A federal appeals court has ruled that the Trump administration is not required to reinstate millions of dollars in climate-related grants to cities and non-profit organisations, finding that a lower court lacked jurisdiction over the dispute.
On Wednesday, the US Court of Appeals for the Fourth Circuit granted the government’s request to vacate an injunction that had ordered the restoration of the funds. The panel cited two US Supreme Court orders holding that disputes over cancelled grant programmes fall under the jurisdiction of the US Court of Federal Claims pursuant to the Tucker Act.
The decision marks another setback for grant recipients seeking to challenge funding withdrawals by the Trump administration in federal district courts. Writing for the panel, Judge Allison Jones Rushing rejected arguments that the case raised separation-of-powers concerns, stating that “the alleged statutory and constitutional violations do not alter the essentially contractual nature” of the plaintiffs’ claims under the Administrative Procedure Act.
The Trump administration has repeatedly relied on the Tucker Act—an 1887 statute governing contract claims against the federal government—to argue that funding disputes must be heard in claims court rather than district courts. The DC Circuit has previously accepted this position, ruling that the Environmental Protection Agency could withhold billions of dollars in grants appropriated for greenhouse gas reduction projects.
Judge Rushing also concluded that the EPA did not violate the Inflation Reduction Act or the Infrastructure Investment and Jobs Act, noting that neither statute requires grants to be distributed to specific recipients, but only that funds remain available for obligation.
The appeal arose from an order issued by the US District Court for the District of South Carolina, which had directed the EPA to restore grants awarded to cities including Baltimore, Nashville, and San Diego.
In that earlier ruling, District Judge Richard M. Gergel found the agency likely violated the APA, citing the EPA’s failure to produce documentation showing any individualised review of the plaintiffs’ grants.
The appellate panel disagreed, stating that “pausing funding pending review is not the same as the complete, permanent termination of grant programmes” alleged by the plaintiffs. Judges Paul Niemeyer and Toby J. Heytens joined the opinion.
The plaintiffs are represented by the Southern Environmental Law Center.
The case is The Sustainability Institute v. Trump, Fourth Circuit, No. 25-01575, decided on 21 January 2026.
