On August 7, 2026, the First Circuit held in Woonasquatucket River Watershed Council v. U.S. Department of Agriculture that federal agencies likely violated the Administrative Procedure Act (APA) when they categorically froze already-awarded federal financial assistance under the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA). The decision is important for nonprofits, grant recipients, infrastructure and transportation industry members, and others that rely on federal awards. But its significance extends beyond federal funding disputes. The opinion also addresses three recurring issues in modern administrative-law litigation: when broad government directives are reviewable final agency action, how courts should treat agency decisions that disrupt reliance interests, and what remedies remain available under the APA after the Supreme Court's decision limiting universal injunctions in Trump v. CASA, Inc., 606 U.S. 831 (2025).
The case arose from the January 2025 Executive Order titled "Unleashing American Energy." The order directed agencies to pause the disbursement of funds appropriated through the IIJA and the IRA while agencies reviewed the relevant programs for consistency with the law and the Administration's policy objectives. The next day, the Office of Management and Budget (OMB) and the National Economic Council (NEC) issued a memorandum instructing agencies to immediately implement that funding pause for programs, projects, and activities implicated by the executive order.
Several nonprofit organizations sued in the District of Rhode Island challenging the OMB/NEC memorandum and related decisions by the Department of Agriculture, Department of Energy, Department of the Interior, Environmental Protection Agency, and Department of Housing and Urban Development freezing already-awarded IRA and IIJA funds. They brought claims under the APA and sought preliminary relief, including relief under 5 U.S.C. § 705, which authorizes courts to stay agency action pending judicial review.
The district court granted a preliminary injunction, reasoning "that a universal preliminary injunction was ... appropriate because" the "normal remedy for unlawful agency action is vacatur" and "similarly situated nonparties" should not be denied relief "just because there was not enough time or resources for them to join the suit." It barred the agencies from implementing the pause on already-awarded IRA and IIJA funding and ordered the agencies to release awarded funds that had been withheld. The government appealed.
The First Circuit affirmed the preliminary injunction with respect to the freeze of already-awarded funding but vacated the portion that ordered the agencies to make specific payments.
On the merits, the court rejected the government's argument that the plaintiffs had failed to challenge a final agency action and were instead mounting an impermissible "programmatic attack." The APA does not allow plaintiffs to challenge a broad federal program in the abstract. But the court explained that an across-the-board decision that applies to "discrete agency actions" can itself be a reviewable final agency action. Here, the agencies made decisions to categorically freeze IRA and IIJA funds in accordance with the OMB/NEC memo. Those actions, and the memo directing the agencies to freeze funding, were likely sufficiently concrete and final to support APA review.
That part of the decision is likely to matter well beyond federal grants. Agencies often argue that challenges to broad initiatives are not reviewable because they attack a program, policy direction, or enforcement posture rather than a final agency action. The First Circuit's decision confirms that courts will look past that framing when the plaintiff can identify a concrete, across-the-board agency decision that has practical and legal consequences.
The court also held that the plaintiffs were likely to succeed on their arbitrary-and-capricious claims. In the government's view, the district court erred in concluding that the agencies needed to consider grantees' reliance interests before freezing the funds because many grant contracts authorize termination. The First Circuit rejected that argument, explaining that even if many grants authorize termination, that does not excuse the government from considering reliance interests at all, and the government's "freeze first, ask questions later" approach did not satisfy its obligations under the APA. Agencies may change policy, including after a change in presidential administration. But when agencies change course in a way that disrupts settled expectations, they must consider parties' reliance on the prior regime and weigh those interests against the government's new policy objectives. That requirement is especially important when the government's actions affect already-awarded funds and ongoing projects.
While agreeing with the plaintiffs on the merits, it drew an important remedial line. The APA allows courts to set aside or suspend unlawful agency action, and that relief may have financial consequences. But the APA's waiver of sovereign immunity does not authorize district courts to order specific performance of contractual payment obligations. Relying on that distinction, the First Circuit vacated the part of the district court's order requiring the agencies to "resume the processing, disbursement, and payment" of funds and to "release awarded funds previously withheld or rendered inaccessible." In the court's view, that portion of the order looked too much like the enforcement of a payment obligation that exceeded the court's authority.
At the same time, the court left in place the portions of the order that barred the government from implementing or relying on the challenged funding-freeze directives, even though the order "may result in the disbursement of funds." That distinction is critical. A district court may not have authority to order the federal government to pay money under a grant or contract through the APA. But it may be able to prohibit the government from relying on an unlawful agency action to withhold those funds.
Finally, the First Circuit addressed the government's argument that the district court issued an impermissible universal injunction. The court agreed that Trump v. CASA limits courts' traditional equitable authority to issue universal relief. But it held that the district court's order was best understood as resting on the APA's independent remedial authority, including section 705. Section 705 authorizes courts to "issue all necessary and appropriate process to postpone the effective date of an agency action or to preserve status or rights" pending judicial review. The First Circuit concluded that the government's arguments, which were limited given the posture of the case, had not shown that section 705 categorically prohibits relief that extends beyond the named plaintiffs.
The court was careful to cabin the scope of its section 705 decision, given the preliminary posture and the fact that the district court issued the order before CASA was decided. But the decision is nonetheless significant. It suggests that, even after CASA, the APA provides plaintiffs a mechanism for seeking broader interim relief against unlawful agency action.
For regulated parties, grant recipients, and federal contractors, the decision has several practical implications.
First, broad agency directives may be reviewable when they produce concrete legal or practical consequences. Plaintiffs cannot use the APA to challenge agency policy in the abstract, and non-final agency actions are not subject to review. But agencies cannot necessarily avoid APA review by characterizing a categorical freeze, pause, or enforcement directive as general policy guidance. If the agency has made a definitive decision and affected parties can identify the decision being challenged, courts may treat the action as reviewable.
Second, reliance interests matter. Entities that receive grants, permits, licenses, or other agency authorizations should document the commitments they make in reliance on those agency decisions. Staffing decisions, project timelines, contracts, subawards, community commitments, and operational changes may all be relevant if the government later changes course.
Third, plaintiffs challenging federal funding pauses should be mindful of the line between APA relief and contract relief. A claim framed as an effort to compel payment under a grant agreement may run into sovereign-immunity and Tucker Act obstacles. A claim challenging the legality of the agency action that caused the payment freeze may fit more comfortably within the APA. The remedy requested should reflect that distinction.
Fourth, section 705 remains an important tool. After CASA, the government is likely to argue that broad preliminary relief is impermissible. The First Circuit's decision underscores that the APA enacts a specific statutory framework for challenging administrative action and gives plaintiffs a potent response: Congress provided specific remedial authority in the APA to preserve the status quo and protect rights pending review.
The decision is formally about a funding freeze affecting IRA and IIJA awards. But its broader message is that agencies must comply with ordinary administrative-law requirements even when implementing high-level presidential priorities. Agencies may reconsider prior policies and funding decisions. They may exercise lawful discretion in individual cases. But they may not impose categorical freezes without engaging in reasoned decision making. For entities affected by sudden changes in federal policy, Woonasquatucket River Watershed Council provides a useful roadmap for both challenging unlawful agency action and thinking carefully about the remedy that challenge should seek.
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