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Case number 25-5122 et al.

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Climate United Fund et al.

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versus Citibank NA, Environmental Protection Agency, and Liam Zeldin in his official capacity as Administrator, United States Environmental Protection Agency, a balance.

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Mr. Robb for the EPA, Mr. Allen for Citibank NA, Mr. Niekowski for the private plaintiff appellees, Ms.

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Rick Depot for the state bank's appellees.

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Good morning, Mr. Roth.

[00:00:35] Speaker 03:
Good morning.

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You may proceed when you're ready.

[00:00:36] Speaker 03:
Thank you, Your Honor.

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May it please the court, Yakov Roth on behalf of the federal defendants.

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Your Honor, our basic position here is that the plaintiffs' only cognizable claims sound in contract, and that affects both where the claims can be pursued and the remedy the plaintiffs may seek.

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As the court knows, the dispute really boils down to a question of whether these claims are, in essence, contractual.

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What I'd like to do to start is offer two hypotheticals that I think can help tease out why the answer is yes.

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So the first hypothetical.

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I want to hear that, but I want to hear just before you get into that, because I know there's a lot to say about the Tucker Act.

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If the district court's injunction were to be lifted, what would happen to the disputed funds?

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Well, it's a good question, Your Honor, and actually we

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Because the TRO was issued immediately after the termination of the grants, but before anything happened to the funds, we're sort of speculating a little bit about exactly how it would play out.

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I think what would happen is Treasury would terminate the financial agency agreement with Citibank.

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and that would cause the funds to revert to Treasury, then the question becomes, can they be what we call re-obligated?

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It's really a replacement grant is the way EPA is thinking about it to replace the grants that had been terminated.

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And in terms of replacement grant, my understanding from briefing is that that's actually a very narrow, has very narrow parameters and effectively would have to go back to these

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same organizations?

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We agree it's narrow.

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We don't think it needs to be the same organizations.

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The details of that are, you know, would need to be worked out, obviously, with OMB and subject to GAO guidance on that question.

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But we didn't get there.

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We didn't get anywhere close to there because immediately after the grants were terminated, it was enjoyed.

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But we have to think about Congress' intent here in setting up

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agency and the replacement grant is an authority that gets around the appropriations limitations.

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Expiration.

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This cannot be re-obligated.

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That's right.

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So the appropriation has expired and the question is if a grant that was obligated prior to the expiration

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can no longer be effectuated here because of termination.

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What can the agency do with that appropriation?

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And there is a limited set of circumstances in which they can be.

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Funds go back in the treasury and the appropriations expire.

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How can you not have an appropriations clause?

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Well, the GAO guidance does provide for what they call replacement grants under limited circumstances, where it's not considered a new obligation, it's considered a replacement for the old obligation.

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Exactly where the line is on that is, you know, I think a fairly debated question.

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If they can't be re-obligated, then I think Judge Katz is right, then the money would

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sit in an expired account for a while because of the expiration of the grant.

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But again, I think we're sort of jumping ahead a little bit because the initial question is, can EPA terminate the grant?

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That's actually all that has happened so far in this case, is the termination of the grants.

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And can I just ask one more?

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Sure.

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Before you get into the hypos, what are we really fighting over

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You're gonna re-obligate anyway.

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It's largely the same kind of grantees for the same kind of purpose.

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You all might think this is hugely wasteful spending on a very bad idea, but it's gonna happen anyway.

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Are we just fighting over, you wanna redo the grants to have better transparency?

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Yes, Your Honor.

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It's the oversight point.

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I mean, that was the basis given for the termination.

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That was EPA's concern with the way these contracts were structured.

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And that's what the EPA would like to remedy through re-obligation.

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So my understanding is that there is just as much, if not more, transparency over these funds because the EPA can see exactly what's going on in the Citibank.

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accounts, and they have all the reporting and all the checks on how they're spent that they would have in any grant situation, if not more.

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Your Honor, I think there's two aspects to it.

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One is the way these grants are structured, it's essentially a large advance.

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And then there's reporting later of like, you know, every year, what did you do with the money?

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As opposed to upfront.

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More frequently plus in real time visibility.

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Yes, their EPA has ability to see the money flowing out, right, of the accounts.

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Yes, they have that.

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But they don't have, other than in particular circumstances that are specified in the contract,

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they don't have a pre-approval sign off of.

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And that's by design.

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I mean, there's a whole... Well, certainly by design.

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...by professors about the funding.

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This is a... It's a not traditional government programming, but really trying to leverage private investment.

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I understand these plaintiffs undertook to something like leverage the government's money, something like five to seven times,

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private investments so that it costs the taxpayers a lot less to build these energy infrastructure projects.

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But my understanding about why this was designed this way to have the money, as you put it, parked outside of

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the government and not be the after the fact reimbursement was so that these entities would be in a position to do that leveraging, would be in a position to be seen as a stable and adequately funded partner up front.

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And so if that model, I mean, if there's something illegal about that model, we should know, but I don't see

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anything to that effect.

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And I don't see, after how many months, actually any evidence of the structural problems that the government purported to rely on here.

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So, Your Honor, I think that's conflating two different questions.

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One is who has, from sort of an accounting standpoint, can the grantees claim these monies on their balance sheet for purposes of leveraging?

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And then there's a separate question of,

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oversight on how they then spend the money and EPA's ability to monitor that and sign off on that and understand what's going on with the money flowing out.

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I think those are not necessarily tied together.

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You could have a regime where the money is held on their balance sheets, but nonetheless, EPA is entitled to additional rights in terms of being able to approve the expenditures to sub-grantees and sub-sub-grantees

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And in fact, the contract does give EPA certain rights in that respect.

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They're just very limited and most of the expenditures don't need to be pre-approved or pre-cleared.

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The other aspect of it that's problematic.

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The additional rights to approve, I mean, would that be what's missing?

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In turn, what is the concern given that these grantees are subject to very strict guardrails and if the money is misused, they're subject to criminal penalty.

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Your honor, I think it's the ability to ensure that that's actually happening.

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That those guardrails are being

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respected and enforced.

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So it's the EPA's ability to see and understand what exactly the money is going to.

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And then what I was going to get to, the second sort of aspect of the problem from an oversight perspective,

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is you might have thought that with $20 billion, there would be a large number of grantees doing a large number of projects, right?

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Like you could have 1,000 projects for $20 million each.

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Instead, we have almost all of that money being granted to three organizations that then go through the process of sub-grants to others who then pass it through to others.

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And the further removed it is, the harder it is for EPA to be able to understand what's going on and to trace the money.

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And so that is part of the concern as well from oversight.

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I didn't see that argument in your brief, but I've done a lot of reading over the past few weeks.

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There's been a lot of briefing on very quickly, but the pass-through aspect of the way these are structured is unusual.

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So why not?

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modify the grant agreements instead of canceling that?

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I mean, I thought EPA has already done significant audits and continues to do so.

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It's trying to.

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It's actually very hard.

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And that itself is costly.

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The administration costs of these grants are significant.

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But I think the point of termination is that's the leverage that EPA has under the contract.

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EPA doesn't, you know,

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The way to fix this, at least EPA's determination about the way to fix this, was these are fundamentally structured in a way that impedes oversight.

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They were modified, of course, in a very sort of questionable point in time to further impede oversight.

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And EPA's determination.

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But they were strengthened.

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They were significantly strengthened.

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in the amendments that occurred after the election.

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And so EPA's determination was, these need to be terminated, and we need to redo them.

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And again, the question for the court is just, is the challenge to that action, to the termination of the grants, is that, in essence, a contractual claim?

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Mr. Roth, can I ask you?

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the grantees, one of their primary arguments is that they have title to these funds because of the way, a somewhat unusual way that this money is dispersed to them into their accounts at Citibank and now that they have title to that.

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And so they're making a kind of property claim.

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And so I have actually read through a lot of the grant agreements and

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And I guess, so if there's a question about whether they have title to the funds, it certainly doesn't seem obvious to me, at least in reading the grant agreements.

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But if there is a serious question about that, is that question one that's appropriate for the district court or for the court of federal claims?

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Because the threshold question, whether they have a property right,

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And if they do have a property right, presumably they could remain in district court.

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I'm interested in both of those questions.

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How do we figure out whether they have this property right?

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And who decides if they have a property right under the grants?

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Would it be appropriate for jurisdiction to remain in the district court?

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Or would that question also go to the court of federal?

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So Your Honor, the way I see it, they certainly have rights and interests in these funds.

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But so does EPA.

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And the contract itself makes that

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I mean, this is a 60 page single space contract grant agreement, all sorts of provisions about who can do what with the money when.

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And so I think the takeaway for me from that agreement is that the nature of the dispute is over the contractual provisions and EPA's ability to terminate under those contractual provisions, which to me is a contract question.

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So assuming I agree with that as a general matter,

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more specific question about whether they have title, whether they in fact have a claim.

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I guess my question is this, assuming they did have title to these funds, that we were to read the contract and clue that it had title, then would jurisdiction be appropriate in the district court?

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No, I don't think so, because I think the debate would remain whether EPA is entitled under the contract to terminate.

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And even plaintiffs don't dispute.

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two things that EPA has an interest, secured interest in the funds under the agreement.

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And two, that there is a termination provision in the agreement.

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So that clause in particular, I find very hard to reconcile with their argument that essentially there's this is not a contract dispute.

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We just have the money.

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It's ours.

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And, you know, if you want to have a fight about that, it's a property fight, not a contract fight.

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There is a provision in the contract that allows for termination under certain circumstances, which to me,

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completely inconsistent with the idea that this is all done merits of whether they have property right so my assumption is just just assuming and I know you disagree with this that they do have title if that was the case would they have a property right claim they could bring in district court I don't think so your honor let me offer this hypothetical so they analogize in their brief to a mortgage they say

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It's essentially like we have the house, the bank has an interest in because they've lent money for this.

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So if you have a mortgage agreement with a bank and the agreement has a provision for when the bank can initiate foreclosure proceedings if you default, and let's say the bank initiates the foreclosure and I say,

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Wait, I did pay, you know, you're misreading the contract or you don't have the facts right.

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I would sue the bank for breach of contract because we have an agreement that dictates when the bank is able to do that.

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And I'd be saying you are exceeding your rights.

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under the contract now I could get specific performance probably against the bank in that scenario, but that's because the bank is not the federal government.

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And so I have a broader set of remedies available to me, but it's still fundamentally a contract dispute.

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So your position is that there's no way to re-characterize this contract claim as a

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On this contract, I don't think so.

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I think you do have to look at the contract in order to sort of appreciate that that's the world we're in, right?

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You look at the contract and you see, okay, this is a five-year arrangement where there are lots of things the EPA has to do over the course of that five years, sign off on things, approve a work plan, approve a budget.

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The grantees have to make certifications every time they disperse funds.

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You do have to look at that to appreciate we're in the middle of a course of performance that is going both ways and that is expected to go both ways for a number of years.

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That tells us this is a contract fight.

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And if I did want to sort of start by offering these hypotheticals to try to tease that out.

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I'm going to let you do that.

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But I'm just on this very same issue that Judge Rao was pressing you on.

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land versus dollar, same kind of debate.

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And the Supreme Court there said that the plaintiffs weren't relegated to the court of claims.

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That they had, or at least claimed, and they said it's a merits issue that would have to be resolved, but they had claimed a

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Ownership interest in the shares and you know that yes that was a question of the nature of the agreement between them because they were using the shares they said is collateral the maritime commission said no you turn them over to us right.

[00:16:47] Speaker 03:
Well, you know, I think to me the important aspect of land versus dollar that's different from here is the court emphasized there that the party's obligations under the contract were over.

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The contract itself had sort of been completed.

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We had moved on.

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And now the question is, who owns this sort of post contract?

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That, to me, is a lot closer to the megapulse set of facts, where you may have originally come into acquisition of some sort of property by virtue of contract.

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But at the point of the dispute, that's not at issue.

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What's at issue is, how are you then using that going forward?

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And the claim in megapulse was that the use of the property was inconsistent, violated a statute.

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So fine, no problem, that's not a contract dispute.

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Here, again, we're only a few months into a contract that is scheduled to last for years and that has a termination provision in the contract.

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So the way I was trying to conceptualize this was... Go ahead, go ahead.

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Okay.

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So if we think about the same agreements that we had here, but imagine that the grantees were convicted of wire fraud in connection with

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the administration of those grants.

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And so under the terms of the contract, there would then be no dispute that termination is permissible.

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Would plaintiffs still have a claim?

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Would we still be here having this dispute under those facts?

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I think the answer is no.

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Then if we change the hypothetical a little bit, we say, OK, assume the same facts as this case, but let's imagine that the grant agreements had said termination, EPA may terminate this agreement at any time for any reason.

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Would we still be here having this dispute on those facts?

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I think the answer is no, again.

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And if I'm right about that, I think the consequence is this case hinges on two things.

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What do the contracts say?

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and have those terms been satisfied?

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In other words, contract interpretation, contract application.

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And if that's not, in essence, contractual, it's hard for me to see what would be.

[00:19:00] Speaker 06:
So it's tough, though.

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I mean, this is an area, as you know, we've been working with these tech rat cases in other cases recently.

[00:19:08] Speaker 06:
So let's say with the mortgage situation, homeowner

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has a mortgage.

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And instead of foreclosing, the bank representatives come with a moving truck and start taking away the plaintiff's property and inviting someone else to move in.

[00:19:29] Speaker 06:
It doesn't look any more like a contract dispute.

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It looks like some kind of invasion of a property interest.

[00:19:37] Speaker 06:
And I thought actually that our court's treatment in Trans-Ohio was very interesting because there's an underlying contractual right to the supervisory goodwill.

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Remember, this is the one with the failing thrifts.

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The thrifts, the new legislation comes in.

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But the court says, well, these are constitutional and statutory claims.

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go to the district court, the thrifts end up losing.

[00:20:14] Speaker 06:
But in terms of the jurisdictional threshold, you could, I'm sure you could, characterize that as really a contract claim.

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Because the question is, what is the nature of what they were given when they were accorded the authority to claim a supervisory goodwill as an asset?

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And in fact, in the end of the day, the court says that,

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there wasn't the power to trump the will of a future Congress.

[00:20:44] Speaker 06:
But nonetheless, it's based on contract.

[00:20:47] Speaker 03:
Well, yeah, I mean, I think the way I understand Trans Ohio was the court was saying with respect to the claims that are based on the statutory or what they claim to be their statutory or constitutional rights, we can go ahead and analyze that.

[00:21:01] Speaker 03:
And I'm happy to do that for this case as well.

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And I can get to that in a minute.

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But I do think

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The facts of this case and the arguments in this case are much more close to Ingersoll Rand, where it was a termination of a contract.

[00:21:16] Speaker 03:
The challenge was to the termination of the contract.

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And this court said, if you're challenging the termination of the contract, that's a contractual claim, even if it also derivatively runs afoul of a regulation.

[00:21:31] Speaker 03:
I'm not really seeing a lot of difference between this case and Ingersoll-Rand, but I'm happy to talk about the statutory and constitutional rights, because that is what Trans-Ohio said the court can review.

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And plaintiffs do emphasize those ostensible rights here to try to

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get away from the Tucker Act problem.

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And I'm not really sure whether the right way to analyze it is to say those are still contract claims and therefore they have to go to the claims court or whether the better way to analyze it is to say those claims fail on the merits to the extent that they're being used to try to get the relief the plaintiffs are asking for here.

[00:22:10] Speaker 03:
Either way, I'm sure it doesn't justify the preliminary injunction.

[00:22:15] Speaker 03:
But we sort of have to go right by right through the analysis.

[00:22:19] Speaker 09:
can I ask your position in a nutshell I think is does the right to terminate turn on what's in the grant or what's in the regs and I can imagine a lot of cases where the answer

[00:22:41] Speaker 09:
to that question would be pretty clear.

[00:22:44] Speaker 09:
But there's this weirdly endless loop quality to this where you look at the termination reg and it has some substantive rules like you can authorize this termination based on no longer effectuating agency policy.

[00:23:08] Speaker 09:
has a process rule, which is you have to put termination grounds in the grant.

[00:23:14] Speaker 09:
And then it has a cross reference to the grant.

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You can terminate for failure to satisfy the grant, all of which is good for you.

[00:23:25] Speaker 09:
But then you go to the contract, and it says, right to terminate only as specified in the regs.

[00:23:34] Speaker 09:
point you to the regs, and the regs point you to the grant, and it starts to look kind of messy to figure out what source of law is governing the scope of your right to terminate.

