# U.S. states litigation against federal funding rescissions

> Live situation record from CLSTR: https://clstr.news/situations/us-states-litigation-against-federal-funding-rescissions
> Updated: 2026-10-11T02:41:01.000Z. Sources: 7. Developments: 2.

Multiple U.S. states have initiated legal action against the Trump administration following the unilateral cancellation of various federal grants.

In one legal challenge, California and six other states filed a lawsuit in the U.S. District Court for the Northern District of California regarding the rescission of $810 million in congressionally approved funding. The states allege the administration used a “pocket rescission” that violates the Impoundment Control Act and constitutional separation-of-powers. The targeted funds include $567 million in Department of Health and Human Services grants for refugee and asylum services, race-based programs, and gender-related research. The White House defended the decision as a measure to cut “wasteful and harmful government spending.”

Separately, fourteen Democratic-led states filed a lawsuit in the U.S. Court of Federal Claims to recoup over $100 million in canceled COVID-19 relief grants. The plaintiffs allege the Department of Labor committed a breach of contract by terminating funds originally allocated under the American Rescue Plan Act (ARPA) for the modernization of state unemployment IT systems. The administration stated the termination was due to the funds no longer meeting current departmental priorities.

## Timeline

### 2026-10-11: Fourteen states sue Trump administration over canceled COVID relief grants

Fourteen Democratic-led states are suing the Trump administration to recover over $100 million in canceled COVID-19 relief grants intended for state unemployment IT modernization.

3 sources. https://clstr.news/cluster/fourteen-states-sue-trump-administration-over-canceled-covid-relief-grants

### 2026-10-01: California and six states sue Trump administration over $810 million funding rescission

California and six other states are suing the Trump administration, alleging the unconstitutional withholding of $810 million in congressionally approved federal funds.

4 sources. https://clstr.news/cluster/california-and-six-states-sue-trump-administration-over-810-million-funding-rescission

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Cite as: U.S. states litigation against federal funding rescissions. CLSTR, https://clstr.news/situations/us-states-litigation-against-federal-funding-rescissions