Judge Denies Trump Bid to Toss Out Suit Over Funding Freeze (2)

The Trump administration offered “no rationale” for cutting off potentially trillions of dollars in federal funding of grants, loans and other financial assistance to recipients nationwide with less than 24 hours notice to conduct an ideological review, a judge said.

US District Judge Loren AliKhan in Washington on Monday denied a request by the White House Office of Management and Budget to dismiss a suit filed by a national group of nonprofits challenging the funding freeze. She also granted the group’s request for a temporary restraining order against the freeze, the second such ruling in less than a week.

AliKhan, an appointee of former President Joe Biden, said in a 30-page written ruling that if OMB intended to conduct an “exhaustive review” of what programs should or shouldn’t be funded, it could be carried out “without depriving millions of Americans access to vital resources.”

“As defendants themselves admit, the memorandum implicated as much as $3 trillion in financial assistance,” the judge said. “That is a breathtakingly large sum of money to suspend practically overnight.”

AliKhan previously blocked the funding freeze with a brief administrative stay until she could rule on the TRO, which itself will only last until she decides whether to issue an injunction that would remain in place until the case is resolved. A similar TRO was granted just days ago by a federal judge in Rhode Island in a suit brought by Democrat-led states.

In both cases, the judges said that the plaintiffs are likely to succeed in their suits restricting the flow of funds. AliKhan said in her ruling that organizations nationwide may be at risk of “irreparable harm” from the rollout of the Trump’s administration’s pause in financing.

The White House didn’t immediately respond to a message seeking comment on the ruling.

Trump defended the move during a White House event on Jan. 29, casting the freeze as one that would allow his administration to review discretionary spending programs and “quickly look at the scams, dishonesty, waste, abuse that’s taking place in our government for too long.”

Surprise Memo

Diane Yentel, chief executive officer of the National Council of Nonprofits, which filed the lawsuit on behalf of thousands of members across the US, said in a statement that nonprofits had been “left in limbo” by the spending freeze.

“We are determined to continue to do all we can to prevent this administration’s reckless attempt to halt funding that would put people’s lives and safety at risk, from pausing research on cures for childhood cancer to halting food assistance, safety from domestic violence and closing suicide hotlines,” Yentel said in the statement.

The suits were filed last month after OMB issued a surprise memo telling federal agencies to pause all financial assistance to ensure it’s aligned with Trump’s recent slew of executive orders. Those orders include banning the use of funds for diversity programs, abortion and other policies opposed by the new administration.

The OMB had said a pause was needed for agencies to review spending on “financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal.” But the groups allege the plan violates federal law because it was rolled out in an “arbitrary and capricious” manner and violates the the First Amendment.

Trump rescinded the memo within days, in what appeared to be a major reversal amid confusion and concern about the impact of the spending freeze nationwide. In both suits, the Trump administration said the TROs should be denied because the memo had been withdrawn, but the judges in both cases said the risk of harm remained.

In the Washington case, AliKhan pointed a White House statement issued after the OMB memo was rescinded that said the move was “NOT a rescission of the federal funding freeze.” The judge said it “strains credulity” for OMB to “innocently claim” that the memo was rescinded simply to end confusion after she issued her earlier administrative stay.

“The rescission, if it can be called that, appears to be nothing more than a thinly veiled attempt to prevent this court from granting relief,” the judge said.

AliKhan also rejected the government’s argument that the pause in funding would be too brief to cause “lasting damage.” She said the directive in the OMB memo “is effectively indefinite with no clear parameters for when it will end.”

‘Sweeping Freezes’

Before the ruling was handed down, Justice Department attorney Daniel Schwei urged the court to reject the order, saying the plaintiffs were essentially asking the court “to superintend the entire executive branch’s disbursement of funds.” Such a move would be an “extraordinary intrusion” by the courts, he said.

Prior to the hearing, a small West Virginia organization that belongs to the National Council of Nonprofits filed a brief outlining what they describe as a concrete example of the impact of the freeze. The nonprofit, whose name is redacted in the filing, said it was forced to lay off some staff and may go out of business altogether as a result of the funding freeze, and that its clients who seek to live at home with disabilities may be forced into more expensive nursing homes or “wind up homeless on the streets.”

(Updates with comment from the National Council of Nonprofits.)

To contact the reporter on this story:
Erik Larson in New York at elarson4@bloomberg.net

To contact the editors responsible for this story:
Misyrlena Egkolfopoulou at megkolfopoul@bloomberg.net

Elizabeth Wasserman, Peter Blumberg

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