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1 UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
2 ------------------------------x
3 STATE OF NEW YORK, et al.,
4 Plaintiffs,
5 v. 25 Civ. 2990 (ER)
6 UNITED STATES DEPARTMENT OF
EDUCATION, et al.,
7
Defendants. Oral Argument
8 ------------------------------x
New York, N.Y.
9 May 6, 2025
10:00 a.m.
10
Before:
11
HON. EDGARDO RAMOS,
12
District Judge
13
APPEARANCES
14
NEW YORK STATE OFFICE OF THE ATTORNEY GENERAL
15 Attorneys for Plaintiffs
BY: ANDREW S. AMER, ESQ.
16 STEPHEN C. THOMPSON, ESQ.
Assistant Attorneys General
17
UNITED STATES ATTORNEY'S OFFICE SOUTHERN DISTRICT OF NEW YORK
18 Attorneys for Defendants
BY: CHRISTOPHER K. CONNOLLY, ESQ.
19 DANA W. KUMAR, ESQ.
Assistant United States Attorneys
20
21
22
23
24
25
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1 (Case called)
2 THE DEPUTY CLERK: Counsel, please state your names
3 for the record.
4 MR. AMER: Good morning, your Honor. Andrew Amer with
5 the New York Attorney General's Office. I'll be presenting the
6 argument for the plaintiffs today.
7 THE COURT: Good morning.
8 MR. AMER: Good morning.
9 MR. THOMPSON: Good morning, your Honor. Stephen
10 Thompson, also from the New York State Office of the Attorney
11 General.
12 MR. CONNOLLY: Good morning, your Honor. Christopher
13 Connolly from the US Attorney's Office on behalf of defendants.
14 MR. KUMAR: Good morning, your Honor. Dana Kumar,
15 also from the U.S. Attorney's Office of the Southern District
16 of New York, on behalf of the defendants.
17 THE COURT: Good morning to you all. This matter is
18 on for a hearing on the request for a preliminary injunction
19 brought on behalf of the State of New York, 15 other states,
20 and the District of Columbia.
21 Mr. Amer, I'll hear you.
22 MR. AMER: Thank you, your Honor.
23 Again, for the record, Andrew Amer with the New York
24 Attorney General's Office.
25 On March 28th of this year, your Honor, the Department
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1 of Education and Secretary McMahon pulled the rug out from
2 under the plaintiff-states when they cut short by a full year
3 the period for the states to draw down on nearly $1 billion of
4 education-stabilization funding that Congress had appropriated
5 and that the Education Department had already awarded to them.
6 And without even a minute's advance notice, the defendants
7 declared that the states' window to liquidate those funds had
8 already expired, a full year before the extensions had
9 permitted them to draw down on those funds.
10 The Department's actions have upended ongoing programs
11 and projects intended to address the devastating impact of
12 COVID-19 on K-12 students and teachers. Our motion asks the
13 Court to preliminarily enjoin this agency action in order to
14 maintain status quo pending resolution of this case.
15 I'd like to first address irreparable harm if that's
16 okay with the Court, but I did want to just briefly review how
17 we got to where we are.
18 THE COURT: Very well.
19 MR. AMER: A few years ago, your Honor, the states
20 submitted detailed grant applications for funding under COVID
21 appropriation laws, which the Department approved, confirming
22 that the projects were eligible under the appropriating
23 legislation. The Department awarded billions of dollars in
24 funding under this appropriation statute. For example, just to
25 name two of the appropriations, the two that received the
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1 largest amounts, California received an appropriation of——an
2 award of $15 billion, New York received an award of $9 billion.
3 The states then submitted extension requests, providing
4 detailed explanations for why they needed more time to draw
5 down on these funds. As an example of these extension
6 requests, the Court can look at Exhibit 4 to the New York
7 declaration, which is Docket No. 26. It's quite detailed.
8 The Department granted the states' extension requests
9 based on specifically finding that the states had provided
10 sufficient justification and documentation and extended the
11 liquidation period for an additional 14 months, through March
12 of 2026. Now the state education agencies relied on both the
13 initial grant awards and the extension approvals through March
14 of 2026 in planning their budgets, in developing and launching
15 programs and projects using the funding, and in entering into
16 contracts with vendors. Programs and projects were ongoing
17 when the extension approvals were rescinded on March 28th.
18 THE COURT: Can I ask just a couple of questions on
19 that.
20 MR. AMER: Certainly.
21 THE COURT: First of all, I don't believe that this is
22 an issue in this case, but were there any restrictions on how
23 the funds could be used by the local and state school
24 authorities?
25 MR. AMER: There were, your Honor, because the monies
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1 were appropriated for specific types of programs and projects,
2 and in seeking the grants in the original applications, the
3 state education agencies had to describe the projects and
4 programs that were going to be funded by this money. And so
5 when the state education agencies seek reimbursement for funds
6 during their window, they need to show that the projects are
7 the same ones for which the funds were granted. In other
8 words, it has to match; the reimbursement request has to match
9 up with what the grants were awarded for in the first instance.
10 THE COURT: So you have to provide receipts, as it
11 were.
12 MR. AMER: Yes. Effectively, yes.
13 THE COURT: And then some of these projects were for
14 infrastructure projects, correct?
15 MR. AMER: That's correct. In the appropriating
16 legislation, there was money that was made available for
17 improving facilities——for example, ventilation. It was all
18 intended to address the need to prevent the spread of virus,
19 not only for COVID-19 but in the future, for whatever other
20 viruses might happen in the future.
21 THE COURT: And as I understand it, the monies for
22 which you received an extension, I guess you received an
23 extension to draw those monies down, correct?
24 MR. AMER: Correct. The initial 120-day period in the
25 statute ran the end of January of 2025, I believe, and Congress
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1 allowed extensions for another 14 months, and when those
2 extension requests were made, they were quite detailed. Like I
3 said, if you look at Exhibit 4 to the New York declaration,
4 you'll see it's very detailed. And there was a specific
5 finding by the Education Department when granting those
6 extension requests that sufficient justification and
7 documentation had been provided.
8 THE COURT: And the monies that we're talking about
9 for which you requested an extension to liquidate, were those,
10 in what I understand government parlance to be, appropriated
11 funds?
12 MR. AMER: They were not only appropriated funds, they
13 were funds that had already been awarded in the grant award
14 notifications, so they were monies that the states understood
15 they were already entitled to under the grants. They just
16 hadn't tapped them yet, they hadn't liquidated them yet,
17 because their projects were ongoing and this is a
18 reimbursement-type process.
19 THE COURT: And again, it doesn't appear to be part of
20 the dispute here, but to your knowledge, did the federal
21 government refuse to reimburse any projects that were submitted
22 by the various states?
23 MR. AMER: I'm not aware that that happened, and I
24 would say, your Honor, in fact, prior to February of 2025, the
25 reimbursement process was automated, and there is evidence in
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1 the record that under that procedure, the states typically
2 received reimbursement the next business day following the
3 request. So this was a very cursory ministerial review of
4 payment requests that just checked to make sure that the
5 receipts——if we'll call them that——matched up with what the
6 awards were originally approved for.
