Rescission-in-Name-Only Does Not Moot a De Facto Federal Funding Freeze; APA Injunctions May Bar Categorical Freezes but Generally May Not Compel Grant/Contract Disbursements

1. Introduction

In State of New York v. Trump (consolidated Nos. 25-1236, 25-1413), the First Circuit reviewed (1) a preliminary injunction entered by the District of Rhode Island blocking a sweeping, categorical “freeze” of federal financial assistance allegedly implemented across multiple agencies shortly after President Trump took office in January 2025, and (2) enforcement orders directed at FEMA for noncompliance.

The plaintiff coalition—numerous States, the District of Columbia, and the Governor of Kentucky—alleged that OMB’s January 27, 2025 Memorandum M-25-13 (and related executive orders and agency practices) caused immediate disruptions in federal grant and assistance flows needed for essential state services. Although OMB formally “rescinded” the memorandum on January 29, 2025, the States argued the “freeze” continued in practice.

The central issues on appeal were:

  • Mootness: whether rescission of the OMB Memorandum eliminated the live controversy;
  • APA reviewability and merits: whether the challenged “freeze” was a reviewable, discrete agency action and likely “arbitrary and capricious” under the APA;
  • Preliminary injunction factors: irreparable harm, balance of equities, and public interest;
  • Remedial limits: whether the district court could order agencies to “release and transmit” payments—given sovereign immunity and the Tucker Act, as framed by subsequent Supreme Court decisions;
  • Enforcement: whether the district court’s orders against FEMA improperly compelled payment or otherwise exceeded jurisdiction.

2. Summary of the Opinion

Chief Judge Barron, joined by Judges Montecalvo and Rikelman, held:

  • Preliminary injunction: affirmed in part and vacated in part.
  • FEMA enforcement orders: affirmed in full.

Key holdings:

  • No mootness: OMB’s rescission did not moot the case because the States challenged the “OMB Directive” (the operative freeze command), and the district court found the rescission was “in name only” and the freeze’s “substantive effect … carries on.”
  • APA “arbitrary and capricious” likely: the States were likely to succeed in showing the categorical, immediate freeze was arbitrary and capricious—especially for failing to account for reliance interests and the obvious consequences of halting vast streams of obligated assistance.
  • Programmatic-attack argument rejected: the challenge targeted discrete, across-the-board agency actions (a categorical freeze), not an impermissible “programmatic attack” barred by Norton/Lujan.
  • Tucker Act remedial constraint: after Department of Education v. California and National Institutes of Health v. American Public Health Association, the injunction could not (as framed) compel specific performance payments on “awarded grants” and “executed contracts.” The court vacated that payment-compelling portion while leaving intact the prohibitions on implementing the freeze.
  • FEMA enforcement orders valid: the enforcement order required FEMA to stop a manual-review process found to be an end-run around the injunction; it did not itself order money payments barred by the APA/Tucker Act framework.

3. Analysis

3.1. Precedents Cited

(a) Mootness and voluntary cessation

  • Powell v. McCormack, 395 U.S. 486 (1969): supplied the baseline test—mootness arises when issues are no longer “live” or parties lack a legally cognizable interest. The First Circuit used Powell to frame why rescission alone does not end a controversy when challenged conduct persists.
  • Bayley's Campground, Inc. v. Mills, 985 F.3d 153 (1st Cir. 2021) and ACLU of Mass. v. U.S. Conf. of Cath. Bishops, 705 F.3d 44 (1st Cir. 2013): articulated the “formidable burden” under voluntary cessation—mootness only if it is “absolutely clear” the challenged behavior will not recur.
  • FBI v. Fikre, 601 U.S. 234 (2024): reinforced that voluntary cessation requires assurance the challenged policy will not resume; here, the record suggested the opposite.
  • West Virginia v. EPA, 597 U.S. 697 (2022): for the proposition that the party asserting mootness bears the burden to show the plaintiff lacks a personal stake.
  • Hisp. Affs. Project v. Acosta, 901 F.3d 378 (D.C. Cir. 2018): used to characterize the existence/scope of a de facto policy—supporting the district court’s factual finding that the freeze persisted beyond the rescission.

(b) Preliminary injunction framework and standard of review

  • Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7 (2008): supplied the four-factor test (likelihood of success, irreparable harm, balance of equities, public interest).
  • N.H. Indon. Cmty. Support v. Trump, 157 F.4th 29 (1st Cir. 2025): provided the First Circuit standard for reviewing preliminary injunctions (abuse of discretion; legal issues de novo; factual findings clear error).
  • Rhode Island v. Trump, 155 F.4th 35 (1st Cir. 2025): supported the notion that downstream, nonpecuniary impacts of funding disruptions can constitute irreparable harm.

