily enjoined
this second rescission. Defendants appealed the second preliminary injunc-
tion and moved for a stay pending appeal. The motion should be denied.
First, plaintiffs are exceedingly likely to succeed on the merits. The
district court has jurisdiction over plaintiffs’ APA claims seeking to vacate
agency action—here, defendants’ unlawful use of regulatory authority to
rescind previously granted extensions. Plaintiffs sought, and the court
ordered, solely equitable relief: a preliminary injunction preventing defen-
dants from rescinding the previously granted extensions and directing
them to treat plaintiffs’ reimbursement requests as timely so they may
be reviewed accordingly. The Tucker Act does not apply because plaintiffs
2
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do not seek monetary damages for breach of contract, nor did the court
order payment of any kind.
Plaintiffs are also likely to succeed in showing that defendants’
actions were arbitrary and capricious and contrary to law. For example,
the Department’s attempt to justify terminating plaintiffs’ liquidation
periods based on the pandemic’s end is unreasonable and contrary to
Congress’s intent that funds remain available to address the pandemic’s
lingering effects, including loss of educational attainment. And defendants
failed to consider plaintiffs’ extensive reliance on the extended liquidation
periods.
Second, the equitable factors weigh dispositively in plaintiffs’ favor.
As the district court found, absent injunctive relief, plaintiffs will suffer
irreparable harm from needing to dismantle necessary educational program-
ming, upend employment determinations, and stop infrastructure projects
in their tracks, leaving sections of schools unusable. By contrast,
defendants suffer no harm from accepting plaintiffs’ reimbursement
requests as timely.
3
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BACKGROUND
Congress provided pandemic relief through several major
appropriations laws, including the American Rescue Plan Act of 2021
(ARP), Pub. L. No. 117-2, 135 Stat. 4.2 ARP established and funded
programs under which States could apply for grants to support the
education of K–12 students. Congress provided that these “education-
stabilization” funds be broadly used, inter alia, to restore in-person
instruction; ensure continuity of services; respond to students’ academic,
social, and emotional needs; and address the lasting impact of learning
losses. See, e.g., ARP § 2001(e), 135 Stat. at 20-22. Department guidance
confirmed the broad range of permitted uses for funding. 3
Plaintiffs applied for and collectively received billions of dollars in
education-stabilization grants. As part of that initial grant-approval
process, plaintiffs submitted to the Department plans for the use of their
2 In addition to ARP funding to all plaintiffs, the agency action at
issue also implicates certain grants to Maryland, Michigan, and Pennsylvania
under the Coronavirus Response and Relief Supplemental Appropriations
Act, 2021, Pub. L. No. 116-260, 134 Stat. 1909 (2020).
3 U.S. Dep’t of Educ., Frequently Asked Questions: Elementary and
Secondary School Emergency Relief Programs 14 (Dec. 7, 2022 update).
(For sources available online, URLs appear in the Table of Authorities.
All websites last visited on June 12, 2025.)
4
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funds, created systems for reviewing and approving funding requests
from local education agencies and nonpublic schools in plaintiffs’ juris-
dictions, and directed the Department to public websites with detailed
information about local projects. 4
Congress provided that education-stabilization funds “remain
available” through specified dates and did not tie the funds’ availability
to the pandemic’s end. E.g., ARP § 2001(a), 135 Stat. at 19. Under ARP,
awarded funds are available for obligations incurred under contracts
entered into through September 2024. See id.; 20 U.S.C. § 1225(b). And
under applicable regulations, grant recipients initially had until January
2025 to liquidate funds. See 2 C.F.R. § 200.344(c). Accordingly, the statute
set an initial deadline for States to enter into eligible contracts, and
States then continued during the liquidation period to seek reimburse-
ment for expenses under those contracts as the work continued.
4 See, e.g., Letter from Miguel A. Cardona, U.S. Sec’y of Educ., to
Betty Rosa, N.Y. State Comm’r of Educ. 1 (Aug. 5, 2021); N.Y. State Educ.
Dep’t, American Rescue Plan (ARP): Elementary and Secondary School
Emergency Relief (ESSER) State Plan (June 7, 2021). (See also Hr’g Tr.
