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Ninth Circuit Denies Stay in Lawsuit Over UC Funding
Court Declines to Pause, Pending Appeal, Reinstatement of Federal Grants Cut by Trump Administration, Allowing Money to Continue Flowing to DEI, Green Projects That Conflict With Executive Priorities
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday denied a request by the Executive Branch to stay, pending appeal, a preliminary injunction requiring the government to reinstate research grants in California that had been terminated after being identified as conflicting with President Donald Trump’s orders curtailing the use of federal funds for the promotion of “diversity, equity, and inclusion” or “environmental justice.”
Saying that the government had failed to meet its burden to show a likelihood of success on the merits and other factors, the court specifically rejected the assertion that the injunctive relief interferes with the policy agenda set by the Executive Branch and found insufficient the claim that the money that will be expended cannot be recovered if the order is eventually overturned.
Yesterday’s order, signed by Circuit Judges Morgan B. Christen and Roopali H. Desai and by Senior Circuit Judge Richard A. Paez, allows federal funds to continue flowing to University of California (“UC”) researchers on the projects, which include grants of $1.3 million for the evaluation of the effect of wildfire smoke within “environmental justice communities” and another $1 million to go to using artificial intelligence and satellites to detect climate change.
Executive Order No. 14151, signed by Trump on Inauguration Day, directs federal departments to provide the director of the Office of Management and Budget with a list of all “[f]ederal grantees who received [f]ederal funding to provide or advance DEI, DEIA, or ‘environmental justice’ programs, services, or activities since January 20, 2021.” The decree expressly directs agency heads to “terminate…all…‘equity-related’ grants.”
Paez, Christen, and Desai were each appointed by Democrat presidents.
June Order
At issue is an order, issued in June by District Court Judge Rita F. Lin of the Northern District of California, certifying two overlapping classes of UC researchers—those whose grants were terminated for researching what Lin described as “blacklisted DEI topics” and others who lost funding by way of a form letter without any project-specific explanation—and granting preliminary injunctive relief on a class-wide basis as to both categories of plaintiffs.
In a concurrently filed order addressing the scope of the injunction, Lin made clear that the government is to restore virtually all grants to any UC campus that were cut due to ties to diversity-related or environmental topics or by way of form letters and wrote:
“While this matter remains pending, any future grant terminations by Agency Defendants [meeting criteria set forth for each class] are vacated upon issuance, and the Agency Defendants are enjoined as to those terminations.”
The question arose after six researchers, hailing from UC Berkeley and UC San Francisco, filed a putative class action complaint in April, seeking to have funding restored to their projects and those of their colleagues. Erwin Chemerinsky, dean of the UC Berkeley School of Law, helped prepare the pleading.
Plaintiffs in the so-called “Form Termination Class” asserted a claim rooted in the Administrative Procedure Act (“APA”), and the researchers who lost funding due to projects having ties to diversity or environmental concerns raised a First Amendment challenge.
They named a multitude of federal agencies as defendants, but the government requested a stay of the injunction only as it pertains to research grants awarded by the Environmental Protection Agency (“EPA”) and the National Endowment for the Humanities (“NEH”). In April, each group sent letters terminating funding to certain projects, saying that the awards “no longer effectuate” the government’s policy goals.
Stay Factors
Christen wrote yesterday’s order and noted that “[w]e consider four factors when we decide whether to stay an injunction,” including likelihood of success on the merits, if the applicant will be irreparably harmed, any injury that would result from pausing the effect of the lower court’s order, and where the public interest lies.
The government asserted that the Form Termination Class is not likely to succeed on the merits of the APA claim because the agencies’ decision to discontinue previously funded grants is a discretionary executive action outside the scope of review by federal courts.
Rejecting this argument, the jurist said that federal regulations “outline the requirements for termination, the notification requirements when grants are terminated, and the effects of suspension and termination of grants” and so “provide a meaningful standard by which courts may review the agencies’ exercise of discretion.”
Citing case law providing that federal agencies may change existing policy if they offer a reasonable explanation for the move and consider serious reliance interests at stake, she remarked:
“The EPA form letter provides three disjunctive reasons for termination: (1) failure to exhibit ‘merit, fairness, and excellence;’ (2) ‘fraud, abuse, waste, and duplication;’ and (3) failure to ‘serve the best interests of the United States.’ The letter does not explain which rationale applies to the recipient of the form letter.”
Acting Chairman of NEH Michael McDonald declared that the grants were selected for termination based on their having ties to “environmental justice” or “diversity, equity, and inclusion,” but Christen said that “we agree with the district court that the recipients of the form letter and the public were left to guess at the reasons for these terminations.”
Pointing out that “[t]he government conceded at oral argument that there is no record evidence that either agency considered the researchers’ reliance interests,” she declared:
“[T]he government has not ‘made a strong showing’ that it is likely to succeed on the merits of its argument that the district court abused its discretion when it concluded that the termination of grants by form letters was likely arbitrary and capricious.”
First Amendment Claim
Addressing the First Amendment claim asserted by the “DEI Termination Class,” she explained:
“The government relies on the significant flexibility it is afforded when acting as a patron to subsidize speech, as opposed to when it regulates speech as a sovereign. The government argues that it ‘can, without violating the Constitution, selectively fund a program to encourage certain activities it believes to be in the public interest’ to the exclusion of other activities.”
Reasoning that the government “misreads” First Amendment jurisprudence, she wrote:
“Contrary to the government’s argument, this case does not appear to be one in which an agency decided not to ‘fund a program.’…Rather, it is one in which more than a dozen agencies selected particular grants for termination…based on their connection to DEI, DEIA, and environmental justice.”
Saying that “the record at this stage shows that the agencies selected grants for termination based on viewpoint,” Christen opined:
“We are bound by the bedrock principle that the government cannot ‘leverage its power to award subsidies on the basis of subjective criteria into a penalty on disfavored viewpoints’ or ‘aim at the suppression of dangerous ideas’ in the provision of subsidies.”
Other Factors
As to the other factors, she commented that the assertion that the preliminary injunction interferes with the chosen policy agenda of the Trump administration “rests on the assumption that the government’s conduct is lawful.” As to the ongoing flow of federal funds, she said:
“Even if the government may be unable to recover at least some of the funds it disburses pursuant to the grants and may therefore suffer some degree of irreparable harm,…the remaining equitable factors do not favor the [stay].”
The government also raised jurisdictional concerns, saying that the Tucker Act restricts review of any breach of contract claims against the U.S. government to the Court of Federal Claims. Finding this argument to be without merit, Christen declared:
“Plaintiffs’ APA claim is not premised on any rights derived from their grants or any purported contract and thus resolving the claim does not require analyzing the terms of any grant or contract.”
Addressing objections based on standing, she declared:
“The government separately argues that not every member of the Form Termination Class has standing because class members will only suffer injury to the extent they are unable to replace any terminated federal funding….[T]he government… overlooks that the class representatives…also allege injury in the form of opportunity costs associated with seeking alternative funding, disruptions to projects, and reputational harms associated with grant terminations.”
The case is Thakur v. Trump, 25-4249.
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