On February 24, 2026, the United States Court of Appeals for the District of Columbia Circuit held oral arguments in the case Climate United Fund v. Citibank to consider the future of almost $20 billion in climate funding appropriated under the Inflation Reduction Act (IRA). Now before the full court of appeals, at issue is whether to affirm the preliminary injunction that the District Court granted in April 2025. That injunction barred the United States Environmental Protection Agency (EPA) from effectuating grant terminations and required the disbursement of frozen funds for two of the three programs within the IRA’s Greenhouse Gas Reduction Fund (GGRF): (1) the National Clean Investment Fund (NCIF) and (2) the Clean Communities Investment Accelerator (CCIA).
After last week’s oral argument, this en banc review appears to be less about whether EPA acted improperly, a point several judges seemed to accept, and more about whether and what relief the court can still offer to the plaintiffs. This is due, in part, to Congress repealing the statutory basis for the GGRF and rescinding unobligated program funds during the litigation. At oral argument, the judges appeared to coalesce around three possible paths forward. The court could find that (1) this case is really a contract dispute that belongs in the Court of Federal Claims (CFC); (2) EPA violated the separation of powers, but the federal district court may be unable to provide equitable relief due to the repeal; or (3) EPA violated the Administrative Procedure Act (APA) and the court may be able to grant equitable relief. This third outcome arguably has the strongest legal basis and would allow the court to affirm the preliminary injunction, keep the case in district court, and preserve the possibility of future grant reinstatement.
This blog discusses the factual and litigation background of the case and canvasses the three possible outcomes that the judges focused on during the oral argument.
Background
Climate United Fund v. Citibank is a consolidated lawsuit brought by NCIF and CCIA grantees that challenges EPA grant terminations and attempts to claw back the $19.97 billion in congressionally appropriated funds that have been obligated to the grantees. The GGRF was created by section 60103 of the 2022 IRA. That section appropriated $27 billion to EPA to make grants to states, municipalities, tribal governments, and eligible nonprofit organizations to finance the deployment of low-carbon technologies and carry out other greenhouse gas emission reduction activities.
Early into the second Trump administration, EPA Administrator Lee Zeldin led a public campaign against the GGRF, calling the program “criminal” and publicly expressing his desire to terminate it. Indeed, the EPA’s webpage for the GGRF now reflects this narrative.
As part of Administrator Zeldin’s quest to dismantle the GGRF, in February, EPA sought to prevent the grantees accessing the Citibank accounts where their grant funds are held. Plaintiffs filed suit soon after, on March 9, bringing claims under the APA, the IRA, and the Constitution. Two days after that, EPA sent identical Notice of Termination letters to each NCIF and CCIA grantee, purporting to terminate their grant agreements on the basis that there had been “waste, fraud, and abuse” in the program, though EPA provided no evidence to back up that claim and still hasn’t. At oral argument, the federal government attorney arguing the case stated that they’d find such evidence in the course of discovery.
In April 2025, the District Court for the District of Columbia issued a preliminary injunction barring EPA and Citibank from giving effect to the termination notices and requiring Citibank to disburse grant funds to the Plaintiffs. The Defendants appealed that order and almost immediately, the D.C. Circuit issued an administrative stay as to the injunction’s requirement that funds must be disbursed during the appeal.
While briefing continued, President Trump signed into law a budget reconciliation bill, the so-called “One Big Beautiful Bill Act” (OBBA) (Pub. L. 119–21), on July 4, 2025. Among other things, the OBBA repealed Section 60103 of the IRA and rescinded the unobligated balance of the program funds. The unobligated balance amounted to about $19 million in funds for EPA to administer the GGRF. All other funds appropriated for the program had already been obligated to grantees.
Thereafter, in a September 2, 2025 decision, a split panel of the D.C. Circuit vacated the preliminary injunction issued by the District Court. The Plaintiffs then filed a petition for, and were granted, a rehearing en banc. In the order granting rehearing, the D.C. Circuit vacated its prior judgment and reinstated its earlier partial administrative stay, meaning that the funds are still frozen but EPA cannot effectuate termination of Plaintiffs’ grant awards. Before oral argument, the Sabin Center submitted an amicus brief in support of the plaintiffs, urging the D.C. Circuit to affirm the district court’s preliminary injunction.