[00:23:50] Speaker 03:
Your honor, the way I see it, the reg provides certain grounds, but the reg also says you can terminate consistent with the terms and conditions of the grant, which points us to the grant.

[00:24:02] Speaker 03:
And I think once we're then pointed to the grant, the important point is it's a contract fight about the terms of the grant.

[00:24:11] Speaker 03:
So if it violates the terms of the grant, it might also violate the reg.

[00:24:16] Speaker 03:
If it's consistent with the terms and conditions of the grant, then it's consistent with the reg, but it all therefore turns on

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what are the terms of the grant and have they been satisfied, which again to me is a sort of classic contract dispute.

[00:24:31] Speaker 03:
And look, we have, you know, I'm not going to get into necessarily here, I don't think it's appropriate forum to get into what our contract arguments are, but we do have arguments that the termination was consistent with the terms of the grant, which we will raise in, you know, once this is properly characterized as a contract claim,

[00:24:52] Speaker 03:
and we can do factual development necessary for a contract claim, we can make that argument.

[00:24:56] Speaker 03:
But for the present purposes, all that really matters is that it is, at its nature, a contract claim.

[00:25:04] Speaker 03:
But I do want to address the statutory quasi-constitutional argument that Judge Pillard asked about, because plaintiffs do put a lot of emphasis on that.

[00:25:14] Speaker 03:
They really point to two statutes, the APA and then the appropriations law itself.

[00:25:19] Speaker 03:
I think the APA clearly doesn't work in getting them anywhere.

[00:25:22] Speaker 03:
I mean, Megapulse itself said every contract breach and termination could be re-characterized as arbitrary and capricious.

[00:25:30] Speaker 03:
That can't possibly be enough to get you out.

[00:25:32] Speaker 06:
Some can be.

[00:25:33] Speaker 06:
I mean, some cases that have some contract in them are nonetheless pursued and we have held can be pursued.

[00:25:40] Speaker 06:
So anyway, well, I think I think you need some.

[00:25:43] Speaker 03:
Right, Your Honor, I think you need some independent substantive right apart from the contract and apart from the APA to be able to point to.

[00:25:52] Speaker 03:
And the only thing they point to here is the appropriations

[00:25:56] Speaker 03:
law itself, which simply says here is some money that is available for EPA to make grants.

[00:26:05] Speaker 03:
And I think it's important to distinguish here the situation that this court has been grappling with in the radio related cases where

[00:26:15] Speaker 03:
The appropriation statute itself identified the recipients.

[00:26:20] Speaker 03:
And so the court was struggling with how to characterize that.

[00:26:25] Speaker 03:
It was the source of rights.

[00:26:26] Speaker 03:
The statute is the source of rights, the grant agreement.

[00:26:29] Speaker 03:
Here, the statute doesn't identify any recipients.

[00:26:31] Speaker 03:
It just says, here is money for grants.

[00:26:33] Speaker 03:
EPA made the grants.

[00:26:35] Speaker 03:
It made the grants by the deadline in the statute.

[00:26:39] Speaker 03:
And nothing in the statute says those grants cannot be terminated.

[00:26:43] Speaker 03:
And I don't think that would be a plausible reading of the appropriations.

[00:26:48] Speaker 04:
Are you saying that makes a difference?

[00:26:50] Speaker 04:
I thought the government's position in the radio cases was that having that type of statute doesn't make it material difference.

[00:26:56] Speaker 04:
But here you're arguing that it is.

[00:26:58] Speaker 03:
I'm just saying it's easier, Your Honor.

[00:27:00] Speaker 03:
I think this case is an easier case in the sense that there is no conceivable argument that the grantees have independent rights that are conferred on them by the appropriation statute.

[00:27:11] Speaker 03:
It's all coming from the grant agreements.

[00:27:15] Speaker 06:
Well, you have Congress saying, here's a program we're setting up and we're appropriating money.

[00:27:19] Speaker 06:
We want the particular activity that we've identified.

[00:27:24] Speaker 06:
infrastructure, energy infrastructure, advanced energy technology to be developed.

[00:27:31] Speaker 06:
That's what we want.

[00:27:33] Speaker 06:
And we want it to happen quickly.

[00:27:36] Speaker 06:
So there's an appropriations, there's a deadline for actually doing the contracting and getting the money out the door.

[00:27:45] Speaker 06:
That's September, 2024.

[00:27:47] Speaker 06:
EPA complies and identifies these grantees.

[00:27:53] Speaker 06:
They qualify.

[00:27:54] Speaker 06:
EPA gets them, everything's good, and why is it not a separation of powers claim when the plaintiffs say, okay, now EPA does not value this kind of energy development activity, terminates the grants to, in their view,

[00:28:22] Speaker 06:
permanently obstruct and foreclose implementation of this congressional program.

[00:28:29] Speaker 06:
There's, I mean, we have cases, Bowen, National Center for Manufacturing, Maryland Department of Human Resources, where there's a contract in there somewhere, but there's still, the plaintiff's claim is not you violated her contract.

[00:28:45] Speaker 06:
It's you are upending, unilaterally as the executive, upending the will of the Congress that appropriated these monies for this purpose.

[00:28:55] Speaker 03:
So, Your Honor, I think there's at least two reasons why that's not

[00:28:59] Speaker 03:
correct.

[00:29:00] Speaker 03:
But one is that's not what EPA is doing.

[00:29:02] Speaker 03:
So again, EPA has been really clear on this from in the termination letters and in every statement it's made that this is not some sort of frontal assault on the appropriation or Congress's objective.

[00:29:16] Speaker 03:
In fact, there's a whole series of grants, the solar grants that were not touched because they don't implicate the structural problems

[00:29:24] Speaker 03:
with these particular grant agreements.

[00:29:26] Speaker 03:
So the problem that EPA has is with these contracts, not with the statute.

[00:29:31] Speaker 03:
And that's why EPA has made very clear it intends, as it, you know, consistent with principles of appropriations law,

[00:29:38] Speaker 03:
to continue to make these funds available in a permissible way, and in a way that comports with the oversight principles that it thinks are important here.

[00:29:49] Speaker 03:
So that's sort of number one.

[00:29:50] Speaker 06:
You said there were two things.

[00:29:52] Speaker 06:
One was that this is not done for disagreements with the objective, and the other is?

[00:29:57] Speaker 03:
So the other is, I don't think this statute actually

[00:30:01] Speaker 03:
compels the entire amount to be spent, unlike some other appropriation statutes.

[00:30:06] Speaker 03:
So they cite a case where the law said agency shall do something.

[00:30:12] Speaker 03:
Sometimes the agency must.

[00:30:14] Speaker 03:
It doesn't say that here.

[00:30:14] Speaker 03:
So this just says, here's money.

[00:30:16] Speaker 03:
It's available to make grants.

[00:30:19] Speaker 03:
So I'm not sure they even get past that first step of there's a mandate from Congress to spend the entirety of the funds.

[00:30:25] Speaker 03:
Now, again, that's EPA is not

[00:30:28] Speaker 03:
planning to set aside the money, EPA does really want to have these funds be available for the purposes Congress identified.

[00:30:36] Speaker 03:
But just from a legal standpoint, I think they have two hurdles they have to get over that they can't.

[00:30:42] Speaker 06:
So you said that it's been really consistently clear that this is not an assault on Congress's objectives.

[00:30:49] Speaker 06:
But the district court held, in support of the preliminary injunction, something else, that actually EPA had terminated the grants.

[00:30:59] Speaker 06:
and just because it had decided to shut down the program because it disagreed with it as a policy matter.

[00:31:04] Speaker 06:
And in fact, I'm trying to remember there was a communication from the EPA to the court saying, don't worry about irreparable harm to the reputation of the plaintiffs.

[00:31:18] Speaker 06:
It's not gonna be reputationally damaging to them because it's just a policy disagreement.

[00:31:25] Speaker 03:
It is a policy issue, Your Honor, but it's a policy issue with

[00:31:32] Speaker 03:
these contracts, not with statute.

[00:31:35] Speaker 06:
So it's about the transparency and the fraud.

[00:31:40] Speaker 03:
The risk of fraud, yeah.

[00:31:43] Speaker 03:
To be clear, we're not accusing anybody of fraud.

[00:31:46] Speaker 03:
I don't want to suggest otherwise.

[00:31:50] Speaker 03:
It's a risk issue.

[00:31:52] Speaker 03:
Does EPA have the tools and the oversight that it needs under this contract to ensure that that doesn't happen?

[00:31:58] Speaker 03:
And that was the concern that motivated the termination.

[00:32:01] Speaker 03:
Now, you're right, Your Honor.

[00:32:02] Speaker 03:
The district court did say, no, this is really an effort to dismantle the program.

[00:32:07] Speaker 03:
The court didn't cite anything for that proposition.

[00:32:11] Speaker 03:
And I don't think it's supportable based on anything in the record.

[00:32:15] Speaker 03:
Again, the materials from the EPA have been quite clear and consistent on both the reasons for determinations as focused on the contracts and on their intent going forward to ensure that the money is used as Congress

[00:32:31] Speaker 03:
intended.

[00:32:33] Speaker 04:
Just ask why didn't EPA or the government here issue a notice of exclusive control?

[00:32:42] Speaker 04:
Yeah, so it sort of goes back to... It seems to be a mechanism that's available.

[00:32:45] Speaker 03:
So it sort of goes back to what I was saying at the very beginning with Judge Pillard, which is we never got to the point of actually taking the money back.

[00:32:55] Speaker 03:
The first step is terminating the grant.

[00:32:57] Speaker 03:
Once the grant is terminated, there's no live grant.

[00:33:00] Speaker 03:
Money can't be spent because there's no approved work plan anymore for spending the money.

[00:33:05] Speaker 03:
And then that was immediately... We immediately had a TRO that froze everything.

[00:33:10] Speaker 03:
And since that point, we've been in just a period of frozenness, where the money is still in the account.

[00:33:19] Speaker 03:
It can't be spent by anybody.

[00:33:20] Speaker 03:
It can't be pulled back by us.

[00:33:22] Speaker 03:
But we never got there, is the answer.

[00:33:25] Speaker 04:
So the notice of exclusive control would always come after a grant termination?

[00:33:30] Speaker 03:
That's how I read it.

[00:33:32] Speaker 03:
I'm not certain that it's actually required, because I think the alternative, as I was saying,

[00:33:39] Speaker 03:
If Treasury terminates the agency agreement with Citibank, which it can do at any time, then the money may revert to Treasury just by virtue of that.

[00:33:50] Speaker 03:
But again, we never got there.

[00:33:51] Speaker 03:
So it's sort of facts.

[00:33:53] Speaker 06:
As you know, the facts here are not great for the government when the district court

[00:34:01] Speaker 06:
scheduled a hearing on March 11th and the government asked as a matter of courtesy for an extra 24 hours.

[00:34:11] Speaker 06:
It had just recently said, oh, we have some concerns where

[00:34:17] Speaker 06:
where we've sent questionnaires to all the grantees.

[00:34:21] Speaker 06:
We expect the answers, I think it was by March 28, without having any of those answers.

[00:34:28] Speaker 06:
And as far as I can tell from the record, with zero substantiation that any fraudulent activity is occurring.

[00:34:37] Speaker 06:
Am I right?

[00:34:38] Speaker 06:
Zero substantiation.

[00:34:41] Speaker 06:
In that 24-hour grace period that the plaintiffs agreed to and that the court allowed, the government canceled.

[00:34:48] Speaker 06:
These agreements.

[00:34:49] Speaker 03:
Yeah.

[00:34:50] Speaker 03:
Well, let me just say, Your Honor, I can assure the court that the line attorney who requested an extension on the brief was absolutely not trying to game anything with respect to EPA's actions on the grant.

[00:35:02] Speaker 03:
There were two completely separate processes that were playing out at the same time.

[00:35:09] Speaker 03:
And it is unfortunate that the timing went out that way.

[00:35:11] Speaker 06:
I don't think I'm accusing the line attorney of misconduct.

[00:35:16] Speaker 03:
OK, good.

[00:35:16] Speaker 06:
I think there is a question.

[00:35:18] Speaker 06:
about the timing of the EPA decision-maker?

[00:35:21] Speaker 03:
Well, I think, Your Honor, the way I understand the record is, yes, EPA sent out these questions.

[00:35:29] Speaker 03:
And I think EPA ultimately concluded the fact that they need to be sending out these questions and waiting for the grantees to answer these questions really confirms the problem with the way these grants are structured.

[00:35:42] Speaker 03:
Because they should not need to do that.

[00:35:43] Speaker 03:
They should have that information

[00:35:46] Speaker 03:
available to them and the lawsuit was filed and this was a fast moving situation and EPA made the determination to terminate the grant.

[00:35:55] Speaker 06:
Even now that it's clear to me you argue that these terminations are reasonable because of this substantial concerns about program integrity and the award process and the unusual putting it in Citibank

[00:36:09] Speaker 06:
But the plaintiffs and their amici describe how this structure actually affords EPA greater oversight over how these funds are being spent than the standard structure.

[00:36:22] Speaker 06:
So if you could just pinpoint for me, what is it that EPA doesn't have that it needs and why, it's really a two-part question, and why

[00:36:34] Speaker 06:
some kind of renegotiation of these contracts while they are still in place was not absolutely adequate to address that.

[00:36:46] Speaker 03:
So the first thing I would say, Your Honor, is I think that's an arbitrary and capricious challenge to the termination of the grants.

[00:36:53] Speaker 03:
And our fundamental point is that's not cognizable because of

[00:36:58] Speaker 03:
the Tucker Act.

[00:36:58] Speaker 03:
So you cannot challenge a termination.

[00:37:00] Speaker 06:
We're asking you a substantive question.

[00:37:02] Speaker 06:
That we have the Tucker Act issued.

[00:37:04] Speaker 03:
Yeah, OK.

[00:37:04] Speaker 06:
I just want to make clear that that's... But I'm asking you about the conduct when you get to the Court of Claims.

[00:37:12] Speaker 06:
What is your likelihood of success on any of these issues?

[00:37:17] Speaker 03:
Well, I think when we get to the Court of Claims, the questions will be, did we have the contractual right to terminate under these conditions?

[00:37:26] Speaker 03:
And then number two, if not, what are the damages that the plaintiffs are entitled to?

[00:37:30] Speaker 06:
So what is the lack of visibility that you have, that you had, and why, if there's a problem with the structure, but that hasn't played out in any activity that you could identify over what's now been a considerable period, why

[00:37:50] Speaker 06:
isn't approaching them, keeping the program up and running and negotiating something different, absolutely the adequate response.

[00:38:02] Speaker 03:
So, Your Honor, it may be that this could have been modified and that the issues could have been addressed by modification rather than termination.

[00:38:09] Speaker 03:
I don't really know the answer to that, but I'm not sure it matters for purposes of

[00:38:14] Speaker 03:
either this court's review or the claims court's review.

[00:38:16] Speaker 03:
Because I think in the claims court, the question isn't going to be the reasonableness of the concerns.

[00:38:21] Speaker 03:
It's going to be, how much leeway did EPA have under the contract to make these kinds of decisions?

[00:38:27] Speaker 06:
So assume for purposes of my question that you aren't in the court of law.

[00:38:31] Speaker 06:
Assume for purposes of my question that we say, no, this is not really a contract action.

[00:38:37] Speaker 06:
What is the lack of visibility?

[00:38:39] Speaker 06:
What is the problem?

[00:38:40] Speaker 03:
So it's really about the sub.

[00:38:43] Speaker 03:
awards and the sub-recipients.

[00:38:45] Speaker 06:
But you've frozen with respect to the immediate grantees, not just the sub-grantees.

[00:38:50] Speaker 03:
No, I think it's both, Your Honor.

[00:38:52] Speaker 06:
I know, but you have enough visibility into the primary, into the close-in grantees.

[00:38:59] Speaker 03:
The top of the pyramid is eight grantees.

[00:39:02] Speaker 03:
But eight grantees aren't themselves spending $20 billion on projects.

[00:39:07] Speaker 03:
They are passing it through.

[00:39:08] Speaker 06:
So what is the problem with the subs?

[00:39:10] Speaker 03:
The problem is that EPA doesn't have the ability to see what the subs are doing.

[00:39:16] Speaker 03:
And in turn, how the subs are passing the money through to further people down the chain.

[00:39:25] Speaker 03:
We don't have the visibility to see how they're making those decisions or how that money is being used, or at least EPA's determination was that it does not have enough ability to oversee the money at those lower levels, which is how it's ultimately being spent.

