State of Minnesota et al v. Oz et al

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
State of Minnesota, by and through its
Attorney General Keith Ellison, and Shireen
Gandhi, in her official capacity as the
Commissioner of the Minnesota Department
of Human Services,
Plaintiffs,
v.
Dr. Mehmet Oz, in his official capacity as
Administrator for the Centers for Medicare
and Medicaid Services; the Centers for
Medicare and Medicaid Services; Robert F.
Kennedy, Jr., in his official capacity as
Secretary of the U.S. Department of Health
and Human Services; and U.S. Department
of Health and Human Services,
Defendants.
File No. 26-cv-1701 (ECT/DTS)
OPINION AND ORDER
Nathan Brennaman, Emily Doyle, Scott H. Ikeda, and Brandon L. Boese, Minnesota
Attorney General’s Office, St. Paul, MN, for Plaintiffs State of Minnesota and Shireen
Ghandi.
Matthew C. Zorn, Office of the General Counsel, U.S. Department of Health and Human
Services, Washington, D.C.; and David W. Fuller, United States Attorney’s Office,
Minneapolis, MN, for Defendants Dr. Mehmet Oz, the Centers for Medicare and Medicaid
Services, Robert F. Kennedy, Jr., and U.S. Department of Health and Human Services.
The Centers for Medicare and Medicaid Services (“CMS”) deferred more than $259
million in federal funding for amounts the State of Minnesota paid out under its Medicaid
program. This deferral initiated an ongoing back-and-forth administrative process through
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which Minnesota may produce documentation showing that deferred amounts were paid
out to reimburse legitimate claims. For Minnesota, the primary problem is that, during this
process, it will not have access to these funds.
Minnesota brought this case to challenge the deferral.1 	It seeks a preliminary
injunction that would, if issued, require CMS to determine Minnesota’s entitlement to the
deferred amounts using different administrative procedures and restore the deferred
funding pending a final agency or judicial decision regarding whether Minnesota is legally
entitled to the deferred amounts.
The motion will be denied for four primary reasons: (1) The law ordinarily requires
a federal court to wait until a federal agency’s proceedings are final before deciding
whether the agency’s actions are lawful. Here, the proceedings Minnesota challenges have
just started. They are not final in the sense the law requires. (2) Some of the legal theories
Minnesota asserts are novel, and the law does not support them. 	(3) Though Minnesota
credibly complains that the federal government’s deferral is historically unprecedented in
its size and timing, I conclude on this record that the deferral likely complies with the
controlling federal regulations. 	(4) Minnesota’s request for a preliminary injunction
depends on assuming that predicted future events come to pass. As a rule, the law does not
allow a preliminary injunction to be issued based on assumptions like these. All of this is
not to say that Minnesota cannot prevail. 	Minnesota has identified reasonable legal
1 	Minnesota has a co-Plaintiff, the Commissioner of Minnesota’s Department of
Human Services, Shireen Gandhi. For simplicity’s sake, they will be referred to together
here as “Minnesota.”
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concerns 	regarding 	the 	deferral’s 	nature 	and 	scope 	and 	the 	federal 	government’s
motivations for initiating it. 	It is possible the record may support these concerns in the
future. Today it does not.
I
A
A description of the relevant legal background places the dispute in context. 	The
Medicaid program is a cooperative endeavor between the federal government and
participating states to provide medical care to low-income individuals. Harris v. McRae,
448 U.S. 297, 308 (1980); see 42 U.S.C. § 1396-1. 	Medicaid was enacted pursuant to
Congress’s spending power, Medina v. Planned Parenthood S. Atlantic, 606 U.S. 357, 369
(2025), and is designed so that the federal government shares financial responsibility with
participating states for the cost of health care, Harris, 448 U.S. at 309. 	“[I]f a State agrees
to establish a Medicaid plan that satisfies [statutory requirements], which include several
mandatory categories of health services, the Federal Government agrees to pay a specified
percentage of ‘the total amount expended . . . as medical assistance under the State
plan . . . .’” Id. at 308 (quoting 42 U.S.C. § 1396b(a)(1)). “The cornerstone of Medicaid
is financial contributions by both the Federal Government and the participating State.” Id.
“Historically, the federal government has provided on average about 57% of the funds
required to implement Medicaid, and States have supplied the balance.” Medina, 606 U.S.
at 364.
The federal government provides funds to each participating state through a series
of quarterly grant awards. 42 C.F.R. § 430.30. The quarterly awards are advance payments
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based on an estimate of the state’s anticipated Medicaid expenditures for the upcoming
quarter. 	See id. § 430.30(a)(2). 	At the end of each quarter, the state must submit an
“accounting of actual recorded expenditures.” 	Id. § 430.30(c)(2). 	The reports of actual
expenditures are then used to adjust the grant award by increasing or decreasing the
estimate for the next quarter according to the “underestimate or overestimate for prior
quarters.” Id. § 430.30(d)(2).
B
Medicaid provides three enforcement mechanisms by which the federal government
can address concerns it may have regarding state Medicaid expenditures. 	Each of these
includes somewhat distinct procedural processes.
The first enforcement mechanism is a deferral of claims for federal financial
participation (or “FFP”). See 42 C.F.R. § 430.40. As its name suggests, a deferral allows
CMS to “defer a decision on the allowability of claims submitted by a state until further
evidence is submitted.” Americana Healthcare Corp. v. Schweiker, 688 F.2d 1072, 1080
(7th Cir. 1982). 	A deferral is a retrospective mechanism in that it pauses federal
reimbursement for a state’s past expenditures. 	See Perales v. Sullivan, 948 F.2d 1348,
1357 (2d Cir. 1991). The regulations provide for deferral of “a claim or any portion of a
claim for FFP,” provided the Administrator “questions its allowability and needs additional
information to resolve the question,” and “CMS takes action to defer the claim (by
excluding the claimed amount from the grant award) within 60 days after the receipt of”
the claim. 	42 C.F.R. § 430.40(a). 	Within 15 days after CMS decides to defer a claim,
CMS must send the state “a written notice of the deferral that”: (1) “[i]dentifies the type
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and amount of the deferred claim and specifies the reason for deferral,” and (2) “[r]equests
the State to make available all the documents and materials the regional office then believes
are necessary to determine the allowability of the claim.” Id. § 430.40(b). The state must
make the requested documentation available within 60 days of the notice of deferral, or
120 days if the state seeks an extension. 	Id. § 430.40(c)(1). If CMS determines that the
materials submitted by the state “are not in readily reviewable form or that additional
information is needed,” it must “promptly notif[y] the State that it has 15 days to submit
the readily reviewable or additional materials.” 	Id. § 430.40(c)(3). 	If the state fails to
provide the requested materials within 15 days, the claim will be disallowed. 	Id.
§ 430.40(c)(4). In theory, the regulations impose a time limit on the administrative process
for deferrals. CMS has 90 days “after all documentation is available in readily reviewable
form, to determine the allowability of the claim,” and if CMS cannot complete the review
within 90 days, “CMS pays the claim, subject to a later determination of allowability.” Id.
