Emergency Motion for Stay Pending Appeal — New York v. U.S. Department of Education (2d Cir., Doc. 16)
Summary
An emergency motion for a stay pending appeal and for an immediate stay during the consideration of the motion, dated June 6, 2025, Doc. 16, in State of New York et al. v. United States Department of Education et al., Docket No. 25-1424, in the U.S. Court of Appeals for the Second Circuit. It begins with a Motion Information Statement listing Dana Walsh Kumar as moving attorney for defendants-appellants and requesting a return date of Tuesday, June 10. The motion asks for an immediate administrative stay of the district court's June 3 Preliminary Injunction and a stay pending final disposition of the appeal. It argues that the district court lacks jurisdiction because the claims fall within the Tucker Act. The /s/ signature is Dana Walsh Kumar's, with a certificate stating 5200 words.
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Cite this document
“Emergency Motion for Stay Pending Appeal — New York v. U.S. Department of Education (2d Cir., Doc. 16).”
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-c9e448ded6/
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Case: 25-1424, 06/06/2025, DktEntry: 16.1, Page 1 of 30
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
Thurgood Marshall U.S. Courthouse 40 Foley Square, New York, NY 10007 Telephone: 212-857-8500
MOTION INFORMATION STATEMENT
Docket Number(s): 25-1424 Caption [use short title]
Motion for: Stay Pending Appeal of Preliminary State of New York et al. v. United States
Injunction and Immediate Stay During the Department of Education et al.
Consideration of This Motion
Set forth below precise, complete statement of relief sought:
The government requests an immediate
administrative stay of the district court's June 3
Preliminary Injunction pending resolution of the
government's motion for a stay, as well as a stay
pending final disposition of this appeal.
MOVING PARTY: Defendants/Appellants OPPOSING PARTY: Plaintiffs/Appellees
Plaintiff Defendant
Appellant/Petitioner Appellee/Respondent
MOVING ATTORNEY: Dana Walsh Kumar OPPOSING ATTORNEY: Stephen Yanni
[name of attorney, with firm, address, phone number and e-mail]
U.S. Attorney's Office, SDNY Office of the New York State Attorney General
86 Chambers Street, Floor 3, New York, NY 10007 28 Liberty Street New York, NY 10005
212-637-2741; dana.walsh.kumar@usdoj.gov 212-416-6184; stephen.yanni@ag.ny.gov
Court- Judge/ Agency appealed from: Southern District of New York / Edgardo Ramos
Please check appropriate boxes: FOR EMERGENCY MOTIONS, MOTIONS FOR STAYS AND
INJUCTIONS PENDING APPEAL:
Has movant notified opposing counsel (required by Local Rule 27.1): Has this request for relief been made below? Yes No
Yes No (explain): Has this relief been previously sought in this court? Yes No
Requested return date and explanation of emergency:
We request a return date of Tuesday, June 10. The reason for the emergency is that
Opposing counsel’s position on motion: if the injunction stands, the government will be irreparably harmed because
Unopposed Opposed Don’t Know it would result in millions of dollars of payments that should not be made and which
Does opposing counsel intend to file a response: the Department of Education would be unable to recover.
Yes _No Don’t Know
Is the oral argument on motion requested? Yes No (requests for oral argument will not necessarily be granted)
Has the appeal argument date been set? Yes No If yes, enter date:
Signature of Moving Attorney:
DANA KUMAR Digitally signed by DANA KUMAR
Date: 2025.06.06 19:16:12 -04'00' Date: 6/6/2025
Service : Electronic Other [Attach proof of service]
Form T-1080 (rev. 10-23)
Case: 25-1424, 06/06/2025, DktEntry: 16.1, Page 2 of 30
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
State of New York et al.,
Plaintiffs-Appellees,
v.
Docket No. 25-1424
United States Department of Education
et al.,
Defendants-Appellants.
Defendants-Appellants’ Emergency Motion for a Stay Pending
Appeal and for an Immediate Stay During the Consideration of
This Motion
Introduction
By this emergency application, the government requests an
immediate administrative stay pending resolution of the government’s
motion for a stay, as well as a stay pending final disposition of this
appeal.