[00:39:38] Speaker 06:
And is there just, I know this is way in the weeds, but is there some mechanism that EPA has in mind that it would put in place when it re-obligates these funds?

[00:39:51] Speaker 03:
I don't know the answer to that, Your Honor.

[00:39:52] Speaker 03:
I think there are probably different ways to do it.

[00:39:54] Speaker 03:
But I'm not in a position to specify how they would address that.

[00:39:59] Speaker 03:
I can just say that is the issue.

[00:40:01] Speaker 03:
That's what distinguishes these grants from, for example, the solar grants that they have not touched, which are a $7 billion program.

[00:40:10] Speaker 03:
But it doesn't present the same issue.

[00:40:12] Speaker 03:
So whether we agree with the EPA or not on this, it's a legitimate concern that the agency has about its ability

[00:40:20] Speaker 03:
monitor and ensure that the funds are being properly dispersed and expended.

[00:40:35] Speaker 03:
Thank you, your honor.

[00:40:36] Speaker 06:
Thank you, and we'll give you time for rebuttal.

[00:40:43] Speaker 06:
Morning, Mr. Wen.

[00:40:44] Speaker 07:
Morning.

[00:40:45] Speaker 07:
May it please the court, Wen Allen, on behalf of Citibank.

[00:40:49] Speaker 07:
Pardon me?

[00:40:50] Speaker 07:
It happens every day.

[00:40:53] Speaker 06:
You mispronounced my name, but they don't usually use it as my last.

[00:40:59] Speaker 06:
Apologies.

[00:41:00] Speaker 07:
The hazards of having two firsts.

[00:41:01] Speaker 06:
Alan.

[00:41:03] Speaker 07:
Two brief points, and then I'm happy to answer any questions that the panel has.

[00:41:07] Speaker 07:
First of all, Citibank's endeavor to comply with its contracts here is both a party to the financial agency agreement with Treasury

[00:41:13] Speaker 07:
and the account control agreements with the recipients and its endeavor to comply with both.

[00:41:18] Speaker 07:
Under the financial agency agreement, we're obligated to follow directives we receive from Treasury, implement account controls as required by EPA, and comply with fiduciary duties to be owed to the United States.

[00:41:29] Speaker 07:
And so when we complied with directives from EPA and Treasury to pause distribution of funds, we were complying with those contracts.

[00:41:36] Speaker 07:
Plaintiffs suggest in their brief that we should have continued making these distributions over and above the directives that we not do so.

[00:41:42] Speaker 07:
And we simply could not do that.

[00:41:44] Speaker 07:
We're an agent of our principle.

[00:41:45] Speaker 07:
It can only act as directed by the United States.

[00:41:48] Speaker 07:
And plaintiffs are certainly aware of that.

[00:41:50] Speaker 07:
Our status as financial agent is referred to in the account control agreements.

[00:41:54] Speaker 07:
And their grant agreements refer to the FAA.

[00:41:56] Speaker 07:
So that's my first point.

[00:41:58] Speaker 07:
And then the second point is there's a suggestion in the plaintiff's brief that they can continue their claims in this case against Citibank alone.

[00:42:06] Speaker 07:
even if they don't have jurisdiction to pursue those claims against the government.

[00:42:10] Speaker 07:
And I just don't believe that works.

[00:42:12] Speaker 07:
If the government has sovereign immunity with respect to the claims in this court, with respect to the claims against it, Citibank would have derivative sovereign immunity with respect to the same claims.

[00:42:22] Speaker 06:
But the sovereign immunity under the Supreme Court's decision in Yearsley excludes liability of the government representatives lawfully acting

[00:42:32] Speaker 06:
on its behalf.

[00:42:33] Speaker 06:
And if court were to hold that the directions were not lawful, then you don't have sovereign immunity, do you?

[00:42:45] Speaker 07:
Well, I think we still would in the sense that even if

[00:42:52] Speaker 07:
If they're pursuing claims against EPA in this case, arguing that EPA's claims are unlawful, even if those instructions are unlawful, the government has sovereign immunity with respect to claims for specific performance in this court.

[00:43:02] Speaker 07:
Those are the exact same claims they're pursuing against us.

[00:43:05] Speaker 07:
And so I would think we would have derivative sovereign immunity with respect to those claims, because the government would as well.

[00:43:10] Speaker 06:
So you're saying even though your client is a private party that's contracting with the private party plaintiffs, it would

[00:43:21] Speaker 06:
have immunity against the district court's jurisdiction.

[00:43:28] Speaker 06:
I mean, the immunity that the government has is not a substantive immunity.

[00:43:32] Speaker 06:
It's immunity against being pursued in the district court and going to the court of claims.

[00:43:37] Speaker 06:
But that's not a forum-style immunity that you need or have.

[00:43:44] Speaker 06:
So it would seem that one answer to that would be, well,

[00:43:48] Speaker 06:
It's not a substantive immunity.

[00:43:50] Speaker 06:
So if they're going there, you should go.

[00:43:53] Speaker 06:
The plaintiff should be able to see you in the district court.

[00:43:57] Speaker 06:
And maybe there's a timing question.

[00:43:59] Speaker 06:
And I see that there's arguments about stay.

[00:44:02] Speaker 06:
Wouldn't the most that you'd be entitled to would be a stay of claims against Citibank until the court of claims proceedings against

[00:44:12] Speaker 06:
the government were concluded.

[00:44:15] Speaker 07:
But we're completely fine with that release.

[00:44:17] Speaker 07:
I'm not going to say no to that.

[00:44:18] Speaker 07:
And that would make a lot of sense.

[00:44:20] Speaker 07:
But I just would also make the point that I do believe there are substantive reasons why we could be dismissed.

[00:44:26] Speaker 07:
Kind of regardless of what happens in the Court of Federal Claims, that includes derivative sovereign immunity.

[00:44:30] Speaker 07:
But it also includes a contractual defense, which is under Section 6B of the ACA.

[00:44:35] Speaker 07:
It says very clearly that Citibank can't be held liable for failing to perform due to an act of government

[00:44:41] Speaker 07:
So I do believe we have independent contractual defenses that we can invoke, even if the government's actions were not being lawful.

[00:44:50] Speaker 04:
Wouldn't that substantive argument be a reason for vacating the preliminary injunction against Citibank but not necessarily dismissing suit?

[00:44:58] Speaker 04:
In this posture?

[00:45:00] Speaker 07:
In this posture, I think that's right.

[00:45:03] Speaker 06:
But then, what would Citibank have the latitude to do that it doesn't have now?

[00:45:08] Speaker 06:
It would have the latitude to respond to a request from the government to retract money.

[00:45:14] Speaker 07:
Again, we would be still subject to the directions of our principle, the United States.

[00:45:19] Speaker 06:
So why would that be an argument to lift the preliminary injunction against Citibank?

[00:45:24] Speaker 07:
Well, again, if the government, presumably, if there's no preliminary injunction against Citibank,

[00:45:30] Speaker 07:
and there's no jurisdiction over the claims against the government, then we will be subject to their directives.

[00:45:35] Speaker 07:
Mr. Roth has said they're gonna cancel the FAA, and we'd be obligated to return the money to Treasury at that point.

[00:45:44] Speaker 06:
So why would be appropriate in this context of this case where the plaintiff's claims are pending for the preliminary junction to be lifted?

[00:45:52] Speaker 06:
It seems like Citibank might not welcome that because it would expose you more sharply to conflicting directives if you return the money and then are

[00:46:00] Speaker 06:
ultimately liable under the contract.

[00:46:03] Speaker 07:
It is certainly easy for us to have judicial orders governing our conduct in this situation because we just want to comply with the contracts and want to comply with directives we're receiving from court.

[00:46:12] Speaker 07:
So I don't necessarily want to run away from clarity from this court or the district court about how the city bank should proceed.

[00:46:19] Speaker 07:
All I'm saying is

[00:46:20] Speaker 07:
On the merits of a contract claim against Citibank, at the end of the day, there will be defenses for Citibank that we'll be able to invoke to show we've not violated the contract, even if the government's claims are deemed noble.

[00:46:33] Speaker 07:
Or the government's actions are deemed noble.

[00:46:37] Speaker 07:
Thank you very much.

[00:46:38] Speaker 06:
Thank you.

[00:46:41] Speaker 06:
Mr. Allen.

[00:46:46] Speaker 06:
Good morning, Mr. Unikowski.

[00:46:49] Speaker 08:
Thank you, Your Honors.

[00:46:51] Speaker 08:
May it please the Court.

[00:46:53] Speaker 08:
The government scarcely disputes that it has acted unlawfully from start to finish in this case, beginning with the FBI-directed freeze of plaintiff's assets, even in the absence of a court order, to the precipitous termination of the entire program on the literal eve of the TRO hearing.

[00:47:10] Speaker 08:
EPA has no statutory authority for its actions.

[00:47:14] Speaker 08:
Those actions plainly violate the governing regulations.

[00:47:17] Speaker 08:
And EPA's precipitous termination of the program reflects the quintessence of arbitrary and capricious agency decision-making.

[00:47:25] Speaker 08:
Rather than seriously defend the legality of its actions, EPA rests on a jurisdictional defense.

[00:47:30] Speaker 08:
It claims that plaintiffs had no access to judicial review in any form of their constitutional, statutory, and regulatory claims.

[00:47:39] Speaker 08:
and plaintiff's sole remedy is a breach of contract action in the Court of Federal Claims.

[00:47:44] Speaker 04:
Yes, Your Honor.

[00:47:46] Speaker 04:
Mr. Joukowsky, so I take one of, in your brief before this Court, you rely very heavily on the idea that the grantees have title to this money.

[00:47:57] Speaker 04:
What is your best evidence of that?

[00:48:00] Speaker 04:
in the grant agreement, which is very complicated.

[00:48:04] Speaker 04:
And obviously, EPA and the government retain a number of rights with respect to this money.

[00:48:10] Speaker 08:
Sure.

[00:48:10] Speaker 08:
So I direct the court to pages 1134 to 1136 of the Joint Appendix, in which the grant agreement defines the money that's received from Treasury as a form of program income.

[00:48:25] Speaker 08:
So the court can see on JA

[00:48:28] Speaker 08:
1134 at the right above the italicized sentence, the definition of program income says, full amount of the capitalization by non-exchange capital contribution must be recognized, reported and accounted for as program income.

[00:48:47] Speaker 08:
And then you'll see a little bit below that, it says programming to CFR 200.1 defines program income as gross income earned by the non-federal entity.

[00:48:56] Speaker 08:
And so the grantor is actually defining the money received at the city bank account as a form of program income.

[00:49:03] Speaker 08:
And you can see that again, it says that in a few places.

[00:49:05] Speaker 08:
So JA 1135, I'm sorry to go through this quickly.

[00:49:08] Speaker 08:
There's a lot of small print here.

[00:49:09] Speaker 04:
The program income doesn't mean that the grantees have title to it.

[00:49:15] Speaker 08:
No, I think it does.

[00:49:16] Speaker 08:
Sorry.

[00:49:16] Speaker 04:
But I mean, there are lots of other provisions, for instance, like the

[00:49:20] Speaker 04:
close out agreements, right, that grantees can't take the money and put it into another account until the government has closed out the agreements.

[00:49:29] Speaker 04:
And there are lots of other, I mean, you can pick out this program income part, but there are lots of other evidence that EPA has control over this fund.

[00:49:40] Speaker 08:
No, I respectfully disagree.

[00:49:42] Speaker 08:
So I'm happy to talk about the closeout provisions.

[00:49:44] Speaker 08:
The two most pertinent provisions are on JA 1136, where at the very bottom, where it says once the closeout agreement goes into effect, the recipient will be entitled to transfer any remaining funds in the deposit account to an account at a financial institution of its choosing with a condition.

[00:50:03] Speaker 08:
And then there's one more at the bottom of Jay.

[00:50:06] Speaker 04:
Yes, right.

[00:50:08] Speaker 08:
So I'm in response to your comment about the closet agreement.

[00:50:11] Speaker 08:
It basically says we can keep the money and that also you see that in J 1122 it explicitly says that it says after the end of the period of performance.

[00:50:20] Speaker 04:
The recipient may keep and use programming so you know so that that close-out agreement is governed by I mean the government sets the terms of the closeout Well, there's a contract like whether it gets closed out and how it gets closed out is within the government's control so that suggests the grantees Don't have title perhaps until such an agreement is Done and that agreement is within the authority of the government

[00:50:45] Speaker 08:
Again, I would respectfully disagree.

[00:50:47] Speaker 08:
I think program income belongs under the general definition, quote, of federal regulations.

[00:50:51] Speaker 08:
Program income belongs to the grantee.

[00:50:53] Speaker 08:
And here, the grant agreement is defining the money that's disbursed into the account as a form of program income.

[00:50:59] Speaker 08:
So the regulatory definition of program income is programing as, quote, gross income earned by the non-federal entity.

[00:51:06] Speaker 08:
In other words, it belongs to the non-federal entity.

[00:51:09] Speaker 08:
And here, the grant is defining that money in the city account as a form of program income.

[00:51:14] Speaker 08:
I'm sorry.

[00:51:16] Speaker 04:
No.

[00:51:16] Speaker 04:
So I guess, I mean, this is a complicated agreement.

[00:51:19] Speaker 04:
So I guess I'll ask you the same question I asked Mr. Roth, which is, if there is a dispute about who has title to this, and your argument turns on having title to it, why isn't that a contract question that should go to the court of federal claims?

[00:51:34] Speaker 08:
Because I think there's an antecedent question as to whether we're invoking a property right in which we would have access to judicial review.

[00:51:40] Speaker 08:
And to determine whether the district court has jurisdiction, I think it has to answer that antecedent question.

[00:51:45] Speaker 08:
So land versus dollar actually has language on this issue that's quite pertinent to this dispute.

[00:51:51] Speaker 08:
So there's this question in that case where the plaintiff against the government was alleging that certain securities that were in the common stock and the possession of the government was theirs.

[00:52:03] Speaker 08:
And then the government was saying, no, under this contract, we get to keep it.

[00:52:07] Speaker 08:
That was the fundamental dispute.

[00:52:08] Speaker 08:
And so there's this threshold question about whether or not the plaintiff actually had the property

[00:52:14] Speaker 08:
And the Supreme Court held that that was a question for the district court.

[00:52:17] Speaker 08:
It had to determine these property interests before the case went to the Court of Federal Claims.

[00:52:22] Speaker 08:
And Megapulse specifically relies on land versus dollar as the basis of its distinction between cases that go to the Court of Federal Claims and cases that stay in district court.

[00:52:31] Speaker 08:
So if there's some question in the court's mind about whether we have this money or not,

[00:52:36] Speaker 08:
I think the district court has to answer that question.

[00:52:38] Speaker 08:
We think it already did, but the court feels additional analysis is needed.

[00:52:41] Speaker 08:
That's a question for the Article III court.

[00:52:44] Speaker 08:
And if we're right about that, then this case stays in the district court.

[00:52:48] Speaker 08:
It's not just the grant agreement, by the way, Your Honor.

[00:52:50] Speaker 08:
It's also the ACA and the FAA, both of which say that the accounts are in our name and the EPA holds a security interest.

[00:52:58] Speaker 08:
And I think it's just a basic principle of property law that the entity that holds a security interest doesn't have title.

[00:53:04] Speaker 08:
They have a limited ability.

[00:53:05] Speaker 04:
On that reasoning, can you re-characterize any contractual claim as a property claim?

[00:53:11] Speaker 04:
You know, the government says the real question is were they entitled to terminate the grant?

[00:53:15] Speaker 04:
And that is a question of contract for which you have to look at the grant agreements and the ECA, the FAA, and all of these other contracts.

[00:53:22] Speaker 08:
I guess I don't think so.

[00:53:23] Speaker 08:
I think this case differs fundamentally from cases like Vera Cruz Farah and DOA versus California, because in those cases, what the plaintiffs were asking for was money from the Treasury.

[00:53:33] Speaker 08:
I mean, they said they were asking for injunctions to prevent the government from stop paying the money, but like there's a double negative there.

[00:53:39] Speaker 08:
And that really just means they wanted money from the U.S.

[00:53:41] Speaker 08:
Treasury.

[00:53:42] Speaker 08:
And so I guess you could call the right to money from the Treasury a property right, but that's the type of property right we're supposed to vindicate in the Court of Federal Claims, which is a direct forum to ask for money from the Treasury.

[00:53:52] Speaker 08:
Here we're asking for something quite different.

[00:53:55] Speaker 08:
Our position is that this is already our money.

[00:53:57] Speaker 08:
I've quoted you the pertinent provisions of the grant.