(c) APA “programmatic attack” versus discrete agency action

  • Norton v. Southern Utah Wilderness Alliance, 542 U.S. 55 (2004) and Lujan v. National Wildlife Federation, 497 U.S. 871 (1990): the Government invoked these to argue the States impermissibly attacked a broad “program.” The court rejected this, emphasizing Lujan’s acknowledgment that a final, across-the-board order applying a measure “across the board” can be challenged.
  • New York v. Trump, 133 F.4th 51 (1st Cir. 2025): the panel referenced its earlier stay decision rejecting the same “programmatic attack” argument and reaffirmed it on the merits.

(d) Reviewability and “committed to agency discretion”

  • Dep't of Com. v. New York, 588 U.S. 752 (2019) and Abbott Lab'ys v. Gardner, 387 U.S. 136 (1967): invoked for the APA’s “basic presumption of judicial review.”
  • Dep't of Homeland Sec. v. Regents of the Univ. of Cal., 591 U.S. 1 (2020): cited for the narrowness of § 701(a)(2)’s “committed to agency discretion” category and, separately, for reliance interests in arbitrary-and-capricious review.
  • Union of Concerned Scientists v. Wheeler, 954 F.3d 11 (1st Cir. 2020) and Lincoln v. Vigil, 508 U.S. 182 (1993): used to explain § 701(a)(2) applies where statutes provide no meaningful standard or where decisions (like lump-sum allocation) are traditionally discretionary. The court distinguished Lincoln from an across-the-board freeze of obligated funds.
  • Milk Train, Inc. v. Veneman, 310 F.3d 747 (D.C. Cir. 2002): rejected as inapposite because it involved statutory language giving the Secretary broad discretion (“in a manner determined appropriate”).
  • Train v. City of New York, 420 U.S. 35 (1975): cited to illustrate limits on executive withholding of appropriated funds.

(e) Arbitrary-and-capricious review; reliance interests; record-bound reasoning

  • Ohio v. EPA, 603 U.S. 279 (2024) and FCC v. Prometheus Radio Project, 592 U.S. 414 (2021): for the “reasonable and reasonably explained” standard and the requirement of a rational connection between facts and choice.
  • Michigan v. EPA, 576 U.S. 743 (2015): for the principle that review is limited to the agency’s stated grounds.
  • Encino Motorcars, LLC v. Navarro, 579 U.S. 211 (2016) and Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281 (1974): require an agency’s path be reasonably discernible and provide at least minimal analysis.
  • FCC v. Fox Television Stations, Inc., 556 U.S. 502 (2009) and Regents: emphasize agencies must consider reliance interests and cannot ignore them when changing course.
  • Nat'l Council of Nonprofits v. Off. of Mgmt. & Budget, 763 F. Supp. 3d 13 (D.D.C. 2025): referenced for skepticism that 24 hours is enough for agencies to independently review massive volumes of grants.
  • Building & Construction Trades Department, AFL-CIO v. Allbaugh, 295 F.3d 28 (D.C. Cir. 2002): cited for the general principle that a speculative risk of unlawful application does not justify enjoining a policy, but the panel found it irrelevant given the record evidence of how agencies understood and implemented the directive.
  • City & Cnty. of San Francisco v. Trump, 897 F.3d 1225 (9th Cir. 2018) and United States v. Stanchich, 550 F.2d 1294 (2d Cir. 1977): used to treat “savings clauses” and formal caveats with contextual realism, not naïveté.

(f) Remedy limits under sovereign immunity and the Tucker Act

  • Department of Education v. California, 604 U.S. 650 (2025) (per curiam): held the APA’s limited waiver of sovereign immunity does not extend to orders “to enforce a contractual obligation to pay money,” indicating such disputes belong in an “appropriate forum.”
  • National Institutes of Health v. American Public Health Association, 145 S. Ct. 2658 (2025): reinforced that district courts lack jurisdiction under the APA to adjudicate claims “based on” grants or order relief designed to enforce obligations to pay money pursuant to grants.
  • Am. Pub. Health Ass'n v. Nat'l Insts. of Health, 145 F.4th 39 (1st Cir. 2025): cited to rebut the States’ attempted distinction; even there the claims did not depend on specific grant terms, yet the Supreme Court still stayed payment-enforcing relief.
  • Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002): referenced via Department of Education for the “contractual obligation to pay money” concept.

