Commonwealth of Massachusetts, et al v. National Institutes of Health, et al

Filing 105

District Judge Angel Kelley: MEMORANDUM AND ORDER ON MOTION FOR PRELIMINARY INJUNCTION entered. For the reasons stated in the attached memorandum, Plaintiffs' Motion for Preliminary Injunction is GRANTED. The Defendants and their of ficers, employees, servants, agents, appointees, and successors are hereby enjoined from taking any steps to implement, apply, or enforce the Supplemental Guidance to the 2024 NIH Grants Policy Statement: Indirect Costs Rates (NOT-OD-25-068), issued by the Office of the Director of the National Institutes of Health on February 7, 2025, in any form with respect to institutions nationwide until further order issued by this Court.The above resolves the motions filed at: 25-cv-10338-AK [Dkt. 4], 25-cv-10340-AK [Dkt. 5], and 25-cv-10346-AK [Dkt. 2].Associated Cases: 1:25-cv-10338-AK, 1:25-cv-10340-AK, 1:25-cv-10346-AK (MAL)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
________________________________________________
)
COMMONWEALTH OF MASSACHUETTS, et al.
)
)
Plaintiffs,
)
)
)
Case No. 25-CV-10338
v.
)
)
NATIONAL INSTITUTES OF HEALTH, et al.,
)
)
Defendants.
)
________________________________________________
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ASSOCIATION OF AMERICAN MEDICAL
)
COLLEGES, et al.
)
)
Plaintiffs,
)
)
)
Case No. 25-CV-10340
v.
)
)
NATIONAL INSTITUTES OF HEALTH, et al.,
)
)
Defendants.
)
________________________________________________
)
ASSOCIATION OF AMERICAN UNIVERSITIES, et al., )
)
Plaintiffs,
)
)
)
Case No. 25-CV-10346
v.
)
)
DEPARTMENT OF HEALTH & HUMAN
)
SERVICES, et al.,
)
)
Defendants.
)
)

1

MEMORANDUM AND ORDER
ON MOTION FOR PRELIMINARY INJUNCTION
ANGEL KELLEY, D.J.
These three cases came before the Court on an emergency basis on Monday, February 10,
2025.The National Institutes of Health (“NIH”) issued a Supplemental Guidance to the 2024
NIH Grants Policy Statement: Indirect Cost Rates (NOT-OD-25-068) (“Rate Change Notice”) on
Friday night, February 7, 2025, slashing and capping previously negotiated indirect cost rates on
all existing and future grant awards for biomedical research, with an effective date of February
10. This Notice impacts thousands of existing grants, totaling billions of dollars across all 50
states—a unilateral change over a weekend, without regard for on-going research and clinical
trials. The imminent risk of halting life-saving clinical trials, disrupting the development of
innovative medical research and treatment, and shuttering of research facilities, without regard
for current patient care, warranted the issuance of a nationwide temporary restraining order to
maintain the status quo, until the matter could be fully addressed before the Court.
Following full briefing and oral argument by the parties, as well as review of accepted
amicus briefs, the Court GRANTS a nationwide preliminary injunction.
I.

BACKGROUND
Plaintiffs in action 25-CV-10338 are 22 attorneys general, who filed suit on behalf of

their states, Massachusetts, Michigan, Illinois, Arizona, California, Connecticut, Colorado,
Delaware, Hawaii, Maine, Maryland, Minnesota, Nevada, New Jersey, New Mexico, New York,
North Carolina, Oregon, Rhode Island, Vermont, Washington, and Wisconsin (“Plaintiff
States”). Plaintiffs in action 25-CV-10340 are five medical associations, including the
Association of American Medical Colleges, the American Association of Colleges of Pharmacy,
the Association for Schools and Programs of Public Health, the Conference of Boston Teaching

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Hospitals, Inc., and the Greater New York Hospital Association (“AAMC”). Plaintiffs in action
25-CV-10346 are 17 associations and universities, including the Association of American
Universities, the American Council on Education, the Association of Public and Land-grant
Universities, Brandeis University, Brown University, the Regents of the University of California,
Carnegie Mellon University, The University of Chicago, Cornell University, The George
Washington University, John Hopkins University, Massachusetts Institute of Technology, the
Trustees of the University of Pennsylvania, University of Rochester, the Trustees of Tufts
College, and the California Institute of Technology (“AAU”). The Defendants1 in each action
are the National Institutes of Health and the Department of Health and Human Services
(“HHS”).
The National Institutes of Health is a federal agency created to support innovative
medical research strategies to enhance health, lengthen life, and reduce illness and disability.
This case concerns NIH’s co-sharing method of funding biomedical and public health research.
NIH is the primary source of federal funding for health research projects in the United States
through grant awards. In fiscal year 2023, NIH grants totaled over $35 billion—giving out
nearly 60,000 competitive grants to more than 300,000 researchers. The grants primarily go to
public and private colleges and universities, and other non-governmental research institutions.
Congress has established a regulatory framework for how these grants are awarded,
consisting of three primary actions. First, it has authorized NIH to “make grants-in-aid to
universities” for research support. 42 U.S.C. § 241(a)(3). Second, it has instructed the Office of
Management and Budget (“OMB”) to issue general guidance on such grants. See 31 U.S.C. §
503(a), (b)(2)(C). Third, Congress passed an appropriations rider that prohibits HHS and, by

1 The acting directors for each agency are also named as defendants in their official capacities.

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extension, NIH from spending appropriated funds “to develop or implement a modified approach
to” the reimbursement of “indirect costs” and “deviations from negotiated rates.” Consolidated
Appropriations Act, 2018, Pub. L. No. 115-141, 132 Stat. 348, § 226.
A. Grant Award Process
Under the structure of these Acts, NIH has set the regulations that govern the grant
awarding process. As a general overview, the process begins with a notice from NIH that
funding is available for a specific topic. Research institutions then submit applications for a
grant on this specific topic. These applications are formally reviewed—including peer review by
others working in the same field. If the application is approved, NIH will issue a Notice of
Award (“NOA”), which is a legally binding decision indicating that funds can be withdrawn.
This drawdown, or receipt of funds, is very rarely done as one lump sum withdrawal. Typically,
the grantee will use a cost-based accounting system where they are reimbursed for their actual
and documented costs connected to their research grant over the life of the grant.
The regulations proscribe two different categories of costs: direct costs and indirect costs.
45 C.F.R. § 75.412. Direct costs are costs that are attributed to one specific research project. For
example: materials and supplies used in the research project, or a stipend for a graduate student
working only on that one project. Indirect costs are research costs that cannot be attributed to
one specific project but are incurred for common or joint objectives. 45 C.F.R. § 75.2. Indirect
costs include expenses such as, building construction and maintenance, utilities, laboratory
equipment maintenance, and faculty and staff employed across multiple research projects.
Indirect costs are also referred to as facilities and administration (“F&A”) costs. 45 C.F.R. §
75.414(a). All drawdowns for reimbursement of indirect expenses paid are subject to federal
audit.

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B. The Rate Change Notice
The acting director of the National Institutes of Health issued a Supplemental Guidance
to the 2024 NIH Grants Policy Statement: Indirect Cost Rates (NOT-OD-25-068) on Friday
night, February 7, 2025. This Rate Change Notice relates to the administration of indirect costs.
Before this Notice, each institution had negotiated its indirect cost rate (“ICR”) with the
appropriate federal agency, also known as the cognizant agency. Once negotiated, that rate
became binding on every federal agency interacting with the institution. The ICR represents a
percentage of the total grant—not a dollar amount. For example, if an organization has
negotiated an ICR of 30%, and the grant award is $100,000, the total grant amount for the
receiving institution is $130,000 ($100,000 (direct costs), plus $30,000 (indirect costs, or 30% of
$100,000)). These negotiated rates are formalized in a Negotiated Indirect Cost Rate Agreement
(“NICRA”). The varying rates of indirect costs are established so that each research institution
can plan accordingly and facilitate the preparation of their budgets to fulfill their specific
research needs. 45 C.F.R. pt. 75, appx. III § C(4).
After the ICR is agreed upon and the actual costs are incurred, federal agencies are
authorized to conduct audits to ensure that the negotiated ICR conforms with actual costs and
address any amounts questioned during the audit. 2 C.F.R. pt. 200, appx. III § C.11(2)(d).
Funds are recouped and the ICR must be adjusted if the audit indicates that the institution
recovered any unallowable costs. 2 C.F.R. § 200.411(a), (b).
Per federal regulations, the NICRA is binding on every federal agency throughout the life
of the grant. 45 C.F.R. pt. 75, appx. III § C(7). There are limited exceptions through which the
previously negotiated rate can be adjusted and only in particular circumstances, as their fixed
nature is essential for institutions as they budget and plan for their research in the long term. As

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an initial matter, a different-than-negotiated rate can only be used for a single federal award or a
class of awards, defined as a “group of Federal awards either awarded under a specific program
or group of programs or to a specific type of non-Federal entity or group of non-federal entities
to which specific provisions or exceptions may apply.” 45 C.F.R. §§ 75.2, 75.414(c)(1). The
first circumstance under which an ICR can be adjusted is when “required by Federal statute or
regulation.” § 75.414(c)(1). The second circumstance, relevant to the cases before the Court, is
when “approved by a Federal awarding agency head or delegate based on documented
justification,” as later described in Section (c)(3). Id. Turning to Section (c)(3), “[t]he HHS
awarding agency must implement, and make publicly available, the policies, procedures and
general decision making criteria that their programs will follow to seek and justify deviations
from negotiated rates.” 45 C.F.R. § 75.414(c)(3).
The February 7 Rate Change Notice eliminates the individually negotiated rates to
impose a flat rate of 15% across all grants. This usurps all currently existing NICRAs, impacting
both all existing grants and all new grants going forward.
C. Prior Attempts to Limit Indirect Cost Rates Governing NIH Grants
Prior presidential administrations have made changes or attempted to make changes to
the determination of F&A costs. The Clinton Administration limited indirect costs collectable by
NIH grant recipients to 26% of modified total direct costs via the administrative rulemaking
process. See Final Revision to Circular A-21, 56 Fed. Reg. 50224, 50228 (Oct. 3, 1991)
(codified at 2 C.F.R. pt. 200, appx. III § C(8)(a)). A later budget proposal from the Clinton
Administration related to the cutting of F&A funding was rejected out of hand by Congress. See
H. Rep. 103-553 at 67 (1994); Genevieve J. Knezo, Cong. Rsch. Serv., Indirect Costs for R&D at
Higher Education Institutions 32 (1994). The Obama Administration had some discussion

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regarding a cap on all indirect costs, but later changed course after nearly universal institutional
opposition.
In 2017, the first Trump Administration released a budget proposal that would have
slashed the indirect cost rate to a uniform, across-the-board rate of 10%. In direct response,
Congress passed the previously mentioned appropriations rider to prevent this change, deeply
concerned for the resulting harm to the nation’s research capability. Consolidated
Appropriations Act, 2018, Pub. L. No. 115-141, § 226, 132 Stat. 348. This rider has remained
the law from its passage through the present day. Further Consolidated Appropriations Act,
2024, Pub. L. No. 118-47, § 224, 138 Stat. 460, 677; see also Dept. of Defense and Labor, Health
and Human Services, and Education Appropriations Act, 2019 and Continuing Appropriations
Act, 2019, Pub. L. No. 115-245, § 224, 132 Stat. 2981, 3094 (2018); Further Consolidated
Appropriations Act, 2020, Pub. L. No. 116-94, § 224, 133 Stat. 2534, 2582 (2019); Consolidated
Appropriations Act, 2021, Pub. L. No. 116-260, § 224, 134 Stat. 1182, 1594 (2020);
Consolidated Appropriations Act, 2022, Pub. L. No. 117-103, § 224, 136 Stat. 49, 470-71;
Consolidated Appropriations Act, 2023, Pub. L. No. 117-328, § 224, 136 Stat. 4459, 4883-84
(2022).
II.

PROCEDURAL HISTORY
The Rate Change Notice was signed on the evening of February 7, 2025—and was set to

go into effect on the following business day, February 10, 2025. On February 10, the three
Plaintiff groups filed their cases seeking injunctive and declaratory relief, each alleging that the
Rate Change Notice ignores existing regulations, is in excess of statutory authority, and violates
the Administrative Procedure Act (“APA”) because it is arbitrary and capricious, the
Administration failed to follow proper procedure, and the Notice is impermissibly retroactive.

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Each Plaintiff group requested an ex parte temporary restraining order (“TRO”), two of which
were granted, and the third was denied as moot after the Court issued a nationwide injunction in
the second action, AAMC, 25-CV-13460. Defendants subsequently filed reports confirming that
they would not implement the Rate Change Notice until further notice from the Court. The
Court then directed Defendants to submit a consolidated opposition to Plaintiffs’ motions, and
the Plaintiff groups to submit a consolidated reply brief.
On the eleventh day of the temporary restraining orders, February 21, 2025, the Court
extended the temporary orders for good cause, pursuant to Fed. R. Civ. P. 65(b)(2), to resolve the
fully briefed and argued motions for preliminary injunction, which both parties acknowledge is
ripe for this Court.
III.

SUBJECT MATTER JURISDICTION
As a threshold matter, the Court addresses Defendants’ contention that this Court lacks

subject matter jurisdiction to hear these cases. District courts are courts of limited jurisdiction
and can only exercise jurisdiction when authorized by the Constitution or a federal statute. See,
e.g., Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552 (2005). If a district court
finds that it lacks subject matter jurisdiction, it shall transfer the case at issue to the appropriate
district “if it is in the interest of justice.” 28 U.S.C. § 1631. Thus, before moving onto the
merits, the Court first addresses whether it can properly exercise jurisdiction.
Defendants contend that Plaintiffs’ claims lie exclusively in the United States Court of
Federal Claims, pursuant to the Tucker Act, 28 U.S.C. § 1491. Plaintiffs do not agree that the
Tucker Act divests this Court of jurisdiction. For the reasons stated below, the Court rejects
Defendants’ characterization of Plaintiffs’ claims as mere breach of contract claims meant for the
Court of Federal Claims. The Court retains subject matter jurisdiction to hear these cases under

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5 U.S.C. § 702. See Taydus v. Cisneros, 902 F. Supp. 278, 284 (D. Mass. 1995) (holding that
the district court retains jurisdiction per the APA waiver of sovereign immunity).
A. The Tucker Act
The Tucker Act: (1) “confers jurisdiction upon the Court of Federal Claims over the
specified categories of actions brought against the United States,” and (2) “waives the
Government’s sovereign immunity for those actions.”2 Fisher v. United States, 402 F.3d 1167,
1172 (Fed. Cir. 2005). The Tucker Act vests jurisdiction in the United States Court of Federal
Claims with respect to “any claim against the United States founded either upon the Constitution,
or any Act of Congress or any regulation of an executive department, or upon any express or
implied contract with the United States, or for liquidated or unliquidated damages in cases not
sounding in tort.” 28 U.S.C. § 1491(a)(1). In suits seeking more than $10,000 in damages, the
Court of Federal Claims’ jurisdiction is exclusive of the federal district courts. See, e.g., Burgos
v. Milton, 709 F.2d 1, 3 (1st Cir. 1983).3 Thus, plaintiffs wishing to file “a suit against the
United States involving a contract” where the “relief [sought is] over $10,000” must do so in the
Court of Federal Claims. Vill. W. Assocs. v. R.I. Hous. & Mortg. Fin. Corp., 618 F. Supp. 134,
138 (D.R.I. 2009), judgment entered, 641 F. Supp. 2d 135 (D.R.I. 2009).
Generally, claims brought in the Court of Federal Claims “must be for monetary relief;
[they] cannot be for equitable relief, except in very limited circumstances[.]” Gonzales &

The Tucker Act’s waiver of sovereign immunity does not “create[] a substantive right
enforceable against the Government by a claim for money damages.” United States v. White
Mountain Apache Tribe, 537 U.S. 465, 472 (2003). Rather, plaintiffs invoking the Tucker Act’s
waiver of sovereign immunity must point to “a statute” that “can fairly be interpreted as
mandating compensation by the Federal Government for the damage[s] sustained.” Id. (quoting
United States v. Mitchell, 463 U.S. 206, 217 (1983)).
3
For suits against the United States with claims for less than $10,000, the Court of Federal
Claims and Federal District Courts have concurrent jurisdiction under 28 U.S.C. § 1346(a)(2),
also known as the “Little Tucker Act.”
2

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Gonzales Bonds & Ins. Agency, Inc. v. Dep’t of Homeland Sec., 490 F.3d 940, 943 (Fed. Cir.
2007). Such “limited circumstances” are found in cases in which the equitable relief requested is
“an incident of and collateral to” monetary relief. James v. Caldera, 159 F.3d 573, 580 (Fed. Cir.
1998) (quoting 28 U.S.C. § 1491(a)(2) (1994)).
B. The Administrative Procedure Act
The Administrative Procedure Act entitles “a person suffering legal wrong because of
any agency action” to seek “judicial review thereof.” 5 U.S.C. § 702. Congress amended § 702
in 1976 to “broaden the avenues for judicial review of agency action by eliminating the defense
of sovereign immunity” in suits “seeking relief other than money damages . . . .” Bowen v.
Massachusetts, 487 U.S. 879, 891-92 (1988); see Act of Oct. 21, 1976, Pub. L. No. 94-574, 90
Stat. 2721. By clarifying that § 702’s waiver of sovereign immunity applied “only to actions
‘seeking relief other than money damages’ and where ‘there is no other adequate remedy in a
court,’” Congress “sought to pull together the ‘patchwork’ of various statutory waivers of federal
sovereign immunity” into one coherent scheme. Gregory C. Sisk, The Jurisdiction of the Court
of Federal Claims and Forum Shopping in Money Claims Against the Federal Government, 88
Ind. L.J. 83, 90 (2013) (quoting 5 U.S.C. §§ 702, 704). Congress intended “the [1976 APA
amendments] to complement[] . . . the Tucker Act[.]” Id. at 90 n.59 (citing H.R. Rep. No. 941656, at 11 (1976)).
C. Rights and Remedies Test
The “jurisdictional boundary” between the Tucker Act and Administrative Procedure Act
is well-traversed by litigants seeking relief against the federal government. Suburban Mortg.
Assocs., Inc. v. U.S. Dep’t of Hous. & Urb. Dev., 480 F.3d 1116, 1117 (Fed. Cir. 2007). Still,
the boundary’s precise contours remain elusive. See, e.g., Id. at 1124 (listing cases treading the

