First Circuit Curbs Federal Freeze of IIJA and IRA Grant Funds
The First Circuit affirmed an injunction against a federal freeze on awarded infrastructure and energy funds, clarifying APA review for broad executive actions but limiting courts' power to compel direct payments.
The U.S. Court of Appeals for the First Circuit largely upheld a preliminary injunction blocking a federal government freeze on funds already awarded to grantees under the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA). The court held that the administration's categorical directive to pause disbursements was likely a reviewable final agency action under the Administrative Procedure Act (APA), not an unchallengeable 'programmatic attack.' Sophisticated counsel should note the court’s reasoning on several key administrative law principles. First, it found the agencies likely acted arbitrarily and capriciously by instituting a 'freeze first, ask questions later' policy without considering the grantees' significant reliance interests on the awarded funds. Second, the court carefully distinguished between permissible and impermissible remedies; while it affirmed the injunction blocking the government from implementing the unlawful freeze, it vacated the portion of the lower court's order that compelled specific payments, citing sovereign immunity concerns. Finally, the opinion suggests that even after Supreme Court precedent limiting universal injunctions, APA § 705 may provide an independent statutory basis for interim relief that extends beyond the named plaintiffs. Federal award recipients should carefully document reliance interests to strengthen any potential challenge to future policy shifts.