Controversial Transportation Lawsuits Shaping Federal Funding

Since late 2025, a wave of transportation lawsuits over federal funding has moved through the federal courts, most of them triggered by the Trump administration’s decisions to freeze previously committed money or attach new policy conditions to it. Transit agencies, states, and coalitions of local governments have sued the U.S. Department of Transportation, the Federal Transit Administration, and other federal agencies, and courts have so far mostly sided with the plaintiffs. Several of the biggest cases remain active in mid-2026.

Chicago Transit Authority v. U.S. Department of Transportation

The Chicago Transit Authority sued the Department of Transportation and the FTA on March 20, 2026, seeking release of roughly $3 billion in committed federal funding for two rail projects: the Red Line Extension, which would add 5.3 miles of track and four stations south of 95th Street, and the Red and Purple Modernization project, which involves rebuilding 9.6 miles of century-old North Side track and building four new accessible stations. The Red Line Extension was anchored by a Full Funding Grant Agreement the FTA signed on January 10, 2025.¹

On October 3, 2025, the White House Office of Management and Budget paused $2.1 billion in Chicago infrastructure funding, and the FTA froze all disbursements for both projects.¹ The stated basis was a September 2025 rule that eliminated race- and gender-based presumptions from the DOT’s Disadvantaged Business Enterprise program. The CTA argued the rule was applied retroactively only to grants in Chicago and New York, while hundreds of other federally funded projects continued without interruption.²

The CTA said it submitted more than 1,000 pages of compliance documentation on October 21, 2025, and certified compliance again on December 10, 2025, but received no response from the department.¹³⁴ The Department of Transportation defended the freeze as an effort to stop “discriminatory,” “illegal,” and “wasteful” contracting practices, saying “the American people don’t care what race or gender construction workers, pipefitters, or electricians are.”²

Four days after the suit was filed, on March 24, 2026, Judge Thomas M. Durkin granted a temporary restraining order requiring the government to stop applying the new rule to CTA grants and resume payments. He found the government’s actions appeared “pretextual and targeted” and that the CTA would suffer irreparable harm from continued delays.⁵ The order was extended on April 9, 2026. A hearing on the CTA’s motion for a preliminary injunction is scheduled for July 28, 2026, and the government has filed a motion to dismiss.⁴

Gateway Development Commission and the Hudson Tunnel

The $16 billion Gateway Hudson Tunnel Project connecting New York and New Jersey ran into the same problem. The Department of Transportation suspended federal disbursements on September 30, 2025, and by early February 2026 the project’s owner had exhausted available credit and was about to halt construction. Roughly 1,000 workers were laid off during the freeze.⁶⁷

Two suits followed on February 2, 2026. The Gateway Development Commission sued the United States in the Court of Federal Claims, alleging breach of grant and loan agreements over more than $205 million in withheld reimbursements, bringing eight counts including improper suspension of funding and breach of the implied duty of good faith.⁸ New York Attorney General Letitia James and New Jersey Acting Attorney General Jennifer Davenport filed a parallel suit in the Southern District of New York seeking an order declaring the freeze unlawful.⁶

On February 6, 2026, Judge Jeannette A. Vargas issued a temporary restraining order barring enforcement of the suspension. The government sought a stay, and on February 9 Judge Vargas imposed a brief administrative pause on her own order to give the Second Circuit time to consider emergency relief.⁹⁷⁸

New York Congestion Pricing

New York City’s congestion pricing program, which tolls drivers entering Manhattan below 60th Street, drew a related lawsuit after the administration tied its cancellation to federal transportation funding. On March 3, 2026, Judge Lewis J. Liman of the Southern District of New York ruled that Transportation Secretary Sean Duffy had acted “arbitrarily and capriciously” in trying to unilaterally end the program. He found that a February 2025 letter from the administration demanding cancellation amounted to a “definitive repudiation of contractual obligations,” and that threats to withhold federal funding for other New York transit and highway projects were “impermissible.”¹⁰