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jurisdictional line); Bublitz v. Brownlee, 309 F. Supp. 2d 1, 6 (D.D.C. 2004) (noting “[t]he
bright-line rule” between monetary and equitable relief in the Tucker Act–APA context “turns
out to be rather dim . . . .”). Plaintiffs often attempt to “avoid Tucker Act jurisdiction by
‘converting complaints which “at their essence” seek money damages from the government into
complaints requesting injunctive relief or declaratory actions.’” Martin v. Donley, 886 F. Supp.
2d 1, 8 (D.D.C. 2012) (quoting Kidwell v. Dep’t of Army, Bd. for Correction of Mil. Recs., 56
F.3d 279, 284 (D.C. Cir. 1995)).
The Supreme Court has made clear that “[n]ot every claim invoking the Constitution, a
federal statute, or a regulation is cognizable under the Tucker Act.” United States v. Mitchell,
463 U.S. 206, 216 (1983). Indeed, not every “failure to perform an obligation” by the federal
government “creates a right to monetary relief.” United States v. Bormes, 568 U.S. 6, 16 (2012).
When traversing the Tucker Act–APA jurisdictional boundary, courts “must look beyond the
form of the pleadings to the substance of the claim[,]” Suburban Mortg., 480 F.3d at 1124, to
determine whether “the essence of [an] action is in contract . . . .” Am. Sci. & Eng’g, Inc. v.
Califano, 571 F.2d 58, 63 (1st Cir. 1978). The “essence” of an action encompasses two distinct
aspects—the “source of the rights upon which the plaintiff bases its claim” and “the type of relief
sought (or appropriate).” Piñeiro v. United States, No. 08-CV-2402, 2010 WL 11545698, at *5
(D.P.R. Jan. 26, 2010) (quoting Megapulse, Inc. v. Lewis, 672 F.2d 959, 968 (D.C. Cir. 1982));
see also R.I. Hous. & Mortg. Fin. Corp., 618 F. Supp. 2d at 138.
While the First Circuit has not formally adopted the “rights and remedies” test that is
used by several other circuits,4 courts in this Circuit have adopted the test to determine if the

4

See, e.g., Cohen v. Postal Holdings, LLC, 873 F.3d 394, 403 (2nd Cir. 2017); RMI Titanium
Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1136 (6th Cir. 1996); Evers v. Astrue, 536 F.3d
651, 657-658 (7th Cir. 2008); United Aeronautical Corp. v. U.S. Air Force, 80 F.4th 1017, 1026
11

“essence” of an action is truly contractual in nature. See R.I. Hous. & Mortg. Fin. Corp., 618 F.
Supp. 2d at 138; Piñeiro, 2010 WL 11545698, at *5. This Court adopts the Megapulse
framework and discusses each element in turn.
1.

Source of Right

The Defendants contend that Plaintiffs’ source of rights stems from the legally binding
Notice of Awards that are provided to selected grant recipients stating that funds may be
requested. Defendants contend that, generally, grants are treated as contracts when all the
necessary attributes are present and that “[a]ll elements [of a contract] are present in the Notices
of Award,” and the Court should look no further if this “contract” exists. States [Dkt. 73, at 8].
Plaintiffs, however, argue that their claims are not based on the contract. Rather, according to
the Plaintiffs, their claims are rooted in “the Constitution, federal statutes, and federal
regulations, not contract terms.” States [Dkt. 81, at 3]. Plaintiffs explicitly ask this Court to
interpret and enforce the federal regulations, not the grants in which the regulations are
incorporated.
After examining the three Complaints in their entirety, the Court finds that the gravamen
of Plaintiffs’ Complaints does not turn on terms of a contract between the parties; it turns on
federal statute and regulations put in place by Congress and NIH. See, e.g., K-Mar Indus., Inc. v.
U.S. Dep’t of Def., 752 F. Supp. 2d 1207, 1214 (W.D. Okla. 2010) (“The source of the rights
alleged in this action is not contractual, it is the procedures put in place by the defendants.”).
While it is true that the Notice of Award operates as a contract, the claims in this case turn on
how the regulations govern the provision of these awards. This is further underscored by the

(9th Cir. 2023); McKay v. United States, 516 F.3d 848, 851 (10th Cir. 2008); Begner v. United
States, 428 F.3d 998, 1002 (11th Cir. 2005); cf. United States v. J&E Salvage Co., 55 F.3d 985,
988 (4th Cir. 1995) (applying Megapulse to a dispute arising under the Contract Disputes Act).
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Rate Change Notice’s impact not just on current grants, but future ones as well. It follows that
the source in which Plaintiffs aim to vindicate their rights is not in contracts that are yet to exist
(future grants) but is actually in the regulation that facilitates such grants.
Plaintiffs’ contractual relationships with NIH do not automatically “convert a claim
asserting rights based on federal regulations into one which is, ‘at its essence,’ a contract claim.”
Normandy Apartments, Ltd. v. U.S. Dep’t of Hous. & Urb. Dev., 554 F.3d 1290, 1299 (10th Cir.
2009). This is especially the case since “[c]ontract issues may arise in various types of cases
where the action itself is not founded on a contract.” Megapulse, 672 F.2d at 968 (listing
examples of tort theories that could require a court to dispose of contractual issues incidentally).
This is not a request for “monetary relief” that is “dressed in equitable and declaratory garb.”
R.I. Hous. & Mortg. Fin. Corp., 618 F. Supp. 2d at 138 (D.R.I.). Plaintiffs are not seeking
judicial review of a contract. In fact, Plaintiffs have not requested the Court to examine any
contract or grant agreement created between the parties. Rather, they have asked this Court to
review and interpret the governing federal statute and regulations. Accordingly, Plaintiffs have
sufficiently established that the source of their rights is not rooted in any contract between them
and the Defendants.
2.

Relief Sought

This Court now turns to the type of relief sought by Plaintiffs. Defendants contend that
Plaintiffs “seek monetary relief greater than $10,000 for NOA’s reduction of the indirect cost
rate to 15%.” States [Dkt. 73, at 10]. Plaintiffs, on the other hand, contend that they are not
seeking a money judgment at all. Instead, they only “seek declaratory and injunctive relief
returning the parties to the pre-existing status quo by requiring the government to respect
negotiated rates for indirect costs,” States [Dkt. 81, at 5], with existing contracts establishing

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ICR’s for the next several years, underscoring the nature of the ongoing relationship between the
Plaintiffs, other third-parties, and NIH. See, e.g., AAU [Dkt. 2-12, Declaration of Dr. David F.
Kotz, of Dartmouth College] (“Direct negotiations and detailed audits with the federal
government in 2022 resulted in the setting of a predetermined rate that Dartmouth had expected
in good faith would be applicable through 2029.”); Id. [Dkt. 2-20, Declaration of Anshuman
Razdan, of the University of Oregon] (“UO’s current negotiated rate for organized research is
49% (up from 47.5%), last negotiated August 2023 and valid through June 30, 2027.”). None of
Plaintiffs’ Complaints refer to compensatory damages.5
It is now axiomatic that there is a “distinction between an action at law for damages,”
which provides monetary compensation, and “an equitable action for specific relief,” which
might nonetheless require monetary relief. Bowen, 487 U.S. at 893; see Great-West Life &
Annuity Ins. Co. v. Knudson, 534 U.S. 204, 213 (2002) (“[W]hether [restitution] is legal or
equitable depends on ‘the basis for [the plaintiff’s] claim’ and the nature of the underlying
remedies sought.” (quoting Reich v. Continental Casualty Co., 33 F.3d 754, 756 (7th Cir. 1994)
(Posner, J.))). Simply because “a judicial remedy may require one party to pay money to
another” does not necessarily “characterize the relief as ‘money damages.’” Bowen, 487 U.S. at
893. A hallmark of such equitable actions is the existence of prospective relief in ongoing
relationships. Compare Bowen, 487 U.S. at 905 (holding the district court had jurisdiction
because declaratory or injunctive relief was appropriate to clarify petitioner state’s ongoing
obligations under the Medicaid plan), with Me. Cmty. Health Options v. United States, 590 U.S.
296, 298 (2020) (holding that petitioners properly relied on the Tucker Act to sue for damages in

5

All three Complaints request declaratory judgment and injunctive relief. The Complaint by
AAU also requests vacatur of the Rate Change Notice.
14

the Court of Federal Claims because plaintiffs were strictly concerned with “specific sums
already calculated, past due, and designed to compensate for completed labors”). Plaintiffs do
not bring claims for past pecuniary harms. Rather, like the petitioners in Bowen, their claims are
to preserve their ongoing and prospective agreements with NIH. The various harms identified by
Plaintiffs properly correspond to the sought equitable relief. Plaintiffs indicate that the Rate
Change Notice would result in the loss of jobs, the suspension of research, including clinical
trials and infrastructure projects, and a reduction of teaching staff who are committed to
cultivating medical students. See, e.g., States [Dkt. 6-34, Declaration of Dr. Greg Hirth, of
Brown University] (“At a 15% indirect cost rate, many of Brown’s current research projects and
clinical trials will be forced to cease abruptly.”); AAU [Dkt. 2-12, Declaration of Dr. David F.
Kotz, of Dartmouth College] (“The world’s best scientists will not move to (or stay at)
universities where they are not able to conduct world-class research.”); AAU [Dkt. 2-28,
Declaration of Ishwar K. Puri, of the University of Southern California] (discussing the likely
cutting of 73 staff members while also adding “slowdowns or halts in research by USC and other
American universities will allow competitor nations that are maintaining their investments in
research to surpass the United States on this front, threatening both our Nation’s national security
and its economic dominance.”). Ultimately, it is these harms (among many others) for which
Plaintiffs are pleading relief. It would be legal error to construe Plaintiffs’ harms as couched
pleas for monetary relief for which they never ask.
Plaintiffs’ primary purpose in bringing their claims is to seek equitable, not monetary,
relief. Since this Court finds that the proper source of Plaintiffs’ rights is federal statute and
regulations and because the relief sought is injunctive in nature, this Court determines that the
“essence” of the action is not contractual in nature. R.I. Hous. & Mortg. Fin. Corp., 618 F. Supp.

15

2d at 138. Thus, Plaintiffs’ claims cannot properly be brought under the Tucker Act in the
Federal Claims Court and this Court retains jurisdiction.
IV.

PRELIMINARY INJUNCTION LEGAL STANDARD
Courts apply the same standard in assessing motions for temporary restraining order— as

the Plaintiffs originally requested—and motions for preliminary injunction, which follow full
briefing and the opportunity to be heard by the Court. See Fed. R. Civ. P. 65; Wash. Tr.
Advisors, Inc. v. Arnold, 646 F. Supp. 3d 210, 217 (D. Mass. 2022). Following the briefing and
oral argument in this matter, the parties agree the request for a preliminary injunction, as
opposed to a temporary restraining order, is ripe.
The “extraordinary and drastic” remedy of a preliminary injunction requires a showing of
four elements: (1) substantial likelihood of success on the merits; (2) a high likelihood of
irreparable harm if injunctive relief is not granted; (3) a balance of equities tips in the movant’s
favor; and (4) the injunctive relief is in the public interest. See Voice of the Arab World, Inc. v.
MDTV Med. News Now, Inc., 645 F.3d 26, 32 (1st Cir. 2011) (citing Winter v. Natural Res.
Def. Council, Inc., 555 U.S. 7, 20 (2008)). The last two factors “merge when the Government is
the party opposing the preliminary injunction.” Nken v. Holder, 556 U.S. 418, 435 (2009). The
most important of the four elements is the likelihood of success on the merits—which is
considered the “sine qua non” of the inquiry. Ryan v. U.S. Immigr. & Customs Enf’t, 974 F.3d
9, 18 (1st Cir. 2020) (quoting New Comm Wireless Servs., Inc. v. SprintCom, Inc., 287 F.3d 1, 9
(1st Cir. 2002)).
The evaluating court need not conclusively determine the merits of the movant’s claim
but should evaluate the likelihood or not that the movant will prevail on the merits. Id. (citing
Ross-Simons of Warwick, Inc. v. Baccarat, Inc. (Ross-Simons I), 102 F.3d 12, 16 (1st Cir.

16

1996)). The court may accept as true well-pleaded allegations in the complaint and
uncontroverted affidavits. Rohm & Haas Elec. Materials, LLC v. Elec. Circuits, 759 F. Supp. 2d
110, 114 n.2 (D. Mass. 2010) (quoting Elrod v. Burns, 427 U.S. 347, 350 n.1 (1976)). The court
may also rely upon otherwise inadmissible evidence in deciding a motion for preliminary
injunction. Howe v. U.S. Bank Nat’l Ass’n as Tr. for RMAC Tr. Series 2016-CTT, 440 F. Supp.
3d 99, 102 (D. Mass. 2020) (citing Asseo v. Pan Am. Grain Co., Inc., 805 F.2d 23, 26 (1st Cir.
1986)).
A. Likelihood of Success on the Merits
Turning to the likelihood of success on the merits, this Court considers three main
categories as presented by the various Plaintiffs. First, Plaintiffs claim the February 7 Rate
Change Notice violates the plain language of the regulations regarding the administration of
indirect, or F&A, costs. See AAMC [Dkt. 1, at 16]. Second, Plaintiffs argue that absent
compliance with said regulation, the Rate Change Notice is contrary to law. See [id. at 18].
Finally, Plaintiffs argue that the Rate Change Notice failed to follow administrative procedure, as
required by the Administrative Procedure Act, including that the action was arbitrary and
capricious, that it failed to abide by notice-and-comment requirements, and that it is
impermissibly retroactive. See [id. at 19]. The Court addresses each claim in turn.
Before turning to these claims, the Court recognizes that the Plaintiffs made several other
claims, including constitutional arguments, but it is cognizant of the doctrine of constitutional
avoidance, which declares that “federal courts are not to reach constitutional issues where
alternative grounds for resolution are available.” Marasco & Nesselbush, LLP v. Collins, 6 F.4th
150, 178 (1st Cir. 2021) (quoting Vaquería Tres Monjitas, Inc. v. Pagan, 748 F.3d 21, 26 (1st
Cir. 2014)). Although not resolving the merits of the instant cases, alternative grounds exist here

17

such that discussion of “the constitutional questions would be inconsistent with our obligation to
avoid doing so where a non-constitutional disposition is possible.” Id. at 179.
1.

45 C.F.R. § 75.414

45 C.F.R. § 75.414, the regulation that explains the provision of, and potential deviation
from, indirect (F&A) costs, operates within a larger regulatory structure. This structure includes:
(1) Appendix III to Part 75—Indirect (F&A) Costs Identification and Assignment, and Rate
Determination for Institutions of Higher Education (IHEs); and, (2) Appendix IV to Part 75—
Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit
Organizations. The appendices expound upon the identification, negotiation, and administration
of indirect costs, which also operate alongside policy statements provided by HHS and NIH in
the effectuation of grants generally and indirect costs more specifically. See, e.g., States [Dkt.
82-1, NIH Grants Policy Statement].
These regulations and policies provide for a system in which the cognizant agency for
indirect costs, or “the Federal agency responsible for reviewing, negotiating, and approving cost
allocation plans or indirect cost proposals . . . on behalf of all Federal agencies,” undertakes a
lengthy negotiation process to establish a long-term ICR, memorialized in NICRAs, that
complies with this strict regulatory framework. 45 C.F.R. §§ 75.2, 75.414; 45 C.F.R. pt. 75,
appx. III; 45 C.F.R. pt. 75, appx. IV; States [Dkt. 82-1, NIH Grants Policy Statement]; see also
AAU [Dkt. 2-12, Declaration of Dr. David F. Kotz, of Dartmouth College] (“Direct negotiations
and detailed audits with the federal government in 2022 resulted in the setting of a predetermined
rate that Dartmouth had expected in good faith would be applicable through 2029.”); AAU [Dkt.
2-20, Declaration of Anshuman Razdan, of the University of Oregon] (“UO’s current negotiated
rate for organized research is 49% (up from 47.5%), last negotiated August 2023 and valid

18

through June 30, 2027.”); States [Dkt. 6-41, Declaration of Dorota Grejner-Brzezinska, of the
University of Wisconsin-Madison] (“The sense of whiplash is particularly acute, given that UWMadison had finalized its most recent NICRA with DHHS less than three weeks prior.”).
With this understanding of the larger regulatory structure, 45 C.F.R. § 75.414(c)
prescribes the process by which HHS, and by extension NIH, can “deviate” from NICRAs in
seemingly limited circumstances. According to the regulation:
An HHS awarding agency may use a rate different from the negotiated rate for a
class of Federal awards or a single Federal award only when required by Federal
statute or regulation, or when approved by a Federal awarding agency head or
delegate based on documented justification as described in paragraph (c)(3) of
this section.
45 C.F.R. § 75.414(c)(1). Turning to paragraph (c)(3),
The HHS awarding agency must implement, and make publicly available, the
policies, procedures and general decision making criteria that their programs will
follow to seek and justify deviations from negotiated rates.
Id. § 75.414(c)(3).
According to Defendants, “[i]n issuing the Supplemental Guidance, NIH acted under
authority expressly granted in 45 C.F.R. § 75.414(c).” States [Dkt. 73, at 11]. Defendants argue
that the three-page Rate Change Notice provides a “documented justification,” 45 C.F.R. §
75.414(c)(1), for “us[ing] a rate different from the negotiated rate for a class of Federal awards or
a single Federal award,” Id., by “implement[ing] and mak[ing] publicly available[] the policies,
procedures and general decision making criteria that their programs will follow to seek and
justify deviations from negotiated rates.” Id. § 75.414(c)(3). This Rate Change Notice, which at
best provides a summary explanation of the government’s policy to cut all ICRs to a standard
15% rate for all existing and future Federal grants, fails to fulfill the above regulatory mandates
for several reasons.

