Categorical Federal Funding Freezes as Reviewable Final Agency Actions: First Circuit Denies Stay Pending Appeal in State of New York v. Trump

Introduction

In State of New York v. Trump, the United States Court of Appeals for the First Circuit denied a motion by federal defendants (the “Agency Defendants”) for a stay pending appeal of a sweeping preliminary injunction issued by the District of Rhode Island. The case arises from a short-lived but consequential Office of Management and Budget memorandum, M‑25‑13 (the “OMB Directive”), issued on January 27, 2025, directing agencies to “temporarily pause” obligations and disbursements of federal financial assistance pending review for consistency with presidential policy. The Directive referenced multiple Executive Orders signed during the President’s first week in office, including Executive Order 14154, “Unleashing American Energy,” whose Section 7(a) specifically instructed agencies to pause disbursements of funds appropriated by the Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA).

Twenty-two States, the District of Columbia, and the Governor of Kentucky (collectively, the “Plaintiff-States”) sued, alleging that agencies implemented categorical and unlawful freezes of obligated federal funds across numerous programs, that the OMB Directive’s rescission the day after suit was filed was in name only, and that freezes persisted pursuant to the Executive Orders and OMB guidance. The district court issued a TRO and then a preliminary injunction enjoining agencies from reissuing or giving effect to the OMB Directive, and from imposing “categorical” pauses on appropriated funds under grants, contracts, or other executed obligations—specifically including Section 7(a) of the “Unleashing” Executive Order—and ordering notice and release of funds paused on those grounds.

The government appealed and sought a stay pending appeal. Applying the familiar Nken v. Holder factors, the First Circuit denied the stay. While the merits appeal remains pending, this opinion establishes important guidance: categorical freezes of obligated funds implemented under executive directives are reviewable as discrete “final agency actions” under the Administrative Procedure Act (APA); cursory invocations of “to the extent permitted by law” cannot insulate such across-the-board pauses from APA scrutiny; and a party seeking a stay must address all independent grounds supporting the injunction and demonstrate concrete, irreparable harm.

Summary of the Opinion

The First Circuit (Barron, C.J., joined by Montecalvo and Rikelman, JJ.) denies the government’s motion to stay the district court’s preliminary injunction. The court:

• Applies the four Nken v. Holder factors, emphasizing the two “most critical” factors: likelihood of success on the merits and irreparable harm to the movant absent a stay.
• Holds that the government did not make a “strong showing” of likelihood of success because:
  • The district court properly treated agencies’ broad, categorical funding freezes as discrete, final agency actions reviewable under the APA, not as an impermissible “broad programmatic attack” under Norton v. SUWA.
  • The government failed to challenge the district court’s independent arbitrary-and-capricious finding (focusing instead on the Impoundment Control Act), leaving that merits ground unaddressed for stay purposes.
  • Assertions that the Executive Orders and guidance only directed pauses “to the extent permitted by law” did not overcome unrebutted record evidence of categorical freezes.
• Rejects Article II and vagueness arguments because the injunction targets categorical, unlawful pauses and does not impose a “preclearance” regime; its terms are sufficiently specific under Rule 65 and tailored to categorical freezes implemented under identified directives.
• Finds no irreparable harm to the government, given the injunction’s scope and the speculative nature of alleged financial irretrievability; conversely, the States demonstrated substantial harms.
• Concludes the public interest and balance of equities do not favor a stay.

