Cases & Developments

Complaint for declaratory and injunctive relief. Plaintiffs, the Association of American Universities (AAU), the American Council on Education (ACE), the Association of Public and Land-Grant Universities, The Arizona Board of Regents on behalf of Arizona State University, Brown University, California Institute of Technology, the Regents of the University of California, Carnegie Mellon University, the University of Chicago, Cornell University, Board of Trustees of the University of Illinois, Massachusetts Institute of Technology, Regents of the University of Michigan, Regents of the University of Minnesota, the University of Pennsylvania, and the Trustees of Princeton University allege that defendants, the National Science Foundation (NSF) and Brian Stone’s decision to slash indirect cost rates to government-funded research is unlawful. Defendants issued a new policy on May 2, 2025, imposing a categorical cap on all new grant and cooperative agreement awards to universities not to exceed 15%. Plaintiffs allege that if allowed to stand, NSF’s policy “will badly undermine scientific research at America’s universities and erode our Nation’s enviable status as a global leader in scientific research and innovation.” Plaintiffs contend that defendants’ new policy violated the Administrative Procedure Act (APA) as it is (1) contrary to law; (2) an illegal departure from Negotiated Cost Rates in violation of 2 C.F.R. 200.414; (3) an illegal departure from cost recovery regulations; and (4) arbitrary and capricious. Plaintiffs ask that the Court issue a vacatur of the policy; issue declaratory judgment finding the rate cap invalid, arbitrary and capricious, and contrary to law; issue an injunction permanently prohibiting defendants, their agents, and anyone acting in concert or participation with defendants from implementing, instituting, maintaining, or giving effect to the rate cap policy in any form; from otherwise modifying negotiated indirect cost rates except as permitted by statute and by the regulations of OMB; and from rejecting or otherwise treating adversely proposals for NSF funding submitted at universities’ negotiated rates rather than the policy’s proposed 15% rate cap. 

U.S. Department of Education (the Department) sent a letter to Harvard University informing the University that the federal government will no longer provide it with grants. The letter alleges that the University is “engaging in a systemic pattern of violating federal law” and criticizes the University’s management, course listings, and faculty. It further alleges that the University has failed to abide by the Supreme Court’s decision in Students for Fair Admissions v. Harvard (2023). The letter concludes by encouraging the University to draw from its endowment and alumni to compensate for the loss in federal grants. Litigation is ongoing in the related case, Harvard v. U.S. Dep’t of Health and Human Services (D. Mass. Apr. 21, 2025), where amicus briefs are due June 9, 2025, and oral arguments are set to take place on July 21, 2025.  

The National Science Foundation (NSF) published a Policy Notice on the adoption of a standard 15% Indirect Cost Rate (ICR) for NSF Grants and Cooperative Agreements awarded to institutions of higher education. The ICR applies to all NSF financial assistance awards and subawards and is intended to streamline funding practices, increase transparency, and ensure that resources are applied to direct scientific engineering research activities. The ICR is effective beginning May 5, 2025, applies to new awards, and does not apply retroactively to existing awards. The policy notice states that the new policy allows NSF and its awardees to focus more on scientific progress and less on administrative overhead by aligning with common federal benchmarks and improving government efficiency by eliminating the need for individualized indirect cost negotiations.  

The National Institutes of Health (NIH) published a Notice to the research community of a new Civil Rights term and condition that modifies the current terms and conditions for all NIH grants, cooperative agreements, and other transaction (OT) awards. The term applies prospectively to new, renewal, supplement, or continuation awards issued on or after the date of the Notice. The new term requires recipients to comply with all applicable Federal anti-discrimination laws material to the government’s payment decisions for purposes of 31 U.S.C. §372(b)(4). Specifically, recipients must certify that they do not and will not during the term of the financial assistance award, operate any programs that advance or promote “diversity, equity, and inclusion” (DEI), “diversity, equity, inclusion, and accessibility” (DEIA), or discriminatory equity ideology in violation of Federal anti-discrimination laws; and that they will do not and will not for the duration of the term of the award, engage in a discriminatory prohibited boycott (discriminatory equity ideology has the meaning set forth in Section 2(b) of Executive Order 14190 of January 29, 2025; discriminatory prohibited boycott means refusing to deal, cutting commercial relations, or otherwise limiting commercial relations specifically with Israeli companies or with companies doing business in or with Israel or authorized by, licensed by, or organized under the laws of Israel to do business.) Finally, the Notice states that NIH reserves the right to terminate financial assistance awards and recover all funds if recipients, during the term of the award, operate any program in violation of Federal anti-discrimination laws or engage in a prohibited boycott.

The National Science Foundation (NSF) announced that awards that are not aligned with NSF’s priorities have been terminated, including but not limited to those on diversity, equity, and inclusion (DEI) and misinformation/ disinformation. In addition to the updated priorities, NSF also published a number of frequently asked questions (FAQ). The FAQ section addresses questions regarding the absence of an appeal or alternative dispute resolution process existing for the awards that have been terminated, project report requirements, cost reimbursement prior to the award termination date, working with Minority Serving Institutions, and protected characteristics. 

Amicus Brief from the American Council on Education (ACE) and several other higher education associations in Massachusetts v. Robert F. Kennedy Jr. The case challenges the National Institutes of Health’s (NIH) sudden cancellation of research grants that defendants claim no longer aligns with NIH’s priorities. The brief opposes blacklisting of research perceived to be connected to politically disfavored topics, as well as termination of hundreds of existing awards without explanation, notice, or adherence to legal process. In the brief, the associations warn that these actions threaten to destabilize the entire biomedical research system, and further underscore the severe consequences for institutions, researchers, and patients who participate in federally funded studies.