Overview
On August 12, 2025, Judge Rita Lin of the US District Court for the Northern District of California ordered the National Science Foundation (NSF) to reinstate suspended grant funds to the University of California Los Angeles (UCLA). Judge Lin ruled that the NSF's suspension of grant funds violated the court's prior injunction. Although this ruling should offer some comfort to institutions of higher education (IHEs) currently receiving federal research funding, the administration's efforts to restrict funding to IHEs for research on topics that it views as inconsistent with its policies — or as a lever to extract changes to DEI policies and how IHEs handle antisemitism allegations — will almost certainly continue to forge ahead.
I. Background
Faculty and researchers from the University of California (UC) sued the Trump administration in June 2025 in response to federal agency actions, particularly by the National Science Foundation (NSF), to abruptly terminate significant research grants. Notably, UCLA itself is not a plaintiff in the lawsuit. In early 2025, the NSF terminated over $324 million in research grants to UC researchers through en masse funding cuts, citing changes in "program goals and agency priorities." The plaintiffs argued that these decisions were arbitrary and capricious, violating the Administrative Procedure Act (APA), which requires substantive justifications and proper consideration of reliance interests. Judge Lin agreed with the plaintiffs' arguments, and in June 2025, the court granted a preliminary injunction that mandated the reinstatement of these terminated grants.
II. Summary of the Court's Order
Despite the preliminary injunction, the NSF later "suspended" over $550 million in additional research funding to researchers at the UC's Los Angeles campus (UCLA). Federal authorities alleged that UCLA violated civil rights laws, citing accusations of antisemitism on campus, as well as the university's policies addressing race, gender, and transgender athletes, as the grounds for suspension. The NSF contended that these "suspensions" were distinct from terminations and argued that the new cuts fell outside the scope of the previously issued June 2025 court order.
On August 12, 2025, Judge Lin issued a detailed order addressing these suspensions, clarifying the scope of the prior injunction, and assessing the legal validity of NSF's actions. Judge Lin's analysis focused on whether the NSF's indefinite suspensions of grant funding were effectively "terminations" as prohibited by the June 2025 preliminary injunction. The suspensions targeted numerous UCLA grants as part of an ostensible shift in NSF priorities and in response to the university's alleged failures to address antisemitism, bias, and discriminatory practices. The NSF had also instructed UCLA to immediately stop withdrawing funds and submit a corrective action plan, with no clear timeline or guarantee for funds being reinstated.
The court found the NSF's labeling of its actions as "suspensions" rather than "terminations" unconvincing. Judge Lin stated that there was "no principled difference" between the two actions since the indefinite nature of the suspensions effectively prevented researchers from continuing their work. Furthermore, the harm to researchers—such as the loss of staff and graduate students, discontinued multi-year projects, and wasted resources—remained "functionally identical" to the impact of outright terminations on the researchers. The court concluded that the suspensions were "terminations by another name" and therefore fell within the scope of the preliminary injunction.
The court also scrutinized the procedural and legal defects in the NSF's suspension letters. It observed that these notices were form communications that provided no grant-specific explanations for the funding cuts, but instead offered only generalized statements that the "awards no longer effectuate program goals or agency priorities" without explaining "why the specific project was found to be incompatible with [NSF's] priorities." Judge Lin ruled that these generic explanations did not constitute a reasoned decision under the APA requirements, which necessitate a detailed, case-by-case analysis, consideration of reliance interests, and clear grounds for terminating or suspending a grant.
As a result of these findings, the court vacated the NSF's grant suspensions and ordered the immediate reinstatement of funding to the affected UCLA researchers. According to a letter sent to UCLA on August 13, the NSF restored the grant funds and notified UCLA that it could begin withdrawing the funds immediately in accordance with this order.
The federal government has not yet sought to appeal this order, despite having previously appealed the underlying preliminary injunction. On August 21, 2025, the Ninth Circuit denied the government's request to stay the June 2025 injunction pending appeal.
III. Implications for IHEs
Judge Lin's ruling may serve as a significant legal precedent for universities and faculty considering challenging federal funding decisions that are abruptly terminated or indefinitely suspended without a detailed or specific rationale. The decision emphasizes that vague or generic explanations, as well as en masse funding cuts communicated through form letters, can be deemed arbitrary and capricious under the APA. Universities and researchers now have a stronger legal foundation for demanding individualized, reasoned consideration of grant terminations or suspensions.
Judge Lin's decision notably arises out of faculty and researchers taking direct legal action to challenge funding suspensions, rather than leaving such disputes to their institutions. This ruling also underscores a shifting dynamic in how researchers approach grant-related disputes and could inspire similar actions elsewhere. In this case, a class of affected researchers brought their claims, bypassing thorny jurisdictional issues that might arise if only the university itself had filed. This procedural posture could serve as a template for other disputes, particularly where jurisdictional questions arise over whether claims should be brought in district court under the APA or in the Court of Federal Claims under the Tucker Act.
Looking ahead, the decision could also lead federal agencies to reassess their processes for terminating or suspending funding. It could also discourage agencies from linking grant suspensions to broader institutional criticisms without directly tying those allegations to the individual projects and grants at issue. However, the administration issued a new executive order on August 7, 2025, which appears to signal its intent to move in a different direction. The order introduces new funding agreements and potentially even revises existing agreements to include termination of convenience provisions. Unlike the current framework applicable to grants and other financial assistance agreements, termination for convenience provisions are notoriously difficult to challenge and have been historically used when the government is acquiring goods or services instead of providing financial assistance.
Institutions of higher education should closely monitor these developments and anticipate renewed scrutiny of their compliance with federal mandates in the wake of these developments. The final outcome of this case and related lawsuits may further shape funding policies that impact universities and research institutions nationwide.
Steptoe will continue to monitor this case and related developments in the various lawsuits challenging funding cuts.
Please contact a member of Steptoe's Education practice if you wish to discuss how your institution can navigate these developments. Likewise, we invite you to follow our Education Publications page for relevant updates.
