The Trump administration suffered a significant legal defeat after a federal judge ruled that agencies cannot revoke previously awarded federal grants simply because a new administration adopts different policy priorities, according to a newly issued court order exclusively obtained by RadarOnline.com.
U.S. District Judge Indira Talwani sided with a coalition of 20 states and three governors and the District of Columbia, denying the administration’s motion to dismiss while granting summary judgment on a key claim challenging the government’s interpretation of federal grant regulations.
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Judge Rejects Grant Termination Theory
The court found grants must be evaluated based on the program goals.
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The dispute centered on a provision known as the “Termination Clause,” which the administration argued allowed agencies to end grants if they no longer aligned with agency priorities.
Talwani rejected that interpretation, ruling the regulation does not authorize agencies to terminate grants based on priorities developed after the awards were issued.
Instead, the court found grants must be evaluated based on the program goals and agency priorities in place when funding was originally awarded.
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States Unite Against Trump Administration
Federal agencies have already terminated billions of dollars in grant funding.
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The lawsuit was brought by New Jersey, Massachusetts, New York, California and numerous other states – along with the governors of Pennsylvania, Kansas and Kentucky, who argued the administration’s approach threatened billions of dollars in congressionally approved funding.
According to the ruling, the coalition demonstrated it currently has at least 1,180 active federal grants totaling more than $5.39 billion, giving the plaintiffs standing to pursue the case because those awards remain at risk of future termination.
The opinion also noted that since January 2025, federal agencies have already terminated billions of dollars in grant funding affecting a wide range of programs, including university research, school nutrition initiatives, violent crime prevention efforts and other federally funded projects.
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Trump’s Defense Falls Flat
Several states had shown an imminent risk because agencies had already terminated numerous grants.
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The Trump administration had argued the lawsuit should be thrown out, contending the states lacked standing and that any dispute over future grant terminations was too speculative.
Talwani disagreed, finding the states had shown an imminent risk because agencies had already terminated numerous grants while continuing to review additional awards under the administration’s broader effort to reduce federal spending.
The judge further concluded that allowing agencies to change the rules after grants had already been awarded would conflict with the federal regulatory framework, requiring recipients to receive clear notice of funding conditions before accepting federal money.
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Federal Funding Fight Takes Turn
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Agencies cannot rely on changing policy priorities alone to cancel existing awards going forward.
While the court emphasized that the ruling does not restore grants already terminated, it declared that agencies cannot rely on changing policy priorities alone to cancel existing awards moving forward.
The decision marks one of the most significant judicial setbacks to date for the administration’s efforts to reshape federal spending through sweeping grant reviews, and it clears the way for the coalition of states to continue protecting billions of dollars in active federal funding unless a higher court intervenes.
A significant victory for the states, universities, and public programs that rely on billions of dollars in federal grant funding.