State of Michigan v. DeVos, 481 F.Supp.3d 984

Background

The CARES Act (Mar. 2020) allocated GEER and ESSER funds (~$16 billion) to help K–12 education respond to COVID-19 and directed LEAs to “provide equitable services in the same manner as provided under section 1117” of the ESEA.
Section 1117 historically apportions funds to private schools based on the number of low-income children attending those schools. Congress explicitly incorporated §1117 into §18005(a) of the CARES Act.
The Department of Education issued non-binding Guidance (Apr. 30, 2020) and an interim final Rule (July 1, 2020) that adopted a different allocation option: require LEAs to share CARES funds with private schools based on total enrollment (or accept constraints to use the §1117 low-income formula only in limited circumstances). The Rule went into effect without prior notice-and-comment.
Plaintiffs (eight states, D.C., and four large school districts) challenged the Rule under the Constitution and the APA and moved for a preliminary injunction to block enforcement.
Plaintiffs presented district-level evidence that the Rule would divert substantial CARES funds from public schools, disrupt budgeting and reopening plans, and impose operational harms; the Department did not meaningfully dispute those harms at the hearing.
The district court granted a preliminary injunction prohibiting the Department and Secretary DeVos from enforcing the Guidance or the interim final Rule against the plaintiffs pending further order.

Issues

Issue	Plaintiffs' Argument	Defendant's Argument	Held
Whether §18005(a)’s phrase “in the same manner as provided under section 1117” requires using §1117’s low‑income formula to apportion CARES funds	§18005(a) plainly and unambiguously incorporates §1117’s formula (based on low‑income student counts); Congress’ words must be given their ordinary meaning	The CARES Act’s context (aiming to aid “all” students) makes §18005(a) ambiguous; agency may interpret and adopt a total‑enrollment approach	Court held the statutory language is plain: §18005(a) incorporates §1117’s formula; the Rule contradicts the statute and is unlawful
Whether Chevron deference saves the Department’s interpretation	Not applicable because the statute is unambiguous; agency cannot rewrite clear law	Agency invoked Chevron to justify resolving alleged ambiguity	Court found no step‑one ambiguity, so Chevron deference does not apply; agency exceeded its authority
Whether the Rule is arbitrary, capricious, or in excess of statutory authority under the APA	Rule is substantively unlawful and exceeds statutory limits (5 U.S.C. §706(2)(A),(C))	Agency argued interpretive authority and contextual reading justified the Rule	Court concluded plaintiffs likely to prevail under the APA because the Rule departs from Congress’s unambiguous formula
Preliminary‑injunction factors (irreparable harm, balance of hardships, public interest)	Plaintiffs will suffer irreparable budgetary and operational harms; public interest favors enforcing Congress’s statute and protecting public schools	Department argued public interest supports broader sharing with private schools; enforcement needed for equitable services	Court found plaintiffs showed likely irreparable harm; balance of hardships and public interest favor injunction; injunction granted

Key Cases Cited

Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008) (preliminary injunction standard requires likelihood of success, irreparable harm, balance of equities, and public interest)
Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984) (two‑step framework for agency deference where statute is ambiguous)
Utility Air Regulatory Group v. EPA, 573 U.S. 302 (2014) (agency may not promulgate rules inconsistent with an unambiguous statute)
King v. Burwell, 576 U.S. 473 (2015) (limits on interpreting statutory text by relying on broader context; careful use of context to effectuate congressional intent)
Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014) (statutory interpretation begins with the text)
City of Los Angeles v. Barr, 941 F.3d 931 (9th Cir. 2019) (use of ordinary meaning and dictionary definitions in statutory construction)
E. Bay Sanctuary Covenant v. Barr, 964 F.3d 832 (9th Cir. 2020) (when government is a party, hardship and public interest factors merge)
Gonzales v. Oregon, 546 U.S. 243 (2006) (limits on broad executive reinterpretation of statutory grants)
Clinton v. City of New York, 524 U.S. 417 (1998) (Executive may not enact, amend, or repeal statutes)
Wisconsin v. Yoder, 406 U.S. 205 (1972) (importance of public education as a core state function)
Garcia v. Google, Inc., 786 F.3d 733 (9th Cir. 2015) (Ninth Circuit application of preliminary injunction standards)