Oral Argument and the Question of Remedy
With this backdrop, last Tuesday, the parties participated in an oral argument that lasted almost three hours. In appeals like this, the D.C. Circuit reviews the district court’s preliminary injunction “for abuse of discretion, its underlying legal conclusions de novo, and its findings of fact for clear error.” Huisha-Huisha v. Mayorkas, 27 F.4th 718, 726 (D.C. Cir. 2022). The court considers the same preliminary injunction factors that the district court applied, which requires the plaintiffs to establish that “they are likely to succeed on the merits, that they are likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in their favor, and that an injunction is in the public interest.” Winter v. NRDC, 555 U.S. 7, 20 (2008) (cleaned up).
As noted above, it appeared that the judges broadly converged around three possible outcomes to decide the rehearing: (1) Plaintiffs’ claims are really contract disputes that belong in the CFC; (2) EPA’s actions violated the separation of powers doctrine but the Court’s ability to grant relief may be affected by the enactment of the OBBA; or (3) EPA’s actions violated the APA but the Court’s ability to grant relief may be affected by the enactment of the OBBA. The range of possible outcomes underscores both the novelty and complexity of the case. Each is considered in turn below.
Outcome Number 1: Wrong Forum and No Equitable Relief
One of the main issues in the cases involving federal funds frozen by the Trump administration has been whether federal district court is the proper venue for the plaintiffs’ claims, or whether the CFC is the court with proper jurisdiction (see here for more background on the forum dispute). The CFC is a statutorily-created federal court which, under the Tucker Act, has jurisdiction to hear cases against the United States seeking monetary damages in excess of $10,000.
As noted above, in this en banc review, to have the preliminary injunction upheld, the plaintiffs have to demonstrate that they have a likelihood of success on the merits of their claims. But, if their claims boil down to a contract dispute with EPA, they would be in the wrong forum and can’t succeed in district court. This forum dispute was discussed at length during the oral argument.
The plaintiffs argue that the case doesn’t involve a simple contract dispute. Rather, they allege that EPA’s termination of their individual grants amounts to the programmatic dismantlement of the NCIF and CCIA, which implicates the separation of powers doctrine and the APA (more on this below). If the court finds that EPA’s actions do amount to dismantling the programs entirely, the plaintiffs’ claims are properly in district court, where prospective injunctive relief can be granted.
However, the government argues that the Plaintiffs are really challenging EPA’s termination of individual grants, and the validity of that termination is a purely contractual dispute. They accept that the Plaintiffs may have grounds to bring a breach of contract claim—i.e., on the basis that EPA impermissibly terminated the grant agreements—but that claim would need to be heard in the CFC. In response, plaintiffs assert that the CFC cannot provide adequate relief: they are not asking for a money judgement, but instead a reinstatement of their grants, a remedy that the CFC cannot grant. Nor can the CFC enjoin EPA from dismantling the NCIF and CCIA which the plaintiffs argue is the heart of their claims. The plaintiffs also distinguish themselves from other cases where grant funding disputes have been sent to CFC. They argue that because the grant funds are already in individual Citibank accounts in their names, they have property rights in the funds, and are simply asking the court to provide relief that will give them access to their property. This is different from other funding cases, where the money obligated to grantees remains with EPA.
If the Court agrees with EPA’s characterization of the dispute, the Plaintiffs would likely have to refile their case in the CFC, which, as we’ve explained before, may not provide equivalent or timely relief.
Outcome Number 2: Separation of Powers Violation, but No Equitable Relief
As previewed above, one of plaintiffs’ claims is that EPA violated the separation of powers doctrine by dismantling the NCIF and CCIA programs. The plaintiffs argue, and the District Court accepted, that when EPA cancelled their grants, it had no intention to make their grant funds available to others. This, the plaintiffs claim, is a violation of the separation of powers doctrine because EPA would effectively be refusing to spend congressionally appropriated funds. The District Court concluded that this claim was likely to succeed on the merits and relied on that in granting the preliminary injunction. But, after that, Congress enacted the OBBA which repealed the statutory basis for the GGRF.