19

First, the Rate Change Notice ignores the separate requirements of § 75.414(c)(3), which
dictates that the Agency must provide a “documented justification” by making publicly available
the “policies, procedures and general decision making criteria” that the Agency will use to then
seek and justify deviations from negotiated rates. The Rate Change Notice purports to announce
a single, uniform policy for all current and future grants, but fails to offer the procedures and
decision making criteria it “will follow to seek and justify” the deviations from the negotiated
rates. Defendants have failed to provide or point to any announced procedure or decision
making criteria. At base, NIH failed to provide any requisite documented justification, which
certainly was available to it through audits and other materials.
Even if the Rate Change Notice represented sufficient explanation of policy, procedures,
and decision making criteria—of which it includes none—NIH did not comply with the step-bystep process mandated by the language of the regulation. The plain language is instructive,
making clear NIH “must”—present tense—make available the policies, procedures, and decision
making criteria that the Agency “will follow”—future tense—to seek and justify the deviation.
The Federal Register notice discussing § 75.414 specifically recognizes this sequential process,
stating:
Language in paragraph (c) provides for the consistent application of negotiated
indirect cost rates, and articulates the conditions under which a Federal awarding
agency may use a different rate. These conditions include approval of the Federal
awarding agency head (as delegated per standard delegations of authority) based
on documented justification, the public availability of established policies for
determinations to use other than negotiated rates, the inclusion of notice of such a
decision in the announcement of funding opportunity, as well as in any preannouncement outreach, and notification to OMB of the decision.
Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal
Awards, 78 Fed. Reg. 78,590, 78,600 (Dec. 26, 2013). The three-page Rate Change Notice
purported, but failed, to do all of these required steps in one fell swoop.

20

Second, by creating such a uniform policy, NIH molds the language of the regulation to
fit its policy goals, rendering the text as written meaningless. As provided for in the regulation,
the Agency may seek to deviate from the NICRA for “a class of Federal awards or a single
Federal award.” 45 C.F.R. § 75.414(c)(1) (emphasis added). A class of federal awards is
defined as, “a group of Federal awards either awarded under a specific program or group of
programs or to a specific type of non-Federal entity or group of non-Federal entities to which
specific provisions or exceptions may apply.” Id. § 75.2. Defendants argue that there is no limit
to the size of the class, States [Dkt. 73, at 12], but fails to mention the definition of that term-ofart provided for in the regulation itself. If a “class of Federal awards” actually means all Federal
awards, the definition provided for in § 75.2, and the inclusion of “a class of Federal awards” in
§ 75.414(c)(1), would be rendered entirely superfluous and meaningless. Pulsifer v. United
States, 601 U.S. 124, 125 (2024) (“When a statutory construction ‘render[s] an entire
subparagraph meaningless,’ this Court has noted, the canon against surplusage applies with
special force.” (quoting National Ass’n of Mfrs. v. Dep’t of Def., 583 U.S. 109, 128 (2018)).
Even the dictionary definition of class—a “group, set, or kind sharing common
attributes” —underscores that the plain meaning of the text refers to a subset, as opposed to all,
federal awards. Class, The Merriam-Webster Dictionary (2025). In ignoring the plain meaning,
Defendants are asking the Court to re-mold the text to meet the Administration’s policy goals.
See Fourstar v. Garden City Grp., Inc., 875 F.3d 1147, 1152 (D.C. Cir. 2017) (Kavanaugh, J.)
(“It is not a judge’s job to add to or otherwise re-mold statutory text to try to meet a statute’s
perceived policy objectives. Instead, we must apply the statute as written.”).
In light of the above, the Rate Change Notice directly conflicts with the plain language of
45 C.F.R. § 75.414(c), disregarding an existing regulation and regulatory structure. FCC v. Fox

21

Television Stations, Inc., 556 U.S. 502, 515 (2009) (“An agency may not . . . simply disregard
rules that are still on the books.”); Nat’l Env’t Dev. Ass’n’s Clean Air Project v. EPA, 752 F.3d
999, 1009 (D.C. Cir. 2014) (“It is axiomatic . . . that an agency is bound by its own regulations.”
(internal quotation marks and citation omitted)). As a result, the Plaintiffs are likely to succeed
in claiming the Rate Change Notice conflicts with existing regulation.
2.

Section 224 Rider

If one is looking for further assurances that the Rate Change Notice violates 45 C.F.R. §
75.414(c), it was reiterated through the adoption of the § 224 Rider in 2018. The rider has been
re-adopted by Congress in each year since. In 2017, the first Trump Administration released a
budget proposal that would have slashed the indirect cost rate to a uniform, across-the-board rate
of 10%. It stated, “[t]he Budget includes an indirect cost rate for NIH grants that will be capped
at 10 percent of total research. This approach would be applied to all types of grants with a rate
higher than 10 percent currently and will achieve significant savings in 2018. It would also bring
NIH’s reimbursement rate for indirect costs more in line with the reimbursement rate used by
private foundations, such as the Gates Foundation, for biomedical research conducted at U.S.
universities.” Office of Management & Budget, Major Savings and Reforms: Budget of the U.S.
Government Fiscal Year 2018, at 43 (2017).
Following its introduction, the House Subcommittee Labor, Health and Human Services,
and Education of the Committee on Appropriations held a two-hour long hearing discussing
concerns, on a bipartisan basis, relating to the cap of indirect costs. Hearing on the Role of
Facilities and Administrative Costs in Supporting NIH-Funded Research Before the Subcomm.
on Labor, Health and Human Services, Education, and Related Agencies of the H. Comm. on
Appropriations, 115th Cong. (2017), available at:

22

https://www.youtube.com/watch?v=R3Eb7CjsjRE. Instead of solely declining to adopt the
Administration’s budget recommendation, Congress, again on a bipartisan basis, adopted the
previously mentioned appropriations rider to prevent such a change through regulatory action.
Consolidated Appropriations Act, 2018, Pub. L. No. 115-141, § 226, 132 Stat. 348. This rider
has remained the law from its passage through the present day. Further Consolidated
Appropriations Act, 2024, Pub. L. No. 118-47, § 224, 138 Stat. 460, 677; see also Department of
Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019 and
Continuing Appropriations Act, 2019, Pub. L. No. 115-245, § 224, 132 Stat. 2981, 3094 (2018);
Further Consolidated Appropriations Act, 2020, Pub. L. No. 116-94, § 224, 133 Stat. 2534, 2582
(2019); Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, § 224, 134 Stat. 1182,
1594 (2020); Consolidated Appropriations Act, 2022, Pub. L. No. 117-103, § 224, 136 Stat. 49,
470-71 (2021); Consolidated Appropriations Act, 2023, Pub. L. No. 117-328, § 224, 136 Stat.
4459, 4883-84 (2022). When enacting the rider, both the House and Senate Appropriations
Committees specifically addressed the need for the rider in direct response to the
Administration’s proposal in their respective reports.
According to the House Appropriations Committee,
While the Committee appreciates the Secretary’s efforts to find efficiencies in
NIH research spending, the Administration’s proposal to drastically reduce and
cap reimbursement of facilities and administrative (F&A) costs to research
institutions is misguided and would have a devastating impact on biomedical
research across the country. To ensure that NIH can continue supporting both
direct and F&A costs as is their current practice, the bill includes a new general
provision directing NIH to continue reimbursing institutions for F&A costs
according to the rules and procedures described in 45 CFR 75 (with the exception
of existing waivers for training grants). This provision also prohibits funds in this
Act from being used to implement any further caps on F&A cost reimbursements.
H.R. Rep. No. 115-244, at 50 (2017). The Senate Appropriations Committee shared the same
sentiment in adopting the rider:

23

Central to the Administration’s proposal to reduce Federal investments in
biomedical research is its proposal to cap the F&A costs of grants, so-called
“indirect costs,” at 10 percent. The F&A cost of a grant is intended to cover the
indirect costs of biomedical research, ranging from administration and facilities to
the cost of equipment shared across multiple researchers. For example, at research
facilities focused on making the next breakthrough in cancer treatment, indirect
costs supply the air handlers that provide the precise conditions needed to
generate therapeutic T cells for immunotherapy trials, complex data systems to
analyze and protect patients’ genomic data, and support for the next generation of
scientific leaders. The methodology for negotiating indirect costs has been in
place since 1965, and rates have remained largely stable across NIH grantees for
decades. The Administration’s proposal would radically change the nature of the
Federal Government’s relationship with the research community, abandoning the
Government’s long-established responsibility for underwriting much of the
Nation’s research infrastructure, and jeopardizing biomedical research
nationwide. The Committee has not seen any details of the proposal that might
explain how it could be accomplished without throwing research programs across
the country into disarray. To avoid this possibility, the Committee has included
bill language to prohibit HHS from developing or implementing a modified
approach to funding F&A costs.
S. Rep. No. 115-150, at 109 (2017). Both committees across both chambers of Congress were
clear. Not only would they not adopt the budget proposal as written, but they wanted to ensure
any future, similar proposals would be contrary to law, not just regulation. Congress’ rebuke of
the first Trump Administration’s proposal to slash and cap was patently clear.
Turning to the language of the rider itself, Congress provided:
In making Federal financial assistance, the provisions relating to indirect costs in
part 75 of title 45, Code of Federal Regulations, including with respect to the
approval of deviations from negotiated rates, shall continue to apply to the
National Institutes of Health to the same extent and in the same manner as such
provisions were applied in the third quarter of fiscal year 2017. None of the funds
appropriated in this or prior Acts or otherwise made available to the Department
of Health and Human Services or to any department or agency may be used to
develop or implement a modified approach to such provisions, or to intentionally
or substantially expand the fiscal effect of the approval of such deviations from
negotiated rates beyond the proportional effect of such approvals in such quarter.

24

Further Consolidated Appropriations Act, 2024, Pub. L. No. 118-47, § 224, 138 Stat. 460, 677.
This rider contains three, overlapping provisions meant to restrict NIH’s ability to enact an
across-the-board rate reduction.
Taking each in turn, Congress first mandated, “with respect to the approval of deviations
from negotiated rates, [45 C.F.R. § 75] shall continue to apply to the National Institutes of Health
to the same extent and in the same manner as such provisions were applied in the third quarter of
fiscal year 2017.” As described above, the Rate Change Notice failed to comply with 45 C.F.R.
§ 75.414(c). If looking for further confirmation, Congress intended the rider to prevent the
Administration from implementing the proposed 10% cap, or any similar cap, as violative of the
provisions of 45 C.F.R. § 75. Otherwise, passing such a statute would be meaningless and
ineffective in addressing congressional concerns regarding the Administration’s efforts to cap
ICRs. Congress does not pass meaningless statutes. See, e.g., Plaut v. Spendthrift Farm, Inc.,
514 U.S. 211, 216 (1995); Rumsfeld v. FAIR, 547 U.S. 47, 57 (2006). The Trump
Administration previously unequivocally agreed, including in its 2019 budget proposal:
For the past two years, NIH has been prohibited by law from reducing grantee
administrative costs and shifting these resources to support direct research on high
impact areas, such as cancer, Alzheimer’s disease, and heart disease. The
Congress imposed this prohibition, which limits NIH’s ability to maximize its
support of direct biomedical research. The Budget proposes to eliminate the
current prohibition, which would give NIH the flexibility to support more direct
research while encouraging research institutions to improve the efficiency of
operations
Office of Management & Budget, Major Savings and Reforms: Budget of the U.S. Government
Fiscal Year 2020, at 43 (2019). Congress, the first Trump Administration, and this Court agree:
A universal cap to ICRs is contrary to the first provision of the appropriations rider.
Turning to the second provision, “[n]one of the funds appropriated . . . may be used to
develop or implement a modified approach to such provisions.” Again, Congressional intent

25

makes clear that an across-the-board ICR cap was considered a modified approach to the existing
regulations. At base, a single ICR capped at 15% is certainly a different approach than
negotiating ICRs institution by institution with deviations allowed in limited, justified
circumstances. As such, the Rate Change Notice is also contrary to the second provision of the
appropriations rider.
Turning to the third provision of the rider, “[n]one of the funds appropriated . . . may be
used . . . to intentionally or substantially expand the fiscal effect of the approval of such
deviations from negotiated rates beyond the proportional effect of such approvals in such
quarter.” The Plaintiffs and Defendants put forth two interpretations of this provision. Plaintiffs
claim the “fiscal effects” focus on the institution. As a result, “the ‘fiscal effect’ of [the Rate
Change Notice]—which yields across-the-board 15% indirect cost rate, compared with the near
30% historical average—plainly goes beyond ‘the proportional effect of such approvals’ in the
third quarter of Fiscal Year 2017.” AAU [Dkt 16, at 18]. Should the fiscal effect refer to the
institution, this Court agrees the Rate Change Notice plainly violates the provision.
The Defendants argue the “fiscal effect” refers to the government, and “because the [Rate
Change Notice] does not seek to save the government money; rather, it takes the appropriations
to NIH as a given and allocates the grants made with that money so that more of the money is
spent on the direct costs[,] . . . the [Rate Change Notice] does not increase the ‘fiscal effects.’”
States [Dkt. 73, at 17]. Should the fiscal effect refer to the government, the Court disagrees with
Defendants claim that the action does not “expand the fiscal effects” for two reasons.
First, as Plaintiffs argue, “[t]he rider focuses on [] ‘the fiscal effect of the approval of
such deviations from negotiated rates.’ . . . Nothing in the rider suggests that the Executive may
try to make up for that forbidden effect [of cutting ICRs across the board] through separate

26

grants.” States [Dkt 81, at 10]. This is supported by the history of the 2017 proposed rate cut.
Contrary to Defendants’ assertion, the 2017 proposal did not only focus on savings. It also
claimed that a cut to F&A (indirect) costs was necessary so “available funding can be better
targeted toward supporting the highest priority research on diseases that affect human
health . . . .” Office of Management & Budget, Major Savings and Reforms: Budget of the U.S.
Government Fiscal Year 2018, at 43 (2017). In essence, the administration made the same claim
that “available funding” would be redirected to direct costs. Again, Congress passed the rider to
prevent any similar efforts following the 2017 proposal and any alternative interpretation would
again render the rider meaningless and superfluous. Again, Congress does not pass meaningless
statutes. See, e.g., Plaut, 514 U.S. at 216; FAIR, 547 U.S. at 57.
Second, Defendants argue, both in their briefing and at the February 21, 2025 motion
hearing, this “fiscal effect” is different from the 2017 “fiscal effect” because in 2017, the focus
was “saving,” as opposed to the reallocation of indirect costs to direct costs. States [Dkt. 73, at
17]. This is unconvincing for two reasons. First, as described above, the Administration’s 2017
proposal similarly claimed the “available funds” would be repurposed for direct costs. Major
Savings and Reforms: Budget of the U.S. Government Fiscal Year 2018, at 43 (2017). This view
is reinforced by the 2019 budget proposal, which stated that because of the rider, the “NIH has
been prohibited by law from reducing grantee administrative costs and shifting these resources to
support direct research on high impact areas, such as cancer, Alzheimer’s disease, and heart
disease . . . . The Budget proposes to eliminate the current prohibition, which would give NIH
the flexibility to support more direct research while encouraging research institutions to improve
the efficiency of operations.” Major Savings and Reforms: Budget of the U.S. Government
Fiscal Year 2020, at 43 (2019). This explanation echoes in the same reasoning as the current

27

proposed cap, particularly considering the Rate Change Notice offers no explanation as to how
the newly available funding will be re-allocated to direct costs. Second, this Court is
unconvinced the 15% ICR is unrelated to saving. NIH issued the Rate Change Notice on the
evening of February 7, 2025. By 6:19 P.M., NIH had tweeted, “This change will save more than
$4B a year effective immediately.” States [Dkt. 6-5]. Considering the current explanation
nearly mirrors that of the 2017 and 2019 budget proposals, the Court sees little reason to credit
the Defendants’ post-hoc explanation.
Considering the above, whether the fiscal effect is at the institution level or the
government level is of little consequence because the Rate Change Notice violates the third
provision of the appropriations rider under either interpretation.
Based on the plain language of the rider, reinforced by legislative history and
acknowledged by the first Trump Administration, the Rate Change Notice is in direct
contravention of Section 224. Again, the Plaintiffs are likely to succeed on the merits of their
claim that the Rate Change Notice as issued is contrary to law.
3.