7 THE COURT: Okay. So there was no controversy or
8 dispute concerning the nature of the projects that the various
9 school authorities engaged in and sought reimbursement for; is
10 that right?
11 MR. AMER: That's correct. I mean, to the extent that
12 states were seeking monies for projects that were not eligible,
13 they wouldn't have been given those funds in the grant award.
14 THE COURT: Okay.
15 MR. AMER: So in addressing irreparable harm, I wanted
16 to approach this by describing the four buckets of irreparable
17 harm as we see it, established by the declarations in the
18 record.
19 First, a portion of the grants go directly to the
20 state education agencies to cover the cost of administering the
21 grant programs. We're talking about, again, billions of
22 dollars. It takes a fair amount of overhead to administer the
23 programs for the local education agencies and the nonpublic
24 schools that are eligible for this funding. And most notably,
25 this goes to pay staff to administer these programs. Each
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1 state's administrative apparatus is being adversely impacted by
2 the agency action, and in fact some administrative arrangements
3 are already being dismantled by the states, as evidenced by the
4 declarations, because the funding is now gone as a result of
5 the Department's actions, and that includes laying off staff
6 and furloughing staff.
7 THE COURT: And has that already happened?
8 MR. AMER: It has. And I would refer the Court to the
9 Illinois declaration at paragraph 25——that's Docket No. 18——the
10 New York declaration at 55-57, paragraphs 55-57, and that's
11 Docket No. 26. It's happened already, and it's continuing to
12 happen.
13 Second, programs and services to compensate for lost
14 instruction time to students are being halted with no ability
15 of the states to pick up the tab to keep these programs
16 running. This has real adverse consequences for students and
17 their ability to catch up for all the lost time due to the
18 pandemic. It's important, your Honor, to understand that due
19 to budget timing, the states are simply not in a position to
20 consider now whether and how the states and their legislatures
21 might be able to appropriate funds to continue these programs
22 because the states never needed to pursue that option, given
23 that the federal government stepped up to the plate and,
24 through the American Rescue Plan, made these funds available.
25 So this is a lost opportunity for the states that translates
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1 into irreparable harm. And unfortunately, it's just too late
2 for the states to step in and consider being able to continue
3 these vitally important programs for students.
4 Third, vendors, local education agencies, and
5 nonpublic schools have already incurred expenses that they were
6 expecting would be reimbursed from the grant monies, but they
7 are now left holding the bag because the funding is no longer
8 available. Now this exposes the states to potential lawsuits,
9 which of course have attendant defense costs. And that's in
10 the record, the New York declaration, paragraph 61. Again,
11 it's Docket No. 26.
12 THE COURT: What is a nonpublic school?
13 MR. AMER: Nonpublic schools are religious schools and
14 private schools.
15 THE COURT: Okay. And the various acts don't make any
16 distinctions between those entities.
17 MR. AMER: Actually, there are three different
18 programs that are involved here. It will test my memory of the
19 acronyms, but there are the ESSER funds, which is public
20 schools; there's the Homeless Children and Youth; and then
21 there's the EANS program, and that is for the nonpublic
22 schools, the final one.
23 Fourth, your Honor, the vendors are refusing to
24 perform services under existing contracts. This includes
25 contractors who are just walking off construction projects,
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1 leaving schools with areas that are unusable and unsafe. In
2 fact, the New York declaration at paragraphs 47-49 attests to
3 the fact that there are some facilities that now have gaping
4 holes in the walls and the ceiling because ventilation upgrade
5 projects have been halted since the contractors have walked off
6 the site in light of the March 28th letter rescinding the
7 extension approvals. This clearly adversely affects the
8 states' ability to provide for the basic educational needs of
9 their students.
10 Now the defendants have basically one response to all
11 of this harm. Their response is that in fact there is no
12 irreparable harm here because the states can seek
13 project-specific extension requests. So let me be clear. It's
14 our position that there simply is no equivalence between the
15 right that the states had to submit timely payment requests
16 prior to 5 p.m. on March 28th, which were subject to this
17 cursory ministerial review, and their ability now under this
18 new process to ask for project-specific extensions. Before the
19 rescission letter, state education agencies had to submit a
20 fairly——had to submit these payment requests, and as I
21 mentioned, they were subject to pretty ministerial, minimal
22 review, and in fact, states were receiving payment within the
23 next business day when it was done on an automated process.
24 Post-rescission letter, this new process that the defendants
25 contend is just as good clearly is not. The states are
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1 stripped of their ability to submit payment requests that are
2 viewed as timely, and instead they now must submit extension
3 requests all over again. They're starting from square one.
4 And they have to do so on a project-specific basis, which was
5 never the case in terms of how they had to request the prior
6 extensions. Each project must be——each project-specific
7 request must be supported by detailed information, as listed in
8 the Department's April 3rd letter, and it has to include a
9 justification as to why the Department should grant the
10 extension.
11 THE COURT: But hadn't that already been done? In
12 order to qualify for payment in the first instance, didn't you
13 have to submit information concerning the projects that you
14 wanted to undertake and why they were within the purview of the
15 funding statutes? Wasn't that already done?
16 MR. AMER: Absolutely, your Honor. In fact, what was
17 done prior, if you include the original application for the
18 grant, was even more extensive. But yes, all of that. It
19 simply ignores the history here of the Department having
20 already approved the grants initially and then approving the
21 prior extension requests, and those extension requests were
22 granted based on specific findings by the Department that each
23 state had provided a sufficient justification and
24 documentation.
25 THE COURT: Can you give me an idea of how many
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1 different projects, say, California and New York were running
2 that were subject to these programs?
3 MR. AMER: We have in the record spreadsheets, and I
4 can get the number for you, but if you look at Exhibit 4 to the
5 New York declaration, you'll see all of the projects that are
6 the subject of the extension requests. It's dozens for both of
7 those states, because they're large states, obviously. And the
8 amount of money that was remaining for this funding as of
9 March 28th is tens of millions for some states and more than a
10 hundred million for other states. So New York, for example,
11 was about 134 million, I think. A number of states had eight-
12 and nine-figure sums left on their funding to draw down on. So
13 still a significant amount of money we're talking about here,
14 your Honor, as of the date of the rescission letter.
15 THE COURT: And was it the intent of the various
16 agencies to ultimately draw down all of those funds or were
17 there going to be some left over?
18 MR. AMER: I believe it was the intent to use all the
19 funds, but, you know, it's possible that come March of 2026,
20 they might not have tapped all of the funding, but I think it
21 was certainly the intent to do so.
22 The new process also runs contrary to the urging of
23 the Senate Committee on Appropriations. That committee had
24 urged the Department to adopt a procedure for extension
25 requests that would impose minimal burden on the states, and in
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1 fact, that was the case for the prior extension request round,
2 if you will. There's simply no indication in the record, your
3 Honor, of how long this new process——which is a six-step
4 process of review, including two different levels of management
5 within the Department that's outlined in the April 3
6 letter——simply no indication in the record of how long that
7 review would take, nor do we know how likely it is that any
8 project-specific extension will be approved.
