Labor & Employment Law Daily Wrap Up, REMEDIES, DAMAGES—D.R.I.: Preliminary injunction issued regarding firings at three more federal agencies, (May 7, 2025)

By Todd Harrison, J.D.

Further, the court found that the executive order disregarded the fundamental constitutional role of the branches of government, ignoring the “the unshakable principles that Congress makes the law and appropriates funds.”

Facing a legal challenge brought forth by various states against an executive order attempting to dismantle congressionally sanctioned agencies while ignoring congressionally appropriated funds, a federal district court in Rhode Island issued a preliminary injunction preventing the EO from taking effect. The agencies at issue in this instance were the Institute of Museum and Library Services (IMLS), the Minority Business Development Agency (MBDA), and the Federal Mediation and Conciliation Service (FMCS). Following the issuance of the EO, staffing at the agencies was severely reduced, including having no one on staff at the MBDA, resulting in the termination of thousands of grants, despite Congress having appropriated funding for the agencies one day after the EO was issued (Rhode Island v. Trump, No. 1:25-cv-128-JJM-LDA (D.R.I. May 6, 2025)).

Twenty-one states moved for a preliminary injunction seeking to restrain the government from implementing Executive Order 14238, “Continuing the Reduction of the Federal Bureaucracy,” as it applied to three agencies—the IMLS, the MBDA, and the FMCS. The states asserted that the government’s efforts to carry out the EO violated the APA, the Separation of Powers principles, and the Take Care Clause of the Constitution. The government opposed the motion on various jurisdictional grounds and contended that the states had not satisfied the required elements for preliminary relief.

EO. Under the terms of the EO, seven federal agencies, including the three at the center of this action, were directed to (1) eliminate their “non-statutory components and functions... to the maximum extent consistent with applicable law,” and (2) “reduce the performance of their statutory function and associated personnel to the minimum presence and function required by law.”

Appropriations bill. A day after issuing the EO, President Trump signed the Full-Year Continuing Appropriations and Extensions Act, in which Congress funded the three agencies through September 2025 at the same funding levels as the previous year.

Firings. Since the issuance of the EO, the leadership of the three agencies have taken several actions in furtherance of its mandates, including reducing staff to a bare minimum of individuals. In the case of the MBDA, staff was reduced to five members who were then reassigned elsewhere, effectively leaving no one working for the agency.

Most of the fired staff at the IMLS and the MBDA were also responsible for administering grants to the states, resulting in the termination of thousands of grants. The skeleton crew left at the FMCS meant that it would be unable to provide nearly all of its services, including mediation for collective bargaining and generally promoting labor peace. These actions led the states to file this motion for a preliminary injunction.

Standing. First, the government argued that the states lacked standing. The court disagreed, finding that the motion made it clear that the relief sought pertained only to the three agencies at issue in this case, not all of the agencies encompassed in the EO. Thus, equitable relief was not at issue.

Ripeness. Next, the government contended that nearly all the states’ claims of potential injury were based on the future delay or failure to receive funds from the agencies and were thus speculative. The court was again unmoved.

More than mere speculation was being relied on by the states when asserting harms, observed the court. “It is unclear how it is speculative for the States to precipitate delays in funds and services from the MBDA—and harms flowing therefrom—when the unrebutted record reveals that MBDA’s workforce has been reduced to zero,” continued the court. States receiving funding from the MBDA asserted that any pause to such funding would result in cuts to essential programming. The states also pointed to harms resulting from the reductions in staff at the IMLS and the FMCS. As such, the claims were sufficiently ripe for the court’s review.

The Tucker Act. Turning to the issue of subject matter jurisdiction, the government contended that the court lacked jurisdiction over the APA claims related to the government’s grant terminations because, under the Tucker Act, Congress vested the Court of Claims with exclusive jurisdiction over such claims. The court was not persuaded.

California. To support its assertion that the states’ challenges to the grant terminations were claims sounding in contract, the government pointed to the Supreme Court’s ruling on an emergency stay application in Department of Education v. California, 145 S. Ct. 966 (2025). There, the Supreme Court stayed a TRO enjoining the government from terminating education-related grants after finding the government was “likely to succeed in showing the District Court lacked jurisdiction to order the payment of money under the APA.” However, California did not render the present court as an improper forum for the states’ claims under the APA.

The precedential value of California was limited, explained the court. Further, the stay order did not displace governing law that guides the court’s approach to discerning whether the states’ claims are essentially contract claims in order to direct jurisdiction to the Court of Claims.