The Administrative Procedure Act

While contrary to both statute and regulation, the Court must also consider the Rate
Change Notice in light of the Administrative Procedure Act’s substantive and procedural
requirements. Generally speaking, the Federal government, absent its express consent, is
immune from suit, also known as sovereign immunity. With that said, “[t]he APA ‘sets forth the
procedures by which federal agencies are accountable to the public and their actions subject to
review by the courts.’” Dep’t of Homeland Sec. v. Regents of the Univ. of California, 591 U.S.
1, 16 (2020) (quoting Franklin v. Massachusetts, 505 U.S. 788, 796 (1992)). More specifically,
and relevant to the claims in the current matter, the APA provides that a “reviewing court

28

shall . . . hold unlawful and set aside agency action, findings, and conclusions found to be: [1]
arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; [2] in
excess of statutory jurisdiction, authority, or limitations, or short of statutory right; [or, 3]
without observance of procedure required by law.” 5 U.S.C. § 706(2)(A), (C), (D).
Before proceeding to judicial review, the court must ensure the agency action is
considered “final” and thus ripe for review. See 5 U.S.C. § 704. “As a general matter, two
conditions must be satisfied for agency action to be ‘final’: First, the action must mark the
‘consummation’ of the agency’s decisionmaking process—it must not be of a merely tentative or
interlocutory nature. And second, the action must be one by which ‘rights or obligations have
been determined,’ or from which ‘legal consequences will flow.’” Bennett v. Spear, 520 U.S.
154, 177-78 (1997) (first quoting Chicago & Southern Air Lines, Inc. v. Waterman S.S. Corp.,
333 U.S. 103, 113 (1948); and then quoting Port of Bos. Marine Terminal Ass’n v.
Rederiaktiebolaget Transatlantic, 400 U.S. 62, 71 (1970)). Uncontested by either party, it
appears clear that the Rate Change Notice is a “final” agency action ripe for judicial review. The
Rate Change Notice, capping ICRs at 15%, is neither tentative nor interlocutory in nature. The
Notice itself states that “[f]or any new grant issued, and for all existing grants to IHEs . . . ,
award recipients are subject to a 15 percent indirect cost rate . . . . This policy shall be applied to
all current grants for go forward expenses from February 10, 2025 forward as well as for all new
grants issued.” Additionally, it is clear the action is one by which “rights or obligations” are
determined—namely, the ICR applied to each grant recipient, which will determine the amount
of indirect costs reimbursed to each institution.
As the Rate Change Notice is a final agency action, the Court turns to three of the claims
put forth by plaintiffs and contemplated by the APA: (1) that the Rate Change Notice, as put

29

forth, is arbitrary and capricious; (2) that the Agency failed to comply with procedure required
by law, specifically notice-and-comment rulemaking; and, (3) the Rate Change Notice is
impermissibly retroactive.
a. Arbitrary & Capricious
It has long been recognized that “[t]he agency’s action . . . may be set aside if found to be
‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’” Motor
Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 41 (1983)
(quoting 5 U.S.C. § 706(2)(A)); see also Regents, 519 U.S. at 16 (noting that the APA “requires
agencies to engage in ‘reasoned decisionmaking’” (quoting Michigan v. EPA, 576 U.S. 743, 750
(2015))). With that said, “[t]he scope of review under the ‘arbitrary and capricious’ standard is
narrow and a court is not to substitute its judgment for that of the agency.” State Farm, 463 U.S.
at 43; see also Regents, 591 U.S. at 16; Fox Television Stations, 556 U.S. 502, 513-14 (2009).
Although the scope of review is narrow, “the court must undertake ‘a thorough, probing,
in-depth review’ and a ‘searching and careful’ inquiry into the record.” Penobscot Air Servs.,
Ltd. v. FAA, 164 F.3d 713, 720 (1st Cir. 1999) (quoting Citizens to Preserve Overton Park, Inc.
v. Volpe, 401 U.S. 402, 415-16 (1971)). “Only by ‘carefully reviewing the record and satisfying
[itself] that the agency has made a reasoned decision’ can the court ‘ensure that agency decisions
are founded on a reasoned evaluation of the relevant factors.’” Id. (quoting Marsh v. Or. Nat.
Res. Council, 490 U.S. 360, 378 (1989) (alteration in original)). To put a finer point on the
issue, “[w]hile this is a highly deferential standard of review, it is not a rubber stamp.”
Penobscot, 164 F.3d at 720 (quoting Dubois v. U.S. Dep’t of Agric., 102 F.3d 1237, 1285 (1st
Cir. 1996)); see also Bowman Transp., Inc. v. Ark.-Best Freight Sys., Inc., 419 U.S. 281, 285
(1974).

30

There are several considerations that courts have found important when determining if an
agency action is arbitrary and capricious, within the bounds of the standard described above. An
agency has acted arbitrarily and capriciously if it has
relied on factors which Congress has not intended it to consider, entirely failed to
consider an important aspect of the problem, offered an explanation for its
decision that runs counter to the evidence before the agency, or is so implausible
that it could not be ascribed to a difference in view or the product of agency
expertise.
State Farm, 463 U.S. at 43; see Penobscot, 164 F.3d at 719 (holding that courts must “determine
whether the agency has examined the pertinent evidence, considered the relevant factors, and
‘articulate[d] a satisfactory explanation for its action including a “rational connection between
the facts found and the choice made”’”) (quoting State Farm, 463 U.S. at 43); Associated
Fisheries of Me., Inc. v. Daley, 127 F.3d 104, 109 (1st Cir. 1997).
Plaintiffs argue the Rate Change Notice is arbitrary in capricious for several reasons,
including: (1) NIH failed to provide adequate reasoning, disregarding prior fact finding that
supported the existing system of negotiation and failing to consider the relevant factors, and (2)
NIH did not appropriately consider grant recipients’ reliance interests. The Court will take each
argument in turn.
1. Inadequate Reasoning
Agencies must provide sufficient reasoning to justify their rulemaking. “[A]
‘fundamental requirement of administrative law is that an agency set forth its reasons for
decision; an agency’s failure to do so constitutes arbitrary and capricious agency action.’”
Amerijet Int’l, Inc. v. Pistole, 753 F.3d 1343, 1350 (D.C. Cir. 2014) (quoting Tourus Records,
Inc. v. Drug Enf’t Admin., 259 F.3d 731, 737 (D.C. Cir. 2001)). As described above, agencies
must provide reasons that both exhibit sufficient consideration of the relevant factors and

31

pertinent aspects of the problem and demonstrate a rational connection between the facts and
choice that was made. See Regents, 591 U.S. at 16.
Defendants argue the Rate Change Notice supplies three independent reasons justifying
the cap of ICRs at 15%, despite a header that solely claims that the rate notice “Provide[es]
Indirect Cost Rates that Comport with Market Rates.” First, in a single line, NIH claims, “[i]t
is . . . vital to ensure that as many funds as possible go towards direct scientific research costs
rather than administrative overhead.” No additional explanation is provided. Second, again in a
single line, NIH insists that “[i]ndirect costs are, by their very nature, ‘not readily assignable to
the cost objectives specifically benefitted’ and are therefore difficult for NIH to oversee.”
Beyond the fact that the “not readily assignable” language refers to the ways in which indirect
costs support more than one project, in contrast to the direct costs of a single grant award, see 75
C.F.R. § 75.2, no other explanation is provided in the Notice. Third, NIH purports to bring
indirect costs in line with a random collection of private organizations. The Rate Change Notice
offers no explanation as to why those organizations were selected, fails to consider both how
private organizations calculate direct and indirect costs differently than the federal government
(including many indirect costs in their direct costs calculation) and that private foundations are
more likely to fund different types of research with lower F&A costs than the government, and
finally, ignores private organizations’ reliance on complementary federal funding.
These “explanations” are insufficient, and thus the Rate Change Notice is arbitrary and
capricious, for two reasons. First, the explanations are conclusory. “[T]o this end, conclusory
statements will not do; an ‘agency’s statement must be one of reasoning.’” Amerijet, 753 F.3d at
1350 (quoting Butte Cnty., Cal. v. Hogen, 613 F.3d 190, 194 (D.C. Cir. 2010)) (emphasis in
original). As described above, NIH failed to provide any reasoning, rationale, or justification at

32

all. It claims that more funds will go to direct research but fails to address how the money will
actually be directed to cover direct costs and how that research will be conducted absent the
necessary indirect cost reimbursements provided by the federal government. This is particularly
true considering the number of universities and associations that have made clear that research
will have to be cut, as other funding sources will not be able to make up the shortfall. See, e.g.,
States [Dkt. 6-34, Declaration of Dr. Greg Hirth, of Brown University, at ¶ 24] (“Any further
increases in the gap between Brown’s current cost of research and federally sponsored funding
cannot be recouped from other revenue sources.”); AAU [Dkt. 2-1, Declaration of Barbara R.
Snyder, of the Association of American Universities, at ¶ 17] (“AAU member universities’
existing endowments cannot simply be redirected to pick up these losses. The vast majority of
endowed funds often are restricted by the terms on which the funds were donated to the AAU
member university and cannot legally be used to cover research infrastructure costs. Moreover,
an AAU member university may only draw down the portion of the endowment that is
unrestricted at a rate that complies with applicable law.”); AAU [Dkt. 2-3, Declaration of Mark
Becker, of the Association of Public & Land-grant Universities, at ¶ 14] (“Nor can APLU
member institutions’ endowments be simply redirected to make up for these losses . . . .
Endowments are also complex assets with many legal requirements stipulating how they can be
used. And not all universities have large endowments, or any endowment at all—in fact, of the
public institutions that have endowments, nearly half are valued at less than $50 million.”); AAU
[Dkt. 2-8, Declaration of Theresa S. Mayer, of Carnegie Mellon University, at ¶ 18] (“CMU
cannot cover the funding gap itself that would result from the reduction of the indirect cost rate.
While CMU maintains an endowment, it is neither feasible nor sustainable for CMU funds or
other revenue sources to offset shortfalls in indirect cost recovery[.]”); AAU [Dkt. 2-11,

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Declaration of Robert A. Harrington, M.D., of Cornell University, at ¶ 17] (“Cornell’s existing
endowment cannot simply be redirected to pick up these losses. The vast majority of endowed
funds are restricted by the terms on which the funds were donated to the University and cannot
legally be used to cover research infrastructure costs. Moreover, Cornell may only draw down
the portion of the endowment that is unrestricted at a rate that complies with New York State
law.”).
NIH then claims indirect costs are difficult to oversee but fails to explain the inadequacy
of the existing audit system or how the auditing system differs from the tracing of direct costs.
See 45 C.F.R. § 75.500 et seq. Defendants argument that Plaintiffs’ “extensive citations to audit
and calculation requirements for indirect costs confirm NIH’s position” fails to address why the
audit system is deficient. States [Dkt. 73, at 21]. Instead, the citations point to a fairly
comprehensive regulatory regime that NIH seems to ignore in the Rate Change Notice
altogether. See, e.g., 45 C.F.R. § 75.504 (frequence of audits); § 75.507(a) (noting availability of
“program-specific audit guide[s]” maintained by HHS); § 75.508(a)-(d) (describing
responsibilities of IHEs in preparing their audits). Finally, NIH asserts the Rate Change Notice
will bring the ICRs in line with private foundations, providing no explanation for this choice in
light of the fact that private organizations, like the Gates Foundation, are “more expansive than
NIH in defining direct costs, meaning some overhead payments are wrapped in with the grant.”
Jocelyn Kaiser, NIH Plan to Reduce Overhead Payments Draws Fire, Science (June 2, 2017),
https://www.science.org/content/article/nih-plan-reduce-overhead-payments-draws-fire; States
[Dkt 81, at 17 n.14]; see also generally States [Dkt 82-2]. Instead, NIH simply makes a
conclusory claim that “[m]ost private foundations that fund research provide substantially lower
indirect costs than the federal government, and universities regularly accept grants from these

34

foundations.” The Notice does not contemplate if bringing the federal government in line with
private foundations is actually a good thing. NIH’s conclusory statements hardly rise to the level
of “reasoned decisionmaking” required by the APA. Regents, 591 U.S. at 16 (quoting Michigan,
576 U.S. at 750). It is this Court’s obligation to hold NIH “accountable to the public.” Franklin
v. Massachusetts, 505 U.S. 788, 796 (1992). The failure to provide any type of reasoning
renders the Rate Change Notice arbitrary and capricious.
Second, NIH’s proffered “reasons” fail to grapple with the relevant factors or pertinent
aspects of the problem and fails to demonstrate a rational connection between the facts and
choice that was made. In cutting indirect costs without identifying a countervailing funding
stream for such costs of research, the only reasonable outcome will be the discontinuing of
research supported by the slashed F&A rates, including ongoing clinical trials. See, e.g., AAU
[Dkt 2-5, Declaration of Greg Hirth, of Brown University, at ¶ 15] (“At a 15% indirect cost rate,
many of Brown’s current research projects and clinical trials will be forced to cease abruptly.”);
Id. [Dkt. 2-6, Declaration of Theresa A. Maldonado, of the University of California, at ¶ 15]
(“[Indirect costs] not only support the infrastructure and buildings that house pioneering research
teams, but also the personnel who assure the safety of adults and children enrolling in clinical
trials for cancer and chronic disease, the ethics teams that assure those trials are done safely, and
the data and privacy teams that protect research subjects’ personal data.”); Id. [Dkt. 2-15,
Declaration of Laurent Heller, of Johns Hopkins University, at ¶¶ 5-6 (“NIH’s reimbursement of
its portion of indirect costs is essential for supporting . . . critical research” such as “clinical
trials . . . focusing on innovative treatments for pediatric and young adult craniopharyngioma (a
rare type of brain tumor).”]; Id. [Dkt. 2-18, Declaration of Arthur Lupia, of the University of
Michigan, at ¶¶ 7-8 (“[T]here are currently 425 NIH-funded interventional clinical trials

35

underway and not yet completed at the University of Michigan . . . . The loss of [indirect cost
coverage] will immediately impact the University of Michigan’s ability to . . . pay expenses
associated with these [clinical trials].”). The Rate Change Notice seems to have ignored the need
for indirect funds in the administration of any and all research. In essence, by cutting indirect
funds, NIH is cutting research. There also seems to be a limited rational connection between the
facts, particularly the nature of private funding opportunities and their differences from federal
funding grants, as well as the limitation on university endowments, and the decision to cut ICRs
to bring them in line with private organizations.
This failure to grapple with relevant factors and facts is even more egregious in light of
the drastic change from the existing ICR negotiation process. Although a change in policy does
not result in a heightened standard of review, if an agency’s “new policy rests upon factual
findings that contradict those which underlay its prior policy; or when its prior policy has
engendered serious reliance interests” an agency’s failure to consider such factors “would be
arbitrary or capricious . . . .” Fox Television Stations, 566 U.S. at 515. “In such cases it is not
that further justification is demanded by the mere fact of policy change; but that a reasoned
explanation is needed for disregarding facts and circumstances that underlay or were engendered
by the prior policy.” Encino Motorcars, LLC v. Navarro, 579 U.S. 211, 222 (2016) (quoting Fox
Television Stations, 556 U.S. at 515-16) (internal quotation marks omitted). Thus, “when an
agency rescinds a prior policy[,] its reasoned analysis must consider the ‘alternative[s]’ that are
‘within the ambit of the existing [policy].’” Regents, 591 U.S. at 30 (quoting State Farm, 463
U.S. at 51).
As described above, the NIH Rate Change Notice failed to provide even the most basic
level of “reasoning,” let alone recognize or justify the disregarded facts that underlay its existing

36

policy. NIH’s existing ICR negotiation process contemplates the need for an individualized
analysis at the institution level, as well as the dramatically different needs of those varying
institutions. The Rate Change Notice failed to acknowledge those circumstances, nor provides
any justification for that disregard.
As the reasons in the Rate Change Notice are both conclusory and fail to grapple with the
necessary factors, facts, and pertinent aspects of the problem demanded by this change from the
existing ICR negotiation process, the Plaintiffs are likely to succeed in their claims that the Rate
Change Notice is arbitrary and capricious.
2. Substantial Reliance Interests
The justifications provided by the Rate Change Notice fails in an additional respect.
Even if the reasons provided had been more thorough and sufficient, the Notice fails in its
entirety to recognize or consider the substantial reliance interests at issue. Courts have long
recognized that “[w]hen an agency changes course . . . it must ‘be cognizant that longstanding
policies may have “engendered serious reliance interests that must be taken into account.”’”
Regents, 591 U.S. at 30 (quoting Encino Motorcars, 579 U.S. at 222). “It would be arbitrary and
capricious to ignore such matters.” Regents, 591 U.S. at 1913 (quoting Fox Television Stations,
556 U.S. at 515); see also Perez v. Mortg. Bankers Ass’n, 575 U.S. 92, 106 (2015) (“[T]he APA
requires an agency to provide more substantial justification when . . . its prior policy has
engendered serious reliance interests that must be taken into account. It would be arbitrary and
capricious to ignore such matters.”); Smiley v. Citibank (South Dakota), N. A., 517 U.S. 735,
742 (1996) (“Sudden and unexplained change[s to prior policies] . . . may be ‘arbitrary,
capricious [or] an abuse of discretion.’” (quoting 5 U.S.C. § 706(2)(A)).

