Federal judge says Trump admin is violating order to halt funding freezes; DOJ's initial appeal denied

Editor's note: An appellate court on Tuesday evening denied the Department of Justice's motion for an administrative stay on this week's district court orders. A second motion for a stay pending appeal is still under consideration, with a response requested by Friday.

Updated at 4:30 p.m. ET on Feb. 10

A federal judge has determined the Trump administration is violating a temporary restraining order by continuing to improperly freeze federal funds—including those related to National Institutes of Health and other agencies. 

The order from Judge John J. McConnell, Jr., of the U.S. District Court for the District of Rhode Island, specifically calls out any holds related to President Donald Trump's Unleashing American Energy executive order, which targeted disbursements of funds appropriated through the Inflation Reduction Act of 2022 and the Infrastructure Investment and Jobs Act. 

The judge also addressed health and research funding by telling the government it "must resume the funding of institutes and other agencies of the Defendants (for example the National Institute for Health) that are included in the scope of the Court's [temporary restraining order]." While this appears to address recent weeks' immediate rescindments of federal grants, states have also filed another lawsuit Monday against a weekend policy announcement that will limit future National Institutes of Health grant funding, as Fierce Biotech reported.

Shortly after, the Department of Justice filed for an appeal of the temporary restraining order and Monday order, writing that they intend to request a stay from McConnell's orders.

A coalition of 23 attorneys general had filed for a preliminary injunction Feb. 7 and a motion for enforcement of the temporary restraining order alongside evidence of funds continuing to be withheld. 

California Attorney General Rob Bonta, part of that group, warned these funds must be released to states as allocated under the Inflation Reduction Act (IRA) and Biden's infrastructure legislation. California's Medicaid program is supposed to receive $107.5 billion in federal funding this year.

There has been "an ever-changing kaleidoscope of federal financial assistance that has been suspended, deleted, in transit, under review and more since entry of the [court] order," plaintiffs said in their filing (PDF). "These conditions persist today. And, while it is imaginable that a certain amount of machinery would need to be re-tooled in order to undo the breadth of the federal funding freeze, there is no world in which these scattershot outages, which as of this writing impact billions of dollars in federal funding across the plaintiff states, can constitute compliance with the order."

Community health centers, Head Start programs and university research projects have struggled (PDF) to access funds following the national freeze. And states say a preliminary junction is necessary to limit budgetary confusion.

The Department of Justice, in response, argued that it was working to root out fraud and criticisms that the court's prior temporary restraining order was ambiguous. 

McConnell rejected both arguments, writing that the "likely unconstitutional" freezes "were a result of the broad categorical order, not a specific finding of possible fraud." He also said that his prior temporary restraining order "is clear and unambiguous in its scope and effect." 

The Trump administration and its agencies "must immediately restore" the frozen funds until a decision is made on the preliminary injunction request, McConnell wrote. 

Those who refuse to obey such a court order "generally risk criminal contempt even if the order is ultimately ruled incorrect," according to a prior case cited by McConnell as a warning at the top of Monday's order.

In light of the government's rebuttal, he said he would permit requests for targeted relief from the temporary restraining order if the government "can show a specific instance where they are acting in compliance with this Order but otherwise withholding funds due to specific authority." 

Democratic lawmakers had also asked the Trump administration last week for answers on why some federal financial assistance recipients still aren't receiving funds, and whether department heads "intend to follow the Constitution, the law and orders from federal judges." 

Ongoing freezes spur frustrated questioning

The Trump administration's "temporary pause" and review of federal financial assistance has earned two sweeping temporary restraining orders that instruct the executive branch to release any frozen funds.

In a Feb. 3 press conference held by Senate Democrats, Patty Murray, D-Washington, said she "spent the day on the phone with a number of my constituents who were calling, who still don't have access to their funds."

Sen. Ron Wyden, D- said he continues to hear from providers in Oregon and Wisconsin who are facing similar problems. Nonprofit organizations also testified that morning about organizations that had been forced to drastically scale back operations due to funding delays.

Citing these concerns, Democratic members of the House's Energy and Commerce Committee penned letters to department heads Feb. 5 requesting information on their compliance with the courts' orders. 

The letters, one of which was sent to Health and Human Services' Acting Secretary Dorothy Fink, state that any lingering funding freezes are illegal and ask recipients to "confirm whether [the department] intends to comply with the courts' orders."

If so, the lawmakers told department heads to respond by Friday with information on who is ensuring compliance and what actions have been taken to ensure compliance. They also requested all written guidance provided on how workers are to comply with the court orders, and a response on whether all covered funds have been released for disbursement "or, if not, when they will be." 