9 In short, your Honor, the new process gives the states
10 no assurance or comfort that they will be able to liquidate
11 anywhere close to the funding that was awarded and that
12 remained unliquidated, and they will have no clarity on that
13 issue any time soon, given this six-step process that the
14 Department purports they will undertake.
15 I would also mention, your Honor, that both the
16 administration and Secretary McMahon have mentioned any number
17 of times in public that the ultimate goal here is to completely
18 dismantle the Department of Education. That's something the
19 Court can take judicial notice of. It's been reported in the
20 press widely. And they make no——they don't dispute that that's
21 the ultimate goal. That does not bode well, your Honor, for
22 the prospect of this new process and its review happening in a
23 prompt and timely manner. We submit, your Honor, that what is
24 really going on here is that the Department is trying to just
25 wipe the slate clean and get a do-over, not just on the prior
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1 decision to grant the extensions but also to award the grants
2 in the first instance. That is clear from the Department's
3 April 3 letter, which requires states seeking project-specific
4 extension under this new process to explain how a particular
5 project is necessary to mitigate the effects of COVID rather
6 than just focusing on why they need more time.
7 I did want to mention, by the way, just to circle
8 back, New York had approximately 85 projects underway for those
9 three funding programs that I mentioned.
10 I want to move next to the likelihood of success
11 prong, your Honor, and address first the threshold question
12 that defendants have raised of whether this is a final agency
13 action subject to review under the APA. This case focuses on
14 the Department's two determinations conveyed in the March 28th
15 letter——the first being the rescission of the prior approvals,
16 and the second, the determination to declare that the
17 liquidation periods already expired as of 5 p.m. on March 28th.
18 We submit there is absolutely nothing tentative about those
19 determinations. They are not subject to any further agency
20 action. And those two determinations have immediate legal
21 consequences for the states. The states no longer have the
22 right to submit timely payment requests to liquidate their
23 grant funds that would be subject to a cursory ministerial
24 review. Now the defendants conflate these two determinations
25 with some future decision that the Department may reach about
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1 whether to grant extensions on a project-specific basis, but
2 that's an entirely different agency action and it's simply not
3 relevant to the question of whether the two determinations
4 encompassed in the March 28th letter are now final. But I
5 would add, your Honor, that even if the Court considers this
6 new process of seeking project-specific extensions to be some
7 sort of reconsideration of the March 28th determinations, the
8 APA expressly forecloses their argument that it's not final
9 under Section 704 because that section says that even if
10 there's reconsideration, it doesn't make agency action nonfinal
11 unless the agency action is inoperable pending the outcome of
12 the reconsideration. And here, they say it's effective
13 immediately, not that it's inoperable.
14 So for those reasons, your Honor——
15 THE COURT: In other words, if the Department of
16 Education were to say, we are rescinding the grants that were
17 made in two weeks, for example——
18 MR. AMER: I think it would have to be more than that.
19 I think, under Section 704, they would have to say, we are
20 going to rescind subject to this process of a project-specific
21 extension, and our rescission remains inoperable pending our
22 consideration and decision on any project-specific extension
23 you want to make.
24 THE COURT: So status quo continues, and you can
25 submit the requests for reimbursement in the meantime.
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1 MR. AMER: Exactly right, your Honor, and it makes
2 sense that Section 704 says that because it by design means
3 that there's no impact of the agency action until this
4 reconsideration process plays out and there's a definitive
5 determination.
6 Another threshold issue that defendants have raised is
7 prudential ripeness. For the same reason that the agency
8 action is final, we believe that it's also fit for review by
9 this Court because there's nothing more that the agency need do
10 in terms of its consideration, and absent the Court's review,
11 the states will endure the hardship of the irreparable harm
12 that I've already discussed. And so those are the two prongs
13 of the prudential ripeness test that are clearly met here.
14 I wanted to turn next to the substantive claims under
15 our likelihood of success prong and just talk about the two APA
16 claims, the first being arbitrary and capricious. Your Honor,
17 this is a classic case of an agency changing position without
18 complying with the change in position doctrine that requires a
19 reasoned explanation and accounting for the significant
20 reliance interest of the plaintiff. And I should mention that
21 the Supreme Court has very recently discussed this change in
22 position doctrine in the FDA v. Wages & White Lion Invs. case
23 that was decided April 2nd of this year; that's at 2025 WL
24 978101. The March 28th letter provides the only explanation
25 from the Department for its about-face on the extension
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1 approvals, and their explanation boils down to saying that
2 because the pandemic is over, there's no extra time warranted
3 for the states to have in order to liquidate hundreds of
4 millions of dollars that remain in funding. This makes no
5 sense, for two reasons, your Honor.
6 First, the end of the pandemic is not a new
7 development. The federal government declared the pandemic to
8 be over in May of 2023. That's when the health emergency was
9 declared at an end. That is long before the Department granted
10 the extensions that it is now rescinding, and some of those
11 extensions were granted as recently as January and February of
12 this year, so 2025. So there's nothing new here that would
13 justify and provide a reasoned explanation in terms of the
14 timing of the health emergency being over.
15 Second, the state education agencies, as the Court has
16 already noted, previously provided, and the Department already
17 accepted as warranted, the explanations given by the states in
18 support of the prior extension requests for why more time was
19 needed to put these funds to use. And I'll just give you two
20 examples.
21 The states previously explained that they needed more
22 time to implement and continue programs like after-school
23 classes and summer school and extended school year programs to
24 make up for lost instruction time. The fact that the pandemic
25 ended in 2023 didn't obviate the need for this critical
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1 intervention to help the students catch up from the pandemic
2 and the lost instruction time.
3 Another example is that the states already explained
4 that supply chain disruptions due to the pandemic require them
5 to take additional time to complete construction projects, like
6 HVAC upgrades.
7 So those explanations have already been provided and
8 have already been accepted.
9 The defendants ignore the states' reliance on the
10 extensions, the second part of the change in position test.
11 It's clear from the declarations that state education
12 authorities——agencies and local education agencies factored
13 into their budgets program planning and contracting with
14 vendors their ability to continue to liquidate the grant funds
15 through March of 2026, each of these entities incurring costs
16 they expected would be reimbursed through timely payment
17 requests, subject, again, to a cursory ministerial review by
18 the Department. So in the absence of a reasoned explanation
19 and no accounting for the substantial reliance interests, it's
20 clear that this action by the defendants violates the change in
21 position doctrine.
22 The second substantive claim under the APA is contrary
23 to law. I'll just briefly mention the two points there that we
24 think indicate the states are highly likely to succeed on that
25 claim.
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1 First, Congress clearly intended the funds to remain
2 available after the end of the health emergency. Congress
3 specifically did not tie the funds to the continuing existence
4 of the health emergency, as it did with other COVID funding.
5 And we cite to a number of statutes on page 24 of our opening
6 brief that illustrate Congress tying the funds to the health
7 emergency. So Congress knew how to do it, and didn't do it
8 here with respect to the American Rescue Plan funds at issue.
9 THE COURT: As I understand it, you say in your papers
10 at various points that Congress encouraged the Department of
11 Education to be flexible and to allow these extensions; is that
12 right?
13 MR. AMER: Yes, that's the Senate Committee on
14 Appropriations Report that urged the Department to be liberal
15 with granting extensions and to require minimal burden in terms
16 of documentation. And that's exactly what happened in terms of
17 the prior round of extensions.