This is a suit brought by sixteen states and the District of Columbia
against the United States Department of Education (the “Department”
or “ED”) and Education Secretary Linda McMahon regarding a recent
Department decision concerning funding provided in COVID-19 relief
statutes. That funding, which amounted to hundreds of billions of
dollars, had to be obligated and liquidated by January 2025, but the
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Department has discretion to extend that deadline upon a request by a
state “when justified.” 2 C.F.R. § 200.344(c). Although extensions had
previously been granted, on March 28, 2025, the Department rescinded
those extensions and implemented a new process by which states could
seek additional extensions. And on May 11, 2025, the Department
issued a letter explaining in more detail the reasons for rescinding the
previously granted extensions and informed the states that the existing
liquidation extension would expire on May 25, 2025. Plaintiffs, seeking
immediate payment, sought a preliminary injunction, which the district
court granted.
An immediate stay should be entered for the following reasons.
First, the district court lacks jurisdiction over the claims in this
case, which fall within the Tucker Act and must therefore be brought in
the Court of Federal Claims. Although plaintiffs style their claims as
seeking relief under the Administrative Procedure Act (“APA”), they
actually seek payments from the federal government pursuant to grant
agreements. As the Supreme Court recently held in a similar case, the
APA’s waiver of sovereign immunity does not extend to orders to enforce
a contractual obligation to pay money. Department of Education v.
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California, 145 S. Ct. 966, 968 (2025). The district court thus lacks
jurisdiction over these claims.
Second, the district court improperly enjoined the Department from
exercising legitimate discretion over approval of liquidation extension
requests. The Department’s explanation in its May 11 Letter for
rescinding previously granted liquidation extensions is reasonable and
afforded the plaintiffs ample notice. The Department is thus likely to
succeed on the merits of its claim that its actions were lawful.
Third, a stay will not harm plaintiffs because the funds will still be
available at the conclusion of the litigation and plaintiffs can request
funds for specific projects in the meantime. Allowing the injunction to
stand, however, will irreparably harm the government because it would
result in potentially millions of dollars of payments that should not be
made and which the Department would be unable to recover.
Accordingly, this Court should stay the district court’s injunction,
immediately during the consideration of this motion, and until final
resolution of the appeal.
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Statement
A. Statutory and Regulatory Background
In the midst of the COVID-19 pandemic and ensuing public health
emergency, Congress enacted several statutes that appropriated funds to
respond to the crisis. Three of those statutes were the Coronavirus Aid,
Relief, and Economic Security Act (“CARES”), Pub. L. No. 116-136 (2020),
134 Stat. 281, the Coronavirus Response and Relief Supplemental
Appropriations Act, 2021 (“CRRSA”), Pub. L. No. 116-260 (2020), 134
Stat. 1182, and the American Rescue Plan of 2021 (“ARP”), Pub. L. No.
117-2, 135 Stat. 4 (2021). These statutes provided funding to support
schools and students experiencing challenges stemming from the
pandemic, to support the “safe return to in-person instruction,” and to
account for “learning loss” from the pandemic. E.g., Pub. L. 117-2, 135
Stat. 4 (2021). Together, these statutes established the Education
Stabilization Fund (“ESF ”), composed of “relief funds that support State
and institutional efforts to prevent, prepare for, and respond to the
coronavirus impacts” on students. U.S. Department of Education,
Education Stabilization Fund, https://covid-relief-data.ed.gov/.
Three ESF programs are relevant here: the Elementary and
Secondary School Emergency Relief (“ESSER”) program; the Homeless
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Children and Youth (“HCY”) program; and the Emergency Assistance to
Non-Public Schools (“EANS”) program. See https://www.congress.gov/
crs-product/R48186. The Department, through its Office of Elementary
and Secondary Education (“OESE”), disburses these funds to state
educational agencies (“SEAs”) to provide local education agencies
(“LEAs”) with the emergency relief. See 34 C.F.R. Part 76.
Under ARP § 2001(a), approximately $122 billion was to remain
available to SEAs and LEAs through September 30, 2023. This means
that SEAs had until September 30, 2023, to obligate any funds pursuant
to the statutes. Under the General Education Provisions Act (“GEPA”),
however, the authorization of appropriations was “automatically
extended for one additional fiscal year,” 20 U.S.C. § 1226a(a); thus,
recipients of the ESSER, HCY, and EANS funds appropriated through
the ARP had until September 30, 2024, to obligate those funds.
Although SEAs were required to obligate funds by that date, they
were not required to liquidate or draw down funds for all projects by then;
under applicable regulations, funding recipients have 120 calendar days
“after the conclusion of the period of performance” to liquidate all
financial obligations incurred. 2 C.F.R. § 200.344(c). States were
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therefore required to incur obligations eligible for funding by September
30, 2024, and had until January 28, 2025, to liquidate the obligated ARP
funds.
