A federal judge ruled on Tuesday that the Environmental Protection Agency (EPA) acted in an “arbitrary and capricious” manner when terminating contracts with three nonprofits. The judge issued a temporary restraining order that requires the EPA and Citibank to provide nonprofits access to funds in their accounts.

The restraining order is the latest development in a lawsuit brought by three nonprofits that were recipients of grants from the Greenhouse Gas Reduction Fund, a part of the Inflation Reduction Act signed into law in 2022. The EPA had asked Citibank to freeze the accounts over alleged concerns about waste, fraud, and conflicts of interest. However, the judge found the EPA’s claims to be “vague and unsubstantiated.”

According to the judge, the EPA’s termination letters vaguely mentioned “multiple ongoing investigations” into programmatic waste, fraud, and conflicts of interest without offering specific information or factual support for the decision. The judge, Tanya Chutkan of the U.S. District Court for the District of Columbia, stated that this lack of information was insufficient.

In the opinion issuing the restraining order, the judge found that the nonprofits would face imminent, irreparable harm if they did not gain access to their funding. Climate United, one of the plaintiffs, had already committed significant amounts to projects eligible for funding from the Greenhouse Gas Reduction Fund. Another plaintiff, Power Forward, had also committed substantial funds and was unable to pay outstanding invoices due to the freeze on its accounts.

Typically, when the EPA or any government agency moves to terminate a contract, the awardee is provided with written notice and an opportunity to object. However, in this case, the nonprofits were not informed by the EPA or Citibank before their accounts were frozen. Despite requesting withdrawals in February and March, Citibank did not release the funds, and the EPA did not respond to their inquiries.

The EPA eventually offered to meet with Climate United in February, but the meeting was rescheduled multiple times and then canceled without explanation. The formal termination letters were not sent until March 10, right before a scheduled hearing on the matter. The judge concluded that the termination letter seemed to violate a statute and interfered with the nonprofits’ statutory rights to the funds.

By issuing the restraining order, the judge determined that the nonprofits have a substantial likelihood of success in winning the case.