18 But more to the point, Congress, in enacting the
19 legislation that appropriated these funds, didn't specifically
20 tie the availability of the funds to the continuing existence
21 of the pandemic, like they did in these other statutes that we
22 cite to on page 24 of our opening brief. And additionally,
23 Congress did not claw back the funds once the pandemic was
24 declared over, which is something else that Congress did in
25 other instances. For example, we note in the Fiscal
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1 Responsibility Act of 2023, Congress pulled back funding that
2 had not been tapped. So by specifying in the American Rescue
3 Plan statute that the funds are to address long-term effects of
4 the pandemic, and by not tying the funds to the end of the
5 health emergency, and by not clawing the money back as it did
6 in other instances, it's clear we think that Congress obviously
7 intended the funds to remain available after the government
8 declared the health emergency to be over, which shows that the
9 Department's actions here rescinding the funding and declaring
10 the window to be already closed is contrary to law.
11 The final two factors of the preliminary injunction
12 test, your Honor, are public interest and balance of the
13 equities, and I'll just briefly go over those. As your Honor
14 is aware, those two factors merge here, because the government
15 is a party. We submit that because of the strong showing that
16 the states have made on irreparable harm and likelihood of
17 success, that's sufficient to establish that an injunction
18 would in fact be in the public interest. We think, moreover,
19 there is a strong public interest in preventing the Department
20 from violating the APA by abruptly rescinding the prior
21 extension approvals, which afforded the states, until March of
22 2026——so another additional year——to draw down on this critical
23 funding intended to combat the devastating long-term effects of
24 the pandemic on students and educators. And finally,
25 defendants, for their part, we submit, have not articulated any
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1 harm that they will suffer in maintaining the status quo here,
2 which, by the way, would simply require the Department to honor
3 the extension approvals it had previously determined were
4 justified based on the showing that each state has already made
5 when requesting the extensions in the first place.
6 THE COURT: If I were to grant the preliminary
7 injunction, would I have to find likelihood of success both on
8 arbitrary and capriciousness and contrariness to law?
9 MR. AMER: No, you don't, your Honor. Just any one of
10 the claims would support entry of a preliminary injunction
11 under the four-part test. So as long as the Court was
12 satisfied that at least one of the claims had a likelihood of
13 success, that would satisfy that prong.
14 In conclusion, your Honor, the states ask the Court to
15 preliminarily enjoin the defendants from implementing and
16 enforcing the March 28th rescission letter as against the
17 plaintiff-states, so that their education agencies can
18 continue, during the course of this case, to submit timely
19 payment requests to liquidate their funding just as they had
20 been doing prior to March 28th. And as the Court will see in
21 our proposed preliminary injunction order, we also ask that the
22 Court require the defendants to provide two weeks' notice to
23 both the Court and to the plaintiffs if they intend to modify
24 the states' liquidation periods on any other grounds other than
25 those that are set forth in the rescission letter.
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1 THE COURT: The Department of Education has already
2 rescinded the grant so you cannot today submit a reimbursement
3 request in the manner that you could prior to March 28. You're
4 asking me to enter a preliminary injunction that allows you to
5 do that. Why, therefore, isn't that a mandatory injunction as
6 opposed to a prohibitory injunction?
7 MR. AMER: So we think it is a prohibitory injunction.
8 It's simply asking the Court to maintain the status quo as it
9 existed before the rescission letter was issued. I think the
10 defendants' position is that it's a mandatory injunction and
11 that it requires a heightened showing. We absolutely disagree
12 with that. This is a classic example of a prohibitory
13 injunction. It merely seeks to turn the clock back to
14 5:02 p.m. Eastern time March 28th and have the parties proceed
15 just as they had been proceeding the minute before the
16 challenged action took effect.
17 THE COURT: Thank you.
18 MR. AMER: Thank you, your Honor.
19 THE COURT: Mr. Connolly?
20 MR. CONNOLLY: Thank you, your Honor. Good morning
21 again. Christopher Connolly from the U.S. Attorney's Office on
22 behalf of the defendants.
23 At the same time that the Department of Education
24 rescinded its prior extension of the liquidation deadline, it
25 invited states to seek project-specific extensions of the
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1 liquidation period. It provided further information about that
2 process just a few days later in its April 3rd letter. The
3 grant money at issue here is still available to states. To
4 date, the Department has received over 200 applications from
5 around 30 states, including at least one of the
6 plaintiff-states here. The Department has already approved
7 extensions of the liquidation periods for certain projects.
8 And where it's declined to approve extensions, states are able
9 to appeal that declination administratively.
10 THE COURT: But the prior program ended, right? It
11 was rescinded by virtue of the secretary's determination.
12 MR. CONNOLLY: The prior program didn't end. The
13 prior extension deadlines that had been extended until March
14 2026 were ended with the provision that states could then seek
15 project-specific extensions, which many of them have done and
16 some of them have already received.
17 THE COURT: And will they receive approval of those
18 requests if they were to submit an application? Is there a
19 guarantee that they will receive approval for those programs if
20 they were to submit an application in accordance with the
21 secretary's letter?
22 MR. CONNOLLY: So what happens is, states seek an
23 extension, a project-specific extension; they describe the
24 project that they're seeking the extension for; the Department
25 reviews that; and where the Department grants that extension of
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1 the liquidation deadline, then the state proceeds with the
2 project that it had described, and then will come back to seek
3 reimbursement for the funds expended as part of that project,
4 and will presumably have to demonstrate through the receipts
5 and stuff that, you know, the work that they did was related to
6 the project that they'd sought the extension for; and then they
7 would receive the funds.
8 THE COURT: So the answer to my question is no,
9 there's no guarantee; that if they were to make application
10 anew with respect to projects that had previously been
11 approved, there's a possibility that they will not receive
12 reimbursements for those monies expended.
13 MR. CONNOLLY: As I understand it, that would only be
14 in the situation where the work that they undertook was not
15 related to the project that they had explained. The
16 expectation is that when you get this extension of the
17 liquidation period, a project-specific extension, the states
18 have described the specific project that they're going to be
19 undertaking, that they will then be able to draw down those
20 funds after they've engaged in the project. So I think the
21 answer to your Honor would be yes.
22 THE COURT: So then there was no rescission?
23 MR. CONNOLLY: There was a rescission of the March 28,
24 2026, extension, yes, subject to the ability of states to seek
25 project-specific extensions, which many of them are in the
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1 process of doing, and which the Department is in the process of
2 reviewing.
3 THE COURT: But if these projects were already
4 preapproved or approved prior to the rescission of March 28th,
5 why would they have to reapply?
6 MR. CONNOLLY: Your Honor, as I understand it, when
7 the states initially sought these funds, they would describe,
8 perhaps in more general terms, the types of projects that they
9 were intending to undertake in connection with these
10 appropriations. What the Department is asking states to do
11 here is, to the extent that they require additional time to
12 draw down some of those funds, to identify and describe the
13 specific projects that remain at issue. And then the
14 Department is considering those on a project-specific basis,
15 and where it determines it's appropriate, it is extending those
16 liquidation periods for those projects.