[00:53:59] Speaker 08:
I think the ACA and the FAA also make quite clear that the government has a security interest, but otherwise it's our money.

[00:54:06] Speaker 08:
And we're seeking to vindicate our property interest in that money.

[00:54:10] Speaker 08:
I just want to put on the table, by the way, in case the court had some concern.

[00:54:13] Speaker 08:
EPA suggests that we didn't emphasize this argument in the district court.

[00:54:16] Speaker 08:
Actually, this was the core of our argument in the district court.

[00:54:20] Speaker 08:
I can just quote our filing, docket 53 at 8.

[00:54:23] Speaker 08:
EPA disbursed the funds to plaintiffs and the funds belong to plaintiffs and their subgrantees and may be used by them in accordance with the awards.

[00:54:32] Speaker 08:
EPA does not own the funds anymore.

[00:54:34] Speaker 08:
although it retained a security interest as a secured party.

[00:54:37] Speaker 08:
So this is the argument we've been making from day one in this case.

[00:54:41] Speaker 09:
Yes, Your Honor.

[00:54:42] Speaker 09:
What source of law, on your theory, what source of law are they violating here, even assuming this is a property, right?

[00:54:53] Speaker 08:
Sure.

[00:54:54] Speaker 08:
So I think there's three sources.

[00:54:56] Speaker 08:
There's the statute, there's the regulation, and there's the prohibition and arbitrary and capricious agency action.

[00:55:02] Speaker 08:
And I'm happy to go through each of those one by one.

[00:55:03] Speaker 09:
I mean, you didn't.

[00:55:05] Speaker 09:
One thing you could have said but didn't, once you say property, that suggests takings.

[00:55:12] Speaker 08:
So you didn't make that.

[00:55:15] Speaker 08:
We have a due process claim that's still pending in the district court.

[00:55:18] Speaker 08:
In the TRO, the district court found a likelihood of success on that claim, but the district court didn't address it in its preliminary injunction order.

[00:55:24] Speaker 08:
But from our perspective, that's still a live claim.

[00:55:26] Speaker 08:
I think maybe a takings claim.

[00:55:28] Speaker 08:
We haven't put it in the complaint, but we framed it as a due process claim that infringes on our property interest.

[00:55:33] Speaker 08:
And that's still in the case.

[00:55:34] Speaker 08:
We just haven't focused it on appeal because that wasn't the basis of the district court's preliminary injunction order.

[00:55:40] Speaker 08:
But the reason I'm raising this property issue is that the dividing line between jurisdiction

[00:55:45] Speaker 09:
The reason I ask, I'm not sure the line between, unless you assert a takings claim, I'm not sure the line between contract and property matters.

[00:56:00] Speaker 09:
You cite land versus dollar, which seems like a pretty good case for you, but then there's Larson, which

[00:56:07] Speaker 09:
Government oddly didn't cite, but Larson is a case where the government acquires some property through contract and they're holding it.

[00:56:17] Speaker 09:
And someone sues the officer and the court says sovereign immunity because the officer is holding the property can construe the contract.

[00:56:28] Speaker 09:
And even assuming his construction was wrong, construction of the contract,

[00:56:34] Speaker 09:
and the title to the land had passed to the respondent under the contract.

[00:56:41] Speaker 08:
Still sovereign immunity.

[00:56:44] Speaker 08:
Well, so, I mean, the government doesn't cite that case.

[00:56:46] Speaker 09:
I'd want to look at it a little more closely, but I think that the... A little unfair, but I mean, it is a major case in the land versus dollar.

[00:56:56] Speaker 08:
I understand, but I don't think there's a... So the question of who has title is governed by the relevant documents.

[00:57:01] Speaker 08:
And I think that they make it pretty clear, or at least it's for the district court to decide in the first instance.

[00:57:06] Speaker 08:
Who has title because I it's it's not just this.

[00:57:10] Speaker 09:
Let's say they let's say they do have title.

[00:57:13] Speaker 09:
Yes, you still need some source of law to indicate that they're what they're doing Wrongs you

[00:57:23] Speaker 09:
And takings is off the table.

[00:57:25] Speaker 09:
Right.

[00:57:26] Speaker 09:
Larson takes general law off the table.

[00:57:29] Speaker 09:
You can't claim a tort.

[00:57:30] Speaker 09:
You're tortiously holding the property.

[00:57:32] Speaker 09:
And then we're just back to the question, is this being done in violation of regulations or is this being done in violation of the grant?

[00:57:44] Speaker 08:
Right.

[00:57:44] Speaker 08:
So right back to where we started.

[00:57:45] Speaker 08:
Well, I'm happy to talk about that.

[00:57:47] Speaker 08:
So the reason I'm raising this issue about property and so on is that I think that

[00:57:52] Speaker 08:
Congress's channel to the Court of Federal Claims, claims with the plaintiff is just asking the Treasury to pay the money.

[00:57:57] Speaker 08:
And we don't think that aptly characterizes this case.

[00:58:00] Speaker 08:
So all we're talking about in this discussion is which court is reviewing our claims.

[00:58:04] Speaker 08:
And so I'm happy to turn to the statutory and the

[00:58:07] Speaker 08:
regulatory and issues.

[00:58:10] Speaker 09:
I'll let you do that.

[00:58:11] Speaker 09:
But just one response on that, which is we're talking about the Tucker Act and contract claims and doesn't really matter whether

[00:58:23] Speaker 09:
the government's obligation is to pay money out of the treasury, which triggers all sorts of other issues, or whether it's just any old contract obligation.

[00:58:33] Speaker 09:
If it's a contract claim, it's a contract.

[00:58:35] Speaker 08:
So I definitely agree with that, right?

[00:58:36] Speaker 08:
So I definitely agree that a plaintiff cannot just seek specific performance of a contract in federal district court, even if it's not specific performance to pay money.

[00:58:46] Speaker 08:
And I completely agree with that assessment.

[00:58:49] Speaker 08:
But if I could just say two things about that concern that Your Honor's expressed.

[00:58:52] Speaker 08:
So first of all, I don't view what we're asking for here as... I'm sorry.

[00:58:56] Speaker 09:
I just didn't hear you.

[00:58:57] Speaker 08:
Okay.

[00:58:58] Speaker 08:
So if I can say two things about the concern expressed by the court.

[00:59:01] Speaker 08:
So first, I don't think we're actually asking for specific performance of anything.

[00:59:05] Speaker 08:
From our perspective, the government has already performed its obligations under the contract.

[00:59:10] Speaker 08:
The injunction ordered by the district court actually doesn't direct the government to perform any particular provision.

[00:59:15] Speaker 08:
It just directs the government to not interfere with our money.

[00:59:18] Speaker 08:
So I actually think that specific performance is the wrong way to look at this case.

[00:59:22] Speaker 08:
It's more a matter of interfering with property interests we already have.

[00:59:26] Speaker 09:
And second, there's authority from... Interfering in a way that violates fill in the blank.

[00:59:34] Speaker 08:
Well, so the interference, it may violate the contract, but it also independently violates the statute and regulations.

[00:59:41] Speaker 08:
And I think that raises our second point, which if I can just read from this court's decision in Trans-Ohio, here's what it says.

[00:59:48] Speaker 08:
It said, a federal district court may accept jurisdiction over a statutory or constitutional claim for injunctive relief, even where the relief sought is an order forcing the government to obey the terms of the contract.

[01:00:01] Speaker 08:
That is specific performance so even if so we don't think that this is a specific performance case at all, but even if the court conceptualize what we're asking for as an injunction speaking seeing specific performance which we disagree with.

[01:00:14] Speaker 08:
As long as it's not specific performance to pay money, which is its own special category that goes to the Court of Federal Claims, we can ask for that relief, but only if we're not relying on the contract.

[01:00:25] Speaker 08:
We're relying on a statute or regulation.

[01:00:27] Speaker 08:
So I completely agree with the court.

[01:00:28] Speaker 08:
If we said breach of contract, specific performance, we couldn't come to this court even if what we were asking for wasn't money.

[01:00:35] Speaker 08:
But if we say violation of laws, public law, and an injunction, and we're not seeking money,

[01:00:42] Speaker 08:
I think that just the four corners of Trans-Ohio and Sharpe say that we're allowed to ask for that.

[01:00:46] Speaker 06:
I think this court has resolved this issue.

[01:00:52] Speaker 06:
positive law is, other than the contract.

[01:00:55] Speaker 06:
And I had read your briefing, I would have to say, up until your latest one, but maybe including, was that it's agency action that's arbitrary and capricious under the APA, acting in this way without reason.

[01:01:18] Speaker 06:
And that's how I understood you framed the argument in district court, that the asserted reasons for terminating the award were protectual to cover, were protectual cover.

[01:01:35] Speaker 06:
to shut down a program that was approved by Congress, that the new administration didn't like.

[01:01:42] Speaker 06:
But you frame in your Court of Appeals brief, and maybe it's just a packaging question, you talk about an ultra-virus

[01:01:50] Speaker 06:
argument.

[01:01:52] Speaker 06:
And given the fairly solid ground for the pretext theory, I wondered whether is that just encompassed in your ultra virus?

[01:02:00] Speaker 06:
Is that just sort of a handy way of talking about an amalgam of constitutional statutory and perhaps regulatory

[01:02:07] Speaker 06:
claims or what?

[01:02:09] Speaker 08:
So that argument is an alternative argument to address the government's invocation of sovereign immunity.

[01:02:14] Speaker 08:
So the government says that argument was forfeited.

[01:02:16] Speaker 08:
We would respectfully disagree.

[01:02:18] Speaker 08:
You can see on JA 323 and 324 in the NCIF claimant's preliminary injunction brief, we specifically say, quote, it has long been settled that private plaintiffs may bring claims for injunctive relief for violations of federal law.

[01:02:33] Speaker 08:
by federal officials under this court's equity jurisdiction, wholly apart from any federal right of action under the APA.

[01:02:40] Speaker 08:
And I'd also point out that one of the plaintiff appellees I met at the podium on behalf of today, inclusive, at page 31 of their preliminary injunction

[01:02:48] Speaker 08:
have a whole section called EPA's actions were ultra virus because they exceeded the agency's statutory and constitutional authority.

[01:02:56] Speaker 08:
So these arguments were preserved.

[01:02:58] Speaker 08:
But we're making that argument as a threshold argument regarding, excuse me, as an alternative argument about sovereign immunity.

[01:03:04] Speaker 08:
We say both in the alternative that there is no sovereign immunity at all because we're bringing a claim against a federal official for violating federal law and not asking for money from the Treasury.

[01:03:15] Speaker 08:
And then second, even if,

[01:03:17] Speaker 08:
the government would otherwise have sovereign immunity, the waiver in 702 applies.

[01:03:21] Speaker 08:
So there's just two different ways of addressing the government's sovereign immunity argument.

[01:03:26] Speaker 08:
So yes, I don't think we're making a new argument.

[01:03:28] Speaker 08:
I think we're making the same arguments below as we are here.

[01:03:31] Speaker 06:
And again, the affirmative source of law on which you're relying in answer to Judge Katz's question is?

[01:03:37] Speaker 08:
So there's three different sources.

[01:03:40] Speaker 08:
There's the GGRF itself.

[01:03:42] Speaker 08:
There's the applicable regulation.

[01:03:44] Speaker 08:
And there's the bar on arbitrary and capricious agency conduct.

[01:03:47] Speaker 08:
So if I can, if I can go through those briefly one by one, um, the statute itself does not authorize EPA to do this do over after the September, 2024 deadline has expired.

[01:04:00] Speaker 08:
I think the EPA has just divested of authority to do that.

[01:04:04] Speaker 08:
Now I understand.

[01:04:05] Speaker 04:
Yes.

[01:04:07] Speaker 04:
I mean, it's the nature of grants in general that they're, you know,

[01:04:14] Speaker 04:
The executive branch in different agencies issues grants under various conditions.

[01:04:18] Speaker 04:
If those conditions are not met, they may take back the money.

[01:04:21] Speaker 04:
And then that's sort of an ordinary process of grants.

[01:04:25] Speaker 04:
And then the executive can re-obligate the money, presumably, even if the appropriations was for a particular year.

[01:04:32] Speaker 04:
I mean, they took the action.

[01:04:33] Speaker 04:
They obligated the money.

[01:04:35] Speaker 04:
And if a grantee doesn't meet the terms, then they can re-obligate.

[01:04:39] Speaker 04:
That just seems like an ordinary way that grants in the federal government work.

[01:04:44] Speaker 08:
So I completely agree with the court that if there's a violation of the terms of the grant.

[01:04:48] Speaker 04:
I mean, I understand you dispute that, but.

[01:04:50] Speaker 08:
No, but definitely the agency has statutory authority to enforce the terms, because the statute says that the agency is going to give out grants.

[01:04:59] Speaker 08:
All federal grants, as your honor states, have terms and conditions associated with it.

[01:05:03] Speaker 04:
And that's important to protect taxpayers and the public.

[01:05:06] Speaker 08:
Of course, obviously.

[01:05:06] Speaker 08:
I have no dispute that if there's fraud or anything like that or any violation of terms and conditions, it's consistent with the statute

[01:05:12] Speaker 08:
determinate because the statute says that the EPA will award grants that just presupposes that if that the grants can be enforced so if the grant has been violated of course it can take back the money and the way this program was structured was EPA contemplated there might be a situation where a grantee violated the terms and the money had to come back and so it was structured so

[01:05:32] Speaker 08:
The money would go to another one of the grantees pursuant to the original grant.

[01:05:37] Speaker 08:
So you wouldn't need to re-obligate.

[01:05:39] Speaker 08:
You wouldn't need new grants.

[01:05:40] Speaker 08:
You can rely on the existing grants to re-obligate the funds from the terminated grantee.

[01:05:45] Speaker 08:
That's how the program was intended to work.

[01:05:47] Speaker 08:
So we are completely in agreement that agencies always have authority to terminate grants pursuant to the terms of the grant.

[01:05:53] Speaker 08:
Something very different happened here.

[01:05:55] Speaker 08:
EPA has consistently said, including in the district court, that it's not relying on any violation of any terms and conditions.

[01:06:02] Speaker 08:
It's just relying on this, like, in the ether, freestanding authority based on executive power to terminate grants it doesn't like.

[01:06:08] Speaker 08:
And I don't think that there's any provision of the statute that allows it to do that.

[01:06:13] Speaker 08:
Maybe I also may say one other thing about the re-obligation.

[01:06:16] Speaker 04:
Yes, Your Honor.

[01:06:17] Speaker 04:
That's an argument about whether the termination was

[01:06:20] Speaker 04:
valid.

[01:06:21] Speaker 04:
It's not an argument that they violated the statute.

[01:06:24] Speaker 04:
I mean, if you agree that the government can terminate and re-obligate grants generally, then the question of whether they did so lawfully here is a question about the terms of the grant.

[01:06:37] Speaker 04:
It's not a question about the statute.

[01:06:38] Speaker 04:
It doesn't say anything about this.

[01:06:40] Speaker 04:
And certainly the Constitution doesn't say anything about this.

[01:06:44] Speaker 08:
Well, the Constitution says that

[01:06:45] Speaker 08:
Under the appropriations laws, Congress has the power of the purse and if Congress decides that the grants are going to be awarded by September of 2024, then I think that the executive branch.

[01:06:57] Speaker 04:
But you've already said that they could if

[01:06:59] Speaker 04:
if the grantees were violating the terms of the grant, they could take away that.

[01:07:04] Speaker 04:
So that would, in your view, also be contrary to the statute.

[01:07:07] Speaker 08:
No, I think that the statute authorizes the EPA to terminate under circumstances in which the grant would otherwise permit.

[01:07:14] Speaker 08:
But here, EPA has not even taken the position that the grants would otherwise permit it.

[01:07:18] Speaker 08:
They have made a very different argument, that irrespective of what the grants say, there's just this inherent authority

[01:07:24] Speaker 08:
Termination letters say that there's just this inherent authority that the executive branch has to terminate and re-obligate, irrespective of whether or not the grants will otherwise permit.

[01:07:33] Speaker 08:
And that is what we think exceeds the statutory authority of the EPA.

[01:07:38] Speaker 08:
Maybe it's helpful if I talked about this re-obligation argument that EPA is going to make.

[01:07:43] Speaker 04:
Your suggestion is that EPA is not making any argument based on the terms of the grant.

[01:07:48] Speaker 04:
They're only making an inherent authority argument.

[01:07:51] Speaker 04:
I don't know if that's a full reading of the government's brief.