37

As a result, “because [NIH] was not writing on a blank slate, it was required to assess
whether there were reliance interests, determine whether they were significant, and weigh any
such interests against competing policy concerns.” Regents, 591 U.S. at 33 (internal quotation
marks omitted). The reliance interests at play are many and acknowledged by all parties. Nongovernmental organization have relied on the Federal provision of indirect costs for decades.
E.g., AAU [Dkt. 2-7, Declaration of David A. Tirrell, of the California Institute of Technology,
at ¶ 14]; Id. [Dkt. 2-8, Declaration of Theresa S. Mayer, of Carnegie Mellon University, at ¶ 15];
Id. [Dkt. 2-13, Declaration of David Paul Norton, of the University of Florida, at ¶ 15]; Id. [Dkt.
2-20, Declaration of Anshuman Razdan, of the University of Oregon, at ¶ 17]; Id. [Dkt. 2-21,
Declaration of Elizabeth Duggins Peloso, of the University of Pennsylvania, at ¶ 18]; Id. [Dkt. 228, Declaration of Ishwar K. Puri, of the University of Southern California, at ¶ 15]; Id. [Dkt. 229, Declaration of C. Cybele Raver, of Vanderbilt University, at ¶ 14].
Indirect costs are taken into consideration when universities and associations formulate
their overall operating budgets and consider improvements to research infrastructure. E.g., Id.
[Dkt. 2-3, Declaration of Mark Becker, of the Association of Public & Land-grant Universities,
at ¶ 11] (“For each NIH award, APLU member institutions necessarily rely on both the direct
cost and indirect cost allocations in formulating their overall operating budgets for any given
year. These allocations are used to plan for annual staffing needs, infrastructure support (e.g., IT
networks, regulatory compliance, and grant management support), facility building and
renovation, and equipment purchases to support a broad range of overlapping research
activities.”); Id. [Dkt. 2-6, Declaration of Theresa A. Maldonado, of the University of California,
¶ 17] (“UC campuses receive and expend hundreds of millions of dollars annually in multiyear
awards for their projects, centers, and institutes, and can proceed with establishing budget

38

estimates for planning purposes in reliance on the facilities and administrative cost recovery rates
periodically negotiated between individual campuses and the federal government (the
Department of Health and Human Services) that set rates for three to five years.”); Id. [Dkt. 2-12,
Declaration of Dr. David F. Kotz, of Dartmouth College, at ¶ 9] (“Dartmouth spent $17 million
of its own funds for the repair and renovation of research facilities in fiscal years 2022 and 2023,
and anticipates spending another $14 million in institutional funds to maintain these existing
facilities in fiscal years 2024 and 2025. These investments, to which Dartmouth has already
committed, have been made specifically in reliance on our ability to recover a portion of these
expenses through the negotiated indirect costs rate with federal agencies like the NIH.”).
Beyond the institutions, the reliance interests are plenty, ranging from the researchers who chose
to conduct research at certain institutions with the understanding that they would be supported, to
the students who will no longer be admitted to these institutions, to the local communities that
will suffer from the loss of community-based programming. See, e.g., States [Dkt. 6-11,
Declaration of Donald M. Elliman, Jr., of Colorado Anschutz Medical Campus, at ¶ 10] (“The
drastic cuts to NIH F&A will bring the Institute’s research and community-based programs to a
virtual standstill due to the loss of shared administrative staff and the specialized computing
infrastructure essential for the Institute’s efforts.”); AAU [Dkt. 2-7, Declaration of David A.
Tirrell, of the California Institute of Technology] (“Caltech is currently making decisions
regarding admission of graduate students who conduct much of our NIH-supported research. The
number of graduate students – who are the future of biomedical research – who can be admitted
will have to be reduced substantially. The impact on the future of research will be immediate and
unrecoverable. [] Offers to new postdoctoral scholars also will be reduced, with similar impact
on the quality of the research environment and on the future of biomedical research.”).

39

In short, the Notice fails to consider the impact the Rate Change Notice would have on
public health, which is the purpose of the entire regulatory regime. The Notice fails to
contemplate the budgets of these institutions, formulated months and years before this Notice’s
sudden implementation. It fails to contemplate the risk to human life as research and clinical
trials are suspended in response to the shortfall. It fails to contemplate the life, careers, and
advancement that will be lost as these budgets are indiscriminately slashed. Although reticent to
consider together, the Rate Change Notice fails to reflect on the health of those whose hopes rely
on clinical trials and the financial investment that will be lost as research is disrupted. It fails to
consider that public health will suffer.
As an initial matter, Defendants claim that Plaintiffs’ reliance interests “relate[] only to
existing grants, because Plaintiffs can have no legally protectible reliance interests in grants that
they have not yet been awarded.” States [Dkt. 73, at 23] (citing Lemon Bay Cove, LLC v.
United States, 160 Fed. Cl. 593, 613 (2022) (“A property owner who acquires land with
knowledge of a regulatory restraint could be said to have no reliance interest or to have assumed
the risk of any economic loss.”)). However, Defendants misunderstand the nature of the reliance
interests. ICRs, memorialized in NICRAs, are negotiated for a period of several years,
irrespective of any specific grant. Cf. 45 C.F.R. pt. 75, appx. III § C.1 et seq. (establishing
procedures for the “[d]etermination and [a]pplication of [i]ndirect (F&A) [c]ost [r]ates”). At the
very least, these reliance interests exist for the length of the NICRA, which institutions
negotiated with the cognizant agency for the purpose of consistency until the conclusion of the
agreement. See, e.g., AAU [Dkt. 2-12, Declaration of Dr. David F. Kotz, of Dartmouth College,
at ¶ 10] (“Direct negotiations and detailed audits with the federal government in 2022 resulted in
the setting of a predetermined rate that Dartmouth had expected in good faith would be

40

applicable through 2029.”); Id. [Dkt. 2-20, Declaration of Anshuman Razdan, of the University
of Oregon, at ¶ 12] (“UO’s current negotiated rate for organized research is 49% (up from
47.5%), last negotiated August 2023 and valid through June 30, 2027.”). As a result, the reliance
interests concern both existing and future grants—at least those grants awarded within the
timeframe contemplated by each institution’s NICRA.
Nonetheless, Defendants claim to have addressed these substantial and long-standing
reliance interests despite the Rate Change Notice, read generously, offering only a fleeting
reference to reliance interests:
Although cognizant that grant recipients, particularly “new or inexperienced
organizations,” use grant funds to cover indirect costs like overhead . . . , NIH is
obligated to carefully steward grant awards to ensure taxpayer dollars are used in
ways that benefit the American people and improve their quality of life. Indirect
costs are, by their very nature, “not readily assignable to the cost objectives
specifically benefitted” and are therefore difficult for NIH to oversee. . . . Yet the
average indirect cost rate reported by NIH has averaged between 27% and 28%
over time. And many organizations are much higher—charging indirect rates of
over 50% and in some cases over 60%.
This explanation is plainly insufficient because it is conclusory and fails to address some, or any,
of the reliance interests discussed above. “[S]ummary discussion may suffice in other
circumstances, but here—in particular because of decades of industry reliance on [NIH]’s prior
policy—the explanation fell short of the agency’s duty to explain why it deemed it necessary to
overrule its previous position.” Encino Motorcars, 579 U.S. at 222. As stated in Encino
Motorcars, and equally applicable here, “[i]n light of the serious reliance interests at
stake, . . . conclusory statements do not suffice to explain [the agency] decision.” 579 U.S. at 224
(citing Fox Television Stations, 556 U.S. at 515–16).
In both its opposition to the Temporary Restraining Order and at the motion hearing,
Defendants attempted to supplement NIH’s consideration of Plaintiffs’ tremendous reliance

41

interests with additional arguments. In its opposition, Defendants stated, “NIH did note that
‘grant recipients use grant funds to cover indirect costs.’ It simply concluded that the other
interests justifying the Supplemental Guidance outweighed that interest.” States [Dkt. 73, at 23]
(citation omitted). Defendants added, “NIH likewise considered that grantees often accept grants
with lower indirect cost rates, demonstrating that those rates are generally acceptable to the
grantees and would not unduly upset their reliance interests.” [Id. at 24]. However convincing
or unconvincing these arguments may be, the fact of the matter is that they did not appear in the
Rate Change Notice. Defendants attempted to further supplement these claims at oral argument.
After reciting the above quoted language from the Rate Change Notice, counsel for Defendants
added, “[the Rate Change Notice] goes on to explain the various rationales that it thinks trump
those reliance interests. So it was considered. And the idea that it’s not . . . that’s a policy
disagreement . . . . [S]o they were considered here. And you can see the reasons that NIH put
forward for not adhering to them.”
The Court is prohibited from considering these additions to the brief explanation
provided in the Rate Change Notice. “It is a ‘foundational principle of administrative law’ that
judicial review of agency action is limited to ‘the grounds that the agency invoked when it took
the action.’” Regents, 591 U.S. at 20 (quoting Michigan, 576 U.S. at 758); see also State Farm,
463 U.S. at 50 (stating that it has long been recognized that an agency action may only be upheld
“on the basis articulated by the agency itself”); Sec. & Exch. Comm’n v. Chenery Corp., 332
U.S. 194, 196 (1947) (“[It is] a simple but fundamental rule of administrative law . . . that a
reviewing court . . . must judge the propriety of [an agency’s] action solely by the grounds
invoked by the agency.”). Especially in light of Defendants’ arguments in their papers and at the
motion hearing, “[t]he functional reasons for requiring contemporaneous explanations apply with

42

equal force regardless whether post hoc justifications are raised in court by those appearing on
behalf of the agency or by agency officials themselves.” Regents, 591 U.S. at 23; see also Am.
Textile Mfrs. Inst. v. Donovan, 452 U.S. 490, 539 (1981) (“[T]he post hoc rationalizations of the
agency . . . cannot serve as a sufficient predicate for agency action.”); Volpe, 401 U.S. at 419
(rejecting “litigation affidavits” from agency officials as “merely ‘post hoc’ rationalizations”
(citation omitted)). Thus, with no additional explanation on top of what amounts to one sentence
in the Rate Change Notice, NIH plainly failed to sufficiently consider the substantial reliance
interests at stake. Of note, even had the Court considered these additional statements both in the
opposition and at oral argument, NIH still failed to appropriately consider the substantial and
long-standing reliance interests.
In summary, a “[s]udden and unexplained change . . . , or change that does not take
account of legitimate reliance on prior interpretation may be ‘arbitrary, capricious [or] an abuse
of discretion.’” Smiley, 517 U.S. at 742 (1996) (quoting 5 U.S.C. § 706(2)(A)) (citing State
Farm, 463 U.S. at 46-57; United States v. Pa. Indus. Chem. Corp., 411 U.S. 655, 670-75 (1973);
NLRB v. Bell Aerospace Co., 416 U.S. 267, 295 (1974)). The Rate Change Notice was issued,
without warning, on the evening of Friday, February 7, 2025. It was set to take effect on
Monday, February 10, 2025. It would be difficult to mandate a more sudden change. The threepage Notice failed to provide basic reasoning for its decision, as described above, and failed to
address the substantial reliance interests. Although empowered to make impactful policy
decisions, “a new administration may not . . . ignore statutory standards in carrying out its
regulatory functions.” State Farm, 463 U.S. at 59 n.* (Rehnquist, J., concurring in part and
dissenting in part). The Defendants have ignored those statutory standards here and the Plaintiffs
are likely to succeed in their claim that the Rate Change Notice is arbitrary and capricious.

43

b. Failure to Follow Notice and Comment Procedures
According to the APA, before a federal agency adopts a rule a “[g]eneral notice of
proposed rule making shall be published in the Federal Register.” 5 U.S.C. § 553(b). After
providing notice, “the agency shall give interested persons an opportunity to participate in the
rule making through submission of written data, views, or arguments with or without opportunity
for oral presentation.” Id. at § 553(c). Taken together this process is known as notice-andcomment rulemaking and “[f]ailure to abide by these requirements renders a rule procedurally
invalid.” N.H. Hosp. Ass’n v. Azar, 887 F.3d 62, 70 (1st Cir. 2018) (citing Warder v. Shalala,
149 F.3d 73, 75 (1st Cir. 1998); Hoctor v. U.S. Dep’t of Agric., 82 F.3d 165, 167 (7th Cir. 1996)
(stating that, unless an exception applies, a “rule promulgated by an agency that is subject to the
[APA] is invalid unless the agency” follows notice-and-comment procedures)).
Generally speaking, “interpretative rules, general statements of policy, or rules of agency
organization, procedure, or practice” are exempted from notice-and-comment rulemaking. 5
U.S.C. § 553(b)(A). Interpretive rules are those “issued by an agency to advise the public of the
agency’s construction of the statutes and rules which it administers.” Perez, 575 U.S. at 97
(quoting Shalala v. Guernsey Mem’l Hosp., 514 U.S. 87, 99 (1995)). Conversely, so-called
“legislative” or “substantive” rules are subject to the process described above, absent some other
exception. N.H. Hosp. Ass’n, 887 F.3d at 70. Legislative rules are those that “create[] rights,
assign[] duties, or impose[] obligations, the basic tenor of which is not already outlined in the
law itself.” La Casa Del Convaleciente v. Sullivan, 965 F.2d 1175, 1178 (1st Cir. 1992) (citation
omitted). A legislative rule “‘has the force of law,’ while an interpretive rule is ‘merely a
clarification or explanation of an existing statute or rule’ and is ‘issued by an agency to advise
the public of the agency’s construction of the statutes and rules which it administers.’” Id.

44

(quoting Guardian Fed. Sav. & Loan Ass’n v. FSLIC, 589 F.2d 658, 664-65 (D.C. Cir. 1978);
United States Department of Justice, Attorney General’s Manual on the Administrative
Procedures Act 30 n.3 (1947)).
1. Waiver of the Grant Exception
Before examining the boundary between interpretive and legislative rules, Defendants
raise an alternative argument: The Rate Change Notice is exempt from notice-and-comment
rulemaking because an alternative exception applies. The APA provides that notice-andcomment rulemaking applies “except to the extent that there is involved . . . a matter relating to
agency management or personnel or to public property, loans, grants, benefits, or contracts.” §
553(a)(2) (emphasis added). Although seemingly on point, the application of the exception is
not nearly that straightforward. In 1971, the Secretary of the Department of Health, Education,
and Wealth (“HEW”), the predecessor agency of HHS, voluntarily waived the grant exception
found in § 553(a)(2). The Secretary’s statement reads as follows:
The APA exempts from [notice-and-comment rulemaking] matters relating to
public property, loans, grants, benefits, or contracts. . . . The public benefit from
such participation should outweigh any administrative inconvenience or delay
which may result from use of the APA procedures in the five exempt categories.
Effective Immediately, all agencies and offices of the Department which issue
rules and regulations relating to public property, loans, grants, benefits, or
contracts are directed to utilize the public participation procedures of the APA, 5
U.S.C. 553. Although the APA permits exceptions from these procedures when an
agency for good cause finds that such procedures would be impracticable,
unnecessary or contrary to the public interest, such exceptions should be used
sparingly, as for example in emergenc[i]es and in instances where public
participation would be useless or wasteful because proposed amendments to
regulations cover minor technical matters.
Public Participation in Rule Making: Statement of Policy, 36 Fed. Reg. 2,532 (Feb. 5, 1971).

45

2. Binding Nature of the Grant Exception Waiver
In their papers and at oral argument, Defendants state that despite the Secretary’s explicit
statement otherwise, the grant exception in the APA continues to apply, and thus the Rate
Change Notice is entirely exempt from notice-and-comment rulemaking. Defendants argue,
[w]hile the Secretary [of] the Department of Health and Human Services
predecessor department voluntarily agreed to follow notice and comment
rulemaking, he did so ‘as a matter of policy’—not in a binding regulation. See 36
Fed. Reg. 2,532 (Feb. 5, 1971). There is thus no binding requirement of noticeand-comment rulemaking here—and, in any event, no matter what the executive
branch says as a matter of policy discretion, the Court should not extend the
APA’s notice-and-comment requirements to a context, i.e., grant making, that
Congress expressly dictated they should not reach.
States, [Dkt. 73, at 19-20]. At oral argument, Defendants added that post-Loper Bright, courts
“should not let an agency extend a statute to a context that Congress plainly didn’t want it to go.”
As an initial matter, Loper Bright is inapplicable to the matter at hand. In that case, the
Supreme Court held that under the APA, courts need not defer to agency interpretation of
ambiguous statutes. See generally Loper Bright Enters. v. Raimondo, 603 U.S. 369 (2024). That
is not relevant here, where the head of HHS issued a policy statement that was not an
interpretation of an ambiguous statute. The statute was clear. Instead, by adding a notice-andcomment requirement for exempted actions, the agency head was simply adding procedures on
top of the minimum laid out by Congress.
Second, the Supreme Court has long held that agency heads are well within their
function, contrary to Defendants’ statements otherwise, to impose additional procedural and
substantive requirements beyond those required by Congress. Serv. v. Dulles, 354 U.S. 363, 388
(1957) (“While it is of course true . . . the Secretary was not obligated to impose upon himself
these more rigorous substantive and procedural standards, neither was he prohibited from doing
so, . . . and having done so he could not . . . proceed without regard to them.”). While an agency

46

cannot go below the floor set by Congress, it can certainly go above it. Once such procedural
requirements have been put in place agencies must follow them, even when the internal
procedures exceed the process otherwise required. See Morton v. Ruiz, 415 U.S. 199, 235
(1974) (citing Dulles, 354 U.S. at 388; Vitarelli v. Seaton, 359 U.S. 535, 539-40 (1959))
(“Where the rights of individuals are affected, it is incumbent upon agencies to follow their own
procedures. This is so even where the internal procedures are possibly more rigorous than
otherwise would be required.”); cf. Rotinsulu v. Mukasey, 515 F.3d 68, 72 (1st Cir. 2008) (“An
agency has an obligation to abide by its own regulations. The failure to follow an applicable
regulation may be a sufficient ground for vacation of an agency’s decision, resulting in a
remand.” (citing Accardi v. Shaughnessy, 347 U.S. 260, 265-67 (1954); Picca v. Mukasey, 512
F.3d 75, 79-80 (2d Cir. 2008); Nelson v. INS, 232 F.3d 258, 262 (1st Cir. 2000))).
Courts across the country have not only found such self-imposed requirements binding on
the agency by which they were issued: Courts have found HHS, and thus NIH, bound by this
self-imposed waiver of the grant exception. Clarian Health W., LLC v. Hargan, 878 F.3d 346,
356-57 (D.C. Cir. 2017) (“The Government recognizes that, in 1971, the Secretary voluntarily
waived the § 553(a)(2) exception and subjected itself to the statute’s procedural
requirements . . . . Yet, it appears to contest the assertion that this waiver binds the
agency . . . . The Government provides no basis for this argument, however, and it fails to
address this court’s and the Supreme Court’s cases treating this or other such waivers as
binding.” (citing Samaritan Health Serv. v. Bowen, 811 F.2d 1524, 1529 & n.14 (D.C. Cir.
1987); Humana of S.C., Inc. v. Califano, 590 F.2d 1070, 1084 (D.C. Cir. 1978); Rodway v. U.S.
Dep’t of Agric., 514 F.2d 809, 814 (D.C. Cir. 1975) (“[T]he regulation fully bound the Secretary
to comply thereafter with the procedural demands of the APA.”); Dulles, 354 U.S. at 388));