17 THE COURT: So again, I believe I asked Mr. Amer
18 whether the states had undergone that process in the first
19 instance, and I believe his answer was that yes, that the
20 states did, in accordance with the contours of the funding
21 programs, submit proposed projects, which were approved, and
22 for which they simply had to submit the receipts, as I put it,
23 in order to be reimbursed for the completion of those projects.
24 So what you are saying, I think, is that, well, you have to do
25 that again, right?
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1 MR. CONNOLLY: You have to do that again, and as
2 I——obviously at this point we have the complaint, we have the
3 allegations, and I think broadly, the government agrees with
4 what Mr. Amer is describing, but I think the distinction is
5 that those initial applications would not necessarily have gone
6 into the level of detail about specific projects that the
7 Department is now asking for in connection with these
8 project-specific extensions. In some instances perhaps states
9 described those projects specifically; in other instances it
10 was perhaps more of a broader indication of the type of work
11 that they were intending to use the funds for. And now, to
12 seek to get further extensions of that liquidation period, the
13 Department is simply asking the states to describe with
14 specificity the projects for which they require additional
15 extensions.
16 THE COURT: Again, as I understand it——and to your
17 point, we only have the complaint, we have several
18 declarations——not only did they have to initially submit
19 projects for approval, but when they wanted to extend the time
20 to be reimbursed, they had to provide additional details as to
21 why that was necessary, correct?
22 MR. CONNOLLY: The states made applications for
23 extensions before, yes; not on a project-specific basis, but
24 they provided some explanation for why they were requesting an
25 extension of that liquidation period.
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1 THE COURT: And as I read the complaint, in every
2 instance at least that's cited in the complaint, the response
3 that they received for approval of an extension was after
4 careful review or after careful consideration. Do you have any
5 reason to believe that that did not take place——that is to say,
6 careful review or careful consideration?
7 MR. CONNOLLY: I have no reason to believe that that
8 did not take place for the extensions that were described in
9 the complaint. Again, I mean, taking the allegations in the
10 complaint as true at this point.
11 THE COURT: Okay.
12 MR. CONNOLLY: So because these grant funds are still
13 available to the states and because states can continue to seek
14 and have sought and are obtaining these project-specific
15 extensions, a preliminary injunction is not appropriate at this
16 time.
17 I can briefly walk through each stage of the
18 preliminary injunction analysis, beginning with likelihood of
19 success. And in particular, there is no final agency action
20 here. Courts have emphasized that the finality inquiry is
21 flexible and pragmatic, and here, the rescission of the
22 extensions on March 28th was coupled, both in the March 28
23 letter and in the April 3rd letter, with the invitation to
24 states to seek project-specific extensions. And so contrary to
25 some of what the states suggest, this is not foreclosing the
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1 opportunity for states to access these funds and to draw down
2 these funds for the projects that they intended to use them
3 for; it is inviting them to submit some additional information
4 about the specific projects, which the Department is reviewing
5 as they come in and has already started to issue decisions on,
6 that will allow for the continued extension of the liquidation
7 period for these specific projects. So whether and to what
8 extent these states are truly foreclosed from accessing these
9 funds for the projects that they're intending to undertake
10 remains an open question, at least until they submit those
11 extension requests and obtain a decision from the Department
12 on, you know, whether that liquidation period will in fact be
13 extended.
14 THE COURT: So it remains an open question and is not,
15 as I believe you suggested earlier, well, you know, you can put
16 in your application, you can give reasons why an extension is
17 needed, and the likelihood is that yes, you will get
18 reimbursed.
19 MR. CONNOLLY: You put in your application with
20 respect to a specific project and you seek an extension of the
21 liquidation period for that, and where the Department grants
22 that, then you have up until that new deadline to liquidate
23 funds relating to that project. And then——
24 THE COURT: Where the Department grants that, but what
25 about where the Department does not?
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1 MR. CONNOLLY: Where the Department denies an
2 extension request, there is an administrative appeal option.
3 Within 30 days of that denial, you can appeal within the
4 Department for further consideration and can submit additional
5 information in support of your request for an extension of the
6 liquidation period with respect to that project. And I believe
7 in our papers we cited to a Department of Education website
8 that is similar to the April 3rd letter but then builds off it,
9 providing additional information about the way the process
10 works and noting, as I believe the April 3rd letter does not,
11 the ability to appeal within the Department in the event that
12 an extension request is denied.
13 THE COURT: Okay.
14 MR. CONNOLLY: So because that remains an option for
15 states and because the possibility continues to exist for
16 states to obtain these extensions of the liquidation period,
17 the kind of just the precise issue that the plaintiffs are
18 challenging here is not one by which rights and obligations
19 have necessarily been determined. Again, some states have
20 already applied for extensions of the liquidation period for
21 certain projects and have obtained them. So now there's a
22 final agency action that allows them to continue to liquidate
23 those funds. And for other states, that remains a possibility.
24 THE COURT: Have any applications for extensions been
25 denied?
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1 MR. CONNOLLY: There have been. As I understand it,
2 your Honor, a set of applications have been determined at this
3 point. Some projects have been approved for liquidation
4 extensions and others, yes, have been denied for extensions.
5 THE COURT: Okay.
6 MR. CONNOLLY: So in light of that flexible and
7 pragmatic inquiry, the rescission itself on the March 28th
8 letter of the prior extension should not be considered a final
9 agency action. But to the extent that it were, it was not
10 arbitrary and capricious and it was also not contrary to law.
11 And perhaps I'll take those in reverse order.
12 First of all, with respect to contrary to law,
13 plaintiffs' argument is——
14 THE COURT: I'm sorry.
15 MR. CONNOLLY: Contrary to law.
16 THE COURT: Contrary to law.
17 MR. CONNOLLY: Pardon me. Plaintiffs' argument is
18 that where Congress wanted appropriations to terminate with the
19 end of the public health emergency, it said so, and that's
20 true. But what the Department is doing here is not terminating
21 these appropriated funds and it's not cutting off access for
22 the states to these appropriated funds. Congress did——and we
23 explain this in our background section in our brief——it did
24 place at least initial time frames for when these appropriated
25 funds were supposed to be accessed, and beyond that, by
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1 regulation, the Department can extend those deadlines where
2 doing so is justified. And it did that, and it is now
3 continuing to do that.
4 THE COURT: Well, no. It stopped it, and then it
5 created a different avenue for accessing those funds.
6 MR. CONNOLLY: That is true. I mean, a different
7 process for determining whether those extensions are justified.
8 But it's not contrary to the statute, or contrary to these
9 appropriations, because it's not actually terminating the
10 states' ability to access these funds. It is simply
11 implementing a new procedure whereby states can continue to
12 access those funds, and there's nothing in any of these
13 appropriations that would preclude the Department from taking a
14 project-specific look and determining whether, you know,
15 extension of the liquidation periods is appropriate.
16 THE COURT: Well, except that I'm told that the Senate
17 explicitly——I don't know what word to use here——directed,
18 encouraged, told, suggested——that the Department of Education,
19 in administering these funds, be flexible and be as minimally
20 intrusive into the states' ability to access these funds as
21 possible. And that's not what this new process is doing, is
22 it?
