The Sustainability Institute v. Trump (Sustainability Injunct 2)
The EPA is defying this Court's prior order because of an interpretation of the Act which this Court specifically rejected. - Order Enforcing Judgment, ECF 227 (July 22, 2026)
Case Overview
A coalition of nonprofit organizations and local governments sued the Trump administration in March 2025 after the Environmental Protection Agency froze and then terminated grants that Congress had funded through the Inflation Reduction Act and the Infrastructure Investment and Jobs Act. The lead program at issue is the Environmental and Climate Justice Block Grant Program, which Congress created by adding Section 138 to the Clean Air Act and funded with $2.8 billion, appropriated to remain available through September 30, 2026. The plaintiffs argue the EPA had no lawful authority to shut down a program Congress had ordered it to run.
The case is before Judge Richard M. Gergel in the District of South Carolina, brought under the Administrative Procedure Act.
The court granted partial summary judgment to the plaintiffs on the ECJ Program. Judge Gergel held that the EPA's internal guidance terminating the program was arbitrary and capricious and unlawful under the APA, and vacated that guidance. The court found it had jurisdiction over the challenge to the agency guidance, following Justice Barrett's controlling concurrence in the Supreme Court's NIH decision, and rejected the government's argument that the One Big Beautiful Bill Act had mooted the case, noting the Act rescinded only funds that were unobligated when it passed. The court denied the plaintiffs' request for a permanent injunction ordering the EPA to rebuild and staff the program, calling that relief impractical, and left claims over individual terminated grants to the Court of Federal Claims.
After the plaintiffs moved to enforce the ruling, the court issued a clarification order. Judge Gergel held that the EPA must comply with its statutory obligation to administer the ECJ Program through September 30, 2026, and that the agency could not defy the prior order by re-arguing a reading of the statute the court had already rejected. The court's interpretation, he wrote, is the law of the case.
The government filed a notice of appeal to the Fourth Circuit challenging the June 11 and July 22 orders, together with an emergency motion to stay those orders pending appeal.
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The Facts
In 2022 the Inflation Reduction Act amended the Clean Air Act to create the Environmental and Climate Justice Block Grant Program, codified at 42 U.S.C. Section 7438, and appropriated $2.8 billion to remain available until September 30, 2026, directing that the Administrator "shall use" those funds to award grants.
In January 2025 President Trump issued two executive orders, Unleashing American Energy and Ending Radical and Wasteful DEI Programs, directing agencies to pause disbursement of Inflation Reduction Act funds and to terminate environmental-justice and equity-related grants. The Office of Management and Budget and the EPA issued memoranda pausing the funds, and on February 25, 2025 an EPA official decided to terminate the entire ECJ Program for policy reasons. The EPA marked the plaintiffs' grants terminated and sent boilerplate termination letters in July 2025.
The plaintiffs, a coalition of nonprofit organizations and local governments that had been awarded ECJ grants, sued under the Administrative Procedure Act, seeking to vacate the guidance that shut down the program rather than reinstatement of their individual grants.
The Issue
Whether the district court has jurisdiction over an APA challenge to the EPA's guidance shutting down the ECJ Program, or whether the dispute belongs in the Court of Federal Claims as a contract-based grant claim.
Whether the EPA's guidance terminating the ECJ Program was arbitrary and capricious and contrary to law under the APA, given Congress's statutory mandate to award the appropriated funds.
Whether the One Big Beautiful Bill Act's rescission of unobligated funds mooted the plaintiffs' claims.
The Rules
Congress appropriated $2.8 billion to remain available through September 30, 2026, and directed that the Administrator shall use the funds to award grants.
A reviewing court shall set aside agency action found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.
In a controlling concurrence, Justice Barrett explained that district courts have jurisdiction over APA challenges to agency guidance, even guidance about grants, while challenges to the grant terminations themselves belong in the Court of Federal Claims. Vacating the guidance does not reinstate terminated grants.
Even where the President has policy reasons for wanting to spend less than Congress appropriated, he does not have unilateral authority to refuse to spend the funds; he must propose a rescission, which Congress may approve or reject.
The Application
Following the Fourth Circuit's remand to apply the NIH concurrence, Judge Gergel held the court had jurisdiction because the plaintiffs challenged the EPA's guidance shutting the program, not their individual grant terminations, and vacating that guidance would not reinstate any grant. On the merits, the court found the guidance was final and discrete agency action and was arbitrary and capricious: Section 7438 required the EPA to award the appropriated funds through September 30, 2026, and the agency's decision to close the program for policy reasons defied that mandate. The court rejected the mootness argument because the One Big Beautiful Bill Act rescinded only unobligated funds, and repeals of appropriations by implication are disfavored. It declined to order the EPA to rebuild and staff the program, calling that relief impractical, and left the individual grant claims to the Court of Federal Claims. When the EPA continued to resist, the court clarified that its statutory interpretation is the law of the case and the agency may not flout the order.
The Conclusion
The district court has ruled for the plaintiffs on the lead program: it declared the EPA's termination of the Environmental and Climate Justice Program unlawful, vacated the guidance that shuttered it, and clarified that the agency must administer the program through the statutory September 30, 2026 deadline. The government has appealed both rulings to the Fourth Circuit and asked that they be stayed pending appeal, so the operative question now is whether the appellate court leaves the district court's vacatur and enforcement orders in place while the appeal proceeds. Claims over the individual terminated grants remain available to the plaintiffs in the Court of Federal Claims.
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