47

Buschmann v. Schweiker, 676 F.2d 352, 356 n.4 (9th Cir. 1982) (“The Administrative
Procedures Act is applicable to rulemaking by the Secretary of Health and Human Services.
Although 5 U.S.C. § 553(a)(2) would have exempted the rulemaking procedure now in dispute,
the then Secretary of Health, Education and Welfare, in a policy statement dated January 28,
1971, (36 F.R. 2532), required all agencies and offices in his department to utilize the public
participation procedures of § 553. The Secretary does not contest his legal obligation to comply
with § 553 procedures.”); Nat’l Welfare Rts. Org. v. Mathews, 533 F.2d 637, 646 (D.C. Cir.
1976) (“In addition to these substantive standards a regulation must be promulgated in accord
with procedural requirements of the Administrative Procedure Act . . . and any further rules
imposed by the department itself.” (citing Rodway, 514 F.2d at 814; 36 Fed. Reg. 2532 (1971));
Herron v. Heckler, 576 F. Supp. 218, 229-30 (N.D. Cal. 1983) (“The APA contains a provision
that ordinarily would exempt the Secretary from its rule-making
procedures . . . . Notwithstanding this statutory exemption, the Secretary elected to abide by the
provisions of the APA . . . . The Secretary asserts that her obligations under the APA remain
discretionary, because ‘statements of policy,’ unlike rules or regulations, do not create binding
legal obligations . . . . This Court perceives no reason to depart from [] authority. [T]he Court
finds that the Secretary was bound by the provisions of the APA when she promulgated the
claims manual limitations at issue.”); Herron, 576 F. Supp. at 229 n.12 (“Defendants mistakenly
rely solely on the January 1971 directive’s label— ‘statement of policy’—to argue that it carries
no binding legal effect.”); Lewis v. Weinberger, 415 F. Supp. 652, 661 (D.N.M. 1976) (“HEW,
the agency of which the IHS [(Indian Health Service)] is a part, has placed itself under the
procedural requirements of section 553 in all its rulemaking relating to ‘public property, loans,
grants, benefits or contracts.’ 36 Fed. Reg. 2536 (Feb. 5, 1971). Thus, the IHS was bound to

48

comply with A.P.A. rulemaking procedures in this case despite the otherwise applicable
exemption found at subsection (a)(2) of section 553.” (citing Morton, 415 U.S. at 235 (1973);
Rodway, 514 F.2d 809; Florida v. Weinberger, 401 F. Supp. 760 (D.D.C. 1975))).
Defendants cite to a single case that seems to state the opposite: “‘[A]lthough it appears
that no notice of proposed rule making was given when these regulations were issued, the
requirement of notice in the Administrative Procedure Act, 5 U.S.C. § 553(b), is inapplicable
when regulations concern matters relating to grants, as do the instant ones.’ . . . Since the rule
challenged by the plaintiffs falls within the ‘grant’ exception, it is not necessary for the purpose
of procedural review to determine whether the rule is legislative or interpretative.” Opelika
Nursing Home, Inc. v. Richardson, 356 F. Supp. 1338, 1342 (M.D. Ala. 1973) (quoting
Rodriguez v. Swank, 318 F. Supp. 289, 295 (N.D. Ill.1970)). Although the Court assumes it was
not purposely misleading, the case cited by the Defendants is entirely inapplicable. The original
Opelika Nursing Home case was decided on January 29, 1971. Opelika Nursing Home, Inc. v.
Richardson, 323 F. Supp. 1206 (M.D. Ala. 1971), rev’d, 448 F.2d 658 (5th Cir. 1971). It
concerned regulations from 1970, before the Secretary put the new procedural requirements in
place on February 5, 1971. 36 Fed. Reg. 2,532. In short, the 1970 agency action at issue in the
case cited by the Defendants was certainly not subject to the Secretary’s February 1971
announcement. Conversely, seemingly every case that addressed the question after the policy
was issued came to the opposite conclusion.
In light of the weight of precedent, the waiver of the grant exception is binding and
cannot be summarily disregarded. Fox Television Stations, 556 U.S. at 515 (“An agency may
not, for example, depart from a prior policy sub silentio.”). The only remaining question is

49

whether the Rate Change Notice is the type of legislative rule that is subject to notice-andcomment rulemaking.
3. Legislative Rule
As described above, legislative rules are those that “create[] rights, assign[] duties, or
impose[] obligations, the basic tenor of which is not already outlined in the law itself.” N.H.
Hosp. Ass’n, 887 F.3d at 70 (quoting La Casa Del Convaleciente, 965 F.2d at 1178). At its most
basic level, the Rate Change Notice does just that. As opposed to honoring existing NICRAs and
negotiating ICRs on a case-by-case basis as contemplated by the existing regulation, the Rate
Change Notice provides that “there will be a standard indirect rate of 15% across all NIH grants
for indirect costs in lieu of a separately negotiated rate for indirect costs in every grant.” This is
a two-fold overhaul of the existing regulatory regime.
First, courts consider if “the rule is ‘inconsistent with another rule having the force of
law,’ or otherwise ‘alter[s] or enlarg[es] obligations imposed by a preexisting regulation.’” N.H.
Hosp. Ass’n, 887 F.3d at 73 (quoting Warder, 149 F.3d at 75; Aviators for Safe & Fairer
Regulation, Inc. v. FAA, 221 F.3d 222, 226-27 (1st Cir. 2000)) (alterations in original). There is
no question the Rate Change Notice is both inconsistent with an existing rule and alters existing
obligations: The institutions currently dedicated to the good work of improving the lives and
health of Americans do so in reliance on their negotiated indirect cost rates. Despite being
dressed up as a simple deviation, which the Court addressed above, this Rate Change Notice
imposes entirely different obligations, slashing ICRs that resulted from a lengthy negotiation
process prescribed by the current regulation. Thus, this Rate Change Notice is inconsistent with
a current rule having the force of law. In so doing, it alters the agency’s and the institutions’
obligations.

50

Second, courts “consider the manner in which the . . . action[] fit[s] within the statutory
and regulatory scheme.” N.H. Hosp. Ass’n, 887 F.3d at 73 (citing Warder, 149 F.3d at 81). As
the Association of American Universities state, the Rate Change Notice is “manifest not only
with respect to the rate itself, but also with respect to the reticulated process by which the rates
were previously set on an individualized basis, which is not compatible with a single, across-theboard rate.” AAU [Dkt. 16, at 37]. For decades, institutions have relied on the negotiation
process, as laid out by the regulations. With the Rate Change Notice, this negotiation process
would no longer exist. Such a change does not simply, “advise the public of the agency’s
construction of the statutes and rules which it administers,” which would bring it within the
gambit of an interpretive rule. Perez, 575 U.S. at 97. It changes the entire field of play, as
legislative rules often do.
HHS and other agencies have recognized the need for notice-and-comment rulemaking in
similar circumstances. For example, HHS submitted to notice and comment when it intended to
restrict indirect costs for foreign organizations and foreign public entities, Health and Human
Services Grants Regulation, 81 Fed. Reg. 45270 (proposed July 13, 2016) (to be codified at
45 C.F.R. pt. 75), while the Office of Management and Budget submitted to notice and comment
when it planned to “establish a consistent policy for adjustment of indirect cost rates based on a
proposal(s) subsequently found to have contained unallowable costs,” Proposed Revisions to
Circular A-21, 56 Fed. Reg. 29530 (proposed June 27, 1991). In both cases, the agencies
recognized that rules even less substantive than the Rate Change Notice at issue were legislative,
and thus subject to notice-and-comment. The Rate Change Notice does not simply restrict
indirect costs for a subset of organizations, as did the rule submitted in 2016. It also does not
simply adjust the policy for unallowable costs. It restricts indirect costs for every institution

51

accepting a grant from NIH and changes the process by which those indirect costs are
determined on a wholesale basis. If notice-and-comment rulemaking was appropriate for the
former proposed rules, it is certainly appropriate for the proposed Rate Change Notice.
On a final note, Defendants make an additional argument that because the Rate Change
Notice purports to comply with an existing regulation, 45 C.F.R. § 75.414(c), which has already
gone through notice-and-comment rulemaking, no additional notice-and-comment safeguards are
required. States [Dkt. 73, at 22]. This plainly cannot be true. First, as described above, the Rate
Change Notice is inapposite with § 75.414. Second, because the Rate Change Notice is a
legislative rule, any existing regulation cannot excuse NIH from compliance with the APA’s
notice-and-comment rulemaking requirements. Simply claiming a legislative rule complies with
some other regulation does not excuse compliance with administrative law altogether.
As the Rate Change Notice is a legislative rule and no exception is applicable, NIH was
required to submit the Rate Change Notice to notice-and-comment rulemaking. Failure to
comply with these requirements renders the rule procedurally invalid. Thus, the Plaintiffs are,
again, likely to succeed on the merits of their claim.
c. Impermissibly Retroactive
In considering whether retroactive application of an agency regulation is permissible, the
court conducts a two-step inquiry. First, it must determine if the enabling statute endorses
retroactive rulemaking. Landgraf v. USI Film Prods., 511 U.S. 244, 280 (1994). If it does, the
inquiry is complete. If it does not, the court must continue to the second step—determining if the
regulation truly operates retroactively. Id. If it does, the regulation is impermissibly retroactive.
Turning to the first step, “[i]t is axiomatic that an administrative agency’s power to
promulgate legislative regulations is limited to the authority delegated by Congress . . . .

52

Retroactivity is not favored in the law. Thus, congressional enactments and administrative rules
will not be construed to have retroactive effect unless their language requires this result.” Bowen
v. Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988) (citing Greene v. United States, 376 U.S.
149, 160 (1964); Claridge Apartments Co. v. Commissioner, 323 U.S. 141, 164 (1944); Miller v.
United States, 294 U.S. 435, 439 (1935); United States v. Magnolia Petroleum Co., 276 U.S.
160, 162-63 (1928)); see also Brimstone R. & Canal Co. v. United States, 276 U.S. 104, 122
(1928) (“The power to require readjustments for the past is drastic . . . . [I]t ought not to be
extended so as to permit unreasonably harsh action without very plain words.”). Thus, as a
threshold matter, the Court must determine if the authority delegated by Congress explicitly
empowers HHS, and therefore NIH, to issue retroactive regulations. The express language of the
enabling statute does not appear—at least explicitly—to give NIH any such power. See 42
U.S.C. § 241.
Thereafter, the question for the Court becomes whether the Rate Change Notice does, in
fact, operate retroactively. If so, the Rate Change has an impermissible retroactive effect. As an
initial matter, both Plaintiffs and Defendants focus their arguments on the Rate Change Notice’s
application to existing grants, thus so too will the Court. AAU [Dkt. 16, at 32]; States [Dkt. 73,
at 25]; States [Dkt. 81, at 15].
Defendants argue that this case is unlike prior cases that found legislative action to be
impermissibly retroactive, as in those cases, “an agency attempted to claw back money that
already had been paid out.” States [Dkt. 73, at 25]. Defendants argue, instead, that the Rate
Change Notice only applies to existing grants’ “go forward expenses,” and that, therefore, the
Rate Change Notice is not retroactive. However, the Supreme Court has specifically rejected
this view. “[T]he ban on retrospective legislation embrace[s] ‘all statutes, which, though

53

operating only from their passage, affect vested rights and past transactions . . . . Upon
principle . . . every statute, which takes away or impairs vested rights acquired under existing
laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to
transactions or considerations already past, must be deemed retrospective.’” Landgraf, 511 U.S.
at 268-69 (quoting Soc’y for Propagation of the Gospel v. Wheeler, 22 F. Cas. 756 (No. 13,156)
(CCNH 1814)). Thus, the Supreme Court held in Landgraf that a regulation has retroactive
effect when “it would impair rights a party possessed when he acted, increase a party’s liability
for past conduct, or impose new duties with respect to transactions already completed.” Id. at
280. Important to the matter before the Court, “[t]he largest category of cases in which we have
applied the presumption against statutory retroactivity has involved new provisions affecting
contractual or property rights, matters in which predictability and stability are of prime
importance.” Id. at 271 (emphasis added).
Although not a contract, the Notice of Award and NICRA are both legally binding and
have many of the key hallmarks of a contract. When receiving a grant from NIH, institutions are
subject to a Notice of Award, which integrates the previously settled-upon NICRA. In adopting
the Rate Change Notice, even as to “go-forward” expenses, the ICR cap would impair the rights
the institution possessed when accepting the Notice of Award—specifically, the negotiated ICR
at the time of the NOA. The Rate Change Notice imposes a new, lower rate, displacing the
institutions’ right to the previously negotiated—and legally binding—ICR. Additionally, the
institutions will now be liable for more expenses with respect to the Notices of Award already
executed, imposing new duties for transactions already completed. As a result, there is little

54

question the Rate Change Notice is retroactive as to its application to existing grants.6 Thus,
again, Plaintiffs are likely to succeed on the merits as to the retroactive application of the Rate
Change Notice on existing grants.
4.

Other Claims

Plaintiffs make a series of additional statutory and constitutional claims, including
violations of the Public Health Service Act and the Appropriations Clause. Without commenting
on the substance, the Court finds its unnecessary to address those claims at this stage of the
litigation, as the likelihood of success on the merits on each claim addressed above is
independently sufficient to support the issuance of a preliminary injunction. Specifically as to
the constitutional claim(s), the Court “find[s] it unnecessary and, indeed, inappropriate . . . to
reach these claims. Under the doctrine of constitutional avoidance, ‘federal courts are not to
reach constitutional issues where alternative grounds for resolution are available.’” Marasco &
Nesselbush, 6 F.4th at 178 (quoting Vaquería Tres Monjitas, Inc. v. Pagan, 748 F.3d 21, 26 (1st
Cir. 2014)) (citing Nw. Austin Mun. Util. Dist. No. One v. Holder, 557 U.S. 193, 205 (stating
that the court ordinarily “will not decide a constitutional question if there is some other ground
upon which to dispose of the case”)). As in Marasco & Nesselbush, the Court finds discussion
of the merits of the above claims “adequately addresses [Plaintiffs’] remedial requests and that,

6

This Court finds the retroactivity concerns as to new grants that are otherwise still subject to an
existing NICRA to be a closer question. While the Rate Change Notice does not appear to
impose new duties with respect to transactions already completed, as no institution is forced to
undertake new or additional research, the NICRA itself is still its own contractual relationship.
The Rate Change Notice could thus foreseeably impair rights protected by institutions’ NICRAs.
Because all parties limit the retroactivity discussion to existing grants, and success on the merits
is likely for both existing and new grants on several other grounds, the Court finds it unnecessary
to rule on the issue of retroactivity as it applies to future grants, particularly without additional
briefing.
55

hence, resolving the constitutional questions would be inconsistent with our obligation to avoid
doing so where a non-constitutional disposition is possible.” 6 F.4th at 179.
B. IRREPARABLE HARM
The second element that Plaintiffs must show to justify a preliminary injunction is that
they are “likely to suffer irreparable harm in the absence of preliminary relief.” Voice of the
Arab World, 645 F.3d at 32 (quoting Winter v. Nat. Res. Def. Council, Inc., 555 U.S. at 20); see
also Winter, 555 U.S. at 22 (“Our frequently reiterated standard requires plaintiffs seeking
preliminary relief to demonstrate that irreparable injury is likely in the absence of an injunction.”
(first citing Los Angeles v. Lyons, 461 U.S. 95, 103 (1983); then Granny Goose Foods, Inc. v.
Teamsters, 415 U.S. 423, 441 (1974)); and then O’Shea v. Littleton, 414 U.S. 488, 502 (1974)).
Importantly, “[d]istrict courts have broad discretion to evaluate the irreparability of alleged harm
and to make determinations regarding the propriety of injunctive relief.” K-Mart Corp. v.
Oriental Plaza, Inc., 875 F.2d 907, 915 (1st Cir. 1989) (quoting Wagner v. Taylor, 836 F.2d 566,
575-76 (D.C. Cir.1987)).
1.