Conversely, if the department does not intend to comply with the court orders, the lawmakers asked department heads to name those responsible for the decision, the authority they believe they have to violate the judges' orders and whether that decision came from within the agency or the White House. 

"Workers and businesses are being harmed," the seven representatives wrote in their letters. "Americans in need of care are being harmed. Congress and the American people therefore deserve answers. And so do the hard-working career civil servants at your agency that have had unreasonable, illegal and unconstitutional orders pressed upon them while they are simultaneously being coerced to leave public service."

Responses to the legislators' queries were requested by Friday.

Federal judges tell administration to immediately release funds, not resume freeze under different name

The temporary restraining orders for agencies to walk back funding freezes were handed down Friday afternoon by Judge McConnel and on Monday afternoon by Judge Loren AliKhan, of the U.S. District Court for the District of Columbia. 

Each instruct the executive branch not to resurrect the pause, as outlined in last week's memo, "under a different name." 

The orders come after the Office of Management and Budget (OMB) rescinded a memo outlining a funding freeze that threw much of the country's federal funding recipients into a panic. 

However, comments from White House Press Secretary Karoline Leavitt shortly after the rescindment suggested that the administration wasn't backing down from the pause's broader goals.

"This is NOT a rescission of the federal funding freeze," she had written on X. "It is simply a rescission of the OMB memo. Why? To end any confusion created by the court's injunction. The President's [executive orders] on federal funding remain in full force and effect, and will be rigorously implemented." The press secretary gave a similar characterization during a press briefing. 

Twenty-two state attorneys general, who had filed a lawsuit against Jan. 27's initial freeze, subsequently told McConnell that the comments were concerning and warranted a broader intervention from the court. 

"The White House has said subsequent to the rescission of the memo that the rescission is essentially meaningless," Sarah Rice, deputy chief of the Public Protection Bureau in Rhode Island's Attorney General's Office, said during the Jan. 29 hearing. "There's no indication from the United States, and in fact there's contrary indication through these public statements, that the policy has not changed. And that policy, to sum it up, is 'freeze first, ask questions later.' That is the gravamen [heart] of our complaint, that is the source of our harm."

Attorneys for the Department of Justice pushed back, arguing that the initial and expanded relief sought by the states was moot due to the rescindment. McConnell appeared to disagree at the time, and in Friday's order cemented his view that the states "are likely to succeed on the merits of some, if not all, their claims," including that "the Executive's actions violate the Constitution and statutes of the United States." 

Similar arguments played out Monday morning in a parallel case brought before AliKhan by the National Council of Nonprofits and other nonprofit plaintiffs. There, however, they submitted testimonies from nonprofit organizations that hadn't received obligated federal funds. 

A testimony from the board president of an undisclosed West Virginian nonprofit that helps those with disabilities remain in their homes, for instance, was forced to lay off three of its five employees and "drastically reduce services to our customers. This presented a dire situation for our customers, who have immediate needs." The company was notified that it would be receiving allocations on Monday and, if received, would be able to call back two of the three affected employees. 

Addressing the DOJ's arguments, McConnell's Friday order cites the comments from Leavitt and other communications from the Environmental Protection Agency as evidence "that the alleged rescission of the OMB Directive was in name-only and may have been issued simply to defeat the jurisdiction of the courts. The substantive effect of the directive carries on."

McConnell ordered the Trump administration not to "pause, freeze, impede, block, cancel or terminate [its] compliance with awards and obligations to provide federal assistance to the states," and not to block states' access to the assistance (except if previously established by law, regulation or other terms). 

Further, any "indentif[ication] and review" the Trump administration are undergoing as outlined by OMB cannot interfere with financial awards and obligations. The administration is also forbidden from "reissuing, adopting, implementing or otherwise giving effect to the OMB Directive under any other name or title" or other federal agencies, "such as the continued implementation identified by the White House Press Secretary's statement." 

Similar requirements were outlined in AliKhan's order. Both orders require the federal government to communicate the order's restrictions to those agencies that received the initial memo.

The parties now move on to a preliminary hearing where the states will need to produce more concrete evidence in their bid for a preliminary injunction on the funding freeze.

Broad language, discrepancies sowed confusion

The administration's freeze was originally set to go into effect at 5:00 p.m. on Jan. 28 before nonprofit organization opponents secured a last-minute delay until Feb. 3 from the courts. It was rescinded in a one-page memo from Jan. 29.

Trumps' sweeping hold, as outlined in Jan. 27's memo, would have included federal grants, cooperating agreements and loans, among other types of obligations or disbursements that OMB contends made up more than $3 trillion of spending in fiscal year 2024.