The Department, “[w]hen justified,” “may approve extensions for
the recipient or subrecipient” of grant funds. 2 C.F.R. § 200.344(c). In
January 2024, the Department issued guidance stating that “upon
request,” a grantee might be “approved for up to an additional 14 months
beyond” the end of the 120-day liquidation period, “provided a timely and
valid obligation had been made.” https://www.ed.gov/sites/ed/files/
2024/01/Updated-Technical-FAQs-for-Liquidation-Extensions-1.9.24-v-
2-for-posting.pdf. According to the complaint, before March 28, 2025,
plaintiffs received extensions to liquidate EANS, ESSER, and/or HCY
funds, which, in most instances relevant here, extended the applicable
liquidation period to March 28, 2026. Compl. ¶¶ 87-157. Plaintiffs
allege they “were relying on the extension approvals permitting Plaintiffs
to draw upon the ES funding through the expiration of the extended
liquidation periods in executing agreed-upon plans to deliver services to
students and engage in building projects aimed at combating the long-
term effects of the pandemic.” Id. ¶ 158.
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B. Factual Background and Proceedings Below
1. The Department’s March 28 and April 3 Letters
On March 28, 2025, Secretary McMahon issued a letter to all state
recipients of ES funding, including plaintiffs, advising them that the
Department had modified the period to liquidate all obligations under the
ESF, to end on March 28, 2025, rather than the previously extended
deadline of March 28, 2026. March 28 Ltr. (ECF No. 1-1). 1 The letter
explained that states “were entitled to the full award only if [they]
liquidated all financial obligations within 120 days of the end of the
period of performance,” and that the “period to liquidate obligations for
these Grant Awards [had] expired.” Id. Secretary McMahon noted
that, because the pandemic had ended, extending deadlines for COVID-
related grants “is not consistent with the Department’s priorities and
thus not a worthwhile exercise of its discretion.” Id. But the letter also
stated that “even though the COVID pandemic and the liquidation period
under the applicable regulations [had] ended, the Department will
consider an extension to [a state’s] liquidation period on an individual
project-specific basis.” Id. To obtain an extension, the recipient was
1 All references to ECF are to the district court docket.
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required to submit a statement “explaining (1) how a particular project’s
extension is necessary to mitigate the effects of COVID on American
students’ education, and (2) why the Department should exercise its
discretion to grant [the] request.” Id.
On April 3, 2025, Hayley Sanon, the Principal Deputy Assistant
Secretary and Acting Assistant Secretary in OESE, issued a “Dear
Colleague Letter,” also stating that “even though the COVID pandemic
and the liquidation period under the applicable regulations [had] ended,
the Department will consider an extension to [a state’s] liquidation period
on an individual project-specific basis.” https://www.ed.gov/media/
document/dear-colleague-letter-follow-esf-funding-april-3-2025-
109779.pdf. The April 3 Letter identified information states needed to
submit to apply for project-specific extensions. Id. The Department
has since indicated that a state whose project-specific request is denied
may administratively appeal within 30 days. https://www.ed.gov/
grants-and-programs/formula-grants/response-formula-grants/covid-19-
emergency-relief-grants/education-stabilization-fund-liquidation-
extensions. As of June 5, 2025, 34 states and outlying areas have
submitted over 340 project-specific extension requests, and the
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Department had reviewed and issued determinations for 257 project-
specific requests. Id. Non-plaintiff states continue to make requests
through this process and the Department is adjudicating those requests.
Declaration of Ruth E. Ryder, dated May 29, 2025, ECF No. 101 (“Ryder
Decl.”) ¶ 10.
2. Plaintiffs’ First Motion for a Preliminary Injunction and
the District Court’s May 6 Order
Plaintiffs commenced this action on April 10, 2025, challenging the
March 28 Letter’s rescission of the prior extensions. Plaintiffs alleged
they received ES funding grants and also received extensions of the
liquidation deadline in connection with those grants. Compl. ¶¶ 47-157.
They further alleged that rescission of those extensions harmed state and
local programs designed to address the impact of the pandemic. Id.
¶¶ 162-91.