§ 430.40(c)(5)–(6). However, CMS can delay the start of the 90-day period by requesting
additional materials, and the regulation contains no explicit limit on the number of
additional requests CMS may make. See id. § 430.40(c)(3). The burden is on the state to
establish that a deferred claim is allowable. 	Id. § 430.40(b)(2). 	The deferral regulation
includes no mechanism by which a state may gain access to deferred amounts during the
pendency of this process.
The second enforcement mechanism is a disallowance. 	A disallowance is a
determination that “a claim or portion of [a] claim is not allowable.” 42 C.F.R. § 430.42(a).
A disallowance may follow a deferral or be pursued without a deferral. 	See id.
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§ 430.40(e)(2); id. § 430.42. 	A disallowance is a “retrospective refusal to share in an
unauthorized expenditure.” 	Massachusetts v. Departmental Grant Appeals Bd. of HHS,
698 F.2d 22, 25 (1st Cir. 1983). When a disallowance determination is made, CMS must
“promptly send[] the State a disallowance letter.” 42 C.F.R. § 430.42(a). A state has two
options in seeking review of a disallowance: (1) It may request that the Administrator
reconsider a disallowance determination. Id. § 430.42(b). (2) A state may also seek review
from the Departmental Appeals Board, and it may do so regardless of whether it sought
reconsideration of the disallowance determination. 	Id. § 430.42(b)(4)–(5), (f)(1); 42
U.S.C. § 1316(e)(2)(A). The regulations provide that “[t]he Board’s decision . . . shall be
the final decision of the Secretary and shall be subject to reconsideration by the Board only
upon a motion by either party that alleges a clear error of fact or law and is filed during the
60–day period that begins on the date of the Board’s decision or to judicial review.” 	42
C.F.R. § 430.42(f)(3); accord 42 U.S.C. § 1316(e)(2)(B). It appears that a state may retain
the disallowed federal funds pending a final decision. 	See 42 C.F.R. § 433.38(c)(1) (“If
the [state] Medicaid agency has requested administrative reconsideration to CMS or appeal
of a disallowance to the Board and wishes to retain the disallowed funds until CMS or the
Board issues a final determination, the agency must notify the CMS Regional Office in
writing of its decision to do so.”). A state may seek judicial review of the Board’s decision
by bringing an action in a United States District Court. Id. § 1316(e)(C).
The third Medicaid enforcement mechanism is a withholding. Unlike a deferral and
a disallowance, a withholding is not focused on a “claim” for federal funding but is
intended to address broader non-compliance. See 42 C.F.R. § 430.35; 42 U.S.C. § 1396c;
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Massachusetts, 698 F.2d at 25 (“Whereas a finding of noncompliance can (although it need
not) lead to the cessation of federal participation altogether, a disallowance is merely a
retrospective refusal to share in an unauthorized expenditure.”). 	CMS may withhold
payments to a state, in whole or in part, if the Administrator finds that the state’s plan “no
longer complies with the provisions of [42 U.S.C. § 1396a]” establishing minimum
requirements for state plans or “[t]hat in the administration of the plan there is a failure to
comply substantially with any of those provisions.” 	42 C.F.R. § 430.35(a); accord 42
U.S.C. § 1396c. Under the regulations, “[a] question of noncompliance of a State plan may
arise from an unapprovable change in the approved State plan or the failure of the State to
change its approved plan to conform to a new Federal requirement for approval of State
plans.” 42 C.F.R. § 430.35(b). “A question of noncompliance in practice may arise from
the State’s failure to actually comply with a Federal requirement, regardless of whether the
plan itself complies with that requirement.” 42 C.F.R. § 430.35(c). Federal payments may
not be withheld until the state is given “reasonable notice and opportunity for a hearing”
and 	the 	Administrator 	determines 	that 	the 	withholding 	is 	appropriate. 	42 	C.F.R.
§ 430.35(a); accord 42 U.S.C. § 1396c. 	The regulations contemplate that a “reasonable
effort” be made to resolve any issues that could lead to a withholding “through conferences
and discussions” prior to any hearing. 42 C.F.R. § 430.35(a). If the Administrator finds
the state is noncompliant, no further FFP is provided to the state for those portions of the
program affected by the finding, and the withholding continues “until the Administrator is
satisfied that the State’s plan and practice are, and will continue to be, in compliance with
Federal requirements.” Id. § 430.35(d); accord 42 U.S.C. § 1396c. Any state that receives
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a finding of noncompliance may petition for review with the U.S. Court of Appeals for the
circuit in which the State is located. 42 C.F.R. § 430.38(a)–(b); 42 U.S.C. § 1316(a)(3).
II
Turn now to the background and suit-prompting facts. This suit was brought by the
State of Minnesota by and through its chief legal officer, Attorney General Keith Ellison,
and by Shireen Ghandi, Commissioner of the Minnesota Department of Human Services
(“DHS”), the agency responsible for administering Minnesota’s Medicaid program.
Compl. [ECF No. 1] ¶¶ 7–8. 	There are four Defendants. 	See id. ¶¶ 9–12. 	Defendant
United States Department of Health and Human Services (“HHS”) is “responsible for
overseeing state compliance with federal standards for implementing Medicaid programs.”
Cmty. Health Care Ass’n of N.Y. v. Shah, 770 F.3d 129, 135 (2d Cir. 2014). 	Defendant
Robert F. Kennedy, Jr., is sued in his official capacity as the Secretary of HHS. 	Compl.
¶ 11. 	As HHS’s highest-ranking official, Secretary Kennedy is responsible for the
“supervision and management of all decisions and actions of [HHS].” Id. Defendant CMS
is an agency housed within HHS. 	Id. ¶ 10. 	CMS is “responsible for exercising the
delegated authority to oversee state compliance with federal Medicaid requirements.”
Shah, 770 F.3d at 135 (citation modified). And finally, Dr. Mehmet Oz, the Administrator
of CMS, is sued in his official capacity. Compl. ¶ 9. Administrator Oz is “charged with
the supervision and management of all decisions and actions of [CMS].” Id.
On September 17, 2025, Minnesota Governor Tim Walz issued an Executive Order
directing DHS and other Minnesota agencies to take action to combat fraud in the use of
public funds. ECF No. 5-1 at 2–5. Among other things, the Executive Order required DHS
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to “[i]mplement a temporary licensing moratorium” by requesting that CMS “allow DHS
to implement moratoria,” to “[i]mmediately disenroll all Minnesota Health Care Program
enrolled providers who have not billed Medicaid in the last 12 months,” and to “[h]ire an
external consultant to assess DHS and make recommendations on reorganization to more
effectively serve as the State’s Medicaid agency.” 	Id. at 3. 	“Minnesota also identified
providers of 14 total service types as high-risk based on programmatic vulnerabilities,
investigations, and analysis.” ECF No. 6 ¶ 6. DHS “initiated enhanced prepayment review
for all fee-for-service claims involving these services, a 24-month licensing moratorium
for Home and Community Based Services providers, an additional moratorium for Adult
Day Services, and ended enrollment of new autism service providers.” Id.
