Background
In January 2025, the Office of Management and Budget issued Memorandum M-25-13 directing federal agencies to temporarily pause certain grants, loans, and other financial assistance while reviewing programs potentially implicated by newly issued executive orders. The memorandum prompted concern that OMB had ordered an across-the-board freeze on federal financial assistance. The next day, OMB issued guidance stating that the pause was limited to programs implicated by the executive orders and did not apply across the board. OMB rescinded the memorandum one day later.
The National Council of Nonprofits and other federally funded organizations and associations sued OMB, alleging that the memorandum imposed an unlawful global funding freeze. The district court first entered emergency relief and later issued a preliminary injunction barring OMB from implementing, giving effect to, or reinstating under another name the memorandum’s unilateral, non-individualized directives. OMB appealed.
The Court’s Holding
The D.C. Circuit vacated the preliminary injunction because the plaintiffs’ challenge to the rescinded memorandum was likely moot. The court reasoned that plaintiffs sought prospective relief against the memorandum itself, rather than against separate agency actions implementing funding freezes, and that rescission left the memorandum without operative legal effect.
The court further concluded that the government likely satisfied the voluntary-cessation standard by showing no reasonable expectation that the alleged across-the-board freeze would recur. OMB had issued guidance disavowing a blanket freeze before it knew of plaintiffs’ lawsuit, and the government had consistently declined to defend or preserve authority to impose such a freeze. The court did not decide whether plaintiffs had correctly interpreted the memorandum, whether the memorandum was arbitrary and capricious, or whether OMB had statutory authority to impose a global freeze.
Key Takeaways
- Rescission of a challenged government policy can moot a claim seeking only prospective relief against that policy when the challenged conduct is not reasonably expected to recur.
- OMB’s pre-litigation guidance disclaiming an across-the-board funding freeze was pivotal to the court’s voluntary-cessation analysis.
- The ruling vacated preliminary relief on jurisdictional grounds and did not approve the legality or wisdom of a government-wide funding freeze.
Why It Matters
The decision underscores that plaintiffs challenging federal funding directives must identify precisely which operative policies and agency actions they seek to enjoin. A suit directed only at a rescinded memorandum may become moot even if related funding pauses continue under executive orders or separate agency decisions.
The opinion also illustrates how pre-litigation clarification of a challenged policy can help the government establish that allegedly unlawful conduct is unlikely to recur, while leaving the merits of the underlying legal challenge unresolved.