1st Circ: APA Halts Funding Freeze But Won’t Compel Payment
The First Circuit held that an across-the-board freeze on IIJA and IRA funds was likely an unlawful final agency action but found that the district court exceeded its authority by ordering the government to disburse specific funds.
In 'Woonasquatucket River Watershed Council v. USDA', the First Circuit affirmed a preliminary injunction halting a federal freeze on funds awarded under the Infrastructure Investment and Jobs Act and the Inflation Reduction Act, but it vacated the part of the order compelling the government to make payments. The court found that a broad directive to pause funding was likely a reviewable “final agency action” under the Administrative Procedure Act (APA) and that the agencies’ “freeze first, ask questions later” approach likely violated the APA by failing to consider grant recipients’ significant reliance interests.
The decision is important for its clear remedial line: while the APA’s waiver of sovereign immunity allows courts to set aside an unlawful agency action (the freeze), it does not authorize orders compelling the specific performance of payment obligations, which must typically be pursued through the Tucker Act. The court also suggested that APA § 705, which allows courts to postpone agency action, may provide an independent basis for broad injunctive relief extending beyond the named plaintiffs, a notable development following the Supreme Court’s recent limitations on universal injunctions. Counsel for federal grant recipients and contractors should note the strategic importance of framing challenges around APA violations rather than as simple payment disputes.