Ninth Circuit Rejects HUD, DOT Authority to Define FCA Materiality
The 2-1 ruling is the first appellate decision to reject an agency effort to define FCA materiality through grant certifications, narrowing a key enforcement mechanism for the Civil Rights Fraud Initiative.
TL;DR
On August 25, the Ninth Circuit held 2-1 that HUD and DOT lacked statutory authority to require grant recipients to certify antidiscrimination compliance as material to government payment decisions under the False Claims Act. The court also struck conditions restricting fund use for "gender ideology," "elective abortions," or "illegal immigration." Federal grantees and contractors facing agency-imposed materiality certifications are the primary affected class. The appellate panel reasoned that Congress already defined "material" in the FCA and the Executive cannot impose its own definition, a holding that appears broadly applicable beyond the antidiscrimination context at issue.
The Ninth Circuit's 2-1 decision in County of King v. Turner, issued August 25, 2026, is the first appellate ruling to reject an executive agency's attempt to define what counts as "material" for False Claims Act purposes through grant conditions. HUD and DOT had sought to require local government recipients of homelessness and transportation grants to certify that compliance with federal antidiscrimination laws "is material to the government's payment decisions" under the FCA, and that they operate no programs violating those laws. The court largely affirmed a district court injunction blocking the conditions.
On the materiality certification specifically, the Ninth Circuit found no statutory basis for the agencies to impose it. The court reasoned that the FCA doesn't permit the Executive to "impose its own definition of what is 'material'" because Congress already supplied that definition in the statute. The condition, the court concluded, also didn't "flow naturally" from the antidiscrimination statutes under which the grants were authorized. Because this reasoning relies on the FCA's text rather than the particular policy area at issue, the holding appears broadly applicable beyond antidiscrimination certifications.
The decision raises immediate questions for the Civil Rights Fraud Initiative, which the Trump Administration launched to pursue FCA enforcement based in part on grant and contract certifications of compliance with civil rights laws. If the reasoning that agencies lack authority to define materiality through grant conditions holds in other circuits, a central enforcement mechanism for the initiative faces serious legal doubt. The court separately struck down conditions restricting use of funds for "gender ideology," "elective abortions," or "illegal immigration," as well as a SAVE-based immigration verification requirement, finding none had a basis in the authorizing statutes. The panel's willingness to police the boundary between congressional and executive authority over funding conditions is the through-line.
The decision binds only the Ninth Circuit, but its reasoning that the FCA reserves the materiality definition to Congress gives funding recipients in every circuit a precedent to cite when agencies attempt to attach FCA-related certifications to grants or contracts. As the Covington authors note, "funding recipients facing imposition of similar conditions in federal contracts or grants should consider the decision in evaluating such requirements."
Published ·Deep Fathom