Trump administration urges dismissal of California high-speed rail lawsuit

(CN) — California’s attempt to claw back federal dollars for its high-speed rail project is in the wrong court, a U.S. Department of Justice attorney argued Monday.

Attorney Kathryn Barragan argued that some $4 billion in grants provided to the California High-Speed Rail Authority came with requirements. The federal government has the power to terminate those grants if requirements aren’t met, and a District Court has no authority to adjudicate such cases.

The proper venue for those disputes is the U.S. Court of Federal Claims, Barragan said. That’s why U.S. District Judge Dale Drozd should dismiss the case.

Attorney Sharon O’Grady, representing the authority, argued a nuance existed: a direct benefit the federal government would receive, like a cash payment or patent rights. Nothing in this grant agreement provided that direct benefit.

“It’s really not a benefit to the U.S.,” she added. “It’s a public benefit, which is distinguishable.”

The case stemmed from the July decision by President Donald Trump’s administration to reverse course on the grants. In June, Transportation Secretary Sean Duffy said an investigation had found the project was in default of its federal grant terms due to missed deadlines, budget shortfalls and inflated ridership projections.

The authority immediately filed suit, arguing the decision was arbitrary and capricious, contrary to law, and a threat to wreak massive economic damage to the area, state and country.

The federal government responded with a motion to dismiss, which Drozd heard Monday in a remote hearing. The judge made no decision that day, saying he’d issue a written order.

The argument over whether Drozd lacks jurisdiction took up most of the hearing.

Barragan said the U.S. Supreme Court has weighed in on the issue, ruling that a case like the authority’s — even if brought under the Administrative Procedure Act — should go to the U.S. Court of Federal Claims.

Barragan pointed to Department of Education v. California and National Institutes of Health v. American Public Health Association , both decided this year.

“We think that decision is controlling here,” she added.

In the motion to dismiss, the federal government argued that any cause of action hinges on grant agreements between those involved. That means the authority’s claim is based on the grant, over which a district court has no jurisdiction.

The U.S. Court of Federal Claims rules on suits seeking money from the United States.

O’Grady countered that the two Supreme Court cases cited focused on stays from a preliminary injunction. The high court didn’t resolve those cases, and both remain pending.

“This case doesn’t even ask for monetary damages,” O’Grady added. “They’re asking you to dismiss the whole case.”

O’Grady argued the decision to terminate a grant is reviewable by a judge. She likened it to a scholarship: No one is entitled to receive one, but once given, someone has a right to retain it.

“This is not the type of unfettered discretion where the courts don’t get involved,” she said.

A secondary argument of Barragan’s was that a decision to award a grant from a lump-sum appropriation, which is the case here, falls under agency discretion. That makes it unreviewable by Drozd.

The federal government has broad discretion in how it allocates funding, Barragan said.

“The plaintiff doesn’t dispute that there’s broad discretion here,” she added. “These grants are highly competitive.”

Saying he intended to give no indication about the ruling, Drozd asked the attorneys about the case’s timeline if he were to deny the motion to dismiss.

Barragan said next steps would include creating an administrative record — a set of documents an agency uses and a judge would examine to determine the legality of a decision. Building that record would take about a month.

Both sides would then advance to filing motions for summary judgment.

Drozd noted he had over 800 cases when estimating when he might issue a ruling.

“No prediction as to how quickly,” he quipped.