Plaintiffs moved for a preliminary injunction. On May 6, 2025, the
district court entered plaintiffs’ proposed order, preliminarily enjoining
the Department from “enforcing or implementing as against Plaintiffs
during the pendency of this litigation or until further order of the Court
the directives in the March 28, 2025 letter” which rescinded the prior
liquidation deadline extensions. ECF No. 77 (the “May 6 Order”) ¶ 1.
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The May 6 Order also enjoined the Department from “modifying ED’s
previously-approved periods for Plaintiffs to liquidate their obligations
under the ESF without providing notice to Plaintiffs at least fourteen (14)
days prior to the effective date of such modification.” Id. ¶ 2.
3. The May 11 Letter and Plaintiffs’ Second Motion for a
Preliminary Injunction
The Department complied with the May 6 Order and has continued
to process reimbursement requests submitted by plaintiffs (and by non-
plaintiff states on a project-specific basis). Ryder Decl. ¶¶ 9-10.
On May 11, 2025, the Department issued a new “Dear Colleague
Letter” to plaintiffs, informing them of the Department’s decision to
modify the period to liquidate obligations under the ESF program to
terminate on May 25, 2025, as permitted by paragraph 2 of the May 6
Order. ECF No. 84-1 (“May 11 Ltr.”). The May 11 Letter stated that
the amount of federal funds available under the ESF programs was
significantly larger than any prior ED grant program, and that the
Department’s prior extension of the relevant liquidation deadlines was
“unprecedented,” as “the Department had never previously offered such
a broad-based opportunity to all States to liquidate funds in a grant
program for years after the original obligation period set by Congress.”
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May 11 Ltr. 2.
Accordingly, the May 11 Letter explained that the Department is
“exercising its discretion [to terminate the prior extensions] under 2 CFR
§ 200.344(c).” Id. The letter indicated that, “[i]n the time since the
pandemic ended, States have increasingly tapped ESF funds in ways that
are less and less connected to direct academic services to students and
the ongoing educational harms caused by COVID.” Id. It explained
that the Department has “revisited [its] threadbare determination” that
prior extensions (which were “more than three times the length of the
default period”) were warranted and “now concludes that the continued
use of federal funds for COVID-related harms more than two years after
the pandemic ended is unwarranted.” Id. 3.
The Department thus concluded that “[t]he most effective way to
allay” its concerns regarding the propriety of prior extensions “is to run
a new, individualized process that considers the unique circumstances of
each grantee in light of their past performance, their intended use of the
funds, and the lengthy period they have already enjoyed for liquidating
the funds.” Id. The letter points to grantees’ “rapid[ ]” draw-down of
funds after having received extension requests, which “justifies a more
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individualized review process to determine how funds are being used and
whether an extension is appropriate.” Id.
In light of the Department’s discretion in extending liquidation
periods, and because states “have already enjoyed nearly twice” the time
provided by regulation “to liquidate their funds,” the May 11 Letter
stated that “no valid reliance interests exist” in the prior extensions. Id.
4. Nevertheless, the letter explained that the Department had “properly
accounted” for reliance interests by providing plaintiffs with 14 days to
liquidate already-incurred expenses, and provided instructions for
seeking project-specific extensions of the liquidation deadline. Id. 4-6.
In response, on May 14, 2025, plaintiffs moved for an ex parte
temporary restraining order (“TRO”) and preliminary injunction
enjoining the Department from implementing the May 11 Letter and
directing the Department to “process Plaintiff ’s pending payment
requests without delay.” ECF No. 85 (“Pls.’ Br.”) at 18. The district
court temporarily restrained the Department from “enforcing or
implementing as against Plaintiffs the directives in the May 11
Rescission Letter” pending a decision on the preliminary injunction.
ECF No. 95 at 2.
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4. The June 3 Hearing and Preliminary Injunction Order
On June 3, 2025, the district court held a hearing on plaintiffs’
motion. It concluded that despite plaintiffs’ concession that they seek to
require the Department to “process the payment requests without delay,”
June 3, 2025 Tr. 10, using a merely “ministerial” review process that “just
check[s] to make sure the receipts . . . matched up” with approved awards,
May 6, 2025 Tr. 7, and therefore would require payment, the Tucker Act
was not applicable to plaintiffs’ claims and the district court had
jurisdiction over the claims. The district court determined that
“plaintiffs are not seeking payments pursuant to any type of a contract,”
and that because “the rights and remedies are statutorily or
constitutionally based rather than contractually based, the Tucker Act
does not apply.” June 3 Tr. 13.
