Reported / Citable
Background
Thirty-one cities, counties, and local agencies, including San Francisco, Santa Clara County, Sonoma County, San Jose, Culver City, and California transportation and housing authorities, had received or been conditionally awarded federal housing and transportation grants. In 2025, the Department of Housing and Urban Development and Department of Transportation added new conditions tied to executive orders after the awards were made.
The conditions required broad certifications of compliance with federal antidiscrimination law, advance agreement that those certifications were material under the False Claims Act, and restrictions involving gender identity, elective abortion, immigration, and diversity initiatives. HUD also required immigration-status verification for individual beneficiaries. The local governments argued that the agencies lacked congressional authorization and that refusing the terms would jeopardize billions of dollars supporting homelessness programs, health care, and transportation infrastructure.
A federal district court entered a preliminary injunction blocking the conditions. The agencies appealed, principally arguing that the new terms merely ensured compliance with existing law or fell within general statutory authority to administer grants effectively.
The Court’s Holding
The Ninth Circuit largely affirmed. Under the Administrative Procedure Act, an agency action exceeding authority delegated by Congress is unlawful. Because Congress holds the spending power, executive agencies may attach grant conditions only when a statute authorizes them. General administrative language did not permit HUD and DOT to reshape already-awarded programs around executive policy goals.
The panel upheld the injunction against conditions declaring antidiscrimination compliance material under the False Claims Act. An advance materiality concession could strengthen potential fraud liability, and the agencies identified no statutory basis for demanding it. The court also held that HUD’s restrictions on using funds to promote gender ideology, abortion, or unauthorized immigration went beyond the Continuum of Care homelessness statute, including where Congress had authorized or declined to prohibit the affected activities. The immigration-verification mandate likewise exceeded the authority Congress delegated.
The court narrowed one part of the injunction. Agencies may require recipients to comply with Title VI in programs or activities receiving federal financial assistance. But the challenged certifications unlawfully reached a recipient’s programs outside the federally funded sphere. The district court must therefore tailor relief to preserve the lawful, funding-linked portion while continuing to block the broader requirement.
The panel also upheld the findings of likely irreparable harm and favorable equities. Judge Bumatay agreed only with narrowing the antidiscrimination portion and would have allowed the other conditions as permissible exercises of executive discretion.
Key Takeaways
- Federal agencies need congressional authorization to impose substantive conditions on grants; executive orders alone do not supply spending power.
- Broad grant-administration clauses do not necessarily authorize conditions aimed at policy goals beyond the funded program’s statute.
- An agency may require Title VI compliance within federally assisted programs, but cannot automatically extend the certification across every activity of the recipient.
- Requiring a grantee to concede False Claims Act materiality is a distinct legal burden that needs its own statutory basis.
- Local governments can establish irreparable harm when new conditions threaten previously awarded funds on which public programs already rely.
Why It Matters
California cities, counties, transit systems, housing authorities, and nonprofit grant partners now have published Ninth Circuit guidance for challenging midstream federal funding terms. The key question is not whether an administration views a condition as desirable, but whether Congress authorized the agency to impose that condition in the particular grant program.
The ruling does not excuse recipients from federal antidiscrimination law, and it leaves room for properly tailored assurances tied to federally funded activities. Grant recipients should separate lawful program-specific compliance duties from broader certifications, document reliance on existing awards, and evaluate new terms against the precise authorizing statute before signing.