Analysis

Precedents Cited and Their Role

• Nken v. Holder, 556 U.S. 418 (2009): Supplies the four-factor test for a stay pending appeal. The First Circuit emphasizes the two “most critical” factors—likelihood of success and irreparable harm—and holds the government fell short on both.
• Hilton v. Braunskill, 481 U.S. 770 (1987): Cited for the Nken factors’ formulation and the discretionary nature of stays (“not a matter of right”).
• Winter v. NRDC, 555 U.S. 7 (2008): Provides the standard for preliminary injunctions and guides the district court’s merits and harms analysis.
• Norton v. Southern Utah Wilderness Alliance (SUWA), 542 U.S. 55 (2004), and Lujan v. National Wildlife Federation, 497 U.S. 871 (1990): The government argued the case was an impermissible “broad programmatic attack.” The First Circuit distinguishes these cases, noting that discrete, across-the-board agency actions (categorical freezes) are reviewable; Lujan itself acknowledged that final, across-the-board measures can be challenged under the APA.
• Bennett v. Spear, 520 U.S. 154 (1997): Provides the two-part test for finality—consummation of decisionmaking and legal consequences. The district court’s unchallenged findings satisfied Bennett for the agencies’ categorical freezes.
• Franklin v. Massachusetts, 505 U.S. 788 (1992): The President is not an “agency” under the APA. The First Circuit underscores that the injunction targets agency actions, not the President’s directives as such.
• Overton Park v. Volpe, 401 U.S. 402 (1971): The government’s invocation of a “presumption of regularity” does not shield agency action from “probing” judicial review, particularly at the stay stage.
• Department of Commerce v. New York, 588 U.S. 752 (2019): Supports drawing common-sense inferences from the record; courts need not be “naïve” about simultaneous, widespread agency conduct purportedly arising from isolated, independent decisions.
• Building & Construction Trades Dep’t v. Allbaugh, 295 F.3d 28 (D.C. Cir. 2002): Cited by the government to emphasize Article II supervisory authority; the First Circuit agrees with the premise but explains that such authority cannot be exercised in contravention of law.
• Haaland v. Brackeen, 599 U.S. 255 (2023): The government cites parens patriae limits. The First Circuit notes that the States’ own sovereign and proprietary harms suffice, and the parens patriae point does not negate consideration of affected parties in the Nken balance.
• Greenlaw v. United States, 554 U.S. 237 (2008): Courts rely on parties to frame issues; the First Circuit stresses that the government did not develop key arguments (e.g., arbitrary-and-capricious findings).
• United States v. Zannino, 895 F.2d 1 (1st Cir. 1990): Undeveloped arguments are waived; the court applies that principle to the government’s failure to contest independent grounds supporting the injunction.
• Ryan v. ICE, 974 F.3d 9 (1st Cir. 2020): Standard of review (abuse of discretion) for preliminary injunctions; acceptance of amicus briefs limited to issues raised by parties.
• Labrador v. Poe, 144 S. Ct. 921 (2024) (Kavanaugh, J., concurring): Notes the perils of deciding interlocutory motions on compressed timelines; underscores parties’ responsibility to sharpen arguments.
• Hispanic Affairs Project v. Acosta, 901 F.3d 378 (D.C. Cir. 2018): Supports APA review of an across-the-board practice violating a statutory command, consistent with Lujan’s allowance for challenges to final, uniform measures.
• PATCO Local 202, 678 F.2d 1 (1st Cir. 1982) and Fed. R. Civ. P. 65(d)(1)(C): An injunction must describe restrained acts in “reasonable detail,” not enumerate every component known best to the enjoined party; the order here satisfies that standard.
• M.G. ex rel. Garcia v. Armijo, 117 F.4th 1230 (10th Cir. 2024): Recognizes informational asymmetries relevant to injunction specificity, reinforcing why the order’s categorical language is adequate.

Legal Reasoning

The court’s denial of a stay is rooted in three interlocking strands of reasoning under Nken’s framework.

1) Likelihood of Success: Categorical Freezes Are Discrete, Final Agency Actions

The government’s principal argument was that the case amounted to an impermissible “broad programmatic attack” under Norton and Lujan. The First Circuit disagreed, aligning with the district court’s framing: the challenged conduct consists of agencies’ discrete decisions to impose broad, categorical freezes of obligated funds—decisions that are “final” under Bennett because they consummated decisionmaking and had immediate legal consequences (halting disbursements across existing grants, contracts, and other obligations).

Critically, the government did not meaningfully contest the district court’s Bennett findings or show that the APA categorically precludes simultaneous review of numerous discrete final actions across different agencies, especially where each implements the same executive directive in materially identical fashion. Nor did the government rebut the extensive record—emails, notices, declarations—from which the district court permissibly inferred government-wide, categorical freezes implemented “immediately” and “across the board,” notwithstanding boilerplate qualifiers (“to the extent permitted by law”).

2) Independent Arbitrary-and-Capricious Ground Unchallenged

The district court issued the injunction on two APA grounds: contrary to law and arbitrary and capricious. In its stay papers, the government challenged aspects of the “contrary to law” reasoning (focusing on the Impoundment Control Act) but did not address the district court’s independent arbitrary-and-capricious determination. That silence proved consequential. A movant cannot make the required “strong showing” of likely success while ignoring a separate ground that would sustain the injunction on appeal. The First Circuit accordingly treated the merits showing as deficient on that basis alone.

3) “Consistent with Law” Caveats Do Not Cure Categorical Illegality

The government repeatedly asserted that executive directives required pauses only “to the extent permitted by law.” The First Circuit held that the district court reasonably found, on an unrebutted record, that those caveats were “window dressing.” The OMB Directive gave agencies roughly 24 hours to implement a “temporary pause” while analyzing legal requirements later; the “Unleashing” EO and OMB guidance, in particular, directed immediate pauses of IRA/IIJA funds until OMB cleared disbursement. On this record, the court found no abuse of discretion in concluding that agencies implemented categorical freezes without individualized authority determinations and that the injunction appropriately targeted those categorical measures, not lawful, grant-by-grant actions grounded in specific statutory or contractual authority.

4) Article II and Injunction Specificity

The government’s Article II argument—that the injunction impermissibly interferes with presidential supervision—failed because the order enjoins only categorical, unlawful freezes. The President’s supervisory power does not authorize agencies to contravene statutes or the APA. Nor does the injunction impose a “preclearance” regime; the district court previously clarified it imposes no such requirement and permits lawful funding decisions under actual statutory, regulatory, or grant authority.

On specificity, Rule 65 requires “reasonable detail,” not exhaustive itemization. The order’s focus on “categorical pauses or freezes” implemented under the OMB Directive and specified Executive Orders provides adequate notice—especially given informational asymmetries (agencies know the basis for their own freezes). The court rejected vagueness challenges to terms like “giving effect under a different name” for the Directive and pauses “described or implied by” the EOs, finding the injunction sufficiently clear and tailored.