In correspondence dated December 5, 2025, CMS informed Minnesota Deputy
Commissioner of DHS and State Medicaid Director, John Connolly of CMS’s position that
Minnesota’s efforts to fight fraud “are insufficient to adequately address” the issue, and
“urge[d]” Minnesota to take several actions including (1) meeting with CMS to provide
weekly updates regarding its progress in addressing fraud, (2) imposing a six-month
Medicaid enrollment moratorium for Home and Community Based Services providers, (3)
developing a corrective action plan to address fraud, and (4) initiating an off-cycle2
revalidation effort for all provider enrollments currently in place. ECF No. 5-1 at 8–9. In
its December 5 letter, CMS explained that, if Minnesota refused to take the requested steps
2 	Medicaid service providers “are periodically reviewed and revalidated by the state
to ensure that they continue to be eligible for receipt of Medicaid dollars. 	Off-cycle
revalidation simply means that such review is happening now—not on the normal cycle.”
ECF No. 6 at 4 n.1.
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“and/or make adequate progress to address fraud,” then “CMS may use its authority to
withhold future [FFP], in whole or in part.” Id. at 9 (emphasis in original). Minnesota
agreed to take all the actions listed in the December 5 letter. ECF No. 6 ¶ 8.
On December 31, 2025, Minnesota provided CMS with a corrective action plan.
ECF No. 5-1 at 55–59. At a meeting with CMS on January 6, 2026, DHS sought CMS’s
response to the corrective action plan. ECF No. 6 ¶ 9. CMS did not provide substantive
comments on the plan but “expressed willingness to work with [Minnesota] after reviewing
the plan in detail.” Id. “At no time did CMS staff suggest” that the corrective action plan
“was deficient or would form the basis for withholding [FFP] absent any notice to the State
of alleged deficiencies.” Id. ¶ 10.
That same day (January 6), Administrator Oz sent Governor Walz a letter notifying
him that CMS considered Minnesota to be operating in substantial noncompliance with 42
U.S.C. § 1396a(a)(64). 	ECF No. 5-1 at 16. 	That statute requires participating states to
provide a mechanism by which to “receive reports from beneficiaries and others and
compile data concerning alleged instances of waste, fraud, and abuse.” 	42 U.S.C.
§ 1396a(a)(64). 	In his January 6 letter, Administrator Oz explained that, subject to
Minnesota’s opportunity for a hearing, CMS would withhold an estimated $515 million in
FFP from Minnesota’s quarterly claim of expenditures. ECF No. 5-1 at 17. Administrator
Oz asserted that the $515 million represented the quarterly expenditures for the fourteen
high-risk services identified by Minnesota. Id. Administrator Oz explained that, if DHS
“plans to come into compliance with the federal requirements, [it] should submit, by
January 30, 2026 a revised [corrective action plan].” Id.
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On January 9, Deputy Commissioner Connolly wrote to Administrator Oz, notifying
him of Minnesota’s disagreement with the conclusions in Administrator Oz’s January 6
letter and requesting a hearing. ECF No. 5-1 at 20; see also ECF No. 6 ¶ 13 (“Minnesota
appealed the noncompliance decision on January 9, 2026”). 	As of March 2, no hearing
had been scheduled in the noncompliance matter. 	ECF No. 6 ¶ 14. 	According to
Minnesota, it “has asked CMS repeatedly for information and detail regarding the claimed
noncompliance, but CMS has refused to provide any information regarding which specific
statutes or regulations with which Minnesota is noncompliant or how it is noncompliant.”
Id. Regardless, on January 30, Minnesota sent CMS a revised corrective action plan. ECF
No. 5-1 at 31–50. 	In a declaration he filed in this case, Deputy Commissioner Connolly
testified that he asked CMS for comment on the revised corrective action plan, and on
February 25, he was told CMS had no response, “but that written feedback would be
forthcoming at some point in the future.” ECF No. 6 ¶ 16.
That same day (February 25), CMS informed Minnesota via letter that it was
deferring over $259 million in FFP. ECF No. 5-1 at 52. According to Minnesota’s Deputy
Medicaid Director, Patrick Hultman, as far as he can recall, this deferral is more than fifteen
times larger than any other deferral Minnesota has received in the past. ECF No. 7 ¶¶ 1–
2. 	Of the $259 million, the notice explained that approximately $243 million is
“attributable to CMS’s ongoing review of state expenditures, with a focus on fourteen high-
risk Medicaid service areas identified as particularly vulnerable to fraud or abuse.” ECF
No. 5-1 at 53. This $243 million represents 1.8% of Minnesota’s projected federal funding
for this year, and 7.2% of estimated quarterly funds. 	ECF No. 8 ¶ 3. 	According to the
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notice, “CMS . . . identified $164,198,916 FFP for other practitioner, personal care, and
home and community-based services lines that have questionable variances and raise
concerns about allowability of the claimed expenditures.” ECF No. 5-1 at 53. The notice
also explained that CMS had “identified $79,591,344 FFP claimed by the state associated
with reimbursement claims submitted to the state by specific providers that [CMS] ha[s]
identified as high-risk for fraud or aberrant billing practices based on historical billing and
CMS data analytics.” 	Id. 	In the notice, CMS requested that Minnesota “either provide
additional state and provider documentation to support the allowability of these claims,
including through CMS sample-based reviews, or make decreasing . . . adjustments on the
next quarterly CMS-64 submission.” Id.
The deferral was the subject of a press conference on February 25, at which
Administrator Oz and Vice President Vance spoke. 	The White House, Vice President
Vance and Administrator Oz Announce Actions to Address Fraud, Waste, and Abuse
(YouTube, Feb. 25, 2026), https://www.youtube.com/watch?v=mRJN72K2lYw. 	During
the press conference, Administrator Oz stated that “this quarter-billion-dollar deferment is
hopefully going to get on the radar screen for the State of Minnesota, and make sure they
are responsive to our requests.” 	Id. at 11:24. 	He explained that CMS had notified
Minnesota that CMS would retain the deferred amount “and only release it after
[Minnesota] propose[s] and act[s] on a comprehensive corrective action plan to solve the
problem.” Id. at 11:37. He stated that “if Minnesota fails to clean up the systems, the state
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will rack up a billion dollars of deferred payments this year.” 	Id. at 11:46. 	When asked
what actions Minnesota must take to obtain the deferred funding, Administrator Oz stated:
So on December the 7th, we sent a letter to Governor Walz
asking for a corrective action plan, which is a mechanism for
us to extract from the state what they think they can do to fix
the problems. The answer we got back at the end of the month,
which is what the deadline was, was inadequate. 	We alerted
them to this. We issued guidance that we were going to defer
income based on an audit of last quarter’s money. We actually
looked dutifully through all of the bills that were sent to us.
We found that of these high-risk services, roughly half of them,
you really couldn’t trust the data we were looking at. It’s not
that the numbers don’t add up, the backup to the numbers is
not there. So, what do we need to have happen? We need to
know 	that 	the 	providers 	actually 	are 	the 	real 	providers.
