In a narrow decision, the Supreme Court ruled in the Department of Education v. Louisiana, 604 U.S. __ (Apr. 4, 2025), that the federal district court did not have the authority to order the federal government to pay out approximately $65 million in canceled education grants. However, the more controversial part of the Court’s ruling was the majority’s musing (in a short two sentence ruling) about who, if not the district courts, could actually stop the cancelation. The Court shined the spotlight on the Court of Federal Claims (COFC). The decision is bound to raise new challenges for those seeking to sue the federal government for recovery of monetary damages caused by the new executive orders.

Background

As the new administration’s wave of executive orders reverse course on many commitments made by the previous administrations, the lawsuits challenging those executive orders have largely relied on the Administrative Procedure Act (APA).  Broadly, the APA allows the federal district courts to review certain agency actions and set them aside as unlawful when the decisions violate regulations, laws, or the constitution. However, APA provides that if the suing party either (1) seeks “money damages” as part of relief or (2) can seek “adequate remedy” in a court other than the district court, then the district court should dismiss the lawsuit against the agency. Both of these exceptions seem to invoke scenarios where parties may need to sue at another court with special jurisdiction: the Court of Federal Claims, which through the Tucker Act is authorized to decide cases from those suing the Government specifically for money they believed was owed to them.

As Judge Plager of the Federal Circuit once put, this simple distinction—whether an APA case involves money or not—served as a “a relatively watertight barrier,” between district court APA cases and the Court of Federal Claims APA cases. Suburban Mortg. Assocs., Inc. v. U.S. Dep’t of Hous. & Urban Dev., 480 F.3d 1116, 1121 (Fed. Cir. 2007).

That was until 1988 when the Supeme Court chimed in on the issue in Bowen v. Massachusetts, 487 U.S. 879 (1988), and so “the barrier sprang a leak,” that soon became “a gusher.” Id. In Bowen, the Supreme Court held that just because some part of an APA plaintiff’s relief request may be monetary, it does not mean that the case belongs in the Court of Federal Claims. For one, while the Court of Federal Claims is more suited for rewarding money damages, its authority to grant declaratory or injunctive relief is far narrower than the district courts. For an APA plaintiff seeking both types of remedies, therefore, it was still unclear what the proper venue should be.

To keep the cases in the district courts after Bowen, many practitioners attempted to modify lawsuits that had the ultimate goal of getting money form the Government as suits primarily for declaratory or injunctive relief (not normally available at COFC), often without mentioning the request for money damages at beginning.

To navigate this confusing maze of deciding which APA cases belonged in the district court and which at COFC, in the aftermath of Bowen, and to combat forum shopping, the Federal Circuit and the lower courts gradually developed a test that looked beyond the pleadings and to the substance of the claim to determine where the lawsuit should actually be filed. The Court’s decision in Department of Education v. Louisiana, once again, disturbs the calm waters.

The Court’s Decision

The Administration issued an executive order on February 26, 2025, implementing the U.S. Department of Government Efficiency’s (DOGE) “cost efficiency initiative,” and the Order directed federal government agency review pf all existing “covered contracts and grants” and to terminate or modify these agreements where “appropriate and consistent with the law.” Following the administration’s demand, the U.S. Department of Education terminated grants that covered funding for diversity, equity and inclusion (DEI) with boilerplate letters citing a change in policy.

In overturning the district court’s order which would have required the Department to continue funding these DEI grants while the case was proceeding, the Supreme Court majority offered a two sentence take on what should happen with APA claims challenging similar executive orders. The court stated that “the Tucker Act grants the Court of Federal Claims jurisdiction over suits based on ‘any express or implied contract with the United States.’” (citing to 28 U. S. C. §1491(a)(1)), in a seemingly direct edict to parties to bring the cases at COFC instead. Both Justice Jackson’s dissent and the concurrence took issue with the Court’s summary dismissal of the case law developed since Bowen, with Justice Jackson noting in the dissent, that without briefing and oral argument on what the plaintiffs “actually say in their complaint about the legal problem and the relief they are requesting,” the Court cannot make a rushed judgment call on whether COFC should hear the case. Nonetheless, the majority’s ruling now opens the door for filing similar APA actions at the COFC.

Considerations for Plaintiffs

The Court’s ruling in Department of Education v. Louisiana has significant implications for those interested in suing the federal government to challenge federal funding freezes or elimination of grant funding. Clients must seek legal counsel at the outset of the litigation about which venue would be proper for initiating a lawsuit given this uncertainty. Just a few weeks ago, in a lawsuit brought by a coalition of states challenging the withdrawal of funding opportunities and grant terminations by the National Institutes of Health based on perceived connections to DEI and gender issues, the U.S. District Court for the District of Massachusetts became the first federal court to distance itself from the Supreme Court’s decision in Department of Education v. Louisiana. The court held that it did indeed still have jurisdiction over the case. See Commonwealth of Massachusetts v. Robert F. Kennedy, Jr., Case No. 25-10814 (D. MA. May 12, 2025).  In many cases, proceeding in the district courts for remedies other than monetary damages might prevent the litigants from later filing suit at COFC for money damages. Therefore, it is critical for clients to be informed of each jurisdiction’s likely position on the Supreme Court’s recent ruling and be advised of the proper venue to pursue the action.

Fluet’s Government Contracts and Litigation + Investigations teams are closely monitoring how courts respond to the Supreme Court’s decision. Fluet is ready to assist clients as they assess the legal remedies available to them in response to termination of grants and other arrangements.