The district court then decided to “abide by [its] initial finding” that
plaintiffs have established a likelihood of success on the merits, “both
because the Department of Education’s determination to rescind the
deadlines and apply the new approval process is arbitrary and capricious
and because it is contrary to law.” Id. 23. The court determined
“plaintiffs will be irreparably harmed in the absence of preliminary relief
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because of the cessation of programs that are already in place,
infrastructure projects that are already in place, employment
determinations that have been made,” and “that the balance of equities
tip in favor of the plaintiffs” and an injunction is in the public interest.
Id. 23-24.
The court denied the Department’s request to stay the preliminary
injunction order pending any appeal, id. 32, and entered an order
enjoining the Department from “enforcing or implementing as against
Plaintiffs during the pendency of [the] litigation” the March 28 or May 11
letters. ECF No. 106 (“June 3 Order”), ¶¶ 1-2. The district court also
enjoined the Department from “attempting to modify ED’s previously
approved periods for Plaintiffs to liquidate their obligations under the
ESF without providing notice to Plaintiffs at least thirty (30) days prior
to the effective date of such modification” and directed the Department
to “process Plaintiffs’ outstanding and future requests for liquidation of
ESF without delay.” Id. ¶¶ 3-4.
ARGUMENT
An immediate administrative stay should be entered pending
resolution of this motion. The district court’s order may require the
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Department to immediately expend millions of dollars that it will be
unable to recover even if it prevails in the litigation; conversely, if the
order is stayed, plaintiffs will not be harmed as they may seek the
requested funds if their challenge is successful. An immediate stay will
thus allow the Court time to consider the Department’s motion while
preserving the status quo. This Court has entered such immediate
administrative stay orders in past cases. E.g., Hedges v. Obama, No. 12-
3176, dkt. entry 39 (2d Cir. Sept. 17, 2012).
A full stay pending appeal is also warranted. A preliminary
injunction is “an extraordinary and drastic remedy,” Munaf v. Geren, 553
U.S. 674, 689-90 (2008) (quotation marks omitted), whose function is “to
preserve the relative positions of the parties” pending the litigation’s
conclusion, Starbucks Corp. v. McKinney, 602 U.S. 339, 346 (2024)
(quotation marks omitted). Such extraordinary relief should be no
broader than necessary to accomplish this purpose. Madsen v. Women’s
Health Ctr., 512 U.S. 753, 765 (1994). In considering a stay pending
appeal, this Court considers “(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
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of the stay will substantially injure the other parties interested 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) (footnote and
quotation marks omitted). Each factor favors staying the district court’s
order.
A. The Government Is Likely to Prevail on the Merits
1. The District Court Lacks Jurisdiction
The district court lacks jurisdiction over plaintiffs’ claims for
payment of money pursuant to the grants, which can only be brought in
the Court of Federal Claims. Plaintiffs seek court-ordered payment of
federal funds under previously approved grant agreements. Plaintiffs
are thus not just objecting to the Department’s rescission of liquidation
extensions; they seek an order compelling payments and enjoining
withholding of funds.
The district court lacks jurisdiction over such claims. To sue a
federal agency, a plaintiff must show that its claim falls within the scope
of an unequivocally expressed statutory waiver of sovereign immunity.
FAA v. Cooper, 566 U.S. 284, 290 (2012). The APA’s waiver of sovereign
immunity applies only to claims against the United States seeking non-
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monetary relief, and does not apply if any other statute waives sovereign
immunity over the suit or impliedly forbids the relief sought. Match-E-
Be-Nash-She-Wish Band of Pottawatomi Indians v. Patchak, 567 U.S.
209, 215 (2012); California, 145 S. Ct. at 968.
Where a party claims the government is obligated to pay funds
under a contract or grant, the proper remedy is suit under the Tucker
Act, not the APA. The Tucker Act provides exclusive jurisdiction over
such claims to the Court of Federal Claims. 28 U.S.C. § 1491(a);
Presidential Gardens Assocs. v. HUD, 175 F.3d 132, 143 (2d Cir. 1999).
This prohibition extends to claims founded on grants, like those at issue
here, that are implemented through “contracts to set the terms of and
receive commitments from recipients.” Boaz Housing Auth. v. United
States, 994 F.3d 1359, 1368 (Fed. Cir. 2021).