(g) Injunction specificity and appellate jurisdiction over enforcement orders

  • Axia Netmedia Corp. v. Mass. Tech. Park Corp., 889 F.3d 1 (1st Cir. 2018): used to explain Rule 65’s specificity requirement and contempt concerns.
  • Hatten-Gonzales v. Hyde, 579 F.3d 1159 (10th Cir. 2009) and Arlington Indus., Inc. v. Bridgeport Fittings, Inc., 759 F.3d 1333 (Fed. Cir. 2014): cited in the parties’ dispute over whether enforcement orders “modify” an injunction (appealable) or merely “enforce” (generally not appealable until final judgment).
  • Federated Mut. Ins. Co. v. Peterson's Oil Serv., Inc., 155 F.4th 1 (1st Cir. 2025) and Akebia Therapeutics, Inc. v. Azar, 976 F.3d 86 (1st Cir. 2020): invoked to allow “hypothetical” statutory jurisdiction and decide merits where doing so favors the jurisdictional challenger’s position.

3.2. Legal Reasoning

(1) The court reframed “what is being challenged”

A crucial move was the First Circuit’s insistence that the case was not about whether a particular memorandum remained on the books, but whether the directive/policy—a categorical, immediate freeze—continued to operate. The panel treated the district court’s “rescission in name only” finding as factual, reviewable only for clear error, and emphasized the Government did not meaningfully challenge it.

(2) Mootness failed because the challenged conduct persisted

Even accepting voluntary cessation doctrine, the Government’s argument assumed the rescission terminated the challenged conduct. The First Circuit rejected that premise: the “OMB Directive” and agency practice allegedly continued, supported by (i) the White House Press Secretary’s post stating the “funding freeze” remained, and (ii) evidence that agencies continued to impede disbursements and access.

(3) The States’ APA theory was treated as targeting discrete agency action

The court rejected the “programmatic attack” label by characterizing the challenged actions as discrete, agency-wide categorical freezes—akin to an across-the-board final order described in Lujan v. National Wildlife Federation’s footnote as properly challengeable.

(4) Reviewability under § 701(a)(2) did not bar the claims

The Government’s reliance on Lincoln v. Vigil (and related discretion cases) was deemed mismatched: a lump-sum allocation decision is not the same as a categorical pause of already obligated funds. The Government did not identify a statutory structure making these freezes “rare administrative decisions traditionally left to agency discretion” or lacking meaningful standards.

(5) Arbitrary-and-capricious analysis centered on immediacy, breadth, and ignored reliance

The panel affirmed the district court’s likelihood-of-success finding largely on arbitrary-and-capricious grounds:

  • Immediacy (24 hours) + scope (thousands of lines; vast sums) made it plausible the “freeze first, ask later” approach could not reflect meaningful case-by-case legality checks or consideration of impacts.
  • Reliance interests were front and center: States budget, staff, and deliver services based on expected obligated federal assistance. Abrupt categorical stoppage predictably causes service disruption, layoffs, and emergency-response and healthcare impacts—matters agencies must consider under Regents and Fox Television.
  • The Government offered no countervailing evidentiary record in opposition at the preliminary injunction stage to show reasoned decisionmaking occurred.

(6) Winter factors beyond the merits

The court upheld the irreparable-harm finding because the alleged harms were not merely delayed money (potentially remediable later), but operational disruptions affecting instruction, childcare availability, disaster response, healthcare delivery, and state finances—consistent with Rhode Island v. Trump.

On equities and public interest, the Government argued separation-of-powers harms and chilling effects. The panel found the injunction sufficiently specific under Rule 65 and limited to withholding “based on the OMB Directive” (and related executive-order-driven freezes), and it rejected the claimed chilling effect—particularly in light of the district court’s factual finding that FEMA’s “manual review” functioned as an enjoined freeze mechanism.

(7) The key remedial refinement: enjoining a freeze is different from ordering payment

The court drew a sharp line after Department of Education v. California and National Institutes of Health v. American Public Health Association:

  • It is permissible to prohibit implementation of an unlawful directive/policy (e.g., “do not implement the categorical freeze”).
  • It is generally not permissible under the APA’s waiver of sovereign immunity for a district court to order specific performance payments on “awarded grants” and “executed contracts” (i.e., “release and transmit” those payments), because that resembles enforcing “a contractual obligation to pay money” within Tucker Act territory.

Accordingly, the panel vacated the portion of the preliminary injunction compelling “disbursements” on “awarded grants” and “executed contracts,” while leaving intact the prohibitory parts that prevent implementing the categorical freeze.