Footnotes outlined an exception for “assistance received directly by individuals,” and specified that “nothing in this memo should be construed to impact Medicare or Social Security benefits.”

A frequently asked questions explainer from OMB issued on Jan. 29 attempted to offer further clarity on which programs exactly are affected. It said mandatory programs like Medicaid and SNAP will not be paused.

"Funds for small businesses, farmers, Pell grants, Head Start, rental assistance and other similar programs will not be paused," said the OMB in the  FAQ. "If agencies are concerned that these programs may implicate the President’s Executive Orders, they should consult OMB to begin to unwind these objectionable policies without a pause in the payments."

However, that promise contradicted alarms raised by industry figures and lawmakers that state Medicaid portals had stopped working or were unreliable. 

"My staff has confirmed reports that Medicaid portals are down in all 50 states following last night's federal funding freeze," Wyden said Tuesday in a post on X. "This is a blatant attempt to rip away health insurance from millions of Americans overnight and will get people killed."

Other lawmakers confirmed on X their states had been locked out of the portals. In a statement addressing the broader freeze, Illinois State Comptroller Susana Mendoza said her office is "doing everything it can to process federal funds prior to the deadline" and was fortunate to prioritize Medicaid payments. 

"In fact, on Thursday we processed all $518 million in Medicaid bills on-hand and received our federal match yesterday before the administration shut down our access to the Medicaid system," she said. 

Organizations, government policy experts and individuals working in care outlined concerns that the memo’s ambiguous language made it difficult to know what health, research and social support programs were caught in the pause—though they suspected that many will be affected.

“Any grants that have not been paid out in their entirety will be paused pending this review,” Will Walters, a healthcare attorney at Epstein Becker Green, said in an emailed analysis of the memo. “This will impact every imaginable state-federal cooperative program, including most run by state health agencies, which receive the lion's share of their resources from the federal government. I am already hearing from state folks that their federal partners have gone radio silent and revised guidance is coming for certain programs.”

Groups also raised concerns about the detrimental impact an immediate and indefinite halt in funding could have for groups and those who rely on federal funding.

"[The] federal funding freeze threatens the nationwide network of health centers that rely on these resources to provide family planning services to people with no or low incomes,” the National Family Planning and Reproductive Health Association said in a statement. “Even a temporary funding pause could cause significant disruption to clinic operations, jeopardizing patients’ access to contraception, cancer screenings, STI and HIV services, and other essential reproductive healthcare. … These funding disruptions could push some health centers to the brink of closure, leaving vulnerable patients without access to the care they need."

"This is extremely disconcerting," said Carl Schmid, executive director of the HIV+Hepatitis Policy Institute, in an emailed statement. "People with HIV/AIDS depend on medications, healthcare and support services for the rest of their lives and we have to take steps to prevent HIV every day, we just can’t stop funding these programs.  These lifesaving programs serve a wide array of different populations, and HIV is an infectious disease with serious health consequences if not properly addressed—we can’t overlook any community and must serve everyone.” 

The government website on PEPFAR data was offline on Jan. 29.

Amid the pause, each agency would have been required to conduct a comprehensive analysis of their federal financial assistance programs to identify any that could be implicated by President Donald Trump’s flurry of executive orders, OMB Acting Director Matthew Vaeth wrote in the memo.

The agencies would have also been required to pause “other relevant agency activities that may be implicated by the executive orders, including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology and the green new deal,” according to the memo.

OMB “may grant exceptions” permitting new awards or other actions “on a case-by-case basis,” Vaeth wrote.

"These are politicized attacks that do not belong anywhere in the context of the operations of the federal government or support for federal programs, and we absolutely have reason to be concerned that the Trump administration, among many other things, is seeking to deny and end fundamentally important life saving services for transgender people," said SAGE CEO Michael Adams in a press briefing on Jan. 29.

OMB's FAQ, distributed Jan. 29, noted that "[a] pause could be as short as day. In fact, OMB has worked with agencies and has already approved many programs to continue even before the pause has gone into effect. Any payment required by law to be paid will be paid without interruption or delay."

It also specified that "the pause does not apply across-the-board" and only affects "programs, projects and activities implicated by the President's Executive Orders"—though OMB is still requesting information on such conflicts from the agencies for 2,623 programs providing federal financial assistance. 

The Association of American Medical Colleges (AAMC) and the American Hospital Association (AHA) had both told Fierce Healthcare Jan. 29 they were reviewing the memo to fully understand its scope. 