26 (May 6, 2025) (“May 6 Tr.”), ECF No. 84-2.)
5
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After the expiration of the COVID-19 disaster declaration in May
2023, 5 Congress urged the Department to grant States extensions of the
liquidation periods, S. Rep. No. 118-84, at 253 (2023), and the Department
then solicited extension requests. 6 Plaintiffs each submitted detailed
extension requests listing the amount of their eligible unliquidated
funds, the specific schools and subcontractors who would receive those
funds, and the reasons for the extensions. Exercising its regulatory
authority to grant extensions when justified, 2 C.F.R. § 200.344(c), the
Department determined that plaintiffs each had provided sufficient
justification and documentation and approved extensions of the liquidation
periods through, with limited exceptions, March 2026. Relying on these
extension approvals, plaintiffs created budgets, hired staff, began to
upgrade school facilities, and implemented student programming. (See
Pls.’ Mem. of Law 3-4 & nn.3-6 (May 14, 2025) (“Second PI Mot.”), ECF
No. 85 (citing plaintiffs’ declarations).)
5 See FEMA, Major Disaster Declarations and Related Determinations:
Expiration of COVID–19-Related Measures, 88 Fed. Reg. 8884, 8884
(Feb. 10, 2023).
6 Letter from Adam Schott, U.S. Dep’t of Educ., to Grantees (Jan. 9,
2024).
6
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But on March 28, 2025, defendants issued a letter abruptly and
categorically rescinding the previously granted extensions and terminating
the liquidation periods as of that day. Although the extensions had been
sought and approved after the pandemic had ended, the letter asserted
that “[e]xtending deadlines for COVID-related grants . . . years after the
COVID pandemic ended is not consistent with the Department’s priorities
and thus not a worthwhile exercise of its discretion.” (Letter from Linda
McMahon, U.S. Sec’y of Educ., to State Chiefs of Educ. (Mar. 28, 2025)
(“March 28 Letter”), ECF No. 1-1.) The Department purported to institute
an entirely new process, under which States could again apply for
extensions of their liquidation periods but only on a project-specific basis.
The Department would review whether each project was sufficiently
connected to COVID-19 mitigation and aligned with the Department’s
new priorities. (See id.)
Following the March 28 letter, state education agencies were
blocked from submitting timely reimbursement requests for costs associated
with managing and distributing funds to local education agencies. As a
result, some state education agencies were forced to lay off or furlough
staff, or expected to do so imminently. And state and local education
7
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agencies were forced or expected to terminate contracts with vendors and
other partners—including for capital improvements to school facilities
that had already begun. Likewise, programs designed to compensate for
lost instruction time during the pandemic—such as summer school and
extended day programs—were halted or in danger of being discontinued.
(See Pls.’ Mem. of Law 11-12 & nn.11-16 (Apr. 11, 2025), ECF No. 11
(citing plaintiffs’ declarations).)
On April 10, plaintiffs brought this suit challenging defendants’
March 28 termination of their liquidation periods as arbitrary and
capricious and contrary to law under the APA. (Compl. ¶¶ 192-215 (Apr.
10, 2025), ECF No. 1.) The next day, plaintiffs moved for a preliminary
injunction to enjoin enforcement of the March 28 letter. (Notice of Mot.
(Apr. 11, 2025), ECF No. 10.)
On May 6, the district court granted the preliminary injunction.
(Prelim. Inj. Order (May 6, 2025) (“May 6 Order”), ECF No. 77.) The court
determined that the March 28 letter constituted final agency action.
(May 6 Tr. 44.) The court also held that defendants likely violated the
APA because the proffered explanation for their change in position—the
pandemic’s end—was unreasonable and contrary to Congress’s intent
8
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that education-stabilization funds remain available after the pandemic’s
end to address children’s loss of educational attainment and other
continuing difficulties. (See id. at 44-45.)
The court found that, absent preliminary relief, plaintiffs and the
public would suffer irreparable harm from education-program termina-
tions, staff layoffs, and work stoppage on infrastructure projects that
would render parts of schools unusable. By contrast, defendants would
not be irreparably harmed by the preliminary injunction because the
funds were congressionally appropriated for particular uses and already
subject to an extensive vetting process. (See id. at 45-46.) Defendants did
not appeal.