Oftentimes there’s no person that you can associate with the
treatment itself. We need you, after you adjudicate who these
providers are, make sure they’re not already in trouble for
doing bad stuff, and then re-evaluate all the current providers
to make sure they’re supposed to be able to provide these
services. And there’s a whole slew of tools that we can use
including checking before you pay the bill, that the bill is
legitimate. That prepayment review is incredibly important.
Id. at 21:27. For his part, Vice President Vance stated that the federal government doesn’t
“want to be in a situation where the State of Minnesota is being so careless with federal tax
dollars that we have to turn the screws on them a little bit so that they take this fraud
seriously.” Id. at 18:53. He also stated that to obtain the deferred funds, Minnesota needs
to take “some affirmative steps to make sure that the people who are billing us for Medicaid
services are actually providing those Medicaid services.” Id. at 20:48.
On March 4, CMS provided Minnesota with a document explaining that CMS had
identified a “sample of 330 claims from the Fee-For-Service (FFS) data that requires
additional information within each sample.” 	ECF No. 25-1 at 2; ECF No. 25 ¶ 10. 	The
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document included a chart identifying the information needed for each sampled item. See
ECF No. 25-1 at 2–7. The document asserted that this information is needed “to continue
to determine the allowability of claims for the quarter ending September 30, 2025.”3 Id.
at 2. On March 11, CMS provided Minnesota with a document explaining that CMS had
“selected a sample of 160 claims from the managed care (MC) data that requires additional
information within each sample,” and that 	this additional information was needed
“continue to determine the allowability of claims for the quarter ending September 30,
2025.” Id. at 9; ECF No. 25 ¶ 11. As with the March 4 document, the March 11 document
provided a chart indicating the information needed for each sampled item. 	See ECF No.
25 at 9–11. On March 12, Minnesota advised CMS that it anticipated requesting a 60-day
extension of the deadline to provide CMS with requested documentation pursuant to 42
C.F.R. § 430.40(c)(1). ECF No. 38-1 ¶ 9.4
At a regularly-scheduled meeting between DHS and CMS on March 10, Deputy
Commissioner Connolly requested a response from CMS regarding Minnesota’s revised
corrective action plan. 	ECF No. 25 ¶ 13. “CMS said that it had no information for
Minnesota about the proposed Corrective Action Plan, and that CMS could not commit
that it would ever provide Minnesota with feedback on the Corrective Action Plan.” 	Id.
CMS additionally informed DHS that it would be meeting with Minnesota less frequently.
3 	The $243 million deferral is for expenditures claimed for the quarter ending
September 30, 2025. ECF No. 5-1 at 52.
4 	It is not clear whether Minnesota anticipated requesting a 60-day extension to
submit some or perhaps all documentation requested by CMS.
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Id. However, Rory Howe, Director of the Financial Management Group within the Centers
for Medicaid and CHIP Services at CMS, testified that CMS has in fact met with Minnesota
weekly since January 22, with the last meeting taking place March 26. ECF No. 38-1 ¶ 8.
On March 19, CMS notified the State of Minnesota of its decision to approve the
January 30 revised corrective action plan. ECF No. 32 at 3; ECF No. 33-1 at 1. As a result
of the approval, CMS asked that the administrative hearing on Minnesota’s January 9
appeal of CMS’s January 6 determination of noncompliance be stayed “pending complete
implementation of the approved [corrective action plan], as” in its view “successful
completion would moot the appeal.” ECF No. 32 at 4; ECF No. 33-1 at 2.
III
Minnesota asserts five claims in the Complaint. (1) Minnesota claims the deferral
violates its procedural-due-process rights under the Fifth Amendment. Compl. ¶¶ 40–48
(Count I). 	(2) Minnesota claims the deferral violates the Administrative Procedure Act
(“APA”) because it is arbitrary, capricious, and contrary to law. Id. ¶¶ 49–57 (Count II).
(3) Minnesota claims the deferral violates the APA because it was implemented “without
observance of procedure required by law.” 5 U.S.C. § 706(2)(D). Compl. ¶¶ 58–65 (Count
III). 	(4) Minnesota claims the deferral reflects a spending power violation because it
“imposes post-acceptance or retroactive conditions on Plaintiffs’ Medicaid funding.” 	Id.
¶¶ 66–71 (Count IV). (5) Minnesota claims the deferral is the product of ultra vires agency
action. Id. ¶¶ 72–76 (Count V). For relief, Minnesota seeks “an order vacating Defendants’
deferral notice and its immediate withholding of $243,790,260 from Plaintiffs”; “[a]
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declaration that Defendants’ action is unlawful”; and an award of attorneys’ fees and costs.
Compl. at 21–22 (following ‘WHEREFORE” clause).
Minnesota filed its preliminary-injunction motion on March 2. ECF No. 2.5 It seeks
an order “blocking the deferral and restoring Medicaid funding to the State.” ECF No. 4
at 3. Minnesota does not at this time challenge the lawfulness of the withholding procedure
and seems to suggest that it is the exclusive mechanism by which CMS may seek to
investigate or deny Minnesota federal Medicaid funding. 	Supplemental briefing on the
motion was completed on April 2.
IV
A preliminary injunction is an “extraordinary remedy.” 	Winter v. Nat. Res. Def.
Council, Inc., 555 U.S. 7, 24 (2008); Watkins Inc. v. Lewis, 346 F.3d 841, 844 (8th Cir.
2003). 	The 	Eighth 	Circuit's 	familiar 	Dataphase 	decision 	describes 	the 	list 	of
considerations applied to decide whether to grant preliminary injunctive relief: “(1) the
likelihood of the movant’s success on the merits; (2) the threat of irreparable harm to the
5 	To clarify, Minnesota described its motion as seeking “a temporary restraining order
and expedited preliminary injunction.” 	ECF No. 2 at 1. 	Under Federal Rule of Civil
Procedure 65(b), temporary restraining orders are issued “without written or oral notice to
the adverse party or its attorney only if: (A) specific facts in an affidavit or a verified
complaint clearly show that immediate and irreparable injury, loss, or damage will result
to the movant before the adverse party can be heard in opposition; and (B) the movant’s
attorney certifies in writing … why [notice] should not be required.” 	Fed. R. Civ. P.
65(b)(1). Here, Minnesota acknowledged in its motion that it “do[es] not seek an ex parte
temporary restraining order, and [it does] not object to Defendants responding before a
hearing on the motion.” 	ECF No. 2 at 2. 	The motion will be treated as a motion for a
preliminary injunction. 	See Buffalo Wild Wings Int’l, Inc. v. Grand Canyon Equity
Partners, LLC, 829 F. Supp. 2d 836, 838 (D. Minn. 2011) (stating that because the
defendants received notice and the motion for a temporary restraining order was fully
briefed, “the Court w[ould] treat [the motion] as one for a preliminary injunction”).