[01:07:54] Speaker 08:
The district court expressly found in its decision that there was a concession.

[01:08:00] Speaker 08:
You'll see at page 982 of the joint appendix.

[01:08:03] Speaker 08:
The district court expressly points to the specific place in the government's brief where it says this is not a case about breach of any terms and conditions and also quotes the government's lawyers.

[01:08:12] Speaker 08:
And so, yeah, there's this finding that the government wasn't making the argument.

[01:08:16] Speaker 08:
And moreover, we still have no idea what term and condition we're even arguably alleged to have violated.

[01:08:21] Speaker 08:
So the government has, throughout this case, repudiated the idea that there's some term and condition that's been violated.

[01:08:27] Speaker 08:
And the district court made a finding on this issue that the government has not contended in this court is

[01:08:33] Speaker 08:
clearly erroneous or even erroneous at all or an abuse of discretion.

[01:08:36] Speaker 08:
So I think as this case reaches the court, there's this almost undisputed finding from the district court that the government is not relying on any breach of any term and condition.

[01:08:44] Speaker 08:
And it certainly hasn't identified any.

[01:08:46] Speaker 08:
There's this very general language in the reply brief that maybe something bad has happened, but none of the grantees has ever been told what they did wrong at all.

[01:08:54] Speaker 08:
And so I think the question in this case is whether EPA has the authority to just terminate the whole program and re-obligate the funds

[01:09:01] Speaker 08:
just because it disagrees with the decision of the prior administration.

[01:09:05] Speaker 08:
If I can say one word about this re-obligation issue.

[01:09:09] Speaker 08:
So for the first time in the reply brief on appeal, EPA has finally explained its theory as to why it thinks it can re-obligate these funds.

[01:09:17] Speaker 08:
And EPA relies on this GAO decision that represents that the government has a right, even after the deadline, to order a replacement grant, to continue the prior grant.

[01:09:29] Speaker 08:
OK, so first of all,

[01:09:31] Speaker 08:
This court has never agreed that there's this non-statutory exception to statutory deadlines.

[01:09:36] Speaker 08:
But even accepting GAO's guidance as gospel, I still don't think it helps the government here.

[01:09:42] Speaker 08:
So the GAO Red Book, which is, as I understand it, the Bible in this area for GAO lawyers, says that the re-obligation can only occur if the alternative reward amounts to, quote, is, quote, substantially identical to the original grant.

[01:09:59] Speaker 08:
And so the example given in the red book is that when a professor at one university was doing research pursuant to a grant and the professor moved to a different university, the grant could also, and doing the exact same research, the grant could also be moved to the second university because the grants were substantially identical.

[01:10:16] Speaker 08:
It was just the researcher was at one university versus another.

[01:10:20] Speaker 08:
Here, yes sir.

[01:10:21] Speaker 09:
I'm not sure why this matters.

[01:10:25] Speaker 09:
There might be an open question

[01:10:28] Speaker 09:
Assuming that the termination is lawful, then there's an open question about whether they can re-obligate the grants.

[01:10:39] Speaker 09:
That doesn't answer the question whether the termination is lawful.

[01:10:45] Speaker 09:
Suppose they couldn't re-obligate the grants.

[01:10:48] Speaker 09:
You wouldn't take the position that they'd be barred from terminating for criminal misconduct.

[01:10:54] Speaker 09:
Of course not.

[01:10:55] Speaker 09:
So they're different, the lawfulness of the termination is different from the lawfulness of whether they can re-obligate assuming a valid termination.

[01:11:06] Speaker 08:
So the reason this is relevant goes to the government's argument that the correct remedy here is not in order maybe directing re-obligation of the funds, but not in order in joining the termination.

[01:11:16] Speaker 08:
It seems the government has two options.

[01:11:18] Speaker 08:
One is to re-obligate the funds in a manner substantially identical to the existing, which the government says it wouldn't do.

[01:11:25] Speaker 08:
And if it's really going to do that, it just goes to show that the terminations were arbitrary and capricious.

[01:11:29] Speaker 08:
Because the terminations say that there's a misalignment with agencies' policy priorities, which kind of necessarily makes it arbitrary and capricious to give substantially identical grants.

[01:11:41] Speaker 08:
And so it seems to me either the agency will re-obligate in violation of the appropriations deadline or just impound the money.

[01:11:48] Speaker 08:
Whatever the agency does, it's going to be illegal.

[01:11:50] Speaker 08:
That's why we're saying that the correct remedy for what we view as a violation caused by the termination and the freeze is to simply avoid the unlawful agency action, avoid the terminations, as well as the clawback of the money.

[01:12:03] Speaker 08:
So that's the relevance of it.

[01:12:05] Speaker 08:
It just has to do with the government's proposed alternative remedy.

[01:12:08] Speaker 06:
If the district court's injunction is lifted, what happens next?

[01:12:16] Speaker 06:
Will you be able to keep litigating?

[01:12:18] Speaker 08:
Well, as I understand it, if the injunctions lifted, EPA has represented at the podium that it's going to ask Citibank to wire all the money to the Treasury.

[01:12:29] Speaker 08:
We don't think that's lawful at all.

[01:12:30] Speaker 08:
There's no notice of exclusive control, nor has EPA suggested it can do that because it can only do that based on certain criteria that EPA has not suggested are satisfied.

[01:12:40] Speaker 08:
But Citibank has also taken the position in this court and not the podium that it will do whatever it is that EPA tells it to do.

[01:12:47] Speaker 08:
And so judging by the representations of counsel, the next step is that EPA is just, if everything's lifted, if all the injunctions lifted, EPA is going to say, Citibank, wire our money back.

[01:12:57] Speaker 08:
Citibank is going to say yes, regardless of the legality of that action.

[01:13:00] Speaker 08:
Yes, Your Honor.

[01:13:00] Speaker 06:
Do you have any sense of how long that takes?

[01:13:04] Speaker 08:
No, I don't.

[01:13:05] Speaker 08:
I mean, I think we'd probably be pretty fast.

[01:13:06] Speaker 08:
We would like the court to continue at least having the administrative stay in place to prevent this case from potentially being mooted by that.

[01:13:13] Speaker 04:
I mean, why would it be mooted?

[01:13:15] Speaker 04:
I mean, if the grantees were to prevail eventually in the Court of Federal Claims or before the district court, I mean, neither Citibank nor the federal government are insolvent to recover the funds eventually.

[01:13:29] Speaker 08:
Well, that's certainly true.

[01:13:31] Speaker 04:
I mean, these are right.

[01:13:34] Speaker 04:
I mean, you could recover from either or both entities, you know, as the court determined.

[01:13:39] Speaker 04:
They're not going out of business.

[01:13:42] Speaker 08:
Right, so I certainly hope the United States is not going to go out of business, Your Honor.

[01:13:45] Speaker 04:
Yeah, let's hope not.

[01:13:46] Speaker 08:
So if the court were to send us to the Court of Federal Claims, obviously we would litigate there and we would seek the full amount of the award.

[01:13:53] Speaker 08:
However, there's... And would the plaintiffs continue operating?

[01:13:57] Speaker 08:
No, that's the problem.

[01:13:58] Speaker 08:
So there's findings from the district court.

[01:14:00] Speaker 04:
These are just entities that were created to receive federal funds.

[01:14:03] Speaker 04:
And I don't understand what sort of inviolable status that would have.

[01:14:08] Speaker 08:
Well, the point is,

[01:14:09] Speaker 08:
So first of all, if the termination of the program goes into effect, these entities just can't carry out their work.

[01:14:14] Speaker 08:
They can't carry out their work under their grants.

[01:14:15] Speaker 08:
I mean, potentially they could go to the Court of Federal Claims and just seek a whole lot of money.

[01:14:19] Speaker 08:
But first of all, that would take potentially many years.

[01:14:23] Speaker 08:
And also, they wouldn't be working with EPA.

[01:14:26] Speaker 08:
The whole point of these programs is not just it's a boatload of cash.

[01:14:28] Speaker 08:
It's that they're working with EPA to implement Congress's purposes in the GGRF and sort of waiting several years to obtain a large pot of money

[01:14:37] Speaker 08:
It would still go out of business.

[01:14:39] Speaker 08:
There'd be still the reputational harms the district court concluded, which are based on factual findings that are not clearly erroneous.

[01:14:45] Speaker 04:
But if the money were to go out and then the government were to ultimately prevail, the government would be out all of these billions of dollars.

[01:14:54] Speaker 04:
Because there's been no bond and nobody suggests that this money could be recoverable by the government.

[01:15:00] Speaker 04:
Isn't that harm more irreparable to the American people, to the federal government?

[01:15:04] Speaker 08:
So first of all, these are green banks.

[01:15:07] Speaker 08:
You know, giving money, they're giving loans, which are going to be paid back.

[01:15:10] Speaker 08:
So it's somewhat speculative to suggest that this money is all going to disappear.

[01:15:13] Speaker 04:
Second, if the grantees have not suggested that the government could recover this money, if it were to be dispersed.

[01:15:20] Speaker 08:
Well, it's true that if it's dispersed, we don't think it could be recovered directly from the

[01:15:25] Speaker 08:
people it's being dispersed to, but we're giving loans which are being paid back to the entities.

[01:15:29] Speaker 08:
So, you know, there's a potentially, you know, the government could recover and it's a future point, whatever money is in the Citibank accounts.

[01:15:36] Speaker 08:
But just look, your honor, if the concern is wasteful sending, then there's a number of protections that exist.

[01:15:44] Speaker 08:
From the podium today, the government's council suggested that perhaps there's insufficient oversight, being a few new arguments in the case.

[01:15:51] Speaker 08:
I direct the court to some of the declarations in the record describing the very extensive oversight, which is actually much more than the oversight that exists when they're just withdrawing money from the treasury.

[01:16:00] Speaker 08:
That's a J372 to 374.

[01:16:02] Speaker 08:
If the concern is about subgrantees, unlike the typical arrangement, the subgrantees have accounts at Citibank, which are also being monitored by the government.

[01:16:11] Speaker 08:
And in fact, one of the good reasons for this structure is that it gives the government oversight over the subgrantees' actions.

[01:16:17] Speaker 08:
So if the concern is fraudulent or wasteful spending,

[01:16:21] Speaker 08:
I think that there's no real concern for the government.

[01:16:23] Speaker 04:
If the current concern is that we're just- No, but that's not a decision for this court to make.

[01:16:27] Speaker 08:
Well, in the balance of the equities, I mean, look, if we already have a likelihood of success on the merits, I think we have shown equitable harm.

[01:16:35] Speaker 08:
And if we get past those hurdles, as the district court concluded, then the next question is the balance of the equities.

[01:16:40] Speaker 08:
The government has raised the concern that there's going to be fraudulent or wasteful spending, and that's an equitable case to deny an injunction to protect the taxpayer.

[01:16:48] Speaker 08:
What I'm saying is that

[01:16:50] Speaker 08:
There's extensive evidence in the record and the district court made a factual finding that's not clearly erroneous that there's adequate protections to ensure that that equitable interest asserted by the government is not significant enough to withstand the irreparable harm and the likelihood of success that plaintiffs have established.

[01:17:05] Speaker 08:
So it only gets, it's only relevant at that stage of the inquiry.

[01:17:09] Speaker 09:
Can I ask about your APA theory?

[01:17:12] Speaker 09:
You cite the duty of reason decision-making.

[01:17:18] Speaker 09:
Is there any,

[01:17:21] Speaker 09:
contract claim that is obviously proper, obviously channeled to the Court of Federal Claims through the Tucker Act, for which the counterparty couldn't just go to district court and say, well, I want to argue that the termination was not reasoned

[01:17:44] Speaker 08:
Sure, so with respect to that claim, not the regulatory claim, which I haven't talked about what's in our brief, or the statutory claim, but specifically on the arbitrary decision-making.

[01:17:54] Speaker 08:
Yeah, specifically on that claim, I do think our claim ultimately hinges on the view that we're not seeking money from the US Treasury.

[01:18:00] Speaker 08:
So as I read a case like DOE versus California, the plaintiffs in that case essentially alleged that the termination of their grants was ill-reasoned.

[01:18:07] Speaker 08:
And they sought an injunction to stop the government from not paying the money from the Treasury.

[01:18:12] Speaker 09:
So the Tucker Act.

[01:18:14] Speaker 09:
is not exclusive for any government contract not involving payment of money.

[01:18:22] Speaker 09:
The problem with your theory is if you're right here

[01:18:27] Speaker 09:
contracting parties can almost do.

[01:18:29] Speaker 08:
No, that's not the case.

[01:18:30] Speaker 08:
Because if we were just coming to the court and saying, the government breached the contract for an arbitrary and capricious reason, please enjoin the termination and allow us to continue getting paid by the Treasury.

[01:18:42] Speaker 08:
We would lose that case.

[01:18:43] Speaker 08:
And the reason we would lose that case is that you'd look at the text of Section 702 of the APA, which says that if the Tucker Act impliedly forbids

[01:18:53] Speaker 08:
the district court from granting the relief of the plaintiff seeks, then the claim is barred.

[01:18:56] Speaker 08:
And you'd say, look, there's already a forum that exists in which you can argue for an order for money pursuant to a contract as a result of a breach directly from treasury.

[01:19:06] Speaker 08:
So you can go to the court of federal claims and say, I want money from the government because of the breach.

[01:19:10] Speaker 08:
And this court has held that that's your remedy.

[01:19:13] Speaker 08:
That's what you're asking for.

[01:19:14] Speaker 08:
Congress provided a forum where you can ask the court to give you money from the United States.

[01:19:18] Speaker 08:
And if that's what you're asking for pursuant to a contract, that's where you go.

[01:19:22] Speaker 08:
And I think that's very different from a case when we already have the money.

[01:19:25] Speaker 08:
We're not trained to enforce any kind of money-mandating provision, which was at issue in the DOE versus California case.

[01:19:32] Speaker 08:
If you look at the key sentence in that case, the court says that a district court cannot enforce a contractual obligation to pay money.

[01:19:40] Speaker 08:
And it cites the Knudsen case.

[01:19:41] Speaker 08:
And so I think that's totally consistent with the text of Section 702.

[01:19:45] Speaker 08:
OK.

[01:19:46] Speaker 09:
And I got that.

[01:19:49] Speaker 09:
On the reg.

[01:19:50] Speaker 09:
Yes, Your Honor.

[01:19:53] Speaker 09:
If a regulation imposed a freestanding obligation on the government with regard to a contract, you could argue the reg in district court.

[01:20:07] Speaker 09:
Yes.

[01:20:08] Speaker 09:
But how could you make that sort of move with regard to a reg like the one here?

[01:20:21] Speaker 09:
which says one permissible ground for termination is whatever is specified in the contract.

[01:20:31] Speaker 09:
You can't resolve lawfulness.

[01:20:38] Speaker 09:
You can't find the termination unlawful by looking at that reg without just going right back to the contract.

[01:20:46] Speaker 08:
So I respectfully disagree.

[01:20:48] Speaker 08:
It's true that you have to take a peek at the contract, but we're still trying to enforce the reg.

[01:20:52] Speaker 08:
So what the reg is saying is that, so 200.340B says that the federal agency or pass-through entity must clearly and unambiguously specify all termination provisions in the terms and conditions of the federal award.

[01:21:08] Speaker 08:
And then going up a step, 200.340A4

[01:21:13] Speaker 08:
says that the federal award can be terminated pursuant to the terms and conditions of the federal award, including to the extent authorized by law, if an award no longer effectuates the program rules or agency priorities.

[01:21:27] Speaker 08:
So reading those two provisions together, there's a freestanding regulation that says that the agency is not allowed to terminate based on new agency priorities

[01:21:36] Speaker 08:
unless it says that in the terms and conditions.

[01:21:38] Speaker 08:
In other words, there's a default that says that if... Unless it's the term and condition of the grant.

[01:21:45] Speaker 08:
Well, but it's a separate regulatory constraint.

[01:21:47] Speaker 08:
So here's a hypothetical that might be helpful for the court.

[01:21:50] Speaker 08:
Suppose Congress enacted a statute that said that it is illegal, henceforth, for an agency to terminate any contract based on change priorities unless the contract explicitly authorizes the agency to do that.

[01:22:05] Speaker 08:
I think that that statute would be enforceable in federal district court because you'd be making a claim based on the statute, not on the contract, even though the statute requires you to take a peek at the contract.

[01:22:15] Speaker 08:
And that's this case.

[01:22:16] Speaker 08:
It's more than a peek.

[01:22:18] Speaker 08:
Well, yeah.

