Legal Strategies for Navigating Federal Grant Termination

When a federal agency terminates a grant award, the impact on recipients—whether nonprofits, research institutions, or public entities—can be immediate and disruptive. Operations may be halted, staff laid off, and key projects derailed. However, according to an article by Aron C. Beezley and Nathaniel J. Greeson of the Bradley firm, recipients are not without recourse. Understanding the regulatory framework and acting swiftly can make the difference between irreversible loss and a successful challenge.

Federal grant terminations are governed by the Uniform Guidance at 2 C.F.R. Part 200, which allows agencies to terminate awards for cause, with mutual consent, or for convenience. Each type carries distinct procedural rights and remedies. The authors say recipients should begin by closely reviewing their Notice of Award and the agency’s regulations, which often detail what constitutes noncompliance, outline notice requirements, and specify avenues for appeal.

If a grant is terminated for cause, recipients are typically entitled to written notice, an opportunity to respond or correct deficiencies, and access to the agency’s dispute resolution process. Understanding these appeal rights is critical, as procedures vary by agency.

Although grants differ from contracts, courts may apply contractual principles in certain disputes. If the termination violates applicable terms or relies on bad faith, recipients may pursue claims under doctrines like equitable estoppel or even the Tucker Act, though sovereign immunity can limit remedies.

If administrative remedies are exhausted, litigation may be pursued in federal court or the US Court of Federal Claims, depending on the nature of the claim.

For litigation professionals advising grantees, federal grant termination is not final. Legal avenues exist but require prompt action, precise documentation, and early legal guidance to preserve rights and funding eligibility.