For federal grant recipients, this week saw another significant development that will shape the course of litigation over executive orders that programmatically and systematically terminate such fundings.
On January 21, the Court of Appeals for the Fourth Circuit issued its decision in the case challenging various federal agencies’ termination of environmental and agricultural grants previously awarded to several nonprofit organizations and local governments. See Sustainability Institute v. Trump, No. 25-1575 (Jan. 21, 2026). The named agencies terminated the grants to comply with a series of executive orders that broadly required federal agencies to review their current grant obligations and bring those obligations in line with the current administration’s stated policies, namely, eliminating grant support for environmental justice programs and reducing overall federal spending. Previously, the grant recipients prevailed before the district court in establishing that the government had followed improper procedures in terminating the grants, therefore violating the Administrative Procedure Act (“APA”). The district court ordered the federal government to set aside its termination of 32 grants and restore access to grant funds.
In Sustainability Institute, the Fourth Circuit overturned the U.S. District Court for the District of South Carolina’s decision, finding that the district court lacked the authority to review the case. Instead, the Fourth Circuit held that the Court of Federal Claims—the federal court established by Congress with special jurisdiction over cases involving contracts with the federal government—is the only avenue where federal grant recipients can challenge the validity of their individual grant terminations.
While some of the questions bound to arise in grant termination cases are questions that the federal district courts typically review (e.g., if the agencies violated any statutory authority in terminating the grants or whether the underlying executive orders are constitutional or not), the Fourth Circuit held that these lawsuit present claims of “essentially contractual nature,” and, therefore, the cases should proceed at the Court of Federal Claims, which Congress specifically charged with the authority to review contract disputes with the federal government.
While the Supreme Court has not extensively addressed this jurisdictional dispute, the Fourth Circuit read the tea leaves of two Supreme Court decisions from this year, where the Court, indirectly, also expressed doubt over whether any court other than the Court of Federal Claims has authority to review the legality of grant terminations and reigned in the district courts’ willingness to hear such cases. See Nat’l Insts. of Health v. Am. Pub. Health Ass’n, 145 S. Ct. 2658, 2664 (2025) (Gorsuch, J., concurring part and dissenting in part); Dep’t of Educ. v. California, 145 S. Ct. 966, 968 (2025) (per curiam).
Companies and organizations seeking to preserve access to grant funds should heed this guidance and explore whether filing the claim at the Court of Federal Claims would lead to less costly and more expeditious recovery. In particular, in picking that venue, companies and organizations must seek legal counsel over other related challenges that can be brought specifically at the Court of Federal Claims in addition to seeking to restore access to grant funds, taking full advantage of the Court of Federal Claims’ unique but relatively favorable jurisdiction. For example, a comprehensive action before the Court of Federal Claims can not only lead to restoring the grant funding, but include claims to recover any actual losses and costs associated with any temporary terminations or suspensions, remedies related to close-out costs, payment for any goods or services received by the government prior to the grant recission but not paid for, and even seeking special damages for the federal government’s failure to operate in good faith.
Fluet’s Government Contracts and Litigation and Investigations teams continue to monitor the shifting landscape of grant termination claims. Fluet attorneys, with their extensive experience advising clients on strategic litigation in the Court of Federal Claims, are ready to advise organizations interested in bringing challenges before the Court of Federal Claims.
The Fourth Circuit’s decision in Sustainability Institute v. Trump, No. 25-1575 (Jan. 21, 2026) can be accessed here.