Others working in the industry raised concerns over whether funding for clinical research, suicide prevention and state infectious disease surveillance and other day-to-day work would have seen interruptions due to the pause.

"The first reaction was that it appeared to be a pretty brazen power grab," said Andrea Ducas, vice president of health policy at the left-leaning Center for American Progress, in an interview with Fierce Healthcare.  "It's hard to overstate how alarming this is."

She warned the community health center fund, through the Health Resources and Services Administration (HRSA), would have been at significant risk. The fund provides money toward safety net health centers for Medicaid beneficiaries and the uninsured, as well as the National School Lunch Program and the federal food assistance program WIC. Rural hospitals and critical access programs benefit from federal programs as well, she noted.

Farzad Mostashari, M.D., CEO and co-founder of primary care Accountable Care Organization (ACO) company Aledade, noted Jan. 29 that Community Health Centers were unable to access the Department of Health and Human Services' Payment Management System. 

"Section 330 grant funding is a significant portion of how [Federally Qualified Health Centers and Rural Health Centers] keep their doors open," he wrote on X. "I suspect (hope) that the freeze will be lifted soon for them, given their strong bipartisan support."

Seemingly contradicting a FAQ released from OMB, state Medicaid programs were also impacted.

"I am hearing numerous reports that states are locked our of their Medicaid accounts," Joan Alker, executive director of the Center for Children and Families at Georgetown University, had written in a post on X on Jan. 29. "This is a major crisis. Many states draw down funding at the end of the month i.e. this week."

The White House's Leavitt said that same day that the administration was "aware of the Medicaid website portal outage. We have confirmed no payments have been affected—they are still being processed and sent. We expect the portal will be back online shortly."

Legal challenges swiftly follow memo

Democrats pushed back on the pause shortly after the initial memo's distribution.

In a letter penned later that night, Rep. Rosa DeLauro, D-Conn., ranking member of the House’s Committee on Appropriations, and Sen. Patty Murray, D-Wash., vice chair of the Senate’s Committee on Appropriations, told Vaeth “[t]he scope of what you are ordering is breathtaking, unprecedented and will have devastating consequences across the country.” They suggested that the memo and other recent executive branch orders are unlawful and exceed the powers granted by the Constitution.

“We will be relentless in our work with members on both sides of the aisle and in both chambers to protect Congress’ power of the purse,” they warned. “The law is the law—and we demand you in your role as Acting OMB Director reverse course to ensure requirements enacted into law are faithfully met and the nation’s spending laws are implemented as intended.” 

The memo was also quickly challenged in the courts. The National Council of Nonprofits (NCN), American Public Health Association (APHA), Main Street Alliance and LGBTQ+ organization SAGE sued (PDF) OMB ahead of the official 5 p.m. kickoff, asking for a temporary restraining order to halt the decision. They allege Trump's OMB violated the Administrative Procedure Act and First Amendment principles. The request proved successful in delaying the directive until it was later pulled by the administration.

“Federal grants and financial assistance are the lifeblood of operations and programs for many of these nonprofits, and even a short pause in funding—which, for many NCN members, is already in the pipeline—could deprive people and communities of their life-saving services,” the plaintiffs said. “Halting this funding would lead to pauses of important community programs, food and safety assistance, and lifesaving research, among other things: even a short pause could be devastating, decimating organizations, costing lives, and leaving neighbors without the services they need.”

The APHA stressed the importance of programs that support community-based organizations, as well as the Prevention and Public Health Fund. The agency noted that the memo “chills” the group’s mission of health equity.

In a press conference held Jan. 29, Senate Minority Leader Chuck Schumer, D-N.Y., also promised a lawsuit from state attorneys general, which was filed later that day. Democrats at the press conference said Trump's latest act has unleashed a constitutional crisis.

Russell Vought, Trump's nominee to serve as OMB director who served in that post during Trump's first term, has spoke of his desire to impound Congressionally appropriated funds in recent confirmation hearings and interviews. Vought hasn't yet been confirmed by the Senate.

Trump's inner circle and Trump himself support using impoundment—even saying so in a video on his official campaign website—by skirting the Impoundment Control Act, a law they say gives Congress too much power. In conjunction with recent legal decisions, like the overturning of Chevron deference, DOGE leader Elon Musk thinks a conservative Supreme Court will rule in favor of renewed executive power. Other legal experts on both sides of the aisle don't find it likely the courts would rule in their favor, just as they have ruled against impoundment in the past.

The Impoundment Control Act of 1974 prohibits a president from withholding obligated funds already assigned by Congress.