(8) FEMA enforcement orders: permissible enforcement, not a payment decree

The enforcement order against FEMA largely required FEMA to stop the manual review process and to comply with the injunction’s prohibition on implementing the freeze. The panel held that this did not itself order money payments barred by the APA/Tucker Act framework; at most, it prevented FEMA from using an enjoined process that impeded disbursement.

3.3. Impact

(1) Mootness doctrine: “rescission” will be tested against real-world continuity

The decision strengthens the principle that courts will look past formal rescissions where record evidence supports a finding that the challenged directive/policy remains operative. In fast-moving administrative contexts, litigants can expect intense focus on de facto implementation, public statements, agency communications, and continued downstream effects.

(2) APA scrutiny of categorical funding “freezes”

The opinion signals that sweeping, rapid, categorical pauses of obligated assistance—especially where recipients have strong reliance interests—are vulnerable under arbitrary-and-capricious review absent a concrete, contemporaneous, reasoned explanation and meaningful consideration of disruption.

(3) Litigation framing: “discrete” agency-wide actions remain challengeable

By treating an across-the-board freeze as a discrete final agency action (rather than a forbidden “programmatic” claim), the court provides a roadmap for challenging broad policies without falling into Norton/Lujan traps: identify the specific directive/policy and the categorical act of implementation, rather than the entirety of federal spending.

(4) The remedial lesson: injunctions must be drafted to avoid Tucker Act collision

The most consequential prospective effect may be remedial: after Department of Education v. California and National Institutes of Health v. American Public Health Association, district courts in APA cases must separate:

  • Permissible relief: vacating/unlawfully enjoining guidance or categorical freeze directives (forward-looking restraints), and
  • Often impermissible relief: orders that function as payment commands enforcing grant/contract obligations.

Future plaintiffs may increasingly pursue parallel strategies: (i) APA suits to stop unlawful policies, and (ii) Tucker Act/Court of Federal Claims (or other “appropriate forum”) actions for withheld payments, depending on the instrument and statutory scheme.

4. Complex Concepts Simplified

  • Preliminary injunction: a temporary court order entered early in a case to prevent likely harm while the lawsuit proceeds. Courts apply the four-factor test from Winter v. Nat. Res. Def. Council, Inc..
  • Mootness: courts can only decide live disputes. If the challenged conduct stops and cannot reasonably recur, the case may become moot. Under Bayley's Campground, Inc. v. Mills and FBI v. Fikre, a defendant who voluntarily stops challenged conduct bears a heavy burden to show the case is truly over.
  • “Rescission in name only” / de facto policy: even if a memo is withdrawn, courts may find the policy continues if agencies keep acting the same way and public/record evidence indicates ongoing implementation.
  • “Programmatic attack” vs. “discrete agency action”: the APA does not allow lawsuits attacking an entire governmental “program” in the abstract, but it does allow challenges to a particular final directive or rule that applies across the board (as explained by Lujan v. National Wildlife Federation and Norton v. Southern Utah Wilderness Alliance).
  • Arbitrary and capricious: under the APA, agencies must give a reasoned explanation and consider important aspects of the problem. Ignoring obvious consequences or reliance interests can make action unlawful (see Dep't of Homeland Sec. v. Regents of the Univ. of Cal.).
  • Tucker Act / sovereign immunity limits: the federal government can only be sued where it has consented. The APA waives immunity for certain non-monetary relief, but the Supreme Court in Department of Education v. California and National Institutes of Health v. American Public Health Association emphasized that district courts generally cannot use the APA to order payment of money that amounts to enforcing grant/contract obligations—those disputes often belong in the Court of Federal Claims.

5. Conclusion

The First Circuit’s decision does two major things at once. First, it validates aggressive judicial scrutiny of sweeping, rapidly imposed, categorical funding freezes—particularly where the record suggests agencies “froze first” without considering legality, operational consequences, and recipients’ reliance interests—making an arbitrary-and-capricious APA theory especially potent in this setting. Second, it sharply narrows the payment remedies available in district court after Department of Education v. California and National Institutes of Health v. American Public Health Association: courts may stop an unlawful freeze, but generally may not compel specific grant/contract disbursements as such under the APA.

Going forward, the case is likely to be cited for (i) rejecting mootness where rescission is merely formal and the challenged policy persists, (ii) treating categorical freezes as discrete, reviewable agency actions, (iii) emphasizing reliance interests in arbitrary-and-capricious analysis, and (iv) policing injunction drafting to avoid Tucker Act/sovereign-immunity conflicts.