Enactment of the OBBA complicates the court’s analysis, possibly limiting its ability to grant equitable relief to the plaintiffs (i.e., by enjoining EPA from dismantling the NCIF and CCIA), even if the judges find that EPA violated the separation of powers or another violation. The judges questioned whether the repeal of the statutory basis for the NCIF and CCIA eliminates any viable option for a forward-looking remedy (i.e., an injunction). The plaintiffs argued that repealing a statute “doesn’t retroactively render an illegal action legal.” Even granting that, Judge Rao, a Trump appointee, posed two questions. If Congress has repealed the GGRF, (1) how can there now be a separation of powers violation? and, relatedly, (2) what is left to enjoin?
A preliminary injunction must operate prospectively by preventing ongoing or imminent legal harm. If Congress has eliminated the statutory basis for the NCIF and CCIA, the argument goes, EPA lacks ongoing authority to implement the programs, even if the agency previously obligated Congressionally appropriated funds. Further, without the $19 million in funding to administer the program, the court may conclude there is no ongoing conduct to enjoin. In this scenario, the violation would be real but effectively un-remediable via the equitable power of the court.
Outcome Number 3: APA Violation with Possible Equitable Relief
The plaintiffs would, of course, prefer to avoid the first and second outcomes. To that end, there is a third path the court could take. Several judges seemed to suggest that the case might be resolved without reaching the separation-of-powers argument at all by characterizing plaintiffs’ injury as a violation of the APA. On this view, the case would not concern executive dismantlement of a mandatory spending program, but rather unlawful agency action terminating still-valid, congressionally funded grant agreements. The district court’s jurisdiction would rest on a straightforward APA claim: EPA acted “contrary to law” when it purported to terminate grants that it lacked statutory authority to undo or re-obligate. This outcome would also preserve the possibility of funds flowing and the grants later being reinstated on the merits.
For the plaintiffs to succeed on this ground, however, the court would need to interpret Congress’s repeal of the GGRF in the OBBA as leaving intact EPA’s statutory obligation with respect to the already-obligated funds. Congress rescinded only “unobligated balances” when it repealed the program. If already-obligated funds remain legally binding commitments, then the OBBA eliminated future program authority, but did not extinguish the government’s obligation to carry out existing grants. On that reading, prospective relief remains available because there is still agency action to enjoin: the unlawful termination of valid awards.
This characterization is also critical to avoiding Outcome 1. If the grants remain statutory obligations, EPA’s termination letters are not merely breaches of contract, but agency action taken without legal authority. That distinction determines the forum. Illegal agency action is reviewable in district court under the APA, while claims for money damages arising from contractual disputes belong in the CFC.
Under this narrower theory, however, there is still a question as to whether the court can grant equitable relief. Even if the court agrees that the OBBA didn’t affect existing grants, there is no denying that Congress rescinded the money earmarked for EPA’s administration of those grants. That being said, Congress appropriated $3.195 billion in March 2025 (and continued in November 2025) for “Environmental Programs and Management.” Plaintiffs argued that EPA could rely on these funds to administer the program if the court ultimately ruled in their favor. It’s not clear, though, that the court could order EPA to administer the program with funds Congress didn’t appropriate specifically for that purpose.
Conclusion
During the en banc oral arguments held last week to consider the District Court’s preliminary injunction, many of the judges’ questions were directed at three possible outcomes. Two of the possible results–outcomes 1 and 2 described above–would likely lead to the court vacating the preliminary injunction, handing a major loss to the plaintiffs. Outcome 3, however, offers a narrow path to success. Although the forum dispute is a live issue, perhaps the more important determining factors will be the judges’ characterization of both plaintiffs’ injury and the effect of the OBBA. Beyond the $20 billion at stake, the outcome here will set important precedent on agency authority to terminate already-obligated grant funding.
Vincent M. Nolette is the Sabin Center's Equitable Cities Climate Law Fellow.
Romany Webb is a Research Scholar at Columbia Law School, Adjunct Associate Professor of Climate at Columbia Climate School, and Deputy Director of the Sabin Center for Climate Change Law.