Five days later, on May 11, the Department issued a second letter
that again terminated plaintiffs’ liquidation periods, this time as of May
25, 2025. (Letter from Hayley B. Sanon, U.S. Dep’t of Educ. (May 11,
2025) (“May 11 Letter”), ECF No. 84-1.) The May 11 letter again relied
on the pandemic’s end and asserted that the previously approved projects
were insufficiently tied to the governing statutes’ goals and that the
funds would be better used for deficit reduction. The letter also cited the
increased pace of plaintiffs’ reimbursement requests following the May 6
9
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preliminary injunction, which had allowed plaintiffs to resume submitting
timely reimbursement requests, as a reason to require plaintiffs to apply
anew for project-by-project extensions. (See id. at 3.)
Plaintiffs moved for a temporary restraining order and a preliminary
injunction against enforcement of the May 11 letter, which the district
court granted on May 20 and June 3, respectively. (Order to Show Cause
2 (May 20, 2025), ECF No. 95; Prelim. Inj. Order (June 3, 2025) (“June 3
Order”), ECF No. 106.) The court adhered to its earlier findings that
plaintiffs had established a strong likelihood of success on the merits and
irreparable harm, and that the balance of equities and public interest
tipped decidedly in their favor. (Hr’g Tr. 23-32 (June 3, 2025) (“June 3
Tr.”), 2d Cir. ECF No. 17, Ex. 1.) The court rejected defendants’ argument
(raised for the first time) that the Tucker Act divested the court of
jurisdiction, explaining that plaintiffs do not seek to enforce contract
terms or assert claims for money damages but rather seek equitable relief
to enforce statutory rights. (Id. at 13.)
The June 3 order does not require defendants to make any
payments but rather preliminarily enjoins defendants from enforcing the
May 11 or March 28 rescission letters that terminated the liquidation
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periods. (June 3 Order 1-2.) Although the Department may not summarily
reject plaintiffs’ reimbursement requests as untimely, the Department is
entitled to ensure that the funds are being used for previously approved
projects before granting any reimbursement request and the court
imposed no specific time limit on that inquiry. (June 3 Tr. 28.) The court
included a provision requiring that defendants “process” the requests
“without delay” (June 3 Order 2), to ensure that defendants promptly
conducted the pre-March 28 review process (see June 3 Tr. 12-13, 30). The
court agreed this language was necessary to “make sure that these
[requests] are being processed” (see id. at 30), considering that some
reimbursement requests dating to March 28 were still pending as of June
3 (see id. at 25-26).
Defendants appealed from the June 3 order and moved for a stay
pending appeal and an immediate administrative stay. On June 10,
Judge Nathan denied an administrative stay and referred the motion to
a motions panel. Order (June 10, 2025), 2d Cir. ECF No. 24.
11
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ARGUMENT
THIS COURT SHOULD DENY A STAY PENDING APPEAL
The Court considers four factors in issuing a stay pending appeal:
“(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 interesting in the proceeding; and (4) where the
public interest lies.” In re World Trade Ctr. Disaster Site Litig., 503 F.3d
167, 170 (2d Cir. 2007) (quotation marks and footnote omitted). Defendants
satisfy none of these factors.
A. Plaintiffs, Not Defendants, Are Exceedingly Likely to
Succeed on the Merits.
1. The district court has jurisdiction.
The district court correctly concluded that it has jurisdiction over
plaintiffs’ claims under the APA. The APA authorizes federal district
courts to hear suits from persons “adversely affected or aggrieved by
agency action” who seek “relief other than money damages.” 5 U.S.C.
§ 702. By contrast, the Tucker Act—which defendants incorrectly invoke
(Mot. 16-20)—grants the Court of Federal Claims jurisdiction over suits
based on “any express or implied contract with the United States.” 28
12
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U.S.C. § 1491(a)(1). “The Tucker Act yields,” however, “when the
Administrative Procedure Act provides an avenue for relief.” Maine
Cmty. Health Options v. United States, 590 U.S. 296, 323-24 (2020) (citation
omitted).
