Those doing business with the government may face an ogre’s choice at the intersection of two Supreme Court decisions and longstanding Federal Circuit precedent precluding jurisdiction over non-procurement contracts.
The two rulings from the high court, Department of Education v. California (“California”) and National Institutes of Health v. American Public Health Association (“NIH”), veer from prior case law designating the appropriate venue for grant termination challenges. Given this new uncertainty and associated risks, those receiving federal funds should carefully consider the appropriate forum for bringing suit if those funds are cut off.
The Court of Federal Claims Has Historically Lacked Jurisdiction Over Grants and Other Non‑Procurement Contracts
It has long been the law in the Federal Circuit that the Court of Federal Claims (“Federal Claims”) cannot consider claims regarding non-procurement contracts (i.e., grants or collaborative agreements). Under the Tucker Act, 28 U.S.C. Section 1491, Federal Claims has jurisdiction to hear contract claims against the federal government. The Tucker Act, however, is purely jurisdictional, and claimants must rely on a substantive area of law for a successful suit. For many Federal Claims plaintiffs, that act is the Contracts Disputes Act (“CDA”), 41 U.S.C. 7101 et seq., which covers disputes relating to procurement contracts (generally, contracts for purchase of property or services).
In Rick’s Mushroom Serv., Inc. v. United States, the Federal Circuit affirmed a Federal Claims decision that “the CDA is inapplicable to the cost-share agreement and there is no basis for jurisdiction under 28 U.S.C. [Section] 1491(a)(2).” That contract was non-procurement because “the agreement did not provide for transfer of goods or services to the government, there was no evidence of a buyer-seller relationship, and the government did not receive a direct benefit from the operation of the SMA transfer facility.” Id.
In a similar decision, St. Bernard Par. Gov’t v. United States, Federal Claims found it lacked jurisdiction to hear a dispute regarding a collaborative agreement. Because the collaborative agreement repaid the local government for funds the local government paid to contractors to do work that benefited the local government, the agreement did not provide a direct benefit to the federal government. In such cases, plaintiffs were directed that their remedies would lie in suits in district court under the Administrative Procedure Act (“APA”).
Although there are some Federal Claims cases that do consider claims on what appear to be collaborative agreements (e.g., Anchorage v. United States), the general principle that suits on non-procurement agreements do not proceed in Federal Claims appeared to be well-settled before California and NIH.
The Shadow Docket Decisions in California, then NIH, Present a Contradictory Result
California is a challenge to the federal government’s termination of grants that “fail to serve the best interests of the United States,” and was filed in federal district court as an APA matter seeking injunctive relief. In response to suit, both before the district court and the First Circuit, the government argued that there was no jurisdiction to hear these APA challenges and that, instead, because “each grant award takes the form of a contract between the recipient and the government,” suit would have to proceed in Federal Claims. The district court rejected that argument and granted a stay, which the First Circuit affirmed.
The U.S. Supreme Court, however, ruled 5-4 on its “shadow docket” (where it lacked full briefing or argument) that the claims could not proceed under the APA. The Supreme Court found that plaintiffs were not likely to succeed on the merits of their claims (and therefore should not have received preliminary injunctive relief) because “the Tucker Act grants the Court of Federal Claims jurisdiction over suits based on ‘any express or implied contract with the United States,’” including the termination of grants that are at issue in California.
Further complicating the picture, on Aug. 21, the Supreme Court issued another shadow docket decision on grant termination claims, in its 4-1-4 opinion in NIH, 606 U.S. ___ (2025). That case concerns an APA challenge to the NIH’s guidance that the agency would no longer “fund research related to DEI objectives, gender identity, or COVID–19” and NIH’s cancellation of specific grants purportedly in accordance with that guidance. The district court had granted injunctive relief vacating the guidance and the terminations of the grants and refused the government’s request for a stay. The First Circuit also refused a stay while the underlying decision was appealed.
In five separate opinions, four justices found that the district court was wrong on both issues, four justices found that the district court was right as to both, and Justice Amy Coney Barrett broke the 4-4 tie by opining that the district court had jurisdiction under the APA to vacate the guidance, but only Federal Claims had jurisdiction to hear the grant termination claims.