Standard

“Issuing a preliminary injunction based only on a possibility of irreparable harm is
inconsistent with [the Supreme Court’s] characterization of injunctive relief as an extraordinary
remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such
relief.” Winter, 555 U.S. at 22 (citing Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per
curiam)). The burden falls directly on the moving party to demonstrate the likely irreparable
harm. See Fed. R. Civ. P. 65(a); Narragansett Indian Tribe v. Guilbert, 934 F.2d 4, 6 (1st
Cir.1991) (“[I]rreparable harm is not assumed; it must be demonstrated.”); Ross-Simons I, 102
F.3d at 18 (“[T]he burden of demonstrating that a denial of interim injunctive relief would cause

56

irreparable harm [rests] squarely upon the movant.”). Although “[t]he burden is substantial . . . it
is possible to overstate its dimensions.” Ross-Simons I, 102 F.3d at 18. Additionally, when, as
here, “the likelihood of success on the merits is great, a movant can show somewhat less in the
way of irreparable harm and still garner preliminary injunctive relief.” Vaqeria Tres Monjitas,
Inc. v. Irizarry, 587 F.3d 464, 485 (1st Cir. 2009) (quoting E.E.O.C. v. Astra U.S.A., Inc., 94
F.3d 738, 743-44 (1st Cir. 1996)); Ross-Simons I, 102 F.3d at 19 (“[A]n attempt to show
irreparable harm cannot be evaluated in a vacuum; the predicted harm and the likelihood of
success on the merits must be juxtaposed and weighed in tandem.”); Gately v. Massachusetts, 2
F.3d 1221, 1232 (1st Cir. 1993) (noting a “general principle” of equity “that irreparable harm is
subject to a sliding scale analysis”).
In determining if the harm is irreparable, “[i]t is settled beyond peradventure that
irreparable harm can consist of ‘a substantial injury that is not accurately measurable or
adequately compensable by money damages.’” Ross-Simons of Warwick, Inc. v. Baccarat, Inc.
(Ross-Simons II), 217 F.3d 8, 13 (1st Cir. 2000) (quoting Ross-Simons I, 102 F.3d at 19); see
also e.g., Weinberger v. Romero-Barcelo, 456 U.S. 305, 312 (1982) (“The Court has repeatedly
held that the basis for injunctive relief in the federal courts has always been irreparable injury
and the inadequacy of legal remedies.”); K-Mart Corp., 875 F.2d at 915 (noting “injuries to real
estate interests” along with “harm to goodwill” are types of irreparable harm that “frequently
come within the ken of the chancellor”); Danielson v. Local 275, Laborers Int’l Union, 479 F.2d
1033, 1037 (2d Cir. 1973) (“Irreparable injury is suffered where monetary damages are difficult
to ascertain or are inadequate.”).

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As made clear by the declarations in support of a preliminary injunction against the
implementation of the Rate Change Notice, the risk of harm to research institutions and beyond
is immediate, devastating, and irreparable.
2.

Imminent, Dangerous, and Irreparable Harms

Although the harms resulting from the Rate Change Notice are many, not all harms are
irreparable. With that said, Plaintiffs identify several irreparable harms in their declarations.
First, the suspension of ongoing clinical trials and the resulting threats to patients’ lives
represents a dire risk of a quintessentially irreparable nature. Second, the threats to non-human,
yet still essential, research subjects similarly rings in irreparability. Finally, the potential loss of
human capital and talent to virtually every Plaintiff poses yet another harm incapable of run-ofthe-mill legal relief. Because each of these harms, discussed in detail below, cannot be
adequately remedied once inflicted the Court finds Plaintiffs have met their burden of
demonstrating irreparable harm.
The first, and most pressing, irreparable harm is the suspension of ongoing research and
risk to patients’ lives. Institutions across the country described the immediate suspension of
research, and more specifically, clinical trials, should the Court fail to grant a preliminary
injunction in this case. E.g., States [Dkt. 6-34, Declaration of Dr. Greg Hirth, of Brown
University] (“There is no simpler way to put it: At a 15% indirect cost rate, many of Brown’s
current research projects and clinical trials will be forced to cease abruptly. . . . Even a temporary
interruption of work would threaten clinical trials that supply lifesaving medicine and risk
derailing years of careful progress and efforts directed towards major health challenges.”); States
[Dkt. 6-36, Declaration of Bharat Ramratnam, M.D., of Lifespan Corporation d/b/a Brown
University Health] (“Additionally, [the Rate Change Notice] will hinder the purchase of supplies

58

for clinical trials from national and local vendors. As [a] result, this will lead to the premature
closure of clinical trials leading to layoffs in nursing staff. The overall impact will be the
greatest on patient care with potentially life-saving treatments withdrawn from individuals who
have failed all other treatments.” (emphasis removed)); States [Dkt. 82-8, Declaration of Dr.
Penny Gordon-Larsen, PhD, of the University of North Carolina at Chapel Hill] (“In the event
the Supplemental Guidance is implemented, UNC also anticipates, and is planning for, paused or
canceled clinical trials due to an inability to maintain the facilities and regulatory support
necessary for proper trial execution. This would directly impact patient care in North
Carolina.”); AAU [Dkt. 2-13, Declaration of David P. Norton, of the University of Florida in
Gainesville] (“The NIH’s proposal to cut indirect cost rates to 15% would end or seriously
jeopardize[:] . . . the University of Florida[’s] . . . cancer research[] . . . , clinical research aimed
at providing better outcomes for persons stricken with [Parkinson’s] disease . . . , [and] cutting
edge genetics research [into the cause and treatment of ALS].”); AAU [Dkt. 2-21, Declaration of
Elizabeth Duggins Peloso, of the University of Pennsylvania] (“A 15 percent cap on F&A costs
would disrupt numerous ongoing clinical trials in cancer treatment, immunotherapy and bone
marrow transplant therapy with enrolled patients, including those who have already started but
not yet completed treatment.”); AAU [Dkt. 2-28, Declaration of Ishwar K. Puri, of the University
of Southern California] (“USC anticipates the following immediate consequences of cutting the
indirect cost rate to 15%: [1] Stopping/curbing clinical trials[; 2] Closing critical [biomedical]
research programs[; and, 3] Cancell[ation of] Research Symposia . . . [on] Alzheimer’s disease,
diabetes . . . , prostate cancer, addiction, and many other issues.”). The lives that will certainly
be lost from a pause in these trials cannot be replaced. That is not an opinion of the Court—that

59

is the belief put forth by dozens of declarants who represent universities, research institutions,
and associations whose very goals are to protect the sanctity of human life and science.
Even a temporary halt in clinical trials would be catastrophic, as “clinical trials must
generally be continuous to be effective, due to concerns for both patient care and trial validity.”
States [Dkt. 6-34, Declaration of Dr. Greg Hirth, of Brown University]. Because clinical “trials
take years to set up, create, and perform[,]” a freeze in F&A costs would make it “difficult, if not
impossible, to restart” ongoing clinical trials. [Id.] And even if trials were to resume, “the lack
of continuity [would] compromise[] the scientific results . . . .” [Id.]; see also, e.g., States [Dkt.
6-40, Declaration of Leslie Anne Brunelli, of Washington State University] (“[T]he Sharma lab
has already developed nanotherapeutics and is actively testing them on prostate cancer cells and
organoids. This is time-sensitive work, and any disruption would result in immediate and
potentially irreplaceable data loss on these active tests, which would delay and could ultimately
eliminate the viability of the treatment they are researching.”). Existing NIH-funded clinical
trials represent not only significant capital investments in research equipment and animal
specimens, but also an incalculable commitment to patients, who by the very nature of their
condition have nowhere else to turn. Human safety and scientific integrity are immeasurably
compromised by NIH’s slash-and-cap approach. The Court is hard pressed to think of a loss
more irreparable than the loss of a life, let alone the thousands of people who are counting on
clinical trials as their last hope. There is no question, “there can be no do over and no redress.”
League of Women Voters of U.S. v. Newby, 838 F.3d 1, 9 (D.C. Cir. 2016) (quoting League of
Women Voters of N.C. v. North Carolina, 769 F.3d 224, 247 (4th Cir. 2014)); see also States
[Dkt. 6-7, Declaration of Ken A. Dill, Ph.D., of the State University of New York] (“It is not an

60

exaggeration to say that the true cost of the NIH’s decision may be that thousands of American
lives are needlessly degraded or sacrificed.”).
The Court not only considers the harm to research, and by extension, to human life; the
lives of animals that are essential to research in advance of human trials are also put at risk by
the indirect rate cut. For example, at Washington State University,
[w]ithout funds for animal care through the Office of the Campus Veterinarian,
combined with the loss of indirect[ costs] for the research projects themselves
within CVM, research animal colonies will have to be severely reduced or
eliminated. The loss of life would be massive: in 2023, WSU accounted for use of
90,000 animals of which 50% were fish and 39% were mice. The remaining 11%
include amphibians, reptiles, birds and other mammals. The results would be
horrific. . . . WSU cares for valuable gene-edited strains of cattle, rodents and fish
which are irreplaceable, and elimination of animal colonies will take potentially
years to replace even the ones that are capable of replacement. Even if some
funding could be later restored, the massive loss of animal life cannot be easily
replaced, and some projects are unlikely to restart. Moreover, the loss of the
animal population would require layoffs of professional animal care and
veterinary staff that are nearly impossible to replace, given the current disparity in
opportunities in veterinary medicine that are available in the private sector.
States [Dkt. 6-40, Declaration of Leslie Anne Brunelli, of Washington State University]
(emphasis added). At the University of Washington, which operates one of only seven National
Primate Research Centers, “[t]he cut in IDC rates will cripple [the Research Center]’s life-saving
research,” as it is “required to shut down facilities, directly impacting the 170 individuals
employed by the Center. In addition, with other NPRCs impacted, there will be animals that
cannot be sold or relocated to other research facilities. There is limited sanctuary space available,
and the UW would not be able to cover the high costs associated with lifetime sanctuary care, so
these animals would have to be euthanized.” States [Dkt. 6-39, Declaration of Mari Ostendorf,
of the University of Washington]. As a result, the Center’s “pioneering biomedical advances that
benefit human health . . . will be crippled from loss of NIH funding.” Id. Several other
institutions also identified the need to euthanize animals, including those that are currently key to

61

on-going research, as an immediate consequence. See, e.g., AAU [Dkt. 2-21, Declaration of
Elizabeth Duggins Peloso, of the University of Pennsylvania] (“F&A costs are crucial in clinical
trials with live subjects. In one of the studies mentioned [], where researchers are developing
therapies for HIV, autoimmune disease, and cancer, researchers utilize F&A funds to support
16,000 mice, which includes the cost of 5,333 cages, 11 mice caretakers, 4 cage wash
technicians, 3 veterinary technicians, 1 veterinarian, cage equipment costs, feed, bedding,
enrichment, water bottles for all animals, and regulatory and facility support.”); id. [Dkt. 2-28,
Declaration of Ishwar K. Puri, of the University of Southern California] (“NIH’s proposal to cut
indirect cost rates to 15% would seriously jeopardize” “Aging and Alzheimer’s disease
research . . . [conducted with] genetically engineered mice . . . .”).
For essentially all of the Plaintiff institutions, there are myriad other immediate
consequences that will make it harder to fulfill their purpose. “[O]bstacles [that] unquestionably
make it more difficult for the [plaintiff] to accomplish [its] primary mission . . . provide injury
for purposes . . . [of] irreparable harm.” Newby, 838 F.3d at 9 (citing Nat’l Treasury Emps.
Union v. United States, 101 F.3d 1423, 1430 (D.C. Cir. 1996)). These consequences include the
degradation of vital infrastructure, the loss of imperative staff necessary for research to be
conducted, the loss of human capital resulting from leading scientists choosing to work
elsewhere and universities admitting fewer students, and finally, the uncertainty around the
ability to sustain future grant applications, resulting in the loss of direct research. See, e.g.,
States [Dkt. 6-11, Declaration of Donald M. Elliman, Jr., of Colorado Anschutz Medical
Campus] (“The drastic cuts to NIH F&A will bring the Institute’s research and community-based
programs to a virtual standstill due to the loss of shared administrative staff and the specialized
computing infrastructure essential for the Institute’s efforts.”); States [Dkt. 6-15, Declaration of

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Dr. Tony Allen, of Delaware State University] (“[T]he loss of these funds will necessitate layingoff three or more research support personnel, and reductions in or elimination of stipends for
institutionally-supported doctoral students in DSU’s neuroscience PhD program, the only such
program offered at an Historically-Black university.”); States [Dkt. 6-19, Declaration of Denise
Barton, of the University of Massachusetts] (“Loss of IDC will curtail the ability of UMass Chan
Medical School to provide and keep necessary equipment in good shape. Malfunctioning
equipment can produce faulty data and loss of equipment would bring research relying on that
equipment to a halt, which could erase several years of progress on a project or grant.”); States
[Dkt. 6-24, Declaration of Douglas A. Gage, Ph.D., of Michigan State University] (“MSU next
anticipates to draw funds on or around Friday, February 14, 2025. At that time, the reduced IDC
rate will reduce reimbursement for actual expenditures incurred, and MSU must begin to reduce
staffing and identify other reductions, which will be detrimental to attaining committed research
goals.”); States [Dkt. 6-41, Declaration of Dorota Grejner-Brzezinska, of the University of
Wisconsin-Madison] (“NIH’s eleventh-hour change in available funding forces researchers and
university administrators to reconsider whether to submit grant applications, many of which they
have been fine-tuning for months, given uncertainty about whether the institution can afford to
sustain these projects at a 15% IDC rate. The sense of whiplash is particularly acute, given that
UW-Madison had finalized its most recent NICRA with DHHS less than three weeks prior.”);
States [Dkt. 82-8, Declaration of Dr. Penny Gordon-Larsen, PhD, of the University of North
Carolina at Chapel Hill] (“[T]he loss of these funds will immediately impact UNC’s ability to
cover expenses associated with, among other items: facilities operations and maintenance,
facilities debt service and rent, research equipment purchases, federally-mandated regulatory
compliance and grant administration functions, research-specific IT services, and research-

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specific student support.”); AAU [Dkt. 2-7, Declaration of David A. Tirrell, of the California
Institute of Technology] (“This reduction will have deeply damaging effects on Caltech’s ability
to conduct research from day one. For example: . . . [1] The number of graduate students – who
are the future of biomedical research – who can be admitted will have to be reduced
substantially. The impact on the future of research will be immediate and unrecoverable. [2]
Offers to new postdoctoral scholars also will be reduced, with similar impact on the quality of
the research environment and on the future of biomedical research. [3] Support for our shared
biomedical research facilities will have to be reduced immediately. The viability of these
facilities will be compromised.”); [id.] (“Caltech is in the process of submitting 11 applications
for NIH research support. The uncertainty regarding NIH indirect cost policy makes it
impossible to complete submission of these applications, which are intended to support research
related to nicotine addiction, congenital birth defects, aging, neuromodulation, Parkinson’s
disease, and biomedical measurement technologies.”); AAU [Dkt. 2-12, Declaration of David F.
Kotz, of Dartmouth College] (“Such cuts would certainly result in a hiring freeze on faculty,
postdoctoral associates, and graduate students, directly impacting our ability to conduct
advanced research in the public interest and train the next generation of research
scientists. . . . The world’s best scientists will not move to (or stay at) universities where they are
not able to conduct world-class research. The reality of this shortfall and the cuts it would
necessitate would reduce the amount available for new faculty “start-up” packages, which are
required for junior investigators to set up their laboratories and jump start their own new research
programs.”); AAU [Dkt. 2-13, Declaration of David Paul Norton, of the University of Florida]
(“The University of Florida Research Integrity, Security & Compliance (RISC) unit . . . would
have to reduce staffing within RISC by an estimated 5 individuals, which would immediately

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impact its ability to ensure university compliance with federal regulations. The University of
Florida’s Division of Sponsored Programs (DSP) . . . would have to reduce staffing within DSP
by an estimated 18 individuals, thus crippling [] its ability to submit proposals, negotiate awards,
and setting up subcontracts such as to be consistent with the funding agency’s accountability
requirements. The University of Florida’s Research Division of Contracts & Grants . . . would
have to reduce staffing within Contracts & Grants by an estimated 22 individuals, thus crippling
the University of Florida’s ability to meet its obligations to manage federally-funded grants,
including grants from the NIH, so as to meet the funding agency’s accountability
requirements.”); AAU [Dkt. 2-28, Declaration of Ishwar K. Puri, of the University of Southern
California] (discussing the likely cutting of 73 staff members).
These harms are particularly irreparable, as the losses are compounding. Most
institutions draw funds multiple times per month. Each time there is a draw, the immediate cap
on ICRs is felt anew, exacerbating the harms identified more and more over time. See, e.g.,
States [Dkt. 6-13, Declaration of Dr. Pamir Alpay, of the University of Connecticut] (“UConn
and UCH anticipate this will reduce its draw to recover these costs by about $673,000 per
week.”); States [Dkt. 6-32, Declaration of Peter Barr-Gillespie, Ph.D., of Oregon Health and
Science University] (“OHSU’s next anticipated draw of funds is on or around February 10, 2025.
At that time, the reduction in the IDC rate will result in the loss of $1.6M per week in
reimbursement that supports the salaries, facility costs, and research infrastructure that allows
OHSU to conduct research.”); AAU [Dkt. 2-31, Declaration of Dorota Grejner-Brzezinska, of
the University of Wisconsin-Madison] (“UW-Madison typically draws down funds for NIHfunded projects twice per month and next anticipates drawing funds on or around February 17,
2025. At that time, if allowed to be implemented, the reduced IDC rate will result in UW-

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Madison experiencing a $3.9 million loss in IDC recovery for this upcoming draw.”).
Additionally, despite NIH’s claims, institutions’ endowments, which vary from institution to
institution, will be unable to make up the shortfall—a majority of the funds in endowments are
legally bound for specific purposes based on the gift. See, e.g., States [Dkt. 6-34, Declaration of
Dr. Greg Hirth, of Brown University] (“Brown’s endowment, which provides an essential source
of support for the University’s financial aid, faculty salaries, and academic and co-curricular
programs, consists of over 3,800 unique funds that are legal contracts given as charitable gifts by
alumni, parents, students, and friends of the University.”); AAU [Dkt. 2-8, Declaration of
Theresa S. Mayer, of Carnegie Mellon University] (“While CMU maintains an endowment, it is
neither feasible nor sustainable for CMU funds or other revenue sources to offset shortfalls in
indirect cost recovery. . . .”); [id.] (noting 83.3% “of CMU’s endowment . . . is restricted to
specific donor-designated purposes . . . .”); AAU [Dkt. 2-11, Declaration of Robert A.
Harrington, M.D., of Cornell University] (“Cornell’s existing endowment cannot simply be
redirected to pick up these losses.”). Further, even the funds that are unrestricted are generally
subject to a managed annual payout, often further restricted by applicable state laws. See, e.g.,
AAU [Dkt. 2-1, Declaration of Barbara R. Snyder, of the Association of American Universities]
(“The vast majority of endowed funds often are restricted by the terms on which the funds were
donated to the AAU member university and cannot legally be used to cover research
infrastructure costs.”); AAU [Dkt. 2-8, Declaration of Theresa S. Mayer, of Carnegie Mellon
University] (“Even the portion of the endowment that is unrestricted is subject to a carefully
managed annual payout, typically around 5%, to ensure long-term financial stability for the
institution.”); AAU [Dkt. 2-11, Declaration of Robert A. Harrington, M.D., of Cornell