The APA squarely applies to this case. Plaintiffs challenge
defendants’ unlawful agency action—i.e., their rescission of the prior
regulatory approval of the liquidation-period extensions—as arbitrary
and capricious and contrary to law. (Compl. ¶¶ 192-215.) And plaintiffs
seek purely equitable relief to vacate the unlawful rescission, declare the
rescission unlawful, and enjoin its enforcement. (Id. at 51.) See Polanco
v. U.S. Drug Enf’t Admin., 158 F.3d 647, 652 (2d Cir. 1998) (APA applies
to suits seeking “only equitable relief”); Aetna Cas. & Sur. Co. v. United
States, 71 F.3d 475, 479 (2d Cir. 1995) (district courts have jurisdiction
over suits seeking “injunctive relief to force the government to perform a
legal obligation”). Plaintiffs’ claims are not based on any contract and do
not seek monetary damages, and the Tucker Act is therefore inapplicable.7
7Defendants evidently reached the same conclusion when they
failed to challenge the district court’s jurisdiction in opposing plaintiffs’
first motion for a preliminary injunction, despite plaintiffs’ addressing
the Tucker Act in their motion. (See June 3 Tr. 3.)
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See Linea Area Nacional de Chile S.A. v. Meissner, 65 F.3d 1034, 1042-
43 (2d Cir. 1995).
In Bowen v. Massachusetts, 487 U.S. 879 (1988), the Supreme Court
applied the APA rather than the Tucker Act in circumstances analogous
to those presented here. In Bowen, Massachusetts sued the U.S. Secretary
of Health and Human Services to challenge his refusal to reimburse the
State for certain categories of Medicaid expenses. 487 U.S. at 882. The
Court explained that the APA applied because Massachusetts sought
declaratory and injunctive relief to enforce a statutory mandate, id. at
900, and to “undo the Secretary’s refusal to reimburse the State”—not
monetary damages to compensate for past injury, id. at 910. Any resulting
future payments were the proper consequence of the court having
fulfilled its “primary function of reviewing the Secretary’s interpretation
of federal law” and concluding that it was incorrect. Id.
Bowen is directly on point here. Plaintiffs seek specific equitable
relief against the Department’s unlawful action in rescinding the
liquidation-period extensions—just as Massachusetts sought specific
equitable relief against the Secretary’s unlawful action in denying
reimbursements. See id. at 911. And just as in Bowen, plaintiffs’ claims
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for purely equitable relief are not transformed into claims for money
damages merely because vacating and enjoining the Department’s
unlawful rescission might result in the Department ultimately paying
reimbursements. See id. at 893-94, 910.
The preliminary injunction merely stops the Department from
summarily rejecting plaintiffs’ reimbursement requests as untimely. This
prospective injunctive relief concerning the agency’s ongoing obligations
is squarely within the district court’s power to award. See Polanco, 158
F.3d at 652 (district court had jurisdiction to vacate “wrongful agency
action” that created procedural bar to recovering property). Payments
that result from the Department’s consideration of plaintiffs’ timely reim-
bursement requests are simply a byproduct of the awarded equitable
relief. See Bowen, 487 U.S. at 893-94.
Moreover, as the Court explained in Bowen, the Court of Federal
Claims “does not have the general equitable powers of a district court to
grant prospective relief.” Id. at 905. Cases like this one, which seek
“prospective declaratory and injunctive relief to clarify the extent of the
Government’s ongoing obligations,” Maine Cmty. Health Options, 590
U.S. at 326, do not belong in the Court of Federal Claims. They belong
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instead in district court because otherwise plaintiffs would lack any
adequate remedy. See id. at 327.
Defendants wrongly argue that plaintiffs allege a breach of
contract. See Mot. 17-20. Plaintiffs nowhere allege that defendants violated
any contractual term.8 The claims asserted in the complaint, and the
district court’s award of preliminary relief, instead arise from the Depart-
ment’s exercise of regulatory authority. When the Department initially
granted plaintiffs’ extension requests, it acted under its regulatory
authority to approve such requests when justified. See 2 C.F.R. § 200.344(c).
The Department then rescinded those extensions, and plaintiffs challenge
that change in regulatory position as unlawful. Plaintiffs’ claims thus do
not sound in contract but rather “seek to enforce compliance with statutes
and regulations.” See Community Legal Servs. in E. Palo Alto v. U.S.
