A US federal judge on Thursday took up a case by eight Democratic-led states challenging the Trump administration’s termination of millions of dollars in teacher-training grants. US District Judge Angel Kelley said that the challenge to the Department of Education’s decision to cancel certain educational grants belonged both in federal district court and in the Court of Federal Claims.

The decision follows a per curiam opinion from the US Supreme Court issued this past April, which held that President Donald Trump’s administration could move forward with the grant terminations while the lawsuit plays out in the US Court of Appeals for the First Circuit. The dispute ultimately turned on whether the suit properly belonged in district court under the Administrative Procedure Act (APA) or in Federal Claims Court under the Tucker Act, which allows certain entities to “seek financial compensation under defined circumstances.” The Supreme Court, in its April emergency docket order, emphasized that the suit was likely better suited for Federal Claims Court since it involved a “contractual obligation to pay money.”

Judge Kelley, highlighting the crucial distinction between a ruling on the merits and the contractual aspects of this case, recognized that “federal courts are courts of limited jurisdiction.” The judge found that while the Department of Education is partially correct in that the “monetary relief” aspect of the plaintiffs’ case belongs in the Court of Federal Claims, the “plaintiffs are not without remedy.” The judge stated:

Plaintiff States seek vacatur of the Department of Education’s February actions on arbitrary and capricious grounds. As this Court previously stated, it would be legal error to construe such relief as couched pleas for monetary relief for which they never ask … Since this Court finds that the proper source of Plaintiffs’ rights is federal statute and regulations and because the relief sought is equitable in nature, this Court determines that portion of the lawsuit does not sound in contract.

Conclusively, the district court has jurisdiction over determining whether the Trump administration’s actions were unlawful under the APA and Constitution. If the district court finds that the terminations were unlawful, then the plaintiffs may sue in the Court of Federal Claims to request their money damages under the contract.