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movant in the absence of relief; (3) the balance between that harm and the harm that the
relief would cause to the other litigants; and (4) the public interest.” Lexis-Nexis v. Beer,
41 F. Supp. 2d 950, 956 (D. Minn. 1999) (citing Dataphase Sys., Inc. v. C L Sys., Inc.,
640 F.2d 109, 112–14 (8th Cir. 1981) (en banc)). The core question is whether the equities
“so favor[] the movant that justice requires the court to intervene to preserve the status quo
until the merits are determined.” Dataphase, 640 F.2d at 113. “The burden of establishing
the four factors lies with the party seeking injunctive relief.” CPI Card Grp., Inc. v. Dwyer,
294 F. Supp. 3d 791, 807 (D. Minn. 2018) (citing Watkins, 346 F.3d at 844).
A
“While no single factor is determinative, the probability of success factor is the most
significant.” Home Instead, Inc. v. Florance, 721 F.3d 494, 497 (8th Cir. 2013) (citation
modified). 	A movant must show it has a “fair chance of prevailing” on the merits of a
claim to obtain a preliminary injunction. Planned Parenthood Minn., N.D., S.D. v. Rounds,
530 F.3d 724, 732 (8th Cir. 2008); see CPI Card Grp., Inc. v. Dwyer, 294 F. Supp. 3d 791,
807 (D. Minn. 2018) (recognizing that the movant “need only show likelihood of success
on the merits on a single cause of action, not every action it asserts”). 	Under the “fair
chance of prevailing” standard, a movant “need not show that it has a greater than fifty per
cent likelihood of success.” Sleep No. Corp. v. Young, 33 F.4th 1012, 1016–17 (8th Cir.
2022) (citation modified). “[T]he absence of a likelihood of success on the merits strongly
suggests that preliminary injunctive relief should be denied.” CDI Energy Servs., Inc. v.
W. River Pumps, Inc., 567 F.3d 398, 402 (8th Cir. 2009).
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1
Minnesota is not likely to prevail on its Fifth Amendment procedural-due-process
claim. A state, and by logical extension a state agency, are not “persons” for purposes of
the Fifth Amendment. South Carolina v. Katzenbach, 383 U.S. 301, 323–24 (1966) (“The
word ‘person’ in the context of the Due Process Clause of the Fifth Amendment cannot, by
any reasonable mode of interpretation, be expanded to encompass the States of the Union,
and to our knowledge this has never been done by any court.”); see South Dakota v. U.S.
Dep’t of Interior, 665 F.3d 986, 990 (8th Cir. 2012) (“The State is not a ‘person’ within
the meaning of the Fifth Amendment’s Due Process Clause.”); see also In re Jazz Casino
Co., L.L.C. v. J.C.C. Holding Co., Nos. 03–3018 and 03–3245, 2004 WL 2095616, at *6
(E.D. La. Sept. 7, 2004) (recognizing that “[a] State or state agency is not entitled to
constitutional due process protection” under the Fifth Amendment).
At the hearing, Plaintiffs cited one case, West Virginia v. EPA, 669 F. Supp. 3d 781
(D.N.D. 2023), to support their due-process claim. In that case, as Plaintiffs described it,
“the court . . . did find that a due process concern was a valid basis to avoid the agency
action that took place.” ECF No. 30 at 6. Fair enough. See West Virginia, 669 F. Supp.
3d at 806. 	But as far as the court’s opinion shows, the defendants did not raise, and the
court did not address, whether the state plaintiffs were “persons” for purposes of the Fifth
Amendment’s Due Process clause. See id. It would be a mistake to construe the decision
as authority opposing controlling Supreme Court and Eighth Circuit precedents.
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2
a
Minnesota is not likely to prevail on its APA claims.6 There are two problems. The
first is that the agency action Minnesota challenges is not “final.” 	5 U.S.C. § 704. 	The
APA defines “agency action” to “include[] the whole or a part of an agency rule, order,
license, sanction, relief, or the equivalent or denial thereof, or failure to act.” 	5 U.S.C.
§ 551(13). “[T]he word ‘action’ . . . is meant to cover comprehensively every manner in
which an agency may exercise its power.” Whitman v. Am. Trucking Ass’ns, 531 U.S. 457,
478 (2001). 	The Supreme Court has described the requirements for agency action to be
“final”:
First, 	the 	action 	must 	mark 	the 	“consummation” 	of 	the
agency’s decisionmaking process, Chicago & Southern Air
Lines, 	Inc. 	v. 	Waterman 	S.S. 	Corp., 	333 	U.S. 	103, 	113
(1948)—it must not be of a merely tentative or interlocutory
nature. And second, the action must be one by which “rights
or obligations have been determined,” or from which “legal
consequences will flow,” Port of Boston Marine Terminal
Assn. v. Rederiaktiebolaget Transatlantic, 400 U.S. 62, 71
(1970).
6 	The withholding regulations contain special procedures limiting review to a petition
filed “with the U.S. Court of Appeals for the circuit in which the state is located.” 42 C.F.R.
§ 430.38(b)(1). The presence of such review procedures may preclude a district court from
exercising a challenge to federal agency action. 	See Axon Enter., Inc. v. FTC, 598 U.S.
175, 185 (2023). 	Defendants do not argue that the special review procedures in the
withholding regulations preclude jurisdiction here. 	See ECF No. 22. 	This makes sense.
Minnesota is not challenging anything that is happening in the withholding proceeding. Its
claims concern only the deferral proceeding, and, unlike the withholding regulations, the
deferral regulations contain no special review scheme. See 42 C.F.R. § 430.40.
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Bennett v. Spear, 520 U.S. 154, 177–78 (1997) (citation modified). “To constitute a final
agency action, the agency’s action must have inflicted ‘an actual, concrete injury’ upon the
party seeking judicial review.” Sisseton-Wahpeton Oyate of Lake Traverse Rsrv. v. United
States Corps of Eng’rs, 888 F.3d 906, 915 (8th Cir. 2018) (quoting AT&T Co. v. EEOC,
270 F.3d 973, 975 (D.C. Cir. 2001)). Courts take a “‘pragmatic’ and ‘flexible’ approach
to the question of finality.” Hawkes Co. v. U.S. Army Corps of Eng’rs, 782 F.3d 994, 997
n.1 (8th Cir. 2015) (quoting Abbott Lab’ys v. Gardner, 387 U.S. 136, 148–50 (1967),
abrogated on other grounds by Califano v. Sanders, 430 U.S. 99 (1977)), aff’d, 578 U.S.
590 (2016). 	“When an agency ‘has issued a definitive statement of its position,
determining the rights and obligations of the parties, that action is final for purposes of
judicial review despite the possibility of further proceedings in the agency to resolve
subsidiary issues.’” Union Pac. R.R. Co. v. U.S. R.R. Ret. Bd., 162 F.4th 908, 917–18 (8th
Cir. 2025) (quoting Sierra Club v. U.S. Army Corps of Eng’rs, 446 F.3d 808, 813 (8th Cir.