Dep’t of Health & Hum. Servs., No. 25-2808, 2025 WL 1393876, at *2 (9th
Cir. May 14, 2025).
8Defendants’ breach-of-contract cases are inapposite. See Boaz
Hous. Auth. v. United States, 994 F.3d 1359, 1362-63 (Fed. Cir. 2021);
Columbus Reg’l Hosp. v. United States, 990 F.3d 1330, 1350-55 (Fed. Cir.
2021); San Juan City Coll. v. United States, 391 F.3d 1357, 1359 (Fed.
Cir. 2004).
16
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Nor is it true that plaintiffs “are really seeking . . . payment.”
Contra Mot. 19. Consistent with the complaint’s requested relief, the
preliminary injunction does not require the Department to make any
payments but rather enjoins the Department from enforcing the rescission
letters to terminate plaintiffs’ liquidation periods and summarily reject
plaintiffs’ reimbursement requests as untimely. 9 (See June 3 Order 1-2.)
Under the injunction’s terms, defendants may ensure that the funds are
being used for previously approved projects before granting a reim-
bursement, and the court imposed no specific time limit on that inquiry.
(See June 3 Tr. 28.) The district court’s directive that the Department
“process” plaintiffs’ reimbursement requests “without delay” (June 3
Order 2) merely ensures that plaintiffs do not evade the order’s terms by
stalling this review process—which does not include revisiting either the
prior approvals of plaintiffs’ extension requests or the prior approvals of
plaintiffs’ project plans (see June 3 Tr. 28, 30).
9 This case is therefore unlike Sustainability Institute v. Trump,
where the court ordered the government to “restore Plaintiffs[’] access to
grant funds immediately.” See No. 25-1575, 2025 WL 1587100, at *1 (4th
Cir. June 5, 2025) (quotation marks omitted).
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For these reasons, defendants misplace their reliance (Mot. 17-18,
20) on Department of Education v. California, 145 S. Ct. 966 (2025).
There, the Court appeared to conclude that the preliminary relief
“enforce[d] a contractual obligation to pay money,” id. at 968 (quotation
marks omitted). Here, as explained, the preliminary injunction enjoins
regulatory action rather than enforcing a contract obligation or ordering
payment of money. In any event, California is a nonprecedential stay
order, and it recognized Bowen as controlling law. See id.
2. The May 11 rescission letter constitutes final
agency action.
Contrary to defendants’ contention (Mot. 21-22), the May 11
rescission letter is final agency action reviewable under the APA. See 5
U.S.C. § 704. The May 11 letter marks the consummation of the Depart-
ment’s decisionmaking process, see Bennett v. Spear, 520 U.S. 154, 177-
78 (1997), because it definitively rescinded the prior approvals of plaintiffs’
liquidation-period extensions and terminated the liquidation periods as
of May 25, 2025. And the letter had immediate legal consequences, see
id., because plaintiffs could no longer submit timely reimbursement
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requests and instead were directed “to wind down their existing obligations
for work already completed” (May 11 Letter 1).
The Department’s implementation of an entirely new, project-
specific extension-application process is irrelevant. The agency action at
issue is the Department’s final decision to terminate the existing extensions
and institute a new (and arduous) legal regime—not the Department’s
speculative future decisions under that new regime. See Bennett, 520
U.S. at 178 (legal consequences flow where agency alters applicable legal
regime); U.S. Fish & Wildlife Serv. v. Sierra Club, Inc., 592 U.S. 261, 268
(2021) (“What matters . . . is not whether a document is last in line, but
whether it communicates a policy on which the agency has settled.”).
3. Defendants’ rescission of the previously approved
extensions was arbitrary and capricious.
Defendants concede that the May 11 rescission letter represented a
change in position from the Department’s prior approval of plaintiffs’
extension requests. Mot. 23. Accordingly, under the change-in-position
doctrine, defendants were required to “provide a reasoned explanation
for the change, display awareness that they are changing position, and
consider serious reliance interests.” FDA v. Wages & White Lion Invs.,
19
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L.L.C., 145 S. Ct. 898, 917 (2025) (quotation and alteration marks omitted).
