<p>A federal appeals court on Monday largely upheld a ruling that blocked a &#8220;sweeping and unprecedented&#8221; freeze on trillions of dollars in government financial assistance that President Donald Trump&#8217;s administration instituted early last year.</p>
<p>A three-judge panel of the Boston-based 1st U.S. Circuit Court of Appeals sided with Democratic attorneys general from 22 states and the District of Columbia in finding that the White House&#8217;s budget office had directed federal agencies to implement a categorical freeze on funding that was likely improper.</p>
<p>Chief U.S. Circuit Judge David Barron said the Office of Management and Budget &#8220;directed the agency defendants to freeze such funds without considering an obvious aspect of the problem &#8212; namely, the reliance interests of the recipients of the obligated federal funds that were to be frozen.&#8221;</p>
<p>The judge, who like the other panel members was appointed by a Democratic president, pointed to a lower-court judge&#8217;s conclusion that the agencies failed in carrying out OMB&#8217;s directive to assess whether such payments were legally required or appropriate on a case-by-case basis.</p>
<p>While the appeals court largely upheld Rhode Island-based U.S. District Judge John McConnell&#8217;s March 2025 injunction blocking the policy, it overturned part of it to the extent it required agencies to make payments to the states that sued.</p>
<p>It did so citing a ruling last year by the U.S. Supreme Court in a different Trump-era case that indicated lawsuits seeking to recover money owed by the government under contracts and grants must be pursued in a different, specialist court.</p>
<p>The White House did not respond to a request for comment.</p>
<p>The state attorneys general sued after the OMB in January 2025, shortly after Trump returned to the White House, issued a memo directing federal agencies to temporarily pause spending on federal financial assistance programs.</p>
<p>That memo said the freeze was necessary while the administration reviewed grants and loans to ensure they are aligned with Trump&#8217;s executive orders, including ones ending diversity, equity and inclusion programs and directing a pause on spending on projects seeking to combat climate change.</p>
<p>The freeze implicated up to $3 trillion in federal funding.</p>
<p>OMB later withdrew that memo after it became the subject of two lawsuits, including the one before McConnell. But the states argued the memo&#8217;s withdrawal did not mean the end of the policy itself.</p>
<p>(Reporting by Nate Raymond in Boston; Editing by Lincoln Feast.)</p>

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Trump Admin Cannot Implement ‘Sweeping’ Funding Freeze, Court Rules