It is of particular note that the district court had thought to distinguish California in part on the basis that that decision was a shadow docket decision only granting interim relief. The First Circuit had expanded on this point and determined that NIH was different in that the district court “did not ‘enforce a contractual obligation to pay money’” and rather “declared that the [agency] unlawfully terminated certain grants.” Justices Neil Gorsuch and Brett Kavanaugh, who are part of the NIH plurality, wrote a concurring opinion to make plain that California “constitutes a precedent that commands respect in lower courts” and binds lower courts on the issue that Federal Claims is the only court with jurisdiction to hear challenges to grant claims.
Cases at the Intersection of California/NIH and Rick’s Mushroom appear to be Headed Toward a Crash
In the aftermath of California, district courts and appellate courts have reacted differently to APA challenges to grant terminations. Although the lower courts in NIH thought there was a distinction to be made between California and their matter, the Fourth Circuit granted a stay of a district court’s preliminary injunction in American Association of Colleges for Teacher Education v. McMahon on the basis of the California decision. A district court in the First Circuit recently did so as well in Massachusetts Fair Hous., Ctr. v. Dep’t of Hous. & Urban Dev. Other circuits are starting to weigh in on this decision, too. See, e.g., Cmty. Legal Services in E. Palo Alto v. United States Dep’t of Health & Human Services 9th Cir.) (stay); Widakuswara v. Lake, (D.C. Cir.) (stay); Climate United Fund v. Citibank, N.A., (D.C. Cir.) (stay).
Grant cases that proceed to Federal Claims, however, face the problem of Rick’s Mushroom remaining binding precedent there, and there is no guarantee that the government will agree that Federal Claims can hear these suits if they are filed. Indeed, the federal government has long contended that it cannot be subject to estoppel and could argue that it is entitled to take inconsistent positions as to jurisdiction to hear these disputes. Heckler v. Community Health Services of Crawford County, Inc.
Further, although the NIH plurality would have APA and Tucker Act claims proceed concurrently in two different courts, 28 U.S.C. Section 1500 expressly states that Federal Claims does not have jurisdiction over “any claim for or in respect to which” there is a suit pending in another court, which makes such splitting problematic or a trap for the unwary.
Thus, those who have received grant or collaborative agreement funding from the federal government face an untenable choice if challenging a termination: proceed under the APA in district court and be dismissed on one basis or proceed in Federal Claims and be dismissed on another.
Holders of Grant Funding Should Consider the Relative Merits of Each Venue to Choose How to Proceed
With the uncertainty that a suit will overcome a motion to dismiss on jurisdictional grounds either in district court or in Federal Claims, funding recipients should consider other aspects in determining where best to bring suit.
First, although California and NIH provide some level of guidance, the decisions came on the shadow docket, and it is not clear whether the question of Federal Claims jurisdiction was placed before the court or considered in either. Thus, they do not entirely resolve the question. NIH also leaves jurisdiction in district court to consider some APA claims as policies that impact grants.
Second, the Supreme Court’s maxim that equitable estoppel does not apply against the government comes with an important caveat. The Heckler court expressly refrained from ruling that there are no circumstances in which estoppel applies to the government. A situation in which the government successfully advances a position before the Supreme Court (twice) and then takes the alternate position may be that circumstance (of course, Federal Claims jurisdiction is not up to the administration, and a Federal Claims court might take up that issue on its own).
Third, there is no preliminary injunctive relief available for CDA claims on grant terminations. Instead, CDA claimants pursue damages as their exclusive remedy. For that reason, termination of a grant that would have the effect of putting one out of business may require roughing the waters of an APA claim, rather than pursuing the (possibly) now-more-settled path in Federal Claims.
Fourth, the administration may perceive an APA suit seeking immediate injunctive relief as a provocation, unlike a Federal Claims claim. These are untested waters, but the administration’s attempts to move these claims to Federal Claims suggests that it is inviting aggrieved entities to consider damages as an appropriate remedy here. Those who wish to continue long-term relationships with the administration may be well advised to accept that invitation.
Fifth, the Federal Circuit has adopted a workaround to 28 U.S.C. Section 1500, determining that Federal Claims has jurisdiction over split claims if the part before Federal Claims was filed prior to the part in district court. Hardwick Bros. Co. II v. United States. Filing first in Federal Claims, regardless of whether an APA claim is made, is the way to proceed.
Savvy clients should proceed in this area with eyes wide open. Brownstein can help potential claimants carefully craft their requested relief to avoid some of the above pitfalls, through our relationships with the government and litigation advice, if necessary. This will ensure the highest likelihood of success against motions to dismiss for jurisdictional concerns, regardless of venue.