[01:22:19] Speaker 08:
The reg or the statute in your PIPO is just a pointer.

[01:22:24] Speaker 08:
Well, no, it's a constraint.

[01:22:27] Speaker 08:
It's a constraint on what the agency can do.

[01:22:28] Speaker 08:
It says the agency can't terminate based on new priorities unless the contract explicitly authorizes

[01:22:33] Speaker 08:
But in the absence of such language, it's an independent statutory prohibition.

[01:22:38] Speaker 09:
So I think if you suit- If the reg said, there's a termination reg which says agencies may terminate if and only if the ground is specified in the grant.

[01:22:55] Speaker 09:
And that's all the reg says.

[01:22:58] Speaker 09:
You think that would support an APA action on the theory that

[01:23:04] Speaker 09:
the necessary and sufficient and dispositive analysis of the grant, lawfulness of the termination under the grant establishes lawfulness or not of termination under that reg?

[01:23:21] Speaker 08:
So I think that might be a harder case than this, but my bottom line answer is yes, I think an agency is allowed to constrain itself in two different ways.

[01:23:28] Speaker 08:
It's allowed to say we're going to create certain contractual guarantees, which are sort of private law arrangements.

[01:23:33] Speaker 08:
And then it's going to separately have this public law provision enforceable under the APA.

[01:23:37] Speaker 08:
restraining the agency from acting for certain reasons.

[01:23:40] Speaker 06:
What's harder about?

[01:23:41] Speaker 06:
I didn't hear a difference, just so that I can follow where you're going forward.

[01:23:45] Speaker 06:
I didn't hear a difference between the hypo that Judge Cassis has, or your hypo, I guess it was, EPA cannot terminate any contract unless the contract says, except on the terms that the contract says.

[01:23:58] Speaker 06:
And I took Judge Cassis to be saying, well, what if there was a regulation that says agencies may terminate only if the ground is specified in the contract?

[01:24:06] Speaker 08:
So the reason I said it was harder was not because of the statute regulation distinction.

[01:24:10] Speaker 08:
I think those are actually identical.

[01:24:12] Speaker 08:
Yeah.

[01:24:12] Speaker 08:
So the reason I said it harder, I read 200.340 to have changed the pertinent regulations to make it specifically harder.

[01:24:19] Speaker 08:
for agencies to terminate based on change priorities.

[01:24:21] Speaker 08:
That's why in 200.340A4, the reg says that it can only terminate pursuant to the terms and conditions if the award no longer effectuates the program goals or agency priorities.

[01:24:34] Speaker 08:
So the practical effect here is that the agency, we think the practical effect of this reg is that the agency cannot terminate based on change priorities unless the contract explicitly says that the agency can do that.

[01:24:47] Speaker 08:
Because the regulation specifically references terminations based on change priorities and puts what we understand to be an independent constraint on the agency's authority, we think this looks more like a public law case.

[01:24:58] Speaker 08:
But I do think my answer to your hypothetical would, in the end, be the same.

[01:25:02] Speaker 08:
As long as we're enforcing the regulation, the fact that the regulation has language similar to the contractual language, I don't think makes a difference.

[01:25:09] Speaker 09:
The Tucker Act cases are

[01:25:12] Speaker 09:
a little bit messy, to be short, but one principle that seems to be a through line is that you can enforce statutory or regulatory rights in district court to the extent they exist independently.

[01:25:31] Speaker 09:
of the contract.

[01:25:33] Speaker 09:
And maybe the hypo wasn't clear, but it's just designed to posit a case where the regulatory right is entirely dependent on what's in the contract.

[01:25:44] Speaker 08:
Your answer seems to be, doesn't matter.

[01:25:47] Speaker 08:
Well, I guess it depends on what we mean by independent.

[01:25:50] Speaker 08:
So I think the Sharp case, I'm sorry to exceed my time so significantly.

[01:25:54] Speaker 08:
I think the Sharp case is quite pertinent.

[01:25:57] Speaker 08:
The court held that

[01:25:58] Speaker 08:
Section 702 waived sovereign immunity for a due process claim, even though the claim rested necessarily on the premise that the contract with the government gave him a constitutionally protected property interest.

[01:26:12] Speaker 08:
That's not just my spin on the case, like I'm actually quoting Trans Ohio's description of the Sharp case.

[01:26:17] Speaker 08:
So the court held that even when

[01:26:21] Speaker 08:
claim rests on an underlying breach of contract as long as that's a genuinely independent claim based on some other source of law, like due process or in this case a statute or regulation or the APA that that claim is able to see so I certainly understand the point.

[01:26:37] Speaker 08:
that the grant is the but for cause of our claim.

[01:26:41] Speaker 08:
We wouldn't be here today if we didn't enter into grants.

[01:26:43] Speaker 08:
But I don't think that's the analysis.

[01:26:45] Speaker 06:
Yes, Your Honor.

[01:26:45] Speaker 06:
Can you talk about your constitutional claim and if we were to disagree with you on your regulatory and APA claims, would you have a constitutional claim as an independent ground to support the preliminary injunction?

[01:26:59] Speaker 08:
Yes.

[01:26:59] Speaker 08:
And so the district court did find a likelihood of success on that claim.

[01:27:03] Speaker 08:
It wouldn't be an alternative ground.

[01:27:04] Speaker 08:
It would just be affirming that portion of the district.

[01:27:06] Speaker 06:
It is an alternative to your argument.

[01:27:07] Speaker 06:
Among your arguments, is it alone sufficient?

[01:27:10] Speaker 08:
It is alone sufficient, Your Honor.

[01:27:11] Speaker 08:
We think that just Section 7434 does not authorize the agency to redo the entire, to just terminate the whole program and redo the entire program after the deadline expires.

[01:27:25] Speaker 08:
So what's the constitutional use in response to the... Yes, the constitutional argument is that under the appropriations clause, Congress has the power of the purse.

[01:27:33] Speaker 08:
And specifically on appropriations provisions agency has to abide by them and not exceed deadline go past deadlines, merely because the agency is every time the executive branch allegedly fails to comply with a statute that's a constitutional problem.

[01:27:49] Speaker 08:
No, I don't think so, your honor, but this is a special statute.

[01:27:51] Speaker 08:
This is an appropriations provision.

[01:27:53] Speaker 04:
I mean, but that's true of anything.

[01:27:54] Speaker 04:
I mean, if Congress has the power to do it, then the executive branch doesn't have the power to amend it or repeal it or ignore it.

[01:28:01] Speaker 04:
I mean, that's a statutory claim.

[01:28:03] Speaker 04:
Every time that someone alleges that an agency has failed to follow a statute, I mean, why is that a constitutional claim?

[01:28:11] Speaker 08:
Well, so let me try out a different answer in addition to the appropriations clause issue.

[01:28:14] Speaker 08:
So in Aiken, this court classified the Aiken case as a separation of powers to speak.

[01:28:20] Speaker 08:
Even though, in some sense, the agency wasn't violating the statute, the gravamen of the agency's argument there was that even though there was a deadline, the agency just didn't agree with the deadline and just decided not to follow it.

[01:28:32] Speaker 08:
And because that's how the agency framed its position, not grounded in a dispute over interpretation, but an assertion of freestanding executive authority that turned it into a type of

[01:28:41] Speaker 08:
separation of powers case.

[01:28:42] Speaker 08:
I think that's quite similar to what EPA is doing here.

[01:28:44] Speaker 04:
Aiken is really an Article II case.

[01:28:46] Speaker 04:
It's not some sort of free-floating separation of powers argument, right?

[01:28:51] Speaker 04:
It's a question of does the executive branch undoubtedly has discretion to decide how much to enforce a law.

[01:29:00] Speaker 04:
And I think then Judge Kavanaugh's position in Aiken was that this is not part of the enforcement authority where Congress has mandated that something occur at a certain time.

[01:29:11] Speaker 08:
Well, I think that there's a similar type of analysis that happens here, because we're not really disputing the meaning of any particular word in Section 7434.

[01:29:19] Speaker 08:
I mean, it says what it says.

[01:29:20] Speaker 08:
It says September 30, 2024.

[01:29:22] Speaker 08:
And the question is whether under Article 2, the president has the authority to just say, I'm going to redo this whole program, even if I'm not actually enforcing the terms of the grants, just because of a disagreement.

[01:29:32] Speaker 04:
But you've already said earlier in this argument that executive agencies can terminate grants

[01:29:38] Speaker 04:
you know, for a variety of reasons that might be based on the grant or a regulation or some statutory term.

[01:29:44] Speaker 04:
And so then we're just back to whether the termination was lawful.

[01:29:48] Speaker 08:
Well, but there's a difference.

[01:29:50] Speaker 08:
So sometimes the agency will assert, I mean, it's a difference of degree, I think, when you get to a statutory dispute to a true separation of powers dispute.

[01:29:57] Speaker 08:
Sometimes an agency will assert some statutory or regulatory authority.

[01:30:01] Speaker 08:
They'll say there was a breach of the terms and conditions.

[01:30:03] Speaker 08:
They'll say a statute permitted it to do something.

[01:30:05] Speaker 08:
And then the grantee or someone else will disagree.

[01:30:08] Speaker 08:
And then you just tee up a dispute over what the statute or the regulation is.

[01:30:12] Speaker 08:
And I agree that if that's a constitutional claim, everything's a constitutional claim.

[01:30:15] Speaker 08:
I concur with the court on that.

[01:30:17] Speaker 04:
And that's not what's happening here?

[01:30:18] Speaker 08:
I don't think that's what's happening here.

[01:30:19] Speaker 08:
For two reasons.

[01:30:20] Speaker 08:
First of all, the appropriations clause that she had already raised.

[01:30:23] Speaker 08:
Uh, and second, I think that the agency's cause it's because we're talking about an appropriate failing to follow the conditions in an appropriation statute here.

[01:30:31] Speaker 08:
So I think the appropriations clause treats appropriation statute in a special way.

[01:30:35] Speaker 06:
That's, that's it.

[01:30:37] Speaker 06:
There's no obligation that they spend all of this money.

[01:30:40] Speaker 08:
So I respectfully disagree.

[01:30:42] Speaker 08:
I mean, this is an argument that came for the first time in the reply brief and actually EPA doesn't even say it.

[01:30:47] Speaker 08:
It just says elliptically that maybe they don't have to spend it.

[01:30:49] Speaker 04:
I mean, we haven't litigated the Impoundment Control Act here because- Are there any cases saying that it's a violation of the Appropriations Clause not to spend money?

[01:31:01] Speaker 08:
Yeah, I think that is absolutely a violation of the Appropriations Clause.

[01:31:03] Speaker 04:
Are there any cases saying that?

[01:31:05] Speaker 04:
Well, I don't think that this has really been litigated because of the Impoundment Control Act agency- Usually the appropriations cases are about making sure the money is spent.

[01:31:13] Speaker 04:
I mean, they're not about this failing to spend money.

[01:31:16] Speaker 08:
I guess it's a question of what the appropriations means.

[01:31:18] Speaker 08:
We think that in conjunction with the Empowerment Control Act.

[01:31:22] Speaker 08:
the agency does not have the power to not spend these appropriated funds.

[01:31:25] Speaker 08:
We view that as an impoundment, which is contrary to the conjunction of the statute and impoundment control provisions.

[01:31:31] Speaker 04:
And we think that the fact that it would be an impoundment or inconsistent with the statute is just based on your view that the termination of these grants was invalid because you agree that despite, you know, that the statute that says they have to spend this money by September, 2024, they've spent the money.

[01:31:47] Speaker 04:
And if there was a violation of the grant, they could terminate that.

[01:31:51] Speaker 04:
possibly re-obligate the funds.

[01:31:53] Speaker 04:
I mean, you agree that they can do that under the statute.

[01:31:55] Speaker 04:
So the question is only, did they properly do that in this case?

[01:32:00] Speaker 08:
But I don't think the parties are litigating whether or not the terms of the grant permitted the government to do it.

[01:32:05] Speaker 08:
The government has never said that.

[01:32:06] Speaker 08:
If you look at the basis for the government's order, if you look at the basis for the government's action in the termination letter, it just says there's an inherent free-floating authority to reconsider actions.

[01:32:15] Speaker 04:
But you agree that under the statute that the government

[01:32:20] Speaker 04:
at least in certain cases, has the authority to terminate the grant.

[01:32:23] Speaker 04:
So then we're not talking about the appropriations clause or constitutional claim.

[01:32:28] Speaker 04:
We're just talking about whether the termination was valid on the facts here.

[01:32:33] Speaker 04:
Because you've agreed that they have the authority to do it.

[01:32:35] Speaker 08:
So let me just say two things.

[01:32:36] Speaker 08:
First of all, even if we're talking about a statutory versus a constitutional violation, we're also asserting a statutory claim here.

[01:32:42] Speaker 08:
So if the court thinks that

[01:32:43] Speaker 08:
This is better styled as a statutory argument versus a constitution.

[01:32:47] Speaker 04:
My question is the same.

[01:32:48] Speaker 04:
You've conceded that under the statute, there are circumstances in which the government has the authority to terminate these grants.

[01:32:55] Speaker 04:
And so then the question is just, did they properly, lawfully terminate the grants here?

[01:33:01] Speaker 04:
That's not a question about the statute.

[01:33:03] Speaker 04:
It's a question about the grants.

[01:33:05] Speaker 04:
Because you've conceded that under the statute, they have the authority to terminate.

[01:33:10] Speaker 08:
I think the question is, what authority is the government exercising here?

[01:33:15] Speaker 06:
If the government is purporting... What authority is purport... Oh, go ahead.

[01:33:19] Speaker 06:
What authority is staying at exercises or purporting to exercise?

[01:33:25] Speaker 06:
That's right.

[01:33:26] Speaker 08:
Or what authority in some platonic... No, the authority that's... Here's a hypothetical.

[01:33:32] Speaker 08:
Suppose EPA simply announced that it doesn't care about what the Act of Congress says.

[01:33:36] Speaker 08:
It's the executive branch.

[01:33:37] Speaker 08:
It has the unilateral authority to terminate contracts at will.

[01:33:40] Speaker 08:
And so it's just gonna do it because that's just the core article two power.

[01:33:44] Speaker 08:
You know, I think that that would raise separation of powers and constitutional issues.

[01:33:47] Speaker 08:
You wouldn't say, well, you have to just look at the statute and whether there was some justification under the statute.

[01:33:52] Speaker 08:
You'd say if the purported exercise of authority was this freestanding authority that's untethered from the statutory limitations, whether that authority exists, I think would present a constitutional question.

[01:34:02] Speaker 08:
I think that's not so far from what happened here.

[01:34:05] Speaker 08:
EPA is not even purporting to ground its action

[01:34:08] Speaker 08:
terms of any kind of grant.

[01:34:10] Speaker 08:
It's saying it has some authority, independent of the terms of the grant, just based on its arguments.

[01:34:15] Speaker 04:
Notices of termination give a number of reasons for why the grants are being terminated.

[01:34:20] Speaker 04:
They give reasons.

[01:34:22] Speaker 04:
Are those irrelevant?

[01:34:23] Speaker 04:
Or do we think they were in bad faith?

[01:34:26] Speaker 04:
Does the government not get a presumption of regularity?

[01:34:29] Speaker 04:
They have given a number of reasons.

[01:34:31] Speaker 04:
I mean, I understand grantees find them insufficient, but they have given reasons.

[01:34:35] Speaker 08:
But the reasons have nothing to do with the terms of the grants.

[01:34:37] Speaker 08:
They're just these very general statements that EPA would like more oversight, and there's misaligned priorities.

[01:34:42] Speaker 08:
Those reasons have absolutely nothing to do with the grants themselves.

[01:34:46] Speaker 08:
And so, I mean, EPA is really just saying.

[01:34:48] Speaker 04:
But that's a question about the merits, because you're not disputing that you've conceded that they have the authority to terminate grants in some circumstances.

[01:34:56] Speaker 04:
So the questions are just whether those circumstances are valid here.

[01:35:02] Speaker 08:
So I think the question is whether, I mean, I don't mean to repeat myself, but the question is whether EPA can assert an authority that's independent of the terms of the grants to end these entire program just based on change agency priorities, even though the statute itself imposed a deadline for September 2024.

[01:35:18] Speaker 08:
Look, the practical effect of this termination is either gonna be the government impounds the funds, which we think would be unlawful, or it re-obligates to a whole new set of grantees, which would also violate the statute which required a 2024 deadline.

[01:35:32] Speaker 08:
or it gives substantially identical grants, which really makes no sense and is inconsistent with everything EPA has said.