2006)).
i
Minnesota claims the deferral notice is final agency action, see ECF No. 4 at 25, but
assuming the deferral notice is “agency action,” I conclude it does not meet Bennett’s first
element—that is, it does not “mark the ‘consummation’ of the agency’s decisionmaking
process.” 520 U.S. at 177 (citation omitted). A deferral notice communicates the agency’s
questions regarding a claim’s allowability, not a definitive statement that a claim is
disallowed. Under the regulations, a deferral occurs when the Administrator “questions”
the “allowability” “of a claim or any portion of a claim for FFP” and then excludes the
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questioned 	amount 	from 	a 	quarterly 	grant 	award. 	42 	C.F.R. 	§ 	430.40(a)(1)–(2).
Questions—at least when they are genuine—seek to elicit information, not provide
definitive answers. And a deferral notice initiates procedures that may or may not provide
a definitive answer regarding a claim’s allowability. 	Under the regulations, a deferral
notice “[i]dentifies the type and amount of the deferred claim and specifies the reason for
deferral,” and “[r]equests the State to make available all the documents and materials the
[agency] then believes are necessary to determine the allowability of the claim.” 42 C.F.R.
§ 430.40(b)(i)–(ii). 	From there, several things might happen. 	The agency might request
additional information. 42 C.F.R. § 430.40(c)(3). The agency might pay the claim “subject
to a later determination of allowability” if the agency fails to complete its review within 90
days after receiving the requested documentation from the State. 42 C.F.R. § 430.40(c)(5)–
(6). 	The agency might decide to pay the claim on its merits. 	42 C.F.R. § 430.40(e)(1).
The agency might disallow the claim, either because the State failed to provide requested
documentation on time or because the agency determined the claim should be disallowed
on its merits. 42 C.F.R. § 430.40(c)(4), (e)(1). With all these contingencies on the table,
it is difficult to understand how a deferral notice might represent the consummation of the
agency’s decisionmaking process.7
7 	It is true that “[t]he mere possibility that an agency might reconsider in light of
informal discussion and invited contentions of inaccuracy does not suffice to make an
otherwise final agency action nonfinal.” Sackett v. EPA, 566 U.S. 120, 127 (2012) (citation
modified). 	We’re not dealing with that kind of “mere possibility” here. 	The deferral
regulations establish what is in substance an investigative process that might lead to any of
several outcomes, and the deferral process’s investigative character contributes to showing
why a deferral notice is not the consummation of the agency’s decisionmaking process.
That the agency might conceivably rethink its decision to issue the notice is irrelevant.
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In this sense, CMS’s issuance of the deferral notice seems comparable to an
agency’s decision to initiate an audit or similar investigative measures that courts find are
nonfinal. See Harper v. Werfel, 118 F.4th 100, 116 (1st Cir. 2024) (collecting cases from
the Third, Fifth, Sixth, Ninth, and D.C. Circuits holding that investigative actions do not
constitute final agency action), cert. denied sub nom., Harper v. Faulkender, 145 S. Ct.
2867 (2025); see also Gordon v. Norton, 322 F.3d 1213, 1220 (10th Cir. 2003) (holding
that letter indicating agency “was still in the decision-making process and was continuing
to gather information” was nonfinal), abrogation on other grounds recognized by,
Purgatory Recreation I, LLC v. United States, 157 F.4th 1173 (10th Cir. 2025); Nat’l Parks
Conservation Ass’n v. Norton, 324 F.3d 1229, 1238 (11th Cir. 2003) (holding agency’s
failure to discontinue private occupancy of certain structures did not constitute final agency
action where the agency was still “actively planning the prospective management of” the
area); Or. Health & Sci. Univ. v. Engels, No. CV 24-2184 (RC), 2025 WL 1707630, at *4
(D.D.C. June 17, 2025) (holding that an agency’s decision to approve audit plans for a drug
manufacturer was not final agency action), dismissed sub nom. MaineGeneral Med. Ctr. v.
Engels, No. 25-5297, 2025 WL 2982893 (D.C. Cir. Oct. 21, 2025).
The February 25 deferral notice is consistent with this understanding of the
governing regulations. As relevant here, the notice identified the type and amount of the
deferred expenditures. As CMS explained, it identified expenditures totaling $164,198,916
“for other practitioner, personal care, and home and community-based service lines that
have 	questionable 	variances 	and 	raise 	concerns 	about 	allowability 	of 	the 	claimed
expenditures.” 	ECF No. 5-1 at 53. 	CMS also explained it “identified $79,591,344 FFP
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claimed by the state associated with reimbursement claims submitted to the state by
specific providers that [CMS had] identified as high-risk for fraud or aberrant billing
practices based on historical billing and CMS data analytics.” 	Id. 	The notice asked
Minnesota to “either provide additional state and provider documentation to support the
allowability of these claims” or to write off these amounts. 	Id. 	CMS, in other words,
identified concerns and requested documents. 	It did not express a conclusion that these
claims or any part of them would be disallowed. It took no procedure or possible outcome
off the table.
Minnesota argues that the deferral notice is “final” to the extent CMS opted to
subject $243 million in federal financial participation to the “deferral process” rather than
the withholding or disallowance processes. ECF No. 4 at 26. I do not agree. The deferral
notice does not mark the consummation of the agency’s decision-making process to treat
the FFP (once and for all) as a deferral. For that to be so, the deferral procedures would be
self-contained or distinct from withholdings and disallowances. Those lines do not exist,
or at least I have not found them. 	The deferral procedures are not separate from
disallowance—the regulations make clear that a deferral might result in a disallowance of
all or part of the FFP subject to the deferral. See 42 C.F.R. § 430.40(e). Though it is true
that deferrals and withholdings seem designed to address different problems at a high level,
nothing in the regulations prohibits the agency from commencing a withholding based on
information learned through the question-and-answer process associated with a deferral.
Put 	differently, 	a 	deferral 	notice 	marks 	the 	commencement 	of 	a 	back-and-forth
investigative process that could lead to many possible results, including disallowance or
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withholding of FFP implicated by the agency’s questions. A deferral notice does not mark
the consummation of the agency’s decision-making process regarding how the State’s
entitlement to the FFP will be determined.8
Minnesota cites several cases to support its position that the deferral notice is final
agency 	action, 	but 	these 	cases 	address 	materially 	different 	circumstances 	or 	are
unpersuasive for other reasons. In two of the cases, the contested agency action imposed
new or additional obligations on a state that went beyond complying with an investigation.
See Minnesota v. USDA, No. 25-cv-4767 (LMP/JFD), 2026 WL 125180, at *1, *9 n.6 (D.
Minn. Jan. 16, 2026) (finding USDA’s letter requiring Minnesota to recertify all SNAP
beneficiaries by a certain date or face noncompliance procedures was final agency action
because it “determines Minnesota’s obligations and the consequences flowing from a
failure to comply therewith”); Texas v. Brooks-LaSure, 680 F. Supp. 3d 791, 805–06 (E.D.
