Labor & Employment Law Daily Wrap Up, LITIGATION NEWS, TRENDS—Court grants TRO requested by state AGs, restrains various persons from access to Treasury Department’s sensitive data, (Feb 10, 2025)

By Brandi O. Brown, J.D.

The order restrains political appointees, special government employees, and detailed employees, as well as unvetted civil servants, from accessing any of the Treasury’s payment record or data systems containing PII or certain other confidential information.

Over the weekend, a federal district court in New York issued a Temporary Restraining Order sought by the plaintiffs—a group of 19 state attorneys general—in a lawsuit filed on Friday. As described by New York State Attorney General’s office in a press release regarding the suit, the lawsuit “asserts that the Trump administration illegally provided Elon Musk and the so-called ‘Department of Government Efficiency (DOGE)’ unauthorized access to the Treasury Department’s central payment system, and therefore to Americans’ most sensitive personal information, including bank account details and Social Security numbers.”

Payment info. Beginning February 2, 2025, the lawsuit contends, the Trump administration’s Treasury Department adopted a new policy that grants “special government employees,” including Elon Musk and members of DOGE, access to its central payment system operated by the Bureau of Fiscal Services (BFS). This central payment system controls vital funding information, including that related to Social Security payments, veteran’s benefits, and Medicare and Medicaid payments. It also controls billions of dollars that states rely on to support essential services like law enforcement, public education, and infrastructure repairs.

By law, access to BFS is limited, the suit explains, and the AGs assert that the Treasury Department’s new policy violates the law. It also jeopardizes Americans’ most sensitive personal information, they contend, and would allow unauthorized political appointees to access a system and freeze federal funds with the click of a button.

Causes of Action. First, they allege, Treasury’s new policy granting payment system access to individuals associated with Musk’s DOGE initiative risks interference with the payment of funds appropriated by Congress, exceeds Treasury’s statutory authority, and therefore is ultra vires. Second, Treasury’s change in policy violates the Administrative Procedures Act in numerous ways: the change is a final agency action that exceeds statutory authority, is contrary to law, and is arbitrary and capricious. Third, by permitting expanded access to those that may then block payments contrary to Congressional appropriation, the new policy violates both the Separation of Powers doctrine and the Take Care Clause of the United States Constitution.

They seek declaratory relief, a TRO, and preliminary and permanent injunctions in their lawsuit, along with other relief.

The Order. In the order issued on Saturday by the court, it states that its “firm assessment is that, for the reasons stated by the States, they will face irreparable harm in the absence of injunctive relief.” The court explains that this “is both because of the risk that the new policy presents of the disclosure of sensitive and confidential information and the heightened risk that the systems in question will be more vulnerable than before to hacking.”

Statutory claims are particularly strong. “The Court’s further assessment is that, again for the reasons given by the States, the States have shown a likelihood of success on the merits of their claims, with the States’ statutory claims presenting as particularly strong.” The balance of the equities, the court explains, favor the entry of emergency relief.

Who and what is restrained. The court ordered the defendants to show cause why a preliminary injunction should not be issued pursuant to Rule 65 during the pendency of the action and it also ordered that the defendants are “restrained from granting access to any Treasury Department payment record, payment systems, or any other data systems maintained by the Treasury Department containing personally identifiable information and/or confidential financial information of payees” other than to certain civil servants with the need for access and who have “passed all background checks and security clearances and taken all information security training” required. Also restrained from receiving access to those records are “all political appointees, special government employees, and government employees detailed from an agency outside the Treasury Department[.]”

The defendants are also “ordered to direct any person prohibited above from having access to such information, records and systems but who has had access to such information, records, and systems since January 20, 2025, to immediately destroy any and all copies of material downloaded from the Treasury Department’s records and systems, if any[.]”

The lawsuit was filed in federal district court in New York; the case is No. 1:25-cv-01144-JAV.

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