Determining whether a particular action is “at its essence a
contract action” depends both on the source of the plaintiff’s claimed
rights and the relief sought. Up State Fed. Credit Union v. Walker, 198
F.3d 372, 375 (2d Cir. 1999) (quotation marks omitted). Where, as here,
a plaintiff seeks to enforce a contractual agreement to obtain payment of
money, the inquiry is straightforward. Accordingly, the Supreme Court
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recently stayed an order involving Department grants, concluding the
government was likely to succeed in showing the Tucker Act applies and
the district court “lacked jurisdiction to order the payment of money
under the APA.” California, 145 S. Ct. at 968.
That same reasoning applies here. The funds at issue here were
appropriated by Congress and awarded through grant programs. By
plaintiffs’ own characterization, these are funds “the states understand
they were already entitled to under the grants.” May 6 Tr. 6; accord Pl.
Br. 2 (SEAs “submitted grant applications . . . resulting in awards to
Plaintiffs totaling over $50 billion.”). Even in plaintiffs’ view, the
funding was distributed through grants; plaintiffs seek court
intervention to require disbursement of those funds. Such claims must
be brought in the Court of Federal Claims. E.g., Columbus Reg’l Hosp.
v. United States, 990 F.3d 1330, 1338 (Fed. Cir. 2021) (treating federal
grant agreements as contracts); San Juan City Coll. v. United States, 391
F.3d 1357, 1360-62 (Fed Cir. 2004) (same); Pennsylvania Dep’t of Pub.
Welfare v. United States, 48 Fed. Cl. 785, 790 (2001) (same).
The district court, however, without addressing California at all,
simply concluded that the Tucker Act did not apply because the
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“plaintiffs are not seeking payments pursuant to any type of contract.”
June 3 Tr. 10. But while plaintiffs style their claims as seeking to enjoin
the Department from implementing a new policy, what they are really
seeking is payment. They wish to require the Department to review
reimbursement requests subject only to a “ministerial, minimal review,”
so states “receiv[e] payment within the next business day.” May 6 Tr.
10; see id. 6-7 (plaintiffs describing pre-2025 process as “automated” and
resulting in one-day payment after “cursory” review). Plaintiffs describe
the Department’s conduct as trying “to block Plaintiffs’ access to their ES
funds.” Pls. Br. 18. What plaintiffs are asserting is that the
Department is withholding funds plaintiffs are entitled to under the
grant agreement, which amounts to a contract claim. Allowing
plaintiffs to ignore the Tucker Act by claiming they are seeking only to
enjoin the Department to revert back to its pre-March 28 procedures,
which in their view amounted to payment, would let them avoid Tucker
Act jurisdiction through artful pleading. See Ingersoll-Rand Co. v.
United States, 780 F.2d 74, 79 (D.C. Cir. 1985).
The district court likened this case to Bowen v. Massachusetts, 487
U.S. 879 (1988). June 3 Tr. 10. But “Bowen has no bearing on the
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unavailability of an injunction to enforce a contractual obligation to pay
money past due.” Great-West Life & Annuity Ins. Co. v. Knudson, 534
U.S. 204, 212 (2002). Bowen was an action seeking specific relief to
enforce a mandate of the Medicaid Act, “not an action for breach of
contract,” Coggeshall Dev. Corp. v. Diamond, 884 F.2d 1, 5 (1st Cir. 1989),
and courts “have consistently read Bowen to reinforce the jurisdictional
role of the Court of Federal Claims in resolving contract disputes outside
the complex Medicaid arena,” Brighton Village Associates v. United
States, 52 F.3d 1056, 1059 n.3 (Fed. Cir. 1995); see Sustainability Inst. v.
Trump, No. 25-1575, 2025 WL 1587100, at *2 (4th Cir. June 5, 2025)
(distinguishing Bowen and granting stay). For those reasons, the
Supreme Court distinguished Bowen in California, a case more directly
on point to this one. 145 S. Ct. at 968.
2. The Government Is Likely to Succeed in Showing the
Department’s May 11 Letter was Reasonable
The May 11 Letter (like the March 28 and April 3 letters) does not
constitute “final agency action,” and is thus not subject to APA review.
5 U.S.C. § 704; accord Dalton v. Specter, 511 U.S. 462, 469 (1994). This
finality requirement seeks to avoid “piecemeal review” that is
“inefficient” and might later prove to have been unnecessary. FTC v.