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University] (“Cornell may only draw down the portion of the endowment that is unrestricted at a
rate that complies with New York State law.”).
As most universities are non-profit institutions, almost all revenue is re-invested in an
effort to advance the universities’ mission and enhance student life, leaving little option to
redirect funds. See, e.g., AAU [Dkt. 2-8, Declaration of Theresa S. Mayer, of Carnegie Mellon
University] (“As a non-profit institution, CMU reinvests nearly all of its revenue into missioncritical activities, leaving little margin to absorb unexpected funding gaps . . . . CMU does not
generate significant surpluses that could be redirected without impacting core academic priorities
such as educational programs and financial aid support for students.”). These harms, and many
more, do not only impact the Plaintiff states and institutions, but the communities and people
they serve. See generally States [Dkt. 91, Amicus Brief by Cities, Counties, and Mayors, at 412] (discussing harms in local communities including staffing cuts for some localities’ largest
employer, slowing job creation and economic growth, and increasing disparities in health
outcomes for rural and urban communities). The ripples are profound and have the potential to
reverberate around the world.
Finally, “[b]y its very nature injury to goodwill and reputation is not easily measured or
fully compensable in damages. Accordingly, this kind of harm is often held to be irreparable.”
Ross-Simons I, 102 F.3d at 20. This reputational harm will operate on an institutional, local, and
national basis. For example, clinical trial patients have “placed their trust in [the] U[niversity of]
W[ashington] for what is in many cases their last option at lifesaving care” and the ”scaling back
in their level of care[,]” an inevitable result of capping indirect costs at 15%, “would be a
devastating breach of trust.” States [Dkt. 6-39, Declaration of Mari Ostendorf, of the University
of Washington]. “The damage to these patients’ lives and their relationship with their care team

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at UW would be nearly impossible to rectify.” [Id.]. No dollar amount can be placed on patient
trust. On an institutional level, “any limit on [UW’s] ability to start new trials will delay
lifesaving treatments that rely on decades of research and development.” [Id.]. More broadly,
the United States leads the world in the health sciences. The cut proposed immediately hinders
the medical research industries, which will jeopardize the United States’ standing as a global
leader in discovery, innovation, and technological advancement. The cut undermines the
universities’ and institutions’ ability to drive medical breakthrough that benefits public health
and contributes to national advancement in science. Once that is lost, it can almost certainly
never be regained. No dollar amount can be placed on the value of the United States remaining
the world leader in research and medical advancement.
As Plaintiffs have demonstrated their collective harm “is not accurately measurable or
adequately compensable by money damages, irreparable harm is a natural sequel.” Ross-Simons
I, 102 F.3d at 19. Even though, as established above, the likelihood of success on the merits is
great, which would allow “a movant [to] show somewhat less in the way of irreparable harm and
still garner preliminary injunctive relief,” the allowance is unnecessary. Astra U.S.A., 94 F.3d at
743-44 (1st Cir. 1996). It is impossible to accurately measure or compensate humans who lose
their lives from a pause in research. It is impossible to measure the value of lost research
animals—representing years of study central to medical breakthrough—that will be euthanized.
It is impossible to measure the value of discovery from scientists who choose to leave, or of the
potential students who now never become scientists at all. Even for those harms than can be
measured in dollars and cents, the losses are compounding and will result in even greater
disruption to ongoing research and clinical trials. As a result, failure to grant a preliminary
injunction would certainly result in irreparable harm.

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C. BALANCE OF EQUITIES AND PUBLIC INTEREST
Finally, the Court must balance the parties’ relative hardships and consider the public
interest. These factors merge because government parties oppose the preliminary injunction.
Nken, 556 U.S. at 435.
Courts have consistently held there is a strong public interest in health and safety. See
World Gym, Inc. v. Baker, 474 F. Supp. 3d 426, 434 (D. Mass. 2020) (noting a “great” public
interest in public health); see also Grand River Enters. Six Nations, Ltd. v. Pryor, 425 F.3d 158,
169 (2d Cir. 2005) (writing that public health is a “significant public interest”); Jones v. Wolf,
467 F. Supp. 3d 74, 94 (W.D.N.Y. 2020) (confirming there is a public interest in “public health
and safety”). The Plaintiffs’ hardship absent a preliminary injunction, as described above, is
substantial and ranges from the halting of research and clinical trials, resulting in the loss of life
for those of whom are relying on clinical trials as their last hope, to a negative impact on patient
health and outcomes, the death of animals that represent years of research, the degradation of
infrastructure, the loss of staff who are central to patient care and research activities, brain drain
in the healthcare industry, and the delay and potential suspension of future grant applications as
institutions are unable to support additional research projects. Thus, in light of these hardships, a
preliminary injunction would preserve public health, and by extension, serve the public interest.
Additionally, there is “substantial public interest ‘in having governmental agencies abide by the
federal laws.’” Newby, 838 F.3d at 12 (D.C. Cir. 2016) (quoting Washington v. Reno, 35 F.3d
1093, 1103 (6th Cir. 1994)). As described above, it is likely Plaintiffs will succeed on the merits,
rendering the Notice unlawful. Therefore, the preliminary injunction would serve the public
interest as NIH is forced to abide by existing law and regulations.

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Conversely, Defendants do not specifically address the hardship or public interest factors
and thus waive arguments as to their balancing. Doe v. Trump, No. 25-CV-10135-LTS, 2025
WL 485070, at *14 (D. Mass. Feb. 13, 2025); see also United States v. Zannino, 895 F.2d 1, 17
(1st Cir. 1990). Despite this waiver, the Court will consider the three government interests
asserted in the Rate Change Notice: First, NIH seeks to maximize funding toward “direct
scientific research costs rather than administrative overhead”; second, “indirect costs
are . . . difficult for NIH to oversee”; and third, NIH hopes to make indirect costs “reflect . . . the
private sector indirect cost rates.” Despite these interests, the scales remain tipped in Plaintiffs’
favor because the government “cannot suffer harm from an injunction that merely ends an
unlawful practice.” Rodriguez v. Robbins, 715 F.3d 1127, 1145 (9th Cir. 2013); see also R.I.L-R
v. Johnson, 80 F. Supp. 3d 164, 191 (D.D.C. 2015) (finding that the government “cannot suffer
harm from an injunction that merely ends an unlawful practice”). Further, there is no public
interest in upholding unlawful agency action. Newby, 838 F.3d at 12.
Nonetheless, even if promulgation of the Rate Change Notice is ultimately vindicated, the
temporary halting of the rate change cannot create hardship if it does not frustrate Defendants’
policy choices. Defendants indicate they seek to maximize direct funding but neither the Rate
Change Notice nor their filings demonstrate how that is accomplished under the proposed
regulation. Instead, Plaintiffs’ declarations show repeatedly that the overall volume of research
will necessarily decrease. Defendants also state an oversight goal but fail to explain how the
Rate Change Notice increases or simplifies grant supervision beyond the accountability already
required by Appendix III § (C)(11)(c)-(d) to 45 C.F.R. § 75. Finally, as described above, NIH
failed to explain how bringing ICRs in line with private institutions, which not only serve
different roles in supporting institutions that conduct research but also follow entirely different

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procedures in defining direct versus indirect costs, would serve the public interest. In fact, it
only seems to diminish institutions’ ability to support both existing and potential research.
Because Plaintiffs are likely to prevail in their argument that the Rate Change Notice is
counter to statute and regulation, an injunction supports the public interest in having agencies
abide by federal law. Further, an injunction also pauses cuts in grant funding that would
adversely and immediately affect public health. Thus, the public interest factors weigh in favor
of a preliminary injunction.
V.

SCOPE OF INJUNCTION
Having concluded that Plaintiffs have met their burden under the preliminary injunction

standard, the Court must craft the appropriate relief. The AAMC and AAU Plaintiffs urge the
Court to preliminarily enjoin the Defendants from taking any steps to further implement the Rate
Change Notice in its entirety for all grant recipients, while Plaintiff States seek preliminary
injunctive relief for the 22 named Plaintiff States. AAMC and AAU assert there are compelling
reasons to enjoin the implementation of Rate Change Notice, namely the breadth of the impact
on the victims in these suits, but also similarly situated states, associations, universities, and
research institutions. The Plaintiffs represent an excess of 1,400 medical institutions across all
50 states and territories, including Puerto Rico and the District of Columbia. NIH issues nearly
60,000 grants, involving 300,000 researchers at 2,500 universities, medical schools, and research
institutions.
While federal district courts have issued nationwide or “universal” injunctions and they
have been acknowledged by the circuit courts, the Supreme Court has not directly addressed the
issue despite concerns expressed by some justices over their use. See Trump v. Hawaii, 585 U.S.
667, 713 (2018) (Thomas, J., concurring) (expressing skepticism of the use of such authority by

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the district courts.); Dep’t. of Homeland Sec. v. New York, 140 S. Ct. 599, 600 (2020) (Gorsuch,
J., concurring). With that said, there are appropriate circumstances during which nationwide
injunctions are not only appropriate, but necessary. Florida. v. Dep’t of Health & Hum. Servs.,
19 F.4th 1271, 1281-82 (11th Cir. 2021). Such appropriate circumstances include the need “to
protect similarly situated nonparties, [] to avoid the ‘chaos and confusion’ of a patchwork of
injunctions, . . . [or] where the plaintiffs are dispersed throughout the United States.” Id. (citing
Chicago v. Barr, 961 F.3d 882, 916-17 (7th Cir. 2020)). To this end, in drafting equitable relief,
courts must consider “what is necessary, what is fair, and what is workable.” North Carolina v.
Covington, 581 U.S. 486, 488 (2017) (quoting New York v. Cathedral Acad., 434 U.S. 125, 129
(1977)).
As to the similarly situated nonparties, the need here is particularly acute. The Rate
Change Notice was signed on Friday, February 7, 2025 and was set to go into effect on the
following business day, Monday, February 10, 2025. Plaintiffs here were moving with great
speed to file this suit, as the change was announced after business hours on a Friday and its
implementation was set for that following Monday, resulting in immediate harm. As discussed
at oral argument, there are certainly other similarly situated nonparties who likely would have
joined the suits had there been time ahead of the Rate Change Notice’s implementation. These
nonparties should not be forced to suffer the harm just because there was not enough time and
resources for them to join the suit because of the agency’s rush to implement the Rate Change
Notice. “[N]ationwide injunctions provide a mechanism for courts to protect all those who could
be harmed by a federal policy when only a few have the ability to quickly bring their case before
a court.” Amanda Frost, In Defense of Nationwide Injunctions, 93 N.Y.U. L. Rev. 1065, 109495 (2018) (“Nationwide injunctions are at times the only way to prevent irreparable injury to

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individuals who cannot easily or quickly join in litigation.”). Further, this Court agrees with
Plaintiffs that “[c]ourts should also avoid issuing an injunction that ‘lop[s] a state off’ thereby
‘entirely undercut[ting] that injunction’s effectiveness.’” States [Dkt 81, at 26] (quoting
DraftKings Inc. v. Hermalyn, 118 F.4th 416, 424 (1st Cir. 2024)) (modifications in original).
Turning to the “chaos and confusion” of a patchwork of injunctions, the concern is
certainly present in this case. Should an injunction be limited to the named Plaintiffs, institutions
both within and outside the scope of the injunction will need to operate with concern for the
future sustainability of their research. The Massachusetts Institute of Technology (“MIT”)
provides an enlightening example:
As a direct result of real and threatened federal cost-cutting in fundamental
research and potential increased levies on universities, including this attempted
reduction in F&A cost reimbursement rate, MIT is being forced to take immediate
and contemporaneous action to reduce its financial exposure. The Institute is
implementing operating budget reductions and curtailing its capital investments.
At the Institute level, MIT is deferring capital projects, notably including research
infrastructure and space renewals, lab equipment installations, ventilation air
capacity improvements, and energy efficiency upgrades. MIT also expects to
implement a partial hiring freeze across the Institute this week. In addition, this
week MIT is issuing central budgets to its internal units that mandate cuts from
current resource levels.
AAU [Dkt. 2-17, Declaration of Ian A. Waitz, of the Massachusetts Institute of Technology].
Absent a nationwide injunction, institutions across the country will be forced to operate with the
same uncertainty, resulting in the types of irreparable harm that a preliminary injunction is meant
to prevent. In the face of this uncertainty, institutions would almost certainly file many
additional lawsuits. The potential patchwork of injunctions would cause administrability
problems, not only for the institutions relying on consistency to prevent the harm discussed
above but also for NIH as it attempts to comply with varying injunctions across the country.

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As to the third point, Plaintiff States, institutions, associations, and association members
are plainly dispersed across the country. There are 22 states, university declarations from 32
states, and association membership in all 50 states. There is no doubt the Plaintiffs are dispersed
across the country, which weighs in favor of a nationwide injunction.
In addition to the considerations discussed above, the nature of the action itself supports a
nationwide injunction. The normal remedy for a successful APA challenge is vacatur of the rule
and its applicability to all who would have been subject to it. Victim Rts. L. Ctr. v. Cardona, 20CV-11104-WGY, 2021 WL 3516475, at *1 (D. Mass. Aug. 10, 2021) (citing 5 U.S.C. §
706(2)(A) (“The reviewing court shall hold unlawful and set aside agency action . . . found to be
. . . arbitrary [and] capricious . . . .”); William Baude et. al., The Federal Courts and the Federal
System 1354 (8th ed. 2025) (describing how “the Administrative Procedure Act’s provision for
the vacatur of federal agency action may confer” a power analogous to universal injunction “by
statute”); see also Gailius v. INS, 147 F.3d 34, 47 (1st Cir.1998) (finding that vacation and
remand is appropriate when an agency has failed to give adequate explanation for its
conclusions); Nw. Env’t Advocs. v. EPA, 537 F.3d 1006, 1026 (9th Cir. 2008) (“We affirm the
district court’s decision to vacate the regulation and to remand for further proceedings as a valid
exercise of its remedial powers.”); Lovely v. FEC, 307 F. Supp. 2d 294, 301 (D. Mass. 2004)
(“[V]acation is a proper remedy when an agency fails to explain its reasoning adequately.”
(quoting Harrington v. Chao, 280 F.3d 50, 60 (1st Cir. 2002) (internal quotation marks omitted)).
It would be anathema to reasonable jurisprudence that only the named Plaintiffs should be
protected from the irreparable harms of an unlawful regulation. Thus, “when a reviewing court
determines that agency regulations are unlawful, the ordinary result is that the rules are
vacated—not that their application to the individual petitioners is proscribed.” Nat’l Min. Ass’n

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v. U.S. Army Corps of Eng’rs, 145 F.3d 1399, 1409 (D.C. Cir. 1998) (quotation marks and
citation omitted); see also Griffin v. HM Fla.-ORL, LLC, 144 S. Ct. 1, 2 n.1 (2023) (explaining
that “[u]nlike judicial review of statutes, in which courts enter judgments and decrees only
against litigants, the APA . . . go[es] further by empowering the judiciary to act directly against
the challenged agency action. This statutory power to ‘set aside’ agency action is more than a
mere non-enforcement remedy. . . . In these situations, the courts do hold the power to ‘strike
down’ an agency’s work, and the disapproved agency action is treated as though it had never
happened.” (quoting Jonathan F. Mitchell, The Writ-of-Erasure Fallacy, 104 Va. L. Rev. 933,
1012-13 (2018))). Thus, particularly in light of the likelihood of success on the merits as to the
unlawfulness of the Rate Change Notice and the APA claims, the nature of these suits counsel in
favor of a nationwide injunction.
On a final note, there is a noteworthy factor of judicial economy and efficiency that
likewise favors a universal solution to the current dilemma. Plaintiffs’ challenge to the
lawfulness of NIH’s action and the unique nature of the broad impact of the Rate Change Notice
warrants a broad response until final judgment or appellate review, whichever occurs first,
resolves the question of the lawfulness of NIH’s actions. Considering the irreparable harm likely
to befall similarly situated nonparties, the chaos that would result both for institutions and NIH
from a patchwork of injunctions, the diffuse nature of the Plaintiffs, and the nature of the suit, a
nationwide preliminary injunction is the appropriate and reasonable remedy.
VI.

CONCLUSION
For the foregoing reasons, Plaintiffs’ Motion for Preliminary Injunction is GRANTED.
The Defendants and their officers, employees, servants, agents, appointees, and

successors are hereby enjoined from taking any steps to implement, apply, or enforce the

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Supplemental Guidance to the 2024 NIH Grants Policy Statement: Indirect Costs Rates (NOTOD-25-068), issued by the Office of the Director of the National Institutes of Health on February
7, 2025, above referred to as the Rate Change Notice, in any form with respect to institutions
nationwide until further order issued by this Court.

SO ORDERED.
Dated: March 5, 2025

/s/ Angel Kelley
Hon. Angel Kelley
United States District Judge

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