[01:35:39] Speaker 08:
So I think no matter what EPA does going forward, there's going to be a statutory violation.

[01:35:44] Speaker 04:
That's only if the termination is unlawful.

[01:35:47] Speaker 08:
Right, but EPA has not actually defended the lawfulness of the termination pursuant to the statute or the grant.

[01:35:51] Speaker 08:
It's just said it's lawful because EPA has the authority to do it.

[01:35:55] Speaker 06:
So what I've heard Mr. Ross say today, just substantively as opposed to in terms of legal packaging is,

[01:36:01] Speaker 06:
they concluded there was inadequate oversight mechanisms and particularly of the subgrantees.

[01:36:08] Speaker 06:
What is, if that is their concern in your view, what are their options?

[01:36:16] Speaker 08:
Well, then there's certainly the option.

[01:36:17] Speaker 08:
So first of all, I mean, I don't mean to not be non-responsive, but EPA has never substantiated these concerns.

[01:36:22] Speaker 08:
There's very extensive oversight mechanisms.

[01:36:24] Speaker 08:
The oversight of the subgrantees is far greater

[01:36:27] Speaker 08:
than when you have an ordinary withdrawals from the Treasury in which you have no idea what the sub grantees are doing.

[01:36:32] Speaker 08:
In fact, the ability to oversee the subgrantee Citibank accounts is one of the reasons that this program was structured this way.

[01:36:39] Speaker 08:
But if there is

[01:36:40] Speaker 08:
There's concerns about oversight.

[01:36:42] Speaker 08:
I mean, what's difficult is that EPA has never told us what the concerns are.

[01:36:45] Speaker 08:
I mean, there's very frequent check-ins.

[01:36:47] Speaker 08:
Every week we check in with EPA.

[01:36:49] Speaker 08:
There's a work plan that's been approved.

[01:36:51] Speaker 08:
There's full audits of everything we do.

[01:36:53] Speaker 08:
I mean, again, I direct the courts to JA 373 and 374, which enumerates in exhaustive detail all of the oversight mechanisms and auditing.

[01:37:03] Speaker 08:
abilities that the EPA has.

[01:37:05] Speaker 08:
But if there is some concern that it's not enough, then all EPA has to do is tell us, and we probably would try to provide additional oversight mechanisms pursuant to the existing grant, or potentially there could be a mutual agreement to amend the grant.

[01:37:19] Speaker 08:
But termination of the grant as a whole, we think, is an unwarranted step.

[01:37:43] Speaker 06:
Good morning, Ms.

[01:37:44] Speaker 06:
Dippo.

[01:37:54] Speaker 02:
Good morning, Your Honors, and may it please the Court.

[01:37:56] Speaker 02:
Teresa Reed Dippo on behalf of the State Green Bank Subgrantees.

[01:38:01] Speaker 02:
We agree with the presentation of my friend and ask the court to affirm the preliminary injunction in its entirety.

[01:38:10] Speaker 02:
With my five minutes, I'd like to focus on the aspects of the injunction that prohibit the defendants from transferring or moving the funds out of plaintiff's accounts at Citibank during the pendency of the litigation.

[01:38:24] Speaker 02:
That relief clearly does not injure EPA, avoids irreparable harm to plaintiffs, and is a modest measure that appropriately preserves the status quo.

[01:38:36] Speaker 06:
What is the irreparable harm?

[01:38:37] Speaker 06:
This is actually really a broader question than just the state banks.

[01:38:42] Speaker 06:
Is there a concern that they are going out of business?

[01:38:45] Speaker 06:
And as I think one of my colleagues said, if they were only set up,

[01:38:52] Speaker 06:
by EPA to do this in the first place?

[01:38:54] Speaker 06:
Couldn't they be reconvened if everything dried up and they went out of business, they come back?

[01:39:02] Speaker 06:
Tell me a little bit about the irreparable harm here.

[01:39:05] Speaker 02:
So a couple of things, Your Honor.

[01:39:07] Speaker 02:
So first, as to the irreparable harm of not being able to access the funds while this litigation and EPA's conduct is ongoing, there are operational and reputational harms suffered by the plaintiffs, including for some of the plaintiffs

[01:39:21] Speaker 02:
the prospect of going out of business.

[01:39:23] Speaker 02:
For the state green banks, we receive funding from other sources as well, not exclusively from this program.

[01:39:30] Speaker 02:
So our entities would survive the inability to access these funds in some cases, but we would still suffer the operational and reputational harms from the inability to access these funds.

[01:39:42] Speaker 02:
For example, being unable to perform investments that we had planned to do.

[01:39:46] Speaker 02:
And in some cases, that would even result in us being completely unable to participate in those projects because a project delayed turns into a project denied.

[01:39:57] Speaker 04:
But with the state banks reimburse the Treasury or the federal government if the money was dispersed and then it was found, you know, the termination was found to be lawful.

[01:40:09] Speaker 02:
Would they have the wherewithal to return the money to the government to the question whether EPA could recover the funds if they were drawn down.

[01:40:18] Speaker 02:
I think there are actually some places in the record where the district court did consider that possibility and because of actually that extent of the oversight on these accounts.

[01:40:30] Speaker 02:
concluded that it wasn't a substantial concern.

[01:40:32] Speaker 02:
I think that's at J.A.

[01:40:33] Speaker 02:
1002 and that's also in our papers below in the state Green Bank papers below at J.A.

[01:40:39] Speaker 02:
1288.

[01:40:40] Speaker 02:
So not just that the oversight controls on the account would avoid sort of gratuitous drawdowns or spending that EPA couldn't get back, but also that the federal regulations authorize EPA to recover or disallow improper expenses and

[01:40:58] Speaker 04:
That's about improper expenses.

[01:40:59] Speaker 04:
But if it was found that the termination was lawful and that the government was entitled to all of the funds, I mean, the oversight question isn't relevant to whether they could recover money that was dispersed during the pendency of the litigation.

[01:41:13] Speaker 02:
I think it would be relevant to how much money they would have to try to recover because, as I think has been discussed, the grantees and subgrantees have to certify that their withdrawals are to comply with or implement an EPA-approved work plan.

[01:41:28] Speaker 02:
to the question of whether they could recover rather than the amount they would have to recover.

[01:41:32] Speaker 02:
I think the federal regulations give an answer to that.

[01:41:35] Speaker 02:
And that's 2 CFR 200, 345, 346, and 410.

[01:41:41] Speaker 02:
But if I might just get back for a moment.

[01:41:43] Speaker 04:
It doesn't tell me.

[01:41:43] Speaker 04:
That's to really answer my factual question about the solvency of the banks.

[01:41:49] Speaker 04:
If a court said that the government was entitled to recover the funds, could they get the money back from these entities?

[01:41:58] Speaker 02:
If these banks were able to access these funds, then they wouldn't have an insolvency problem.

[01:42:05] Speaker 04:
The money wouldn't be spent.

[01:42:10] Speaker 04:
If the money were spent, would the government get it back?

[01:42:15] Speaker 02:
I think that the federal regulations would provide an avenue for the government to pursue that.

[01:42:22] Speaker 02:
I suppose it's possible, but actually if I might just respond to that by going back to the irreparable harm analysis as to the provision of the injunction that preserves the funds at Citibank.

[01:42:34] Speaker 02:
for the duration of the litigation because I think that in particular reflects that that provision would allow the avoidance of irreparable harm to plaintiffs without harming EPA or raising your honor's concern about the possibility of funds being spent.

[01:42:51] Speaker 02:
That's because EPA hasn't expressed any irreparable harm or any substantial harm that it would suffer from the funds being preserved at Citibank during the duration of the litigation.

[01:43:02] Speaker 02:
There's this question today of whether they want to re-obligate the funds, but even the authority they cite for re-obligation, which is at page 17 of their brief about the ability to make replacement grants, says that those grants would have to be for the same nature and purpose as the original grants.

[01:43:19] Speaker 02:
And EPA hasn't, and I don't think can, provide an explanation of how making a replacement grant that is essentially a continuation of the original grant for the same nature and purpose

[01:43:31] Speaker 02:
would respond to its oversight concerns.

[01:43:35] Speaker 02:
Conversely, preserving the funds at Citibank would avoid some of the irreparable harm that plaintiffs face.

[01:43:42] Speaker 02:
because there's a prospect, as discussed, that the plaintiffs wouldn't be able to recover the funds at the end of this litigation, even if they prevailed, if EPA clogged the funds back.

[01:43:54] Speaker 02:
And that's not because the federal government might go out of business.

[01:43:57] Speaker 02:
It's because of the risk described in the amicus briefs of Professor Bagenstos and of the Natural Resources Defense Council that the funds would be unable to be recovered by the plaintiffs under principles of appropriations law.

[01:44:12] Speaker 06:
I'm sorry.

[01:44:13] Speaker 06:
Were you saying that as between lifting the preliminary injunction and not, you're obviously in favor of keeping the preliminary injunction in place.

[01:44:29] Speaker 06:
But I thought you said something about the stay.

[01:44:32] Speaker 02:
The stay includes a provision that says that the funds are preserved at Citibank.

[01:44:40] Speaker 06:
And I actually, maybe I should ask Ms.

[01:44:43] Speaker 06:
Judy Cassidy if I could, because I had a question about whether even that is tenable for the plaintiffs during the course of the litigation.

[01:44:55] Speaker 06:
I don't know if you have information on that.

[01:44:56] Speaker 06:
Other than that, state banks, which as you point out, have other sources of funding and would not face existential threat from this money's continued

[01:45:06] Speaker 06:
holding in in city bank.

[01:45:09] Speaker 02:
Some of the plaintiffs absolutely face existential threat like going out of business from the inability to access their funds now.

[01:45:17] Speaker 06:
And is that a harm if as Judge Rao's questioning suggested that they are you know

[01:45:23] Speaker 06:
Like a campsite, you set up the tent for the night, you can take it down, you put it back up again when you need it.

[01:45:29] Speaker 06:
If these entities exist only for the purpose of administering these funds and they prevail at the end of the day and get the funds, irreparable harm or not.

[01:45:42] Speaker 02:
Irreparable harm to EPA, is that?

[01:45:44] Speaker 05:
No, no, no, no.

[01:45:45] Speaker 05:
Irreparable harm to the plaintiffs.

[01:45:46] Speaker 02:
Oh, certainly irreparable harm to the plaintiffs.

[01:45:48] Speaker 02:
The League of Women Voters case, I think, highlights that because it talks about when an organization can't carry out its mission or invest in the way it was intended to do, that that's irreparable harm.

[01:46:00] Speaker 02:
And I think that's certainly the case for these plaintiffs.

[01:46:03] Speaker 06:
So the hypothesis is they would go out of business

[01:46:10] Speaker 06:
because they're created only to administer this money.

[01:46:12] Speaker 06:
And if you prevail, they would come back into business and be able to carry out their mission.

[01:46:19] Speaker 06:
So I think the premise of the question is, why is it irreparable harm if their mission is only vis-a-vis this money?

[01:46:30] Speaker 02:
Because in the interim, they suffer operational and reputational harm.

[01:46:33] Speaker 02:
In the interim, they're not able to carry out their mission, because even assuming they could go out of business, fire all of their staff, and turn off all of the lights, and vacate the buildings, and stop paying rent, even assuming all of that could be undone later, which I don't think is consistent with the findings that the district court made, they would still, in the interim, have been unable to fund the projects that they intended to fund.

[01:46:59] Speaker 02:
And also, they would have suffered these reputational harms

[01:47:02] Speaker 02:
which are particularly concrete and important in the context of the funding structure here, because this is all about leveraging and catalyzing private investment via having secure access to capital on the plaintiff's balance sheets.

[01:47:17] Speaker 02:
And if the plaintiffs don't have that stable access to funding, that signals to the market that maybe they're not as secure and reliable.

[01:47:25] Speaker 02:
Maybe they're not the foundation of private investment that they were intended to be.

[01:47:30] Speaker 02:
If I might just add one point about the aspects of the injunction that preserve the funds at Citibank.

[01:47:38] Speaker 02:
I think that that is a tailored provision that could preserve the relative positions of the parties while this litigation is resolved.

[01:47:46] Speaker 02:
It's obvious, I think, that these Tucker Act issues in particular are tricky and that this area of law is fast moving.

[01:47:54] Speaker 02:
But if the court at least ensures that the funds remain at Citibank, that avoids some of the irreparable harm to plaintiffs without harming EPA.

[01:48:04] Speaker 02:
And in the Department of Education teacher grants case,

[01:48:08] Speaker 02:
The federal government actually described that in order to hold the funds in place as a less onerous option to preserve the status quo.

[01:48:18] Speaker 04:
Oh, what would be the basis for preserving that part of the P. I. If we were to conclude that the district court lacked jurisdiction because this was this needs to go to the court of federal claims.

[01:48:29] Speaker 04:
I mean, what would if there's no jurisdiction, then there's no authority

[01:48:33] Speaker 04:
for a PI, any part of it.

[01:48:35] Speaker 04:
I mean, I understand your position about why it would be reasonable to keep the money at Citibank, but what would be the court's authority?

[01:48:45] Speaker 02:
If the court completely disagrees on the Tucker Act issue, I think it is a harder argument to be sure.

[01:48:52] Speaker 02:
The court could leave the administrative stay in place to allow these issues to percolate further while avoiding irreparable harm, some of the irreparable harm that the plaintiffs face.

[01:49:03] Speaker 02:
But I would also say.

[01:49:05] Speaker 04:
Where would we have any constitutional authority to put a stay where we think there's no jurisdiction?

[01:49:13] Speaker 04:
So assuming we thought there was no jurisdiction, would there be any authority of this court or the district court to do a preliminary injunction or a stay?

[01:49:21] Speaker 02:
I think if the court is certain that there is no jurisdiction, this is a much harder argument.

[01:49:28] Speaker 04:
Harder or just completely foreclosed?

[01:49:30] Speaker 04:
I mean, what would be the argument that we

[01:49:33] Speaker 04:
had jurisdiction to do those things.

[01:49:34] Speaker 04:
Is there any argument?

[01:49:36] Speaker 02:
If this court has no jurisdiction and it is certain of that conclusion, I agree it probably could not.

[01:49:41] Speaker 02:
It could not enter an administrative stay.

[01:49:43] Speaker 02:
But we think that would be the wrong view for all of the reasons expressed by my friend and in the briefing.

[01:49:49] Speaker 02:
We ask this court to affirm.

[01:49:51] Speaker 06:
Thank you.

[01:49:52] Speaker 06:
I wonder if I could ask Mr. Unikowsky to respond.

[01:49:56] Speaker 06:
It's my own failure to follow up.

[01:50:01] Speaker 06:
just to have some concrete information about.

[01:50:04] Speaker 06:
In particular, Ms.

[01:50:07] Speaker 06:
Dippo has expressed amenability to having an emergency stay that we entered, a stay in place, and it's better than no stay, I understand.

[01:50:19] Speaker 06:
But I just want to have a more concrete sense of, in terms of the harms to the plaintiffs, what's at stake.

[01:50:29] Speaker 06:
I think I understand if the

[01:50:32] Speaker 06:
preliminary injunction is vacated, that there's a question of whether there's any opportunity for you to seek any further review.

[01:50:40] Speaker 06:
And that's really a question for Mr. Roth.

[01:50:44] Speaker 06:
But if the preliminary injunction remains in place, the emergency stay freezes the money rather than as under the injunction makes it available.

[01:50:55] Speaker 06:
What's at stake there?

[01:50:57] Speaker 08:
Sure.

[01:50:58] Speaker 08:
So first, I direct the court to the Belbacha case, in which this court does say it has authority to enter sort of temporary injunctive relief while Belbacha, B-E-L-B-A-C-H-A, while it's assessing jurisdiction.

[01:51:09] Speaker 08:
So I think the court can reasonably say, if the issue is still percolating in this court, potentially in the bank court, the stay is in place while the court continues to assess jurisdiction.

[01:51:17] Speaker 08:
Plus, we have other claims pending in district court, like a due process claim.

[01:51:21] Speaker 08:
So if there is potential or possible jurisdiction over that claim, I think a stay would still be appropriate.

[01:51:27] Speaker 08:
But I can just answer Judge Pillard's question directly.

[01:51:30] Speaker 08:
So in terms of the irreparable harm, there is declarations from all of the grantees, and they're all a little bit different.

[01:51:36] Speaker 08:
But many of the grantees say that they're going to basically shut down within 30 days or less without the funds, and they can't just pop back up.

[01:51:44] Speaker 08:
It doesn't work that way.