Here, the states were not challenging specific grant terminations or specific payments to which they claimed they were entitled. Rather, they were challenging each agency’s actions implementing a categorical policy to eliminate their “non-statutory components and functions” and “reduce the performance of their statutory function and associated personnel” under the EO.

As to the relief sought, the Court of Claims’ exclusive jurisdiction under the Tucker Act does not arise merely because some interest in a monetary award is asserted, observed the court. The states were seeking equitable relief to enjoin the government’s actions, not specific performance of any grant agreements.

“Accordingly, because the States’ challenges are based on alleged statutory and constitutional violations and the relief they seek is equitable, the essence of their claims are not contractual, so they are not subject to the exclusive jurisdiction of the Court of Claims under the Tucker Act,” the court stated.

Civil Service Reform Act. Next, the government asserted that the court lacked jurisdiction under the Civil Service Reform Act (CSRA). The court could not discern any jurisdictional bar within the CSRA’s statutory scheme that would apply to the states given that none of the states are federal employees. Further, a finding of CSRA preclusion would foreclose all meaningful judicial review over the states’ claims because they cannot bring their claims under CSRA’s statutory scheme.

“Programmatic” challenges. Turning to the likelihood of success on the merits beginning with the APA claims, the government contended that the states were not challenging discrete agency actions but rather a collection of “programmatic activities.” The court was unmoved, finding that the states had underscored the fact that they were challenging the government’s adoption of a discrete, categorical policy applying the measure “of eliminating all functions and components not mandated by statute, and of dramatically reducing their remaining functions” across the board.

Final agency action. As to whether there was final agency action to permit judicial review under the APA, the court found that this requirement was satisfied. Each agency adopted a policy to eliminate all non-statutorily required activities and functions and to reduce their statutory functions and personnel to the bare minimum, thus taking an agency action.

Arbitrary and capricious. An agency action is arbitrary and capricious for APA purposes if it is not reasonable and not reasonably explained. Here, the court found an absence of any reasonable explanation from any of the agencies. The government failed to show that any analysis was conducted to determine which components and functions of the agencies were statutorily required and which were not. Accordingly, the court found the states had established a strong likelihood of success on their arbitrary and capricious claims.

Mandatory statutory duties. It was also likely that the agencies violated the APA in failing to act in accordance with the law, said the court. The states presented compelling evidence that the agencies were flouting their statutory mandates in implementing the directives of the EO, including the staff of the IMLS being reduced from 77 to 12 employees, making it practically impossible for the remaining staff to fulfill its wide-ranging statutory responsibilities. Similar concerns were raised with regard to the reduction of staff at the MBDA and the FMCS.

Violations of appropriations statute. Despite congressional appropriation of funds to each agency, the record showed that the agencies were rescinding or deferring appropriated funds with no plans to spend them. Further, the EO practically proscribed the agencies from increasing expenditures elsewhere to make up for cuts in spending, said the court. Thus, the states were likely to succeed in establishing that the agencies violated the APA by not acting in accordance with their respective statutory mandates and congressional appropriations acts when “effectively absconding their statutory mandates by terminating core services and grant programs.”

Separation of powers. Intertwined with the states’ Take Care Clause claim was their assertion that the government’s actions violated the constitutional separation of powers. The court agreed, finding that the Executive was usurping Congress’s (1) power of the purse, by disregarding congressional appropriations; and (2) vested legislative authority to create and abolish federal agencies. As such, the states established a likelihood of success on their claims that the government violated the Take Care Clause and the constitutional separation of powers.

Irreparable harm. Turning to the question of irreparable harm, the states illustrated several harms arising from the practical undoing of the agencies, including the stopping of public library programs, the loss of entrepreneurial education programs from the termination of MBDA grants, and the complete stoppage of public sector services by the FMCS. Accordingly, the court found the states established a likelihood of success on their claims of irreparable harm.

Equities, public interest. Finally, the court found that the balancing of the equities and the public interest weighed strongly in favor of equitable relief. As previously discussed, the implementation of the EO effectively usurped Congress’s lawmaking and spending authority, explained the court, and the public interest lies in having governmental agencies abide by the laws governing their existence and operations.

For the aforementioned reasons, the court found a preliminary injunction was appropriate and necessary, denying the government’s motion to stay the order for seven days.

The case is No. 1:25-cv-128-JJM-LDA.

Judge: McConnell, J., Jr.

Attorneys: Katherine Connolly Sadeck, Rhode Island Attorney General's Office, for State of Rhode Island. Abigail Stout, U.S. Department of Justice, for Donald J. Trump.

MainStory: TopStory RemediesDamages ContractClaims GovernmentContracts Procedure PublicEmployees RhodeIslandNews GCNNews