The U.S. Supreme Court agreed last week to permit the National Institutes of Health (NIH) to terminate hundreds of grants related to diversity, equity and inclusion (DEI) initiatives worth approximately $800 million. The order was issued in response to the government’s emergency request to stay a lower court injunction barring the termination of the grants. The Supreme Court held that suits challenging these terminations must be brought before the Court of Federal Claims (CFC) and that, conversely, the federal district courts lack jurisdiction under the Administrative Procedure Act (APA) over these suits.
Plaintiffs challenging grant terminations now will need to file a contract claim with the CFC. At the same time, a Civil War-era law deprives the CFC of jurisdiction when the plaintiff has a claim pending in any other court that is based on the same operative facts. So, to pursue monetary relief before the CFC, plaintiffs will first need to drop any existing APA suit. Plaintiffs that wish to pursue both equitable and monetary relief will be able to file a separate suit for equitable relief under the APA in federal district court — but only after their CFC claims have been filed.
Obstacles to Suing the Government
The Trump administration’s mass termination of hundreds of contracts and grants worth over $1 billion has spawned dozens of lawsuits. The plaintiffs in these actions have been forced to contend with a jurisdictional quandary that comes with suing the government, which is created by the doctrine of sovereign immunity.
Under longstanding precedent, the federal government is generally immune from suit in U.S. courts except to the degree that it has waived such immunity through an act of Congress. The Supreme Court construes waivers of the government’s “sovereign immunity” narrowly. Thus, to sue the federal government, a plaintiff must be able to show that its claims are covered by a statutory waiver. Claims challenging the Trump administration’s mass termination of contracts and grants fall awkwardly under two statutes: the APA and the Tucker Act. To avoid dismissal, plaintiffs must carefully navigate the limitations posed by these two statutes.
The APA was enacted in 1946 in response to the expansion of federal power under the New Deal and sets the framework for reviewing the exercise of power by executive agencies. The APA attempted to strike a balance between preserving the advances made by the regulatory state while giving citizens and businesses tools to check the arbitrary exercise of power by agencies. The APA generally permits persons suffering legal wrong because of agency action to seek judicial review in federal district courts and grants these courts the broad power to “hold unlawful and set aside agency action” found to be arbitrary, capricious, contrary to law or the constitution, or unsupported by substantial evidence. 5 U.S.C. §§ 702, 706. Still, such relief only covers “relief other than money damages,” and the courts lack power under the APA to grant relief to the extent that another statute “forbids the relief which is sought.” 5 U.S.C. § 702.
The Tucker Act, in turn, grants the CFC jurisdiction over claims based on “any express or implied contract with the United States.” 28 U.S.C. §§ 1491(a); 1346(a)(2). The Supreme Court has generally interpreted the Tucker Act as granting the CFC exclusive jurisdiction over such claims. See, e.g., E. Enters. v. Apfel, 524 U.S. 498, 520 (1998). Importantly, outside the bid protest context, the CFC lacks the power to grant equitable relief beyond the power to remand matters to the agency with instructions for consideration. See, e.g., U.S. v. Mitchell, 463 U.S. 206, 216-17 (1983).
Historically, to avoid litigating in two venues and take advantage of the broader relief available under the APA, most plaintiffs have attempted to thread this jurisdictional needle by filing APA actions in federal district court. These plaintiffs argue that their lawsuits present statutory or constitutional challenges to agency action, rather than claims seeking monetary damages for breach of the terms of their respective contracts or grants. The court’s latest emergency docket order casts doubt on the viability of this strategy.
Jurisdictional Pitfall
In the case of the NIH grantees, the Supreme Court held that challenges to grant terminations must be filed at the CFC, while more general challenges to agency action (such as challenges to guidance documents addressing the terminations) fall under the exclusive jurisdiction of the federal district courts under the APA. As a practical matter, these plaintiffs will need to withdraw their existing APA claims before filing suit at the CFC.
Although the Tucker Act confers jurisdiction upon the CFC to hear certain types of monetary claims against the United States, 28 U.S.C. § 1500 (Section 1500) curtails that jurisdictional grant by providing that the CFC “shall not have jurisdiction of any claim for or in respect to which the plaintiff . . . has pending in any other court any suit or process against the United States. . . .” Section 1500 was enacted in 1868 to curb duplicate lawsuits brought by residents of the Confederacy after the Civil War. At the time, the common practice was for so-called “cotton claimants” to pursue contract claims against the United States in the Court of Claims under the Abandoned Property Collection Act while simultaneously pursuing tort claims against federal officials in other courts based the same set facts.[1]
In the years that followed the passage of Section 1500, Congress has enacted various jurisdictional statutes that have the cumulative effect of compelling an aggrieved party to seek equitable relief in one court and monetary relief in another court. In 1994, the Court of Appeals for the Federal Circuit effectively defanged Section 1500 by holding that two suits were “for or in respect to” one another only if they arose from the same operative facts and there was some overlap in the relief request. But in 2011, the Supreme Court overturned decades of precedent and adopted a stricter interpretation, holding that the bar applies to suits based on the same operative facts regardless of the relief sought in each suit. Based on this stricter interpretation, the CFC routinely dismisses claims for lack of jurisdiction. Although critics of the law, including the Administrative Conference of the United States, have called for the reform or repeal of Section 1500, none of these efforts have succeeded.[2]
Accepted Workaround
Fortunately, there is an accepted workaround to these jurisdictional roadblocks. Under the Federal Circuit’s “order-of-filing” rule, Section 1500 only bars the CFC from hearing claims if another suit is already “pending” when the CFC suit is filed. If a plaintiff files a claim first in the CFC and then files an APA claim based on the same operative facts in another court, the CFC retains jurisdiction, and the two suits can proceed simultaneously. See Metzinger v. Dep’t of Veterans Affairs, 20 F.4th 778, 786 n.8 (Fed. Cir. 2021).[3] That said, this strategy is not without risk. A high-profile case may well reach the Supreme Court, which has not yet ruled on the merits of the Federal Circuit’s “order-of-filing” rule.
To be sure, case law in this area is still developing. The order was issued under the Supreme Court’s “emergency docket” with a 4-1-4 split without full briefing or oral argument, so the law may very well shift. Additionally, the facts at issue in the order involved grant terminations. The court has not yet addressed whether orders freezing the release of funds to grantees or contractors – arguably administrative actions – fall under the domain of the Tucker Act or the APA. In any event, as the order makes clear, even emergency docket decisions are precedential. So, until further notice, plaintiffs challenging terminations should shift their litigation efforts to the CFC.[4]
Miles & Stockbridge’s government contracts lawyers are monitoring fallout from the court’s ruling and can guide grant recipients as they consider next steps.
Opinions and conclusions in this post are solely those of the authors unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The authors have provided the links referenced above for information purposes only and by doing so, do not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the authors to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the authors if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.
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