Fourteen states sue Trump administration over canceled COVID relief grants

Fourteen Democratic-led states have filed a federal lawsuit in the U.S. Court of Federal Claims to recoup over $100 million in canceled COVID-19 relief grants. The complaint alleges that the Trump administration's Department of Labor committed a breach of contract by unilaterally terminating funds originally allocated under the Biden-era American Rescue Plan Act (ARPA).

The grants were intended to modernize outdated IT systems within state unemployment offices, which faced significant strain during the pandemic. While $780 million was initially awarded for these purposes, approximately $45 million in grants were terminated following a May 2025 decision by the Labor Department. The agency stated the termination was due to the funds no longer meeting the Department’s current priorities.

The legal action was initiated by the attorneys general of California, Colorado, Delaware, Maine, Maryland, Michigan, New Jersey, New Mexico, New York, Oregon, and Washington, alongside the governors of Kentucky and Pennsylvania.