23 MR. CONNOLLY: Respectfully, your Honor, it's not as
24 intrusive as plaintiffs would suggest. I mean, they talk about
25 like a six-part process, but really, most of those parts are
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1 just, you know, review within the Department to determine
2 whether to grant a liquidation extension. For the states, you
3 see in the April 3rd letter, in many instances the kind of
4 basic information that they need to supply, as well as, to be
5 sure, an explanation of the specific project and why a further
6 extension is necessary. But that's in keeping with the
7 Department's regulatory authority to grant these extensions
8 where they're justified. And in the Department's view, given
9 the time that's elapsed since the end of the public health
10 emergency, it's appropriate to take a project-specific look at
11 where states are seeking further extension of the liquidation
12 period, and that is consistent with or certainly not
13 inconsistent with the language of the appropriations.
14 THE COURT: And so the Department of Education changed
15 its mind.
16 MR. CONNOLLY: The Department of Education changed its
17 mind, and it has the ability to do that.
18 THE COURT: And when it does that, doesn't it have to
19 provide a reasoned explanation as to why it's changing its
20 mind?
21 MR. CONNOLLY: It does, and that was what the March 28
22 letter did.
23 THE COURT: Tell me how it did that.
24 MR. CONNOLLY: The March 28th letter explained that in
25 light of the end of the public health emergency and in light of
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1 the Department's priorities, it was, as a general matter, no
2 longer appropriate for extensions of these liquidation periods
3 to occur, but that states would be able to seek extensions of
4 those liquidation periods on a project-specific basis that
5 would allow the Department to evaluate the project in light of
6 Congress's goals in appropriating these funds.
7 THE COURT: And is that reason sufficient on the facts
8 of this case? And I say that because, to Mr. Amer's point,
9 yeah, the COVID emergency is over, but it was over two years
10 ago, and now all of a sudden they're saying, well, you know, we
11 shouldn't be using public funds in connection with a pandemic
12 that's almost two years old now. And also, there's no talk of
13 this in any of the papers, but, I mean, implicit in these
14 programs, in these funding programs, is that I think——and you
15 can tell me if I'm wrong——that there was a loss in educational
16 attainment by all of these children occasioned by the pandemic
17 and the requirement that there be remote learning, if learning
18 there was taking place, and therefore implicit in the funding
19 was that of course it would go beyond the emergency because it
20 was only after the emergency that the school authorities would
21 have the opportunity to address that educational loss.
22 MR. CONNOLLY: I agree that it was implicit that these
23 funds would continue to be available after the emergency, and
24 the Department is not preventing these funds from being
25 available after the emergency. What the Department is doing is
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1 requesting project-specific information from states so that the
2 Department, at a more, I guess, granular level can determine
3 whether, given where we are vis-à-vis the pandemic and the end
4 of the public health emergency, the projects that the states
5 are seeking to undertake remain consistent with Congress's
6 goals in appropriating these funds.
7 THE COURT: Okay.
8 MR. CONNOLLY: The decision is also not arbitrary and
9 capricious. The regulation at issue here, 2 C.F.R. 200.344(c),
10 specifies that the Department can grant extensions where it is
11 justified. And again, that is what the Department is doing.
12 It is granting extensions here, where further extensions are
13 justified. It has changed its procedures for doing that, but
14 the change in procedures is within the parameters of the
15 regulation and, again, not contrary to the appropriation
16 statutes themselves.
17 Turning to irreparable harm, here again, states can
18 and have obtained extensions of the liquidation period, so the
19 scope of the harm and whether and to what extent it is
20 irreparable remains at some level an open question. To the
21 extent a state late last week received an extension of the
22 liquidation period with respect to a project, harms that it
23 thought might otherwise have been occasioned by the March 28th
24 letter, that calculus is different now, right?
25 THE COURT: The disruption has already occurred,
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1 right? You would agree with that.
2 MR. CONNOLLY: The states have alleged——and again, we
3 have their complaint, we have their declarations——that there
4 has been disruption that has been occasioned by the March 28th
5 letter, yes. But the question for the irreparable harm prong
6 is, you know, whether and to what extent the ability to obtain
7 a further extension of the liquidation period can act upon
8 those harms and prevent them from being irreparable, and there,
9 we submit——I mean, one thing that I think to note, your Honor,
10 is that in their declarations and in their opening brief, the
11 states don't address the extension, project-specific extension
12 process that was announced in the March 28th letter and then
13 discussed further in the April 3rd letter, and that does bear,
14 of course, on the nature of the harms and whether they're
15 irreparable.
16 THE COURT: Well, I mean, they do discuss the
17 project-specific process now in place and say that it imposes
18 an additional burden. You can argue about whether that's a
19 real burden or not, but they do address it.
20 MR. CONNOLLY: Right. They do. Absolutely. And
21 their second brief does address it. But the question here is
22 whether and to what extent that process acts upon the harms
23 that they had otherwise articulated and can obviate those harms
24 through the ability to obtain those project-specific extensions
25 of the liquidation period.
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1 THE COURT: Okay.
2 MR. CONNOLLY: And finally, and briefly, your Honor,
3 the public interest and equities factors that are tied together
4 here. The Department has the ability and there is a public
5 interest in making sure that these funds are spent consistent
6 with Congress's appropriations. That's what the Department is
7 attempting to do here. The language of both the March 28th and
8 April 3rd letters talks about asking the states for information
9 on how a particular project's extension is necessary to
10 mitigate the effects of COVID on American students' education.
11 The Department is receiving applications from states that speak
12 to that issue. It is reviewing them in the process that's
13 described in the letters, and on their website, and it is in
14 the process of making those determinations and at times
15 granting those project-specific extensions of the liquidation
16 period.
17 THE COURT: Could we go back to irreparable harm just
18 for a minute.
19 MR. CONNOLLY: Certainly.
20 THE COURT: You didn't mention whether or not the
21 federal government would be irreparably harmed if I were to
22 issue the injunction. Would it?
23 MR. CONNOLLY: Well, your Honor, I think the
24 potential——well, a couple things.
25 First of all, beginning with the public interest
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1 articulated, one potential harm here is that states will draw
2 down funds for projects that the Department, had it reviewed at
3 a project-specific level, would have determined might not have
4 qualified for the extension of the liquidation period.
5 THE COURT: Okay. But we're talking about
6 appropriated funds, correct?
7 MR. CONNOLLY: These are appropriated funds, yes.
8 THE COURT: So these funds were appropriated. Initial
9 applications were made on particular projects and were granted,
10 right? They were approved.
11 MR. CONNOLLY: There was an initial project approval,
12 yes.
13 THE COURT: And then there was a request for an
14 extension to complete those projects and they had to provide
15 additional information, and those extensions were approved
16 after careful consideration, correct?
17 MR. CONNOLLY: As set forth in the complaint, correct.
18 THE COURT: So how is the government irreparably
19 harmed by just allowing those determinations to stay in place
20 and projects to go forward? They were appropriated funds.