[01:51:45] Speaker 08:
So for example, my client, Climate United,

[01:51:48] Speaker 08:
several extensive declarations in the record describing how it has, you know, a number of investment professionals who are just going to leave and are not going to come back if the company just has to, or the nonprofit, excuse me, just has to shut down.

[01:52:01] Speaker 08:
And so realistically, it's just not an option for these entities to shut down, fire or lay off all of their employees, and then litigate for years in the court of federal claims.

[01:52:11] Speaker 08:
They'll just, they're probably not going to come back.

[01:52:14] Speaker 08:
And not just saying that, I direct the court to the, at least, you know, our client has a declaration from Ms.

[01:52:19] Speaker 08:
Baffert and several of the other grantees as well.

[01:52:21] Speaker 08:
Justice Climate Fund has a detailed declaration, for example, as does Power Forward and several other grantees.

[01:52:28] Speaker 08:
Thank you, runners.

[01:52:31] Speaker 06:
Thank you.

[01:52:31] Speaker 06:
Ra.

[01:52:35] Speaker 03:
Thank you, Your Honor.

[01:52:36] Speaker 03:
I was hoping I could clarify one point, then observe a couple of concessions, and then comment on one thing that did not come up.

[01:52:45] Speaker 03:
First, on the clarification, my friend suggested that EPA has not relied on the terms of the grant as the authority to terminate the grant.

[01:52:57] Speaker 03:
That's not correct.

[01:52:59] Speaker 03:
I mean, the termination letter itself

[01:53:01] Speaker 03:
says pursuant to EPA's authority under the regs, the general terms and conditions, the terms and conditions of the grant agreement, and the agency's inherent authority.

[01:53:09] Speaker 03:
So it certainly pointed from the outset to the terms and conditions.

[01:53:13] Speaker 03:
And I think EPA has been pretty clear from the outset of the litigation that in EPA's view, the terms and conditions of the grant as originally entered incorporated EPA's then existing general terms and conditions

[01:53:30] Speaker 03:
which provided for termination consistent with agency priorities.

[01:53:36] Speaker 03:
And then we get into a question of whether the modification.

[01:53:41] Speaker 09:
Is it an argument that the agency priority clause survives or an argument of waste fraud and abuse or both?

[01:53:54] Speaker 03:
It's both.

[01:53:54] Speaker 03:
It's number one, that the more general termination authority survives and that the later modification that purported to strip it out was void or voidable.

[01:54:04] Speaker 03:
And then second that the original version also allowed for termination based on waste or abuse, which were not defined terms at that point, which could have been included a view that the structure of the of the agreements allowed for

[01:54:21] Speaker 03:
waste and abuse that again was reported to be further tightened after the election and then we have a question of contract formation with respect to the modification.

[01:54:32] Speaker 03:
So again we haven't developed all those arguments here because those are contract arguments and we will do that in the Court of Federal Claims but the point for now is yeah it's a contract dispute about the termination provision.

[01:54:46] Speaker 03:
So just want to clarify that and in terms of the concessions

[01:54:49] Speaker 03:
Council said a couple of times, it's not just about the money, it's about working with EPA on this program.

[01:54:56] Speaker 03:
And he mentioned weekly check-ins and so on and so forth.

[01:54:59] Speaker 03:
And I think that suggests two things.

[01:55:01] Speaker 03:
One, this is not just a historical contract where money was turned over and now it's all in their hands to go and run with.

[01:55:08] Speaker 03:
This is an ongoing relationship that's supposed to last for years in which all of the parties have obligations.

[01:55:16] Speaker 03:
And that makes the remedy here look a whole lot like specific performance.

[01:55:21] Speaker 03:
I'm not sure what else it really could be.

[01:55:23] Speaker 03:
And we could look at the order that the district court entered, which enjoins EPA from terminating plaintiff's grant awards.

[01:55:32] Speaker 03:
So this is a grant award with a termination provision, dispute about whether that provision has been complied with, and then the district court is saying, I'm enjoining you from exercising your rights under that

[01:55:45] Speaker 03:
provision.

[01:55:46] Speaker 03:
That is a contract claim.

[01:55:47] Speaker 03:
That's a contract remedy.

[01:55:51] Speaker 03:
And that remains true whether this is a reimbursement or an advance structure.

[01:55:55] Speaker 03:
They're still grant funds.

[01:55:56] Speaker 03:
They're still subject to this agreement.

[01:55:57] Speaker 03:
They're still subject to termination.

[01:55:59] Speaker 03:
The termination clause itself contemplates de-obligating the uncommitted funds.

[01:56:05] Speaker 03:
This is a JA 614, although it appears throughout

[01:56:08] Speaker 03:
the appendix.

[01:56:09] Speaker 03:
I'm not sure how they can square that language with the idea that, well, the money's changed hands, there's no taking it back.

[01:56:16] Speaker 03:
Contract itself contemplates that under certain circumstances, it can be reverted.

[01:56:23] Speaker 06:
It contemplates de-obligating the funds under what circumstances?

[01:56:27] Speaker 03:
When terminated.

[01:56:28] Speaker 03:
when the grant is terminated.

[01:56:30] Speaker 03:
And again, we have a dispute over whether the contract has been terminated consistent with the terms.

[01:56:37] Speaker 03:
If we're right about that, they get nothing.

[01:56:39] Speaker 03:
If they're right about that, they get damages.

[01:56:42] Speaker 03:
And we're not disputing that, but that has to be in a different court.

[01:56:48] Speaker 03:
So those were the two concessions, because counsel also agreed that, yes, there is termination authority, at least under some circumstances, if it's consistent with the terms.

[01:56:57] Speaker 03:
It's not a violation of the statute of the Constitution.

[01:57:01] Speaker 03:
To be clear, because I think there was some confusion about this, we are not accusing grantees of breaching the contract.

[01:57:10] Speaker 03:
But we do maintain that EPA had the authority to terminate the contract under the terms and conditions.

[01:57:16] Speaker 03:
They're two different things.

[01:57:18] Speaker 06:
And specifically invoking which authority?

[01:57:24] Speaker 03:
The authority under the EPA's general terms and conditions that were enforced at the time of the original grant agreement in 2024, and the contract incorporated those and said we're not intending to modify or supplant them.

[01:57:41] Speaker 03:
Those terms and conditions included the right to terminate based on change in policy priorities, as well as, and then the contract itself talked about the waste and abuse.

[01:57:54] Speaker 04:
authority notice of termination accused.

[01:57:57] Speaker 04:
I mean, does it suggest that the grantees engaged in waste, fraud and abuse?

[01:58:02] Speaker 04:
I mean, that is those are the reasons given for the notice of termination.

[01:58:07] Speaker 03:
Um, I don't think it says it in those terms.

[01:58:11] Speaker 03:
Your honor, the agency was certainly concerned about program integrity, the award process and fraud, waste and abuse.

[01:58:20] Speaker 03:
But the accusation is not that

[01:58:22] Speaker 03:
A particular plaintiff has engaged in a particular act that constitutes fraud, for example.

[01:58:27] Speaker 03:
Again, as I was explaining earlier, the concern was the more structural concern about the way these grant agreements were set up and administered and the EPA's lack of oversight tools to ensure that the money wasn't abused.

[01:58:45] Speaker 03:
Two other quick things, if I may.

[01:58:47] Speaker 03:
I did not hear.

[01:58:48] Speaker 09:
Just help me out.

[01:58:50] Speaker 03:
Sure.

[01:58:50] Speaker 09:
What is the basis?

[01:58:53] Speaker 09:
I understand the argument about whether inconsistency with agency priorities is a valid basis for termination.

[01:59:07] Speaker 09:
What is the argument?

[01:59:09] Speaker 09:
What is the basis?

[01:59:11] Speaker 09:
What is your claimed basis for termination?

[01:59:14] Speaker 09:
on the theory that there's no breach, there's no waste, fraud, or abuse, but there's a contract structure that might facilitate that.

[01:59:32] Speaker 09:
I'm not sure I see that in the grant agreement.

[01:59:36] Speaker 03:
Well, right.

[01:59:37] Speaker 09:
So I- Active performance or adequate evidence of waste.

[01:59:41] Speaker 03:
Right.

[01:59:42] Speaker 03:
So the argument there, I mean, I think the initial argument is one you're on a referred to first, which is I get that we don't have to rely on that specific language.

[01:59:50] Speaker 03:
If we were forced to rely on that specific language, I think the argument would be.

[01:59:54] Speaker 03:
that the waste and abuse is the structural risk of waste and abuse rather than a particular instance of waste and abuse.

[02:00:05] Speaker 03:
And look, maybe the court of federal claims will say, that's a bad argument.

[02:00:08] Speaker 03:
You can't terminate under these conditions.

[02:00:11] Speaker 03:
And then we'd be in the world of what are the relevant damages.

[02:00:14] Speaker 03:
And plaintiffs would establish what their losses are, and the government might be on the hook for that.

[02:00:20] Speaker 03:
But that should happen in that form subject to that remedy and not what is effectively specific performance of forcing EPA to go through with this involved multi-year process where they are signing off, approving, engaged in these weekly check-ins and so forth with the plaintiffs when they have, when EPA has determined that the structure of these agreements is inadequate.

[02:00:48] Speaker 06:
So if we disagree with you that EPA retains the authority to cancel an award that no longer effectuates the program goals or agency priorities, you don't have a claim.

[02:01:08] Speaker 03:
Well, Your Honor, I think that question is not the question that's before the court.

[02:01:12] Speaker 06:
No, no, but I'm trying to understand.

[02:01:14] Speaker 03:
If we, yes.

[02:01:15] Speaker 06:
Mr. Unikowsky has argued that what you purport to be doing is actually relevant to the nature of the

[02:01:22] Speaker 06:
And you're making an argument.

[02:01:24] Speaker 06:
We purport to be doing something that's under the contract.

[02:01:27] Speaker 06:
Therefore, we have to go to the court of claims.

[02:01:29] Speaker 06:
So I'm trying to understand the surface plausibility of your argument that you were trying to do something under the contract.

[02:01:36] Speaker 06:
You've argued that you have this authority to terminate a contract.

[02:01:41] Speaker 06:
if a grant, if it no longer effectuates the program goals or agency priorities, you've said, well, that was taken stripped out of the contract at a time that you think is shady, so you would have to show that that was invalid as a legal matter.

[02:01:55] Speaker 06:
That doesn't sound like a contract claim to me.

[02:01:58] Speaker 03:
Well, I think that's very much a contract claim.

[02:02:00] Speaker 03:
It's a claim of whether the modification was permissible.

[02:02:02] Speaker 06:
Whether you have authority to, whether you can check.

[02:02:07] Speaker 03:
We have two versions.

[02:02:08] Speaker 06:
There has to be some external basis for thinking that something that the parties did was important.

[02:02:12] Speaker 03:
Well, we have two versions of the contract, the original version and the later version.

[02:02:15] Speaker 03:
The later version, we believe, lacked consideration for these amendments.

[02:02:20] Speaker 06:
OK, so they say that that provision you're talking about was never in the contract.

[02:02:28] Speaker 03:
Yes, they do say that.

[02:02:29] Speaker 03:
And that goes back to the contract interpretation question under the original version of the contract.

[02:02:35] Speaker 03:
which did incorporate the general terms.

[02:02:37] Speaker 03:
And I think their position is, well, it incorporated it, but then it later took it back.

[02:02:42] Speaker 03:
And we say, no, it didn't take it back because the contract says it doesn't intend to replace the general terms and conditions.

[02:02:48] Speaker 03:
Again, there's a lot to be litigated here under the contract.

[02:02:52] Speaker 03:
And we're not trying to avoid that.

[02:02:54] Speaker 03:
We're just trying to say it has to happen in a particular place.

[02:02:57] Speaker 03:
And if plaintiffs are right, they're entitled to a specific remedy, which is not the remedy that the district wants.

[02:03:01] Speaker 06:
These general terms are not

[02:03:03] Speaker 06:
term of this contract.

[02:03:04] Speaker 03:
They are.

[02:03:05] Speaker 06:
They made a term, but they are general terms in a regulation.

[02:03:09] Speaker 03:
They're general terms separate from the regulation, actually.

[02:03:12] Speaker 03:
They're general terms and conditions that EPA has that were incorporated by this agreement.

[02:03:19] Speaker 03:
The last thing I wanted to say was I didn't hear it.

[02:03:21] Speaker 04:
So your argument, though, is I mean, the way you've characterized the reason for termination here on

[02:03:30] Speaker 04:
on rebuttal sounds more like a general claim, that they're concerned, they're programmatic concerns, they're not about these specific grantees, then that starts to look a lot more like what Mr. Unikowski said, the government is arguing, which is some kind of general authority to restructure the program.

[02:03:49] Speaker 04:
So I'm not sure how that is, that starts to look a lot less like a contract claim than some of the earlier representations.

[02:04:01] Speaker 03:
No, Your Honor, I think that the concerns are with the way these agreements were structured.

[02:04:07] Speaker 03:
And that's not a problem.

[02:04:09] Speaker 03:
The point I was trying to make was that's not an objection to the statute.

[02:04:12] Speaker 03:
The statute doesn't say anything about any of this.

[02:04:15] Speaker 03:
The statute just says make grants.

[02:04:16] Speaker 04:
No, but the source of the authority to restructure a program that the government thinks doesn't have sufficient oversight or whatever,

[02:04:26] Speaker 04:
That is not a claim that comes from the contract.

[02:04:29] Speaker 04:
That's the claim that comes from the executive's duty to take care that the laws be faithfully executed.

[02:04:35] Speaker 03:
Except, Your Honor, that the contract allows for termination.

[02:04:38] Speaker 03:
In our view, properly read, the contract allows for termination when the award no longer furthers agency policies and priorities.

[02:04:48] Speaker 03:
So that, of course, takes into account agency policy views.

[02:04:51] Speaker 03:
What's important is that the policy is about these contracts, not about the statute group.

[02:04:58] Speaker 09:
You agree that your contract defense has to be at least colorable in sort of a L versus hood kind of sense?

[02:05:13] Speaker 03:
Probably.

[02:05:13] Speaker 03:
I mean, if it was totally absurd, I think it would be harder.

[02:05:17] Speaker 09:
Just give me the

[02:05:21] Speaker 09:
you're not putting a lot of weight on this, the possibility that the no longer effectuates agency priorities clause or element is a valid ground for breach.

[02:05:36] Speaker 09:
And maybe I missed it, but it's not actually in the grant agreement.

[02:05:42] Speaker 09:
So walk me through why it might be

[02:05:46] Speaker 03:
So if you go to J.A.

[02:05:48] Speaker 03:
551, EPA agrees to make the following clarifications to the EPA general terms and conditions.

[02:05:57] Speaker 04:
Sorry, my working stack did not have J.A.

[02:06:04] Speaker 03:
551.

[02:06:05] Speaker 03:
Again, there's multiple versions of this throughout.

[02:06:07] Speaker 03:
This is T. EPA agrees to make the following clarifications to the EPA general terms and conditions.

[02:06:14] Speaker 03:
These clarifications expand on, rather than replace or modify, the EPA general terms and conditions.

[02:06:21] Speaker 03:
One of these modifications.

[02:06:23] Speaker 03:
You're saying that incorporates general terms and conditions?

[02:06:27] Speaker 03:
Right.

[02:06:28] Speaker 03:
And at the time this was entered.

[02:06:29] Speaker 09:
Was this before they amended?

[02:06:31] Speaker 03:
This was before the term.

[02:06:33] Speaker 09:
EPA incorporated the amended OMB, Greg?

[02:06:38] Speaker 03:
Into the term and conditions, yes, that's right.

[02:06:41] Speaker 03:
There's also the regulations, which are

[02:06:45] Speaker 03:
which are different, although they overlap.

[02:06:49] Speaker 03:
But it's also, by the way, a J518, which is the original incorporation of the general terms and conditions.

[02:06:58] Speaker 03:
The recipient agrees to comply with the current EPA general terms and conditions available at and the website, which is the October 1st, 2023.

[02:07:07] Speaker 09:
So just in a nutshell, here it is, and then later modifications.

[02:07:12] Speaker 09:
That's the nutshell.

[02:07:13] Speaker 09:
Correct.

[02:07:13] Speaker 09:
And that's colorable enough to get you in the... I certainly think it is.

[02:07:18] Speaker 06:
All right.

[02:07:21] Speaker 09:
Thank you, Your Honor.

[02:07:22] Speaker 06:
Thank you all very much.

[02:07:23] Speaker 06:
The case is submitted.