The May 11 letter does not satisfy this standard.
a. Defendants failed to provide a reasoned
explanation for their change in position.
Defendants failed to provide any “reasoned explanation” for
rescinding the previously approved extensions. See id.
First, the May 11 letter again contended that the pandemic had
ended, and that funds would be better used for deficit reduction. (May 11
Letter 3.) In this Court, defendants do not raise, and thus forfeited, this
end-of-the-pandemic justification. And for good reason: Congress did not
tie education-stabilization funding to the pandemic’s pendency but rather
to specific dates. See, e.g., ARP § 2001(a), 135 Stat. at 19. Congress also
directed that the funds be used to address the pandemic’s long-term
effects on students and schools. See, e.g., ARP § 2001(e), 135 Stat. at 20-
22. Indeed, the pandemic emergency had already formally ended when
Congress urged the Department to grant liquidation-period extensions,
see S. Rep. No. 118-84, at 253, and when the Department did so. The
agency may not second-guess Congress’s specified uses for the funds
based on its own policy views that funds should be used for other
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purposes. See City of Arlington v. FCC, 569 U.S. 290, 297 (2013) (agency’s
power is “authoritatively prescribed by Congress”).
Second, defendants also fail to raise here, and thus abandoned, the
May 11 letter’s baseless contention that a student educational progress
assessment purportedly showed that the funds “have not been put to
their highest and best use.” (See May 11 Letter 3.) As plaintiffs explained
below (Second PI Mot. 11-12), the assessment was conducted months
before many of the projects at issue had begun and thus does not reflect
on the efficacy of those projects. And deficiencies in student performance
further underscore the need for continued access to funding to help
ameliorate them.
Third, the remaining justifications in the May 11 letter are also
arbitrary and capricious. The letter contends that funded projects are
“less connected to direct academic services to students and the ongoing
educational harms caused by COVID.” (May 11 Letter 2.) But defendants
do not dispute (see Mot. 24) that the governing statutes authorize plaintiffs’
projects, including those identified as objectionable in the May 11 letter.
And defendants already approved plaintiffs’ planned uses at the initial
grant-application stage. See supra at 4-5. The regulation authorizing the
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Department to approve extensions allows the agency to consider whether
the applicant showed that additional time is needed to implement the
project—not revisit whether the applicant should have entered into the
approved obligation in the first place. See 2 C.F.R. § 200.344(c).
There is no basis for the letter’s contention that “serious questions”
had arisen about the Department’s own initial extension review process.
(May 11 Letter 3). Defendants’ counsel represented below that he had “no
reason to believe,” based on the record, that the initial process did not
involve a “careful review.” (May 6 Tr. 27; see June 3 Tr. 19.) Contrary to
the letter’s assertion that the original approvals “included no explanation
for the extensions” (May 11 Letter 3), those approvals explained that the
requests “provide[d] sufficient justification and documentation for an
extension to the period of liquidation” (e.g., Letter from Laura Jimenez,
U.S. Dep’t of Educ., to Kathy Hochul, N.Y. Governor (Jan. 13, 2025), ECF
No. 26-1.) The May 11 letter, by contrast, fails to consider the extensive
narratives that plaintiffs submitted supporting their extension requests.
(E.g., Liquidation Extension Request (Dec. 5, 2024), ECF No. 26-4.) And
the length of the extensions and the range of projects to which they apply
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were consistent with Congress’s desire for flexibility and the Depart-
ment’s own guidance. See supra at 4-6.
Nor is there any merit to the letter’s purported concern that the
pace of reimbursement requests increased following the court’s initial
May 6 preliminary injunction. (May 11 Letter 3.) If true, that is because
the March 28 rescission letter prevented plaintiffs from submitting
timely reimbursement requests and thus created a backlog. This conse-
quence of defendants’ unlawful March 28 rescission letter cannot and
does not provide a rational basis to issue the May 11 rescission letter.
b. Defendants failed to consider plaintiffs’
reliance interests.