21 MR. CONNOLLY: Right. I mean, the harm would be that
22 it would prevent the Department from doing what it has now
23 determined is appropriate to do, which is to review these
24 specific projects at a closer level to determine whether they
25 remain consistent with Congress's goals in appropriating the
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1 funds. In the event that preliminary injunction is entered,
2 the process that has been stood up, these applications that the
3 Department is receiving, that would presumably all be put on
4 hold. The Department would not be able to undertake the review
5 that it's undertaking subsequent to the March 28th letter.
6 Thank you, your Honor.
7 THE COURT: Thank you.
8 Mr. Amer, did you want to respond?
9 MR. AMER: I do have a few points, your Honor. Thank
10 you.
11 Your Honor, you raised the question of whether there's
12 any guarantee that these specific project-specific extension
13 requests will be granted, and I think there was a suggestion
14 that they would likely be granted, and I want to put that to
15 rest based on what we know to date.
16 One of the plaintiff-states that did request some
17 project-specific extensions was Arizona, and this past Friday,
18 May 2nd, Arizona received A response by letter to their
19 extension requests. And we have the letter. I'm happy to file
20 it on the docket, your Honor, if you'd like to have the letter
21 on the record.
22 THE COURT: Sure. You can do that.
23 MR. AMER: And there were $7.6 million, roughly, in
24 projects that were the subject of these project-specific
25 extension requests. The Department approved only $1 million
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1 worth of these projects and denied $6.6 million worth of these
2 projects, so the vast majority of the project-specific
3 extension requests were denied.
4 But I think more telling, your Honor, is the reason
5 for why the projects were denied. And I'm just going to quote
6 some of the explanations.
7 There's one project for about $1.2 million, and it was
8 denied for the following reason: "This project is providing
9 resources to teachers rather than directly supporting students
10 academically." That's the reason that that was denied.
11 For a $4.9 million project, the extension request was
12 denied for the following reason: "While this project provides
13 services to students related to mitigating the effects of the
14 pandemic, it is focused on health rather than academics." So
15 that's why that was denied.
16 Another reason for a roughly $450,000 project was:
17 "While this project provides support for mathematics teachers,
18 it does not provide services directly to students."
19 And then the fourth project that was denied for
20 roughly $110,000, the same reason as before: "This project is
21 providing resources to teachers rather than directly supporting
22 students academically."
23 So these reasons that are being given have nothing to
24 do with whether additional time is needed to liquidate these
25 funds. It's really seeking a complete redo of whether the
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1 funds should have been granted in the first place, and it's
2 completely contrary to what's provided for in the
3 appropriations statute. If you just look at the American
4 Rescue Plan statute, it talks about, in Section 2001(e)(2),
5 what the uses of funds are that are permitted. It clearly
6 includes professional development for staff, health-related
7 reasons, so——
8 THE COURT: These were projects that presumably had
9 been previously approved.
10 MR. AMER: Absolutely, because they were included with
11 the original grant application and they were part of the
12 extension request application.
13 So this additional process that is being imposed on
14 the states is just an effort to now apply new and different
15 criteria that actually runs contrary to what the appropriations
16 statute allows, and has absolutely nothing to do with whether
17 more time is needed or not.
18 And to your Honor's point about lost instruction time
19 and why you still need to provide this intervention to
20 students, I did want to mention that in the record——I'll just
21 read one of the paragraphs from the New York declaration,
22 paragraph 54 of Docket No. 26. "Without an update or
23 confirmation that services will resume soon, our largest
24 educational service provider under EANS——" that's the program
25 for nonpublic schools "——who provides, among other things,
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1 tutoring services, plans to terminate all employees that they
2 currently have furloughed. If US DOE is not immediately
3 required to withdraw the March 28 rescission, there will not be
4 enough time to hire new staff and get the programs back up and
5 running for the remainder of the 2024-25 academic year. This
6 will result in severe harm to students, including lost
7 instruction time and further lost opportunities to address
8 learning losses and gaps that were the result of the
9 pandemic——problems the ARP funding was specifically targeted to
10 alleviate."
11 I think that gets right at your Honor's point. And
12 it's not just in the complaint. This is the declaration that
13 New York submitted, so it's in the record as evidentiary
14 material.
15 I think just one last point——well, on that——is that
16 providers of these programs and services know about the
17 March 28th letter, and they know about the April 3rd letter,
18 and they know about this process for submitting
19 project-specific extensions, and they're still not willing to
20 continue performing under these contracts. So they understand
21 that this additional process for getting project-specific
22 extensions doesn't suggest in any way, shape, or form that the
23 funds are going to start flowing again, and once these letters
24 like this May 2nd letter that I read from become public, it
25 will cement the understanding that much of these funds are
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1 going to be yanked and won't be approved.
2 THE COURT: Can you, for the record, just indicate to
3 whom that letter is addressed and who sent the letter.
4 MR. AMER: Yes. So it's on United States Department
5 of Education letterhead. It's dated May 2, 2025. So it was
6 this past Friday. It's to the Honorable Tom Horne, H-O-R-N-E,
7 State Superintendent of Public Instruction, Arizona Department
8 of Education, and it's signed by Hayley, H-A-Y-L-E-Y, W. Sanon,
9 S-A-N-O-N. He's the Principal Deputy Assistant Secretary and
10 Acting Assistant Secretary in the Office of Elementary and
11 Secondary Education of the U.S. Department of Education. So we
12 will file that later today with a cover letter, your Honor.
13 Finally, I think my friend mentioned that the harm
14 that the Education Department suffers is the harm due to the
15 fact that had it reviewed the extension requests on a
16 project-specific basis, it would have been denied because it
17 would have been given an opportunity to have a closer look. I
18 don't think there's any record evidence that suggests that the
19 look that the Department previously gave to these projects,
20 either when the applications for the grant money was originally
21 submitted or when the extension requests were previously
22 reviewed and approved, was anything other than a close look, so
23 the idea that the Department is somehow being deprived, if this
24 Court grants the injunction, of an opportunity to take a close
25 look at these projects I think is contrary to what's in the
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1 record. I think the record suggests that these projects were
2 specified in the prior grant applications and in the prior
3 extension requests, that they were looked at, and I think your
4 Honor even asked my friend whether there's any suggestion here
5 that the Department didn't give those a close look. So I think
6 what the Department is saying is that the harm is not doing
7 something that they actually already did. And that's not harm
8 at all, your Honor.
9 THE COURT: Can I ask if you could speak to the issue
10 of whether or not this is a final order, the March 28 letter.
11 MR. AMER: It's absolutely a final order because
12 there's no reconsideration suggested on the blanket decision to
13 rescind all of the extension approvals. That's not anything
14 that's being looked at today by the Department. The letter was
15 clear, if you look at the language of the letter, that it's
16 effective immediately, the extension approvals are being
17 rescinded, it's being modified to expire as of 5 p.m. on
18 March 28th. There's no tentative nature with respect to that
19 decision, so it's absolutely final. And again, under
20 Section 704, even if the Department did say, you know, we'll
21 reconsider this rescission, as long as they make the rescission
22 operable effective immediately, it's final under the APA.
