A US federal appellate court upheld a lower court decision on Monday, finding that the Trump administration’s “sweeping” suspension of funding for administrative agencies in 2025 was likely unlawful.

In the US Court of Appeals for the First Circuit opinion, authored by Chief Judge David J. Barron, the court blocked the vast suspension of funding for federal agencies imposed by an Office of Management and Budget (OMB) January 2025 memo. Twenty-two state attorneys general as well as the District of Columbia attorney general, brought the suit, arguing that Trump’s attempt to control funds appropriated by Congress exceeded presidential authorization and undermined separation of powers principles.

Like the lower federal court, the appellate court agreed with plaintiffs, holding that the freeze of over $3 trillion in funds appropriated to federal agencies was likely improper. Specifically, the court stated:

The Office of Management and Budget directed the agency defendants to freeze such funds without considering an obvious aspect of the problem — namely, the reliance interests of the recipients of the obligated federal funds that were to be frozen.

OMB’s memo directed federal agencies to temporarily pause spending on federal financial assistance programs. The action allowed the office to review grants and loans issued by agencies to ensure that they aligned with the administration’s policy goals. Specifically, OMB targeted grants and loans relating to diversity, equity, and inclusion policy or efforts, as well as those relating to climate change.

This is the second lawsuit related to OMB’s January 2025 memo. The first was brought by nonprofit entities and trade associations in the US District Court for the District of Columbia, in which case the court issued a similar injunction.