Defendants also failed to consider plaintiffs’ substantial reliance
interests in the already approved extensions. Plaintiffs submitted numer-
ous declarations attesting that state education agencies, local school
districts, and nonpublic schools created budgets, hired staff, offered
services, commenced infrastructure projects, and developed operating
plans in reliance on the extension approvals. See supra at 6. Defendants’
response is that the May 11 letter provided a fourteen-day window in
which to submit reimbursement requests before the liquidation periods
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categorically terminated. Mot. 24-25. But this fourteen-day window was
required by the first preliminary injunction to allow plaintiffs to seek
further relief from the court if defendants again unlawfully rescinded the
extensions. (See May 6 Order 2.) It reflects no meaningful consideration
by defendants of plaintiffs’ reliance interests and ignores the profound
disruptions caused by the termination of the liquidation periods—which
would otherwise end in March 2026—including disruptions to long-term
contracts.
4. Defendants’ rescission of the previously approved
extensions was contrary to law.
Defendants’ termination of plaintiffs’ liquidation periods based on
the pandemic’s end and other invalid factors was also contrary to law.
Congress tied the funds’ availability to specific dates rather than the
pandemic’s duration. Moreover, where Congress intended to limit
pandemic-relief programs to the pandemic’s end, it said so expressly. Cf.
ARP §§ 9402, 9811(b)(3), 135 Stat. at 127, 211. And after the federal
government declared an end to the pandemic, Congress rescinded certain
COVID-related appropriations without disturbing the appropriations
here. Cf. Fiscal Responsibility Act of 2023, div. B, tit. I, Pub. L. No. 118-
24
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5, 137 Stat. 10, 23-30. This statutory context, together with Congress’s
encouraging the Department to grant extensions after the pandemic’s
declared end, establish that defendants’ central reasoning in terminating
plaintiffs’ liquidation periods runs contrary to law.
B. The Balance of Equities Weighs Dispositively in
Plaintiffs’ Favor.
The district court correctly found that, without preliminary relief,
plaintiffs will immediately suffer devastating harm from stopping educa-
tional programs already in place, halting infrastructure projects in their
tracks and thus leaving sections of schools unusable, and forcing wide-
spread staff terminations. (See June 3 Tr. 23-24; May 6 Tr. 45.) Defendants
do not meaningfully contest these findings, which are supported by
abundant record evidence. See supra at 7-8. For example, Maryland was
forced to wind down tutoring programs for Baltimore City public schools
and after-school programming at forty sites. (Decl. of Carey M. Wright
¶ 11 (Apr. 8, 2025), ECF No. 21.) And one independent school in New
York serving students with disabilities had to stop critical infrastructure
work on its gymnasium, leaving large holes in the walls. (Decl. of Christina
Coughlin (“Coughlin Decl.”) ¶ 48 (Apr. 11, 2025), ECF No. 26.) Avoiding
25
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such harms to students and schools is also in the public interest, whereas
there is “no public interest in the perpetuation of unlawful agency
action.” League of Women Voters of U.S. v. Newby, 838 F.3d 1, 12 (D.C.
Cir. 2016).
In arguing that plaintiffs will suffer no harm from a stay (Mot. 27),
defendants ignore the extensive evidence demonstrating that the rescission
had already begun inflicting irreparable harms on plaintiffs and the
public before entry of preliminary relief. Moreover, plaintiffs cannot wait
until they prevail on this appeal to access their education-stabilization
funds (contra Mot. 27-28), because portions of schools will remain unusable
in the meantime and valuable instruction time will be lost. And there is
no guarantee that personnel will be willing or able to pick up where they
left off when the projects resume. (E.g., Coughlin Decl. ¶ 57.)
The Department’s new project-specific extension-request process
does not ameliorate these harms. Defendants have made clear that even
projects authorized under the governing statutes and previously approved
state plans may not survive its new approval process. See Mot. 24. For
example, after Arizona attempted to submit a reimbursement request
through the new process, the vast majority of the request was denied for
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patently invalid reasons, including that the relevant projects “provid[ed]
resources to teachers rather than directly supporting students” and
“focused on health rather than academics.” (Letter from Hayley B. Sanon,
U.S. Dep’t of Educ., to Tom Horne, Ariz. Dep’t of Educ. 2-3 (May 2, 2025),
ECF No. 78-1.) Meanwhile, ARP broadly appropriates funds “to address
learning loss” and to support students’ “academic, social, and emotional
needs.” ARP § 2001(e)(1), 135 Stat. at 20.