Tex. 2023) (finding there was final agency action where the challenged notice issued by
CMS “state[d]—for the first time—a clear and definitive [legal] position [regarding
whether certain arrangements constitute prohibited hold-harmless agreements] that has
immediate impact on Texas.” (citation modified)). Nor is the court’s analysis in California
v. USDA helpful here. 800 F. Supp. 3d 1015 (N.D. Cal. 2025), modified on other grounds,
2025 WL 2772872 (N.D. Cal. Sept. 29, 2025). 	There, the court held that the USDA’s
8 	Defendants sometimes misconstrue Minnesota’s claim. 	They argue, for example,
that the claims are not ripe because “Minnesota has submitted nothing” to CMS “to
substantiate its claims for federal funds” and CMS has yet to make an allowability
determination. ECF No. 22 at 24–25. To be clear, Minnesota does not contend the at-issue
claims are allowable (at least not in this case). 	It challenges CMS’s decision to subject
$243 million to the deferral procedures.
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demand for data regarding California’s SNAP program constituted final agency action,
reasoning that the relevant statutory authority required the USDA to withhold funds from
California if it did not comply. 	California, 800 F. Supp. 3d at 1024. 	The analysis is
unhelpful because the USDA did not disagree that the challenged agency action was final,
meaning the court’s discussion of the issue was truncated. See id. (“Plaintiff States assert,
and USDA has not disagreed, that the demand for SNAP data constitutes final agency
action.”).9 And like here, the statutory provisions provided for review of any withholding
of funds, see 7 U.S.C. § 2023, and the request for information was essentially an
investigative act.
ii
Minnesota identifies three consequences flowing from the deferral notice that it says
meet Bennett’s second requirement that the agency action must have determined “rights or
obligations,” 520 U.S. at 154, 177–78, but the better answer is they don’t. Minnesota first
points out that the deferral notice means it will lack access to the $243 million worth of
deferred funds during the deferral process. 	ECF No. 4 at 26. 	Again, if the agency
challenged this sum directly through withholding or disallowance instead of going through
the deferral process first, Minnesota would have access to the funds pending a final
decision on the merits. See 42 C.F.R. § 433.38(c) (setting forth procedures with which a
state must comply in order to retain disallowed FFP pending a final decision); 42 C.F.R.
§ 430.35(a) (providing that FFP may not be withheld until the state is given “reasonable
9 	The same was true of Minnesota. 	There, the parties did not dispute that the
challenged agency action was final. Minnesota, 2026 WL 125180, at *9 n.6.
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notice and opportunity for a hearing” and the Administrator determines withholding was
appropriate). 	For Minnesota, this is a significant problem. 	The State’s contention is
nonetheless difficult to square with an Eighth Circuit case, In re: SAC & Fox Tribe of the
Miss. in 	Iowa 	/ 	Meskawaki 	Casino 	Litig., 	340 F.3d 749 (8th 	Cir. 2003). 	There,
representatives of the Tribe sued to challenge a National Indian Gaming Commission
(“NIGC”) order temporarily closing a casino operated by the Tribe. Id. at 753–54. Though
an administrative procedure was available to challenge the closure order, the Tribe’s
representatives argued that the temporary closure determined “rights or obligations”
because it prevented the Tribe from continuing to earn revenue through the casino’s
operations during the pendency of the administrative proceedings. 	See id. at 756. 	The
court rejected this contention, explaining:
Although 	the 	Chairman’s 	closure 	order 	is 	effective
immediately and impacts the parties, it does so only on a
temporary basis. 	A temporary closure order inherently is not
“the consummation of the agency’s decisionmaking process,”
even though it may have an immediate effect on the Tribe’s
finances in the near term. The [Indian Gaming Regulatory Act
(“IGRA”)] by its express terms makes the actions of the
Chairman 	in 	issuing 	[a] 	. 	. 	. 	temporary 	closure 	order
preliminary and intermediate. The IGRA contains no language
making a temporary closure order by the Chairman judicially
reviewable. As already discussed, the detailed appeal process
to 	the 	NIGC 	as 	a 	whole 	is 	another 	“adequate 	remedy.”
Accordingly, the Chairman's action is not a final agency action
under Bennett.
Id. Essentially the same could be said of the deferral notice at issue here. It deferred funds
on a temporary basis, pending completion of the deferral process. See 42 C.F.R. § 430.40.
And the deferral notice’s financial impact 	on Minnesota, albeit substantial, seems
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comparable to the casino-closure order’s impact on the Tribe’s finances. If there is a reason
to distinguish these monetary consequences, it has not been identified.10
Minnesota next argues that the deferral notice determined rights or obligations
because “it initiates a process where the burden is on the State to establish the allowability
of a deferred claim.” ECF No. 4 at 26. According to Minnesota, a withholding procedure
is different because the Administrator has the burden to “show the state is in ‘substantial
noncompliance’ with federal law.” Id. (quoting 42 C.F.R. § 430.35(a)(2)). As best I can
tell, this contention misconstrues the withholding regulations. 	Those regulations do not
identify or imply who has the burden to show that the state is or is not in compliance with
Medicaid requirements. 	See 42 C.F.R. § 430.35. It is true that the regulation Minnesota
quoted requires the Administrator to “find” that a state is not in Medicaid compliance
before withholding payments, but that’s after “notice and [an] opportunity for a hearing.”
42 C.F.R. § 430.35(a)(1)–(2). In other words, the provision requires the agency to make
this finding as the adjudicator. 	Id.; see 42 C.F.R. § 430.38(a). 	The regulation does not
answer who has the burden of proof in that proceeding. 	Independent research has not
identified a case that answers the question, either. And if the regulation placed the burden
on the state, Minnesota has cited no case holding that an agency decision shifting a burden
10 	Minnesota identifies a prospective concern—that CMS may prolong the deferral
process unnecessarily or perhaps in bad faith or serve additional deferral notices thus
increasing 	the 	amounts 	subject 	to 	the 	deferral 	procedures. 	Under 	the 	pragmatic,
case-specific rules governing the final-agency-action question, if they come to pass, these
developments 	would 	be 	relevant 	and 	might 	lead 	to 	a 	different 	outcome 	on 	the
final-agency-action question. At this point, they are hypothetical.
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of proof determines “rights and obligations,” thereby making it final for the APA’s
purposes. Union Pac. R.R. Co., 446 F.3d at 813.
Third and finally, Minnesota argues that the deferral notice determined rights or
obligations because it “deprives Minnesota of a discovery period and a contested hearing
where the State can present evidence and examine witnesses.” 	ECF No. 4 at 26. 	This
characterization is imprecise. The withholding regulations, through their incorporation of
the subpart D hearing regulations, explicitly authorize discovery in the same manner
authorized by Rules 26 through 37 of the Federal Rules of Civil Procedure. See 42 C.F.R.