In its FAQ, OMB explicitly said the pause is "not an impoundment under the Impoundment Control Act," and that "temporary pauses are a necessary part of program implementation that have been ordered by past presidents to ensure that programs are being executed and funds spent in accordance with a new President’s policies and do not constitute impoundments."

Thousands of programs under scrutiny

Those internal materials—a spreadsheet listing questions for federal financial assistance programs and an accompanying document guiding departments on how to fill it out—revealed the scale of the review and just what questions the office is seeking to answer.

By Feb. 7, all federal agencies that provide federal financial assistance would have needed to provide requested information to OMB for any program that has funding or activities planned through March 15, according to the instruction sheet.

The accompanying spreadsheet to be filled out by the agencies outlined 2,623 programs providing federal financial assistance that are subject to OMB’s scrutiny.

Among the listed questions for each of these programs were whether it has any pending funding announcements, if it is under a statutory mandate to provide funds through March 15 and what the estimated date of its next obligation or disbursement of funds is.

Also listed were eight “yes or no” questions centered on the Trump administration’s stated political goals. For instance:

  • “Does this program provide Federal funding to non-governmental organizations supporting or providing services, either directly or indirectly, to removable or illegal aliens?”
  • “Is this program a foreign assistance program, or provide funding or support activities overseas?”
  • “Does this program provide funding that is implicated by the revocation and recission [sic] of the U.S. International Climate Finance Plan?”
  • “Does this program include activities that impose an undue burden on the identification, development, or use of domestic energy resources (including through funding under the Inflation Reducing Act of 2022; and the Infrastructure Investment and Jobs Act)?”
  • “Does this program provide funding that is implicated by the directive to end discriminatory programs, including illegal DEI and ‘diversity, equity, inclusion, and accessibility’ (DEIA) mandates, policies, programs, preferences, and activities, under whatever name they appear, or other directives in the same EO, including those related to ‘environmental justice’ programs or ‘equity-related’ grants?”
  • “Does this program promote gender ideology?”
  • “Does this program promote or support in any way abortion or other related activities identified in the Hyde Amendment?”

The Department of Health and Human Services alone would have been required to provide this information on 432 different federal programs that provide grants, loans, scholarships, insurance, and other types of assistance, according to OMB’s distributed spreadsheet. 

Among the programs for which OMB requested more information were those from the Centers for Medicare and Medicaid Services (CMS) granting funds to research and evaluation program payments, delivery, access and quality. 

Also listed were the Medical Student Education Program and other health education funding; the CDC's Sentinel Surveillance System for infectious disease monitoring; the National Bioterrorism Hospital Preparedness Program; the Medicare Enrollment Assistance Program; several programs funding rural hospitals and healthcare; and the 21st Century Cures Act - Precision Medicine Initiative, which funds NIH's All of Us research program. 

Listings in the information request spreadsheet included programs OMB's FAQ said would not face interruptions, such as Head Start, Medicaid and CHIP, plus programs providing grants to states to support Medicaid and CHIP. 

Other noteworthy programs include HHS' Unaccompanied Children Program, which provides care for minors apprehended by Homeland Security, Border Patrol or other federal law enforcement pending claims for relief under immigration law; and the Department of Justice's Drug Data Research Center to Combat the Opioid Crisis.

Also included were the Cell and Gene Therapy Access Model. This model was one of three models created by the Biden administration to help lower the cost of drug prices, but it is yet to be implemented. An HHS spokesperson told STAT work is still ongoing to continue the model, however. The fate of the other two models is even less clear at this time.

Threat of pause brought immediate repercussions

Democratic lawmakers said Head Start was already being impacted. House Whip Katherine Clark, D-MA, said organizations in her state were struggling to access its payments.

Laurel Stine, M.A., EVP and chief advocacy and policy officer at the American Foundation for Suicide Prevention (AFSP), told Fierce Healthcare that AFSP was concerned about the potential "detrimental impact on the wellbeing of Americans.” Like other organizations, AFSP does not yet have a grasp on the full implications of the freeze. 

“This is beyond a government shutdown," Stine noted prior to the rescindment, adding that even during a government shutdown essential services like healthcare are still operational. Most states today still rely on a combination of federal and state dollars to run the program, she noted.

“It’s going to take political will across both parties in order to really step up and recognize that any type of pause, freeze of the flow of federal funds for crucial lifesaving programs, is not the direction that we need to go," Stine said. 

The Head Start program offers education services and health screenings to children. Some Republicans oppose the program and could use the Congressional Review Act to pare the program back, Fierce Healthcare previously reported. Today, the House Committee on Education & Workforce released a statement criticizing the program, citing a recent Government Accountability Office report.