In a pivotal decision on Tuesday, the US Court of Appeals for the D.C. Circuit declared that disputes over cancelled Environmental Protection Agency (EPA) grants should be handled by the US Court of Federal Claims, emphasizing the contractual nature of these disputes. This ruling has significant implications for grantees of the Greenhouse Gas Reduction Fund who have seen their EPA grants abruptly terminated.

The court's decision underscores that litigants cannot circumvent the jurisdictional boundaries set by the Tucker Act, which governs contract claims against the federal government, by seeking injunctive relief in district courts. This clarification came after grantees challenged the EPA's decision to terminate grants based on agency priorities, arguing that such terminations violated the Office of Management and Budget (OMB) regulations unless expressly stated in the grant agreements.

Despite the grantees’ assertions, the court determined that the OMB's guidelines do not provide a private right of action and are intended merely to guide federal agencies in grant management. The court also dismissed the grantees' additional claim under the Administrative Procedure Act, where they accused the EPA of acting without sufficient justification. The court concluded that this claim was too closely tied to the grant contracts to be considered independently.

This ruling gains further context from leaked emails dated back to the Trump administration, revealing discussions among attorneys about preventing nonprofit groups involved in the Greenhouse Gas Reduction Fund from utilizing the granted funds. These communications have raised questions about the motivations behind the grant cancellations.

The decision directs a clear path for future disputes over federal grants, confirming that such cases should be resolved in the realm of federal claims, specifically under the purview of contractual law. This development is a crucial update for entities engaged with federal grants, particularly those involved with environmental and sustainability projects under the EPA's oversight.