As we recently outlined, on January 31, 2025, U.S. District Judge John J. McConnell issued a temporary restraining order (TRO) that blocks the federal funding freeze outlined in the now-rescinded January 27, 2025, Office of Management and Budget (OMB) directive (Directive). In the Order, the Court ruled that the Defendants (including the President, OMB, and numerous federal agencies) are prohibited from reissuing, adopting, implementing, or otherwise giving effect to the OMB Directive under any other name or title or through any other Defendants (or agency supervised, administered, or controlled by any Defendant).
In response, we have seen various federal agencies take the position that the TRO (1) only applies to freezes on financial assistance provided under Title 2 of the Code of Federal Regulations (CFR), (2) does not apply abroad, and (3) does not apply to government contracts administered under the Federal Acquisition Regulation (FAR). Consequently, agencies have continued to freeze federal funds and have refused to resume disbursement of appropriated funds. Agencies continue to issue stop-work orders and modify and terminate contracts under the auspices of compliance with President Trump’s recent Executive Orders (EOs). However, on February 10, 2025, Judge McConnell clarified the scope of his TRO Order. This ruling could have broad implications for federal contractors impacted by the EOs and the federal funding freeze.
Specifically, in response to the Plaintiff’s motion to enforce the TRO, Judge McConnell clarified that “[t]he Defendants issued a broad, categorical, all-encompassing directive freezing federal funding.” He went on to explain that the TRO prohibits all categorical pauses or freezes in obligations or disbursements based on the OMB Directive or based on the President’s 2025 Executive Orders. According to the Court, the broad, categorical, and sweeping freeze of federal funds is likely unconstitutional and has caused and continues to cause irreparable harm to a vast portion of the country.
The Court further ordered that the Defendants:
- immediately restore frozen funding during the pendency of the TRO;
- immediately end any federal funding pause during the pendency of the TRO;
- immediately take every step necessary to effectuate the TRO, including clearing any administrative, operational, or technical hurdles to implementation;
- comply with the plain text of the TRO not to pause any funds based on pronouncements pausing funding incorporated into the OMB Directive;
- immediately restore withheld funds, including those federal funds appropriated in the Inflation Reduction Act and the Infrastructure Improvement and Jobs Act; and
- resume the funding of institutes and other agencies of the Defendants (e.g., the National Institutes for Health) that are included in the scope of the Court’s TRO. Shortly after the Court’s ruling, the Defendants appealed the TRO to First Circuit Court of Appeals.
The key takeaway from this ruling is the Court clarified that the TRO applies to any federal funding freeze imposed as a result of the EOs. This clarification may give contractors the ability to challenge the sweeping agency action taken in response to the EOs, including the issuance of stop-work orders and contract terminations.
If you have questions about this Order or President Trump’s EOs, please contact Sam Finnerty or another member of PilieroMazza’s REAs, Claims, and Appeals or Government Contracts practice groups.
If you’re seeking practical insights to gain a competitive edge by understanding the government’s compliance requirements, tune into PilieroMazza’s podcasts: GovCon Live!, Clocking in with PilieroMazza, and Ex Rel. Radio.