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Standard Oil Co., 449 U.S. 232, 242 (1980). Agency action is final only
when it “mark[s] the consummation of the agency’s decisionmaking
process” and is “one by which rights or obligations have been determined,
or from which legal consequences will flow.” U.S. Army Corps of
Engineers v. Hawkes Co., 578 U.S. 590, 597 (2016) (quotation marks
omitted).
The May 11 Letter’s “determination is merely that the extreme,
broad-based liquidation extensions previously granted are
inappropriate.” May 11 Ltr. 3. But it recognizes that ESF funds may
still serve their intended function, and accordingly outlines the process
for seeking project-specific extensions. Id. 5-6. Thus, the letter does
not determine whether any particular project’s liquidation deadline may
be extended. Indeed, the Department has granted, and continues to
grant, project-specific extensions for non-plaintiff states, and denials of
those requests may be administratively appealed. Ryder Decl. ¶ 10.
Given that process, and the “flexible” and “pragmatic” nature of the
finality inquiry, Abbott Laboratories v. Gardner, 387 U.S. 136, 149-50
(1967), the letter does not amount to final agency action.
The district court appears to have disagreed, having previously
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found a “decision was made to rescind all extensions,” “[t]here was no
equivocation in that determination, and it is operable,” and “presumably
if [states] were to put in a request for reimbursement today, outside of
the new process that has been set up for these funds, it would be rejected
out of hand.” May 6 Tr. 44. But that ignores the specific requests for
funding allowed by the May 11 letter. Plaintiffs may still request a
liquidation extension for a specific project, and if granted, draw down
those funds; if not granted, a state could appeal that decision, and only
then would the action be considered final.
Even if the May 11 Letter does constitute reviewable final agency
action, however, the Department’s actions are not “arbitrary and
capricious.” 5 U.S.C. § 706(2)(A). Judicial review under the APA is
“deferential,” and “a court may not substitute its own policy judgment for
that of the agency.” FCC v. Prometheus Radio Project, 592 U.S. 414, 423
(2021). “A court simply ensures that the agency has acted within a zone
of reasonableness and, in particular, has reasonably considered the
relevant issues and reasonably explained the decision.” Id.
The May 11 Letter survives APA review. The Department has
authority to grant extensions where it determines they are “justified.”
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2 C.F.R. § 200.344(c); see also May 11 Ltr. 3. The May 11 Letter
adequately explains why, in its exercise of that discretion and subject to
a 14-day notice period, it determined to rescind the prior extensions. See
FDA v. Wages & White Lion Investments, 145 S. Ct. 898, 917 (2025)
(“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” (quotation
marks and alterations omitted)).
Contrary to plaintiffs’ previous arguments, the May 11 Letter does
not justify the Department’s change in position merely on the basis that
the pandemic has ended. Contra Pls.’ Br. 10. Rather, the letter
explains that the relevant appropriations statutes “generally require
ESF funds to be used to prepare, prevent, and respond to coronavirus,”
but that “[i]n the time since the pandemic ended, States have
increasingly tapped ESF funds in ways that are less and less connected
to direct academic services to students and the ongoing educational
harms caused by COVID.” May 11 Ltr. 3 (quotation marks omitted).
Project-specific consideration is therefore meant to ensure that ongoing
projects are consistent with the objectives of the appropriations statutes.
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That certain projects identified by the May 11 Letter might arguably be
permitted under those statutes, see Pls.’ Br. 10-11, does not render case-
by-case review of requests for extensions of the liquidation period
arbitrary and capricious.
The Department also adequately explained its basis for taking a
second look at prior extension approvals. Contra Pls.’ Br. 13-14. In the
May 11 Letter, the Department explains that “the original extension
letters included no explanation for the extensions, and the Department
has serious questions about the verification process that resulted in the
approval of effectively blanket extensions.” May 11 Ltr. 3. And the
letter explains that “the Department had never previously offered such a
broad-based opportunity to all States to liquidate funds in a grant
program for years after the original obligation period set by Congress,”
May 11 Ltr. 2, and notes that the extension for the ARP Act “was more
than three times the length of the default period,” id. 3.
The Department also reasonably grounded the exercise of its
discretion in the recent pace of states’ draw-down requests. See Ryder
Decl. ¶¶ 3-6 & Ex. A. Nor does the May 11 Letter ignore reliance
interests, which the May 11 Letter addressed by providing both a “14-day
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period . . . to seek reimbursement for authorized costs” and a process for
seeking individualized extensions. May 11 Ltr. 4-6. Effectively, under
plaintiffs’ view of their reliance interests, the Department would never
be able to modify prior extensions of the liquidation period. That is
inconsistent with the discretion provided to the Department by
regulation.
