FOR IMMEDIATE RELEASE
Media Contacts
[email protected]
410-576-7009
BALTIMORE, MD – Attorney General Anthony G. Brown co-led a coalition of 14 states in filing a lawsuit for damages stemming from the U.S. Department of Labor’s unlawful decision to terminate millions of dollars in federal grants intended to fund improvements in states’ unemployment insurance systems, including in Maryland.
The lawsuit, filed in the U.S. Court of Federal Claims, seeks monetary damages for the Department of Labor’s unlawful decision in May 2025 to terminate more than $100 million in the coalition states’ remaining grant funding. These grants were created by Congress as part of the American Rescue Plan Act of 2021, amid the pandemic-related surge in unemployment claims, and were intended to assist states in modernizing their unemployment insurance system technology to better detect and prevent fraud, promote access, and pay benefits in a timely fashion.
“Maryland was counting on these grants to stop fraud and modernize the systems that help our unemployed residents get back on their feet,” said Attorney General Brown. “We are taking the Trump Administration to court so Marylanders facing a layoff can rely on a system that works quickly, fairly, and securely.”
In total, the Department of Labor awarded more than $780 million to states under this grant program. The Department reviewed and approved the coalition states’ project plans and set multi-year, agreed-upon performance periods in which the projects were to be completed. The coalition states directed hundreds of millions of dollars in grant funding to projects that, once completed, would increase efficiency, help prevent and detect fraud, improve resilience during surges in claims, and improve customer experience.
On May 22, 2025, the Trump administration abruptly and unlawfully terminated each coalition state’s grant agreements. The termination letters stated the agreements “no longer effectuate[] [the Department’s] priorities for its grant funding.” The grant terminations rescinded unexpended funds under the grant agreements, interrupting the modernization work that the Department of Labor had approved and agreed to fund.
Consequently, approved projects were stopped in the middle of the performance periods. States have had to reallocate funding from other sources, scale back project scopes, or cancel projects altogether. The terminations have wasted funds and squandered opportunities to increase efficiencies for unemployment insurance system workers, employers, and administrative staff.
In the lawsuit, the Maryland Department of Labor (MDOL) is suing over grants totaling approximately $20.7 million, about $19.5 million of which was cut by the unlawful terminations. Those grants were being used to, among other things, update the MDOL’s information technology systems, add new fraud prevention and detection tools, and improve access to applications for non-English speakers. The unlawful terminations forced the MDOL to halt and cancel projects and prevented Maryland from realizing the benefits envisioned when the MDOL applied for and was awarded these grants.
In its lawsuit, the coalition argues that the Department of Labor’s grant terminations breached the express terms of each of the coalition states’ grant agreements. The terms of the grant agreements do not allow the Department to unilaterally terminate the grant projects prior to the end of the performance period simply because the administration has changed its priorities. The coalition also argues that the Department breached the implied duty of good faith and fair dealing by wrongfully imposing new terms and conditions, relying on erroneous and bad-faith interpretations of relevant regulations and statutes, and failing to provide the states with formal notice and an opportunity to object to their grant terminations.
Attorney General Brown co-led this lawsuit with Wisconsin Attorney General Josh Kaul. They were joined by the attorneys general of California, Colorado, Delaware, Illinois, Maine, Michigan, New Jersey, New Mexico, New York, and Oregon, as well as the governors of Kentucky and Pennsylvania.
###