23 THE COURT: Thank you.
24 MR. AMER: Thank you, your Honor.
25 THE COURT: Okay. I am going to issue the preliminary
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1 injunction, and we'll talk in a little bit about whether or not
2 I should require the posting of a bond or whether I should stay
3 this determination. But first of all, I do find that the
4 plaintiffs are seeking a prohibitory and not a mandatory
5 injunction. As they indicate, the last peaceable status in
6 this case was just prior to the time that Secretary McMahon's
7 letter of March 28 was issued, and at that time the extensions
8 were in place. Those extensions were rescinded, and
9 accordingly, this is a prohibitory injunction.
10 I further find preliminarily that this is a final
11 order. As Mr. Amer indicated, a decision was made to rescind
12 all extensions. There was no equivocation in that
13 determination, and it is operable, which is to say that the
14 states are required to abide by it, and presumably if they were
15 to put in a request for reimbursement today, outside of the new
16 process that has been set up for these funds, it would be
17 rejected out of hand.
18 I find that the plaintiffs have established a
19 likelihood of success on the merits on both of their causes of
20 action with respect to arbitrary and capricious. The
21 Department of Education changed its mind. I find that the
22 reason proffered was not a reasonable explanation. As we have
23 discussed, Congress intended that these funds be made available
24 to school districts and schoolchildren. There was no reason
25 other than the fact that the COVID emergency had ended some two
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1 years before. However, clearly, the purpose of the funding
2 sources of the acts that provided the funding was so that there
3 can be funding for these programs going forward after the
4 pandemic emergency was deemed to have ended in order to account
5 for the loss of educational attainment that schoolchildren had
6 suffered as a result of remote learning and other difficulties
7 attendant to the COVID-19 pandemic.
8 And with respect to contrariness to law, as we
9 discussed, Congress intended that these funds remain available.
10 Congress intended that the Department of Education be liberal
11 and flexible in making sure that these programs continued to be
12 funded, and that the Department of Education not impose
13 unreasonable obstacles in the way of state agencies looking to
14 continue to fund those programs. As a result of the
15 Department's actions, the plaintiffs have established
16 irreparable harm. There are any number of declarations that
17 have been submitted that talk about the disruption that has
18 been caused by the March 28 letter——programs have been halted,
19 staff has been laid off, infrastructure projects that were
20 begun had been halted midstream, causing unusable locations
21 within schools.
22 On the other hand, there's nothing before me to
23 suggest that the government would be irreparably harmed in any
24 way by the issuance of the preliminary injunction. These are
25 funds that have been appropriated for particular uses.
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1 Applications were made and approved with respect to those uses.
2 Applications were made and approved with respect to extending
3 the drawdown of those funds. There were substantial reliance
4 rights that were established by the plaintiffs, which obviously
5 were interrupted.
6 And again, the public interest and the balance of
7 hardships here weigh clearly in favor of the plaintiffs, who
8 have had to disrupt the provision of educational services to
9 schoolchildren, who have had to halt infrastructure projects
10 midstream because of the Department of Education's
11 determination, and for all those reasons, the plaintiffs have
12 clearly met all of the elements for the issuance of a
13 preliminary injunction, and one will be issued.
14 I will be signing the form preliminary injunction that
15 was provided by the plaintiffs.
16 But let's talk about a bond and a stay. Mr. Amer?
17 MR. AMER: Thank you, your Honor.
18 We do address the bond requirement in point 4 of our
19 reply brief. Obviously, as the Court is aware, there needs to
20 be a specific finding in the preliminary injunction order,
21 which can be done orally, obviously, today.
22 We do think there's no dispute that the Court has wide
23 discretion in setting the bond amount, including setting the
24 bond amount at 0. I think we're talking about whether the bond
25 should be 0 up to $10,000, which is the nominal sum that the
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1 defendants have requested. We think it makes sense for the
2 amount here to be set at 0 because of the various reasons we
3 highlight in our brief——namely, that here, this is a situation
4 where we're seeking to enforce public interests arising out of
5 a comprehensive federal health and welfare statute. Second
6 Circuit has noted that that is a sufficient justification to
7 set the bond at 0. Also, because there is no proof here of
8 likelihood of harm to the defendants as a result of the
9 preliminary injunction, which is one of the findings your Honor
10 just made; that's another reason for justifying a bond at 0.
11 And finally, we think that where the likelihood of success is
12 so strong as it is here, that's another reason for setting the
13 bond at 0. And we would ask, therefore, that the Court set the
14 bond at 0.
15 I'd also mention that there are any number of cases
16 that have been decided within the last couple of months where
17 there have been challenges to this administration's agencies'
18 actions where bonds have been set at 0.
19 I thank you, your Honor.
20 THE COURT: Mr. Connolly, did you wish to be heard?
21 MR. CONNOLLY: Sure. Just briefly, your Honor, on the
22 bond.
23 Obviously, Federal Rule of Civil Procedure 65(c)
24 provides that the Court may issue a preliminary injunction only
25 if the movant gives security in an amount that the Court
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1 considers proper. Here, we are simply asking, in accordance
2 with that rule, for the entry of a de minimis bond of $10,000.
3 Would your Honor like me to address the appellate
4 issue as well?
5 THE COURT: Let me just deal with the bond.
6 I'm not going to require the issuance or the posting
7 of a bond. As we've discussed, I find that the plaintiffs have
8 established a likelihood of success on the merits that is
9 greater than usual, perhaps even overwhelming. In fact, I was
10 going to discuss whether the showing that the states have made
11 would have been enough even to satisfy the test of a mandatory
12 injunction. So I do find that their likelihood of success on
13 this case is strong. And as we have been discussing, this case
14 involves the enforcement of public interest arising out of a
15 comprehensive federal health and welfare statute. So I will
16 not require the posting of a bond.
17 On the issue of the appeal, a stay pending appeal,
18 Mr. Connolly, I'm happy to hear you.
19 MR. CONNOLLY: Certainly, your Honor.
20 The government will confer in light of the Court's
21 ruling. As your Honor knows, decision whether or not to appeal
22 rests with the Solicitor General. We would ask that in the
23 event the Solicitor General determines to appeal your Honor's
24 ruling, that the Court stay the preliminary injunction pending
25 a disposition of that appeal. And obviously in the event that
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1 decision is made, we can provide further information in a
2 letter to the Court, but we would be asking for a stay if an
3 appeal is authorized.
4 THE COURT: Thank you. Mr. Amer?
5 MR. AMER: Your Honor, we don't think that there is a
6 need for this Court to issue a stay. This is not a situation
7 that involves any exigency. There are no planes on the tarmac
8 about to take off. There is going to be a process where the
9 states now submit their payment requests as timely requests as
10 a result of the injunction, the defendants will have an
11 opportunity to review those timely requests, and in the
12 interim, they certainly have time to go to the Second Circuit
13 and seek whatever relief by way of a stay that they feel is
14 necessary.
15 THE COURT: I will not be staying the implementation
16 of the preliminary injunction.
17 Is there anything else that we should discuss today,
18 Mr. Amer?
19 MR. AMER: Nothing from the plaintiffs. Thank you
20 very much.
21 THE COURT: Mr. Connolly?
22 MR. CONNOLLY: No. Thank you, your Honor.
23 THE COURT: Okay. In that event, we are adjourned.
24 We'll be issuing the injunction and posting it on ECF.
25 Thank you all for your very, very helpful arguments.
o0o
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