5) Irreparable Harm, Balance of Equities, and Public Interest

The government argued that the injunction undermines Article II supervision and may force disbursements that are difficult to recoup. The First Circuit found neither claim persuasive. The first depends on the premise—which the government failed to establish—that the injunction reaches lawful conduct; the second was speculative and undeveloped. By contrast, the States presented “unrebutted” evidence of substantial, immediate harms: inability to access obligated funds, disruptions to essential services, debt issues, hiring and planning impediments, and impacts on public university research. The court rejected the contention that courts should disregard impacts on residents; even apart from residents’ harms, the States’ own sovereign and proprietary harms suffice. On this record, the balance of equities and public interest favored leaving the injunction in place.

Impact

Although procedurally limited to the stay posture, the decision carries significant doctrinal and practical consequences for administrative and appropriations law, intergovernmental relations, and injunction practice.

• APA Reviewability of Government-Wide Pauses:
  • The opinion reaffirms that when agencies implement uniform, categorical measures that halt disbursements across existing obligations, those decisions are discrete and final for APA purposes—even if prompted by executive direction.
  • Attempts to recast such measures as individualized or as mere “programmatic” activity will fail where record evidence shows across-the-board implementation with immediate legal consequences.
• “Consistent with Law” Boilerplate:
  • Generic caveats cannot sanitize categorical freezes that, in practice, are imposed first and rationalized later. Courts will examine the real-world effects and timing to determine legality and finality.
• Appropriations and Impoundment Context:
  • Without resolving the ICA’s scope or enforceability, the court signals serious concern with categorical pauses of obligated funds. Agencies must adhere to specific program statutes, allocation formulas, and grant/contract terms; broad executive priorities cannot override those legal commitments.
• Separation of Powers:
  • The President’s constitutionally grounded supervisory authority does not authorize blanket pauses inconsistent with statutory commands. Injunctions tailored to unlawful categorical conduct do not offend Article II.
• Litigation Posture and Stay Practice:
  • Movants must address all independent grounds supporting the injunction; ignoring an arbitrary-and-capricious holding (while contesting only a statutory theory) undermines any “strong showing” of likely success.
  • Irreparable harm cannot rest on speculation about non-recoverability; concrete showings are required.
• Federalism and State Harms:
  • States can demonstrate their own sovereign and proprietary injuries from unlawful federal funding freezes affecting budgeting, debt, hiring, and essential services. Parens patriae limits do not erase those harms.

Complex Concepts Simplified

• Final Agency Action (APA):
  • An agency decision is “final” if it is the culmination of decisionmaking and has legal consequences (e.g., stopping payment on an awarded grant).
• Programmatic Attack vs. Discrete Action:
  • Courts won’t entertain generic challenges to an agency’s entire “program,” but will review specific, uniform, and final actions—like a government-wide order to freeze disbursements under existing obligations.
• Obligated Funds:
  • “Obligation” occurs when the government commits to pay funds, such as when a grant is awarded or a contract is executed. Obligations create legal liabilities, even if payment occurs later.
• Impoundment Control Act (ICA):
  • A federal statute limiting the Executive’s ability to unilaterally withhold or defer appropriated funds. The court did not resolve all ICA issues here but acknowledged its relevance to the “contrary to law” claim.
• Nken Stay Factors:
  • To stay an injunction pending appeal, the movant must strongly show likely success and irreparable harm, and that the balance of equities and public interest favor a stay.
• Rule 65 Specificity:
  • Injunctions must clearly describe what is prohibited. They need not list every program line-by-line, especially if agencies themselves know which actions are implicated.
• Voluntary Cessation:
  • Rescinding a directive during litigation does not necessarily moot a case if there is a reasonable prospect the challenged conduct will recur or persist under another label.
• Article II Supervision vs. Statutory Compliance:
  • The President may set policy direction, but agencies must still comply with statutes, regulations, and grant/contract terms; executive supervision cannot authorize categorical actions that contradict law.

Conclusion

The First Circuit’s denial of a stay in State of New York v. Trump delivers a clear message: across-the-board funding freezes implemented by agencies—even under presidential directive—are reviewable as discrete, final agency actions when they immediately halt disbursements under existing obligations. General assurances that pauses will occur “to the extent permitted by law” cannot mask a practical reality of categorical, immediate freezes adopted first and justified later. For stay purposes, the government’s failure to challenge the district court’s independent arbitrary-and-capricious holding proved fatal to its likelihood-of-success showing, and its assertions of irreparable harm were too speculative.

Practically, the opinion constrains attempts to effect sweeping, government-wide funding pauses by executive fiat and underscores the judiciary’s readiness to police compliance with appropriations statutes, specific program mandates, and the APA’s reasoned decisionmaking requirements. It also offers guidance on injunction specificity and reaffirms that courts may draw common-sense inferences from a robust record when uniform action across agencies coincides with executive direction. As the merits appeal proceeds, this decision sets a consequential benchmark for how courts will evaluate the legality and reviewability of categorical funding actions across the administrative state.