Lastly, plaintiffs have not established a likelihood of success on
their claim that the May 11 Letter is contrary to law. The relevant
statutes provided a deadline for obligation of these appropriations:
September 30, 2024. ARP § 2001(a); 20 U.S.C. § 1226a. The applicable
regulation provided an additional 120 days to liquidate all financial
obligations and gave the Department discretion to extend that deadline
“[w]hen justified.” 2 C.F.R. § 200.344(c). The May 11 Letter continues
to permit states to seek further extensions on a project-specific basis.
May 11 Ltr. 5-6. There is nothing in the statutes that precludes the
Department from rescinding a prior extension and evaluating further
extension requests on a project-specific basis.
The district court reasoned that the purpose “of the acts that
provided the funding was so that there can be funding for these programs
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going forward” after the pandemic ended “to account for the loss of
educational attainment that schoolchildren had suffered as a result of
remote learning and other difficulties attendant to the COVID-19
pandemic.” May 6 Tr. 45. The district court thus concluded that
“Congress intended that these funds remain available” and the
Department must “be liberal and flexible in making sure that these
programs continued to be funded” and “not impose unreasonable
obstacles in the way of state agencies looking to continue to fund those
programs.” Id. But that is incorrect. Nothing in the statutory text
supports that reading. And pursuant to 2 C.F.R. § 200.344(c), it is the
Department that has discretion to determine whether a liquidation
extension is “justified” after the statutorily mandated time has elapsed.
The district court incorrectly ignored the Department’s role to use
discretion to determine when liquidation extensions are “justified.”
3. The Balance of Equities Warrants a Stay
The equitable factors weigh decisively in the Department’s favor.
A stay is warranted because the district court’s injunction will cause
millions of dollars to flow from the public fisc. As in California, the
government will be “unlikely to recover the grant funds once they are
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disbursed.” 145 S. Ct. at 969. No state has “promised to return
withdrawn funds” if the Department prevails in the litigation. Id. If
the preliminary injunction is stayed, the Department will continue to
process requests for payment submitted up through May 25, 2025,
pursuant to the pre-March 28 process.
But the pre-March 28 system of processing requests, as ordered by
the district court and as described by plaintiff, amounts to the
Department ministerially disbursing funds in response to liquidation
requests from plaintiffs. And since May 6, plaintiffs have been drawing
down huge sums at higher rates than before the district court entered the
first preliminary injunction order. Ryder Decl. ¶¶ 4-6. If required to
proceed in this manner, the Department will be left with no meaningful
recourse if it prevails. Accordingly, the government requests a stay
pending appeal, as well as an administrative stay until the Court can
resolve this motion.
A stay will not harm plaintiffs. The Department will retain the
money relating to requests submitted after May 25, 2025, and plaintiffs
can proceed with project-specific extension requests; or if plaintiffs
prevail in their challenge, they may receive money to use for the
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requested projects. Moreover, the gravamen of plaintiffs’ complaint is
monetary, which is quintessentially reparable. Borey v. Nat’l Union
Fire Ins. Co., 934 F.2d 30, 34 (2d Cir. 1991). If plaintiffs prevail, their
requests for liquidation extension requests will be processed under the
pre-March 28 procedure and the funds would therefore be disbursed to
the extent required by law.
CONCLUSION
The Court should stay the district court’s preliminary injunction
entered on June 3, 2025, pending final resolution of the government’s
appeal, and should grant an immediate administrative stay pending its
consideration of this motion.
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Dated: New York, New York Respectfully submitted,
June 6, 2025
JAY CLAYTON
United States Attorney for the
Southern District of New York
Attorney for Defendants-Appellants.
By: /s/ Dana Walsh Kumar
DANA WALSH KUMAR
CHARLES S. JACOB
BENJAMIN H. TORRANCE
Assistant United States Attorneys
86 Chambers Street, Third Floor
New York, NY 10007
Telephone: (212) 637-2741; 2725
Email: dana.walsh.kumar@usdoj.gov
charles.jacob@usdoj.gov
Certificate of Compliance
Pursuant to Federal Rule of Appellate Procedure 32(g), the above-
named counsel hereby certifies that this memorandum complies with
the type-volume limitation of the Federal Rules of Appellate Procedure.
As measured by the word processing system used to prepare it, this
memorandum contains 5200 words.
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