Secretary Duffy filed a notice of appeal to the Second Circuit on May 1, 2026, and the program continues operating during the appeal.¹¹ A separate Commerce Clause and federal preemption challenge from the Trucking Association of New York was dismissed on March 17, 2026, when the court found the tolls were a “fair approximation of use.”¹² A New Jersey lawsuit against the program was paused in late April 2026 for settlement talks.¹³

King County v. Turner: The Broader Grant Conditions Case

Running alongside the individual project fights is a broader challenge to the administration’s use of federal grants as leverage. In King County v. Turner, a coalition that grew to 75 local governments — including King County, Washington; San Francisco; Boston; and New York City — sued the Departments of Transportation, Housing and Urban Development, and Health and Human Services in the Western District of Washington. The plaintiffs alleged the administration was conditioning more than $14 billion in federal grants on compliance with its positions on immigration enforcement, DEI policies, gender identity, and abortion access, in violation of the separation of powers, the Administrative Procedure Act, and the Fifth and Tenth Amendments.¹⁴

Judge Barbara J. Rothstein sided with the plaintiffs and issued three preliminary injunctions between June 2025 and January 2026, blocking enforcement of the disputed conditions, barring retaliation against plaintiffs, and requiring the agencies to process grant agreements. Her January 2026 order rejected the government’s argument that recipients should have to choose between the administration’s reading of anti-discrimination law and existing court precedents.¹⁴ The government appealed to the Ninth Circuit, which heard oral argument on February 9, 2026. As of mid-2026, the panel has not ruled.¹⁵

What These Cases Have in Common

Across the Chicago, Gateway, congestion pricing, and King County cases, plaintiffs have leaned on the same core theories: that the administration is using signed grant agreements and appropriated money as leverage to enforce policy positions Congress did not authorize, and that its freezes and conditions violate the Administrative Procedure Act, the Spending Clause, and separation-of-powers limits. Federal judges reviewing those claims at the emergency-relief stage have used strong language, calling the government’s actions “arbitrarily and capriciously” done, “pretextual and targeted,” and, in the case of funding threats tied to congestion pricing, “impermissible.”¹⁰⁵

None of these cases has produced a final judgment on the merits. The Chicago suit is heading toward a preliminary injunction hearing in late July 2026. The Gateway commission’s remaining claims for freeze-period damages are still alive. The congestion pricing appeal is before the Second Circuit. And the Ninth Circuit’s ruling in King County could reshape the ground rules for every one of these disputes, because it addresses the underlying question of whether the administration can attach these conditions at all.

1
CTA. Chicago Transit Authority Sues Federal Government Over Paused Red Line Extension and Red and Purple Modernization Project Funding
2
U.S. News & World Report. Chicago Transit Authority Lawsuit Targets Federal Construction Funding Halted Last Fall
3
NBC Chicago. Chicago Transit Authority Lawsuit Targets Halted Federal Construction Funding
4
Civil Rights Litigation Clearinghouse. Chicago Transit Authority v. United States Department of Transportation
5
WTTW News. Federal Judge Orders Government to Temporarily Release Red Line Extension Funds
6
ABC7 New York. NY, NJ Sue Trump Administration Over Gateway Project Funding Freeze
7
The New York Times. Gateway Hudson Tunnel Project Trump Funding
8
Civil Rights Litigation Clearinghouse. Gateway Development Commission v. United States
9
Engineering News-Record. Court Pauses Order Reinstating Federal Funding for Hudson Tunnel Project
10
The New York Times. NYC Congestion Pricing Ruling
11
Bloomberg. Trump Administration to Appeal Ruling on NYC Congestion Pricing
12
New England Fuel Institute. Federal Court Dismisses Trucking Association Challenge to NYC Congestion Pricing Plan
13
NJ Spotlight News. NYC Congestion Pricing Back in Court as Trump Appeals Tolls Ruling
14
Public Rights Project. King County v. Turner
15
Courthouse News Service. Trump Admin Asks Ninth Circuit to Lift Block on Grant Conditions