Defendants, by contrast, do not come close to establishing that they
will suffer irreparable harm absent a stay. Even if processing plaintiffs’
timely reimbursement requests under the pre-March 28 process results
in the payment of funds, defendants are not irreparably harmed by
“dispersing congressionally appropriated funds for statutorily mandated
purposes.” Community Legal Servs. in E. Palo Alto, 2025 WL 1393876, at
*6. Here, Congress appropriated the education-stabilization funds to
address the pandemic’s lingering effects on students and schools, and the
Department is not permitted to use the funds for other purposes.
Moreover, defendants chose not to appeal the district court’s May 6
order—under which they continue to operate. See Mot. 10, 27.
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Defendants have also failed to provide any record evidence to
support their assertion that they will be unable to recover grant funds
once dispersed. See Mot. 26-27 (citing California, 145 S. Ct. at 969). That
contention is inconsistent with both defendants’ request for only a
nominal bond of $10,000 (June 3 Tr. 31), and defendants’ declaration
below referencing the Department’s tools for recovering funds (Decl. of
Ruth E. Ryder ¶ 7 (May 29, 2025), ECF No. 101).
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CONCLUSION
The motion for a stay pending appeal should be denied.
Dated: New York, New York
June 12, 2025
Respectfully submitted,
LETITIA JAMES
Attorney General
State of New York
Attorney for Plaintiffs-Appellees
By: . /s/ Stephen J. Yanni .
STEPHEN J. YANNI
Assistant Solicitor General
BARBARA D. UNDERWOOD 28 Liberty Street
Solicitor General New York, NY 10005
JUDITH N. VALE (212) 416-6184
Deputy Solicitor General
STEPHEN J. YANNI
Assistant Solicitor General
of Counsel
(Counsel listing continues on following pages.)
29
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KRISTIN K. MAYES ANTHONY G. BROWN
Attorney General Attorney General
State of Arizona State of Maryland
2005 North Central Avenue 200 Saint Paul Place
Phoenix, AZ 85004 Baltimore, MD 21202
ROB BONTA ANDREA JOY CAMPBELL
Attorney General Attorney General
State of California Commonwealth of Massachusetts
1300 I Street, Suite 125 1 Ashburton Place, 20th Floor
Sacramento, CA 95814 Boston, MA 02108
KATHLEEN JENNINGS DANA NESSEL
Attorney General Attorney General
State of Delaware State of Michigan
820 N. French Street 525 W. Ottawa Street
Wilmington, DE 19801 P.O. Box 30212
Lansing, MI 48909
ANNE E. LOPEZ KEITH ELLISON
Attorney General Attorney General
State of Hawai‘i State of Minnesota
425 Queen Street 102 State Capitol
Honolulu, HI 96813 75 Rev. Dr. Martin Luther King Jr.
Boulevard
St. Paul, MN 55155
KWAME RAOUL AARON D. FORD
Attorney General Attorney General
State of Illinois State of Nevada
115 S. LaSalle Street 100 N. Carson Street
Chicago, IL 60601 Carson City, NV 89701
AARON M. FREY MATTHEW J. PLATKIN
Attorney General Attorney General
State of Maine State of New Jersey
6 State House Station 25 Market Street
Augusta, ME 04333 Trenton, NJ 08625
30
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RAÚL TORREZ BRIAN L. SCHWALB
Attorney General Attorney General
State of New Mexico District of Columbia
408 Galisteo Street 400 Sixth Street, NW
Santa Fe, NM 87504 Washington, DC 20001
DAN RAYFIELD GOVERNOR’S OFFICE OF
Attorney General GENERAL COUNSEL
State of Oregon Thomas P. Howell
100 SW Market Street Deputy General Counsel
Portland, OR 97201 30 N. 3rd Street, Suite 200
Harrisburg, PA 17101
Counsel for Governor Josh Shapiro,
Commonwealth of Pennsylvania
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CERTIFICATE OF COMPLIANCE
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New York, hereby certifies that according to the word count feature of the
word processing program used to prepare this document, the document
contains 5,196 words and complies with the typeface requirements and
length limits of Rules 27(d) and 32(a)(5)-(6).
. /s/ Ava Mortier .
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