§§ 430.35(a), 430.86. The deferral regulations do not mention discovery specifically. See
42 C.F.R. § 430.40. At the same time, however, the deferral regulations require CMS to
share information with a state, including “the type and amount of the deferred claim and
. . . the reason for deferral,” 42 C.F.R. § 430.40(b)(1)(i), and they enable a state to produce
information supporting its claims, 42 C.F.R. § 430.40(c). 	It is not correct to say that the
deferral regulations do not allow for “a contested hearing.” ECF No. 4 at 26. The deferral
regulations permit a state to request fair hearing procedures if a deferral results in a
disallowance. See 42 C.F.R. § 430.40(e)(2); 45 C.F.R. §§ 16.1–16.23. The upshot is that
the differences between the deferral and withholding procedures are not as significant as
Minnesota claims. Regardless, Minnesota identifies no authority supporting the contention
that these differences determine rights or obligations in a way that makes the deferral notice
“final” agency action.11
11 	If the agency’s commencement of the deferral were “final,” I would conclude that
no other statutory bar prevents consideration of the APA claims’ merits. 	Section 704 of
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b
Finality aside, Minnesota has not shown on this record that it is likely to prevail on
the APA claims’ merits. Minnesota asserts two APA theories. The first theory is that the
agency’s decision to defer FFP was “arbitrary, capricious” and “contrary to law,” in
violation of § 706(2)(A) because the agency’s stated reasons for the deferral were
pretextual. See Compl. ¶¶ 49–57. The second theory is that the agency’s deferral notice
independently violated § 706(2)(A) and was “without observance of procedure required by
law” in violation of § 706(2)(D) because it “[did] not provide sufficient specificity for
Minnesota to understand what additional documentation CMS will deem sufficient.”
Compl. ¶¶ 53, 59; see id. ¶¶ 49–65.
The general rules governing § 706(2)(A) claims are familiar. 	Section 706(2)(A)
imposes a “highly differential standard” of review. 	Org. for Competitive Mkts. v. U.S.
Dep’t of Agric., 912 F.3d 455, 459 (8th Cir. 2018). A court reviews “whether the agency’s
the APA “does not provide additional judicial remedies in situations where the Congress
has provided special and adequate review procedures.” Bowen v. Massachusetts, 487 U.S.
879, 903 (1988) (citation modified). “An alternative remedy is adequate so as to preclude
a cause of action under the APA if, though not ‘identical to relief under the APA,’ it is at
least ‘of the same genre.’” 	Am. Fed’n of Lab. & Cong. of Indus. Orgs. v. Dep’t of Lab.,
778 F. Supp. 3d 56, 80 (D.D.C. 2025) (quoting Elec. Priv. Info. Ctr. v. IRS, 910 F.3d 1232,
1244 (D.C. Cir. 2018)); accord Rollerson v. Brazos River Harbor Navigation Dist. of
Brazoria Cnty., 6 F.4th 633, 642 (5th Cir. 2021); Rimmer v. Holder, 700 F.3d 246, 262 (6th
Cir. 2012). This is a “case-specific evaluation.” Hinojosa v. Horn, 896 F.3d 305, 310 (5th
Cir. 2018). 	“[T]he alternative remedy must actually result in a determination of the
underlying legal question, rather than a peripheral issue.” 	Gonzalez Boisson v. Pompeo,
459 F. Supp. 3d 7, 13 (D.D.C. 2020). 	Here, Defendants argue the Medicaid regulatory
framework provides an adequate alternative remedy—judicial review of a decision to
disallow a claim. ECF No. 22 at 24; 42 U.S.C. § 1316(e)(2)(C). 	This misses the mark.
This case isn’t about a hypothetical disallowance; it is about CMS’s decision to commence
deferral procedures. No statute or regulation provides a mechanism to review that decision.
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decision was ‘based on consideration of the relevant factors and whether there has been a
clear error of judgment.’” Voyageurs Nat’l Park Ass’n v. Norton, 381 F.3d 759, 763 (8th
Cir. 2004) (quoting Citizens to Pres. Overton Park, Inc. v. Volpe, 401 U.S. 402, 416
(1971)). 	“If an agency’s determination is supportable on any rational basis,” it must be
upheld. Id. This is particularly the case “when an agency is acting within its own sphere
of expertise.” Id.
Claims that an agency decision violated § 706(2)(A) because it was pretextual are
analyzed under the framework the Supreme Court applied in Department of Commerce v.
New York, 588 U.S. 752 (2019). 	There, the Court considered whether the Secretary of
Commerce violated § 706(2)(A) by reinstating a question about citizenship on the 2020
census questionnaire. 	Dep’t of Com., 588 U.S. at 758–59, 773–77, 780–85. 	The Court
began by identifying “settled propositions” that guided its analysis. 	Id. at 780. 	These
included the general rule that when reviewing agency action, “a court is limited to
evaluating 	the 	agency’s 	contemporaneous 	explanation 	in 	light 	of 	the 	existing
administrative record.” Id. And, the Court observed, “a court may not reject an agency’s
stated reasons for acting simply because the agency might also have had other unstated
reasons,” including political reasons. Id. at 781. As the Court explained, “a court may not
set aside an agency’s policymaking decision solely because it might have been influenced
by political considerations or prompted by an Administration’s priorities. 	Agency
policymaking is not a rarified technocratic process, unaffected by political considerations
or the presence of Presidential power.” 	Id. (citation modified). 	There is, however, a
“narrow 	exception” 	to 	the 	rule 	barring 	“inquiry 	into 	the 	the 	mental 	processes 	of
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administrative decisionmakers” such that “[o]n a ‘strong showing of bad faith or improper
behavior,’ such an inquiry may be warranted and may justify extra-record discovery.” Id.
(quoting Volpe, 401 U.S. at 420).
The Court applied these rules to affirm the district court’s decision that the agency’s
action should be set aside because the “sole stated reason” for the decision “seem[ed] to
have been contrived.” Id. at 784. In a memorandum, the Secretary claimed his decision to
reinstate the citizenship question was based on a request from the Department of Justice,
which sought the data for purposes of enforcing the Voting Rights Act (“VRA”). 	Id. at
761. 	After the case was filed, the Commerce Department filed its administrative record,
which it later supplemented with a memorandum from the Secretary indicating the
Secretary had initially reached out to DOJ to ask if “DOJ would support, and if so would
request, inclusion of a citizenship question as consistent with and useful for enforcement
of 	the 	Voting 	Rights 	Act. 	According 	to 	the 	Secretary, 	DOJ 	formally 	requested
reinstatement of the citizenship question after that inquiry.” Id. at 764–65. Based on the
memorandum, the plaintiffs claimed the agency had not submitted a complete record of
materials considered by the Secretary, and the district court granted their request to compel
the government to complete the administrative record. 	Id. at 765. 	Among an additional
12,000 pages of materials were records confirming that the Secretary “attempted to elicit
requests for citizenship data from other agencies, and eventually persuaded DOJ to request
reinstatement of the question for VRA enforcement purposes.” 	Id. 	The plaintiffs also
moved the district court for extra-record discovery, which the court granted, “authorizing
expert discovery and depositions of certain DOJ and Commerce Department officials.” Id.
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The Court determined the district court erred in ordering extra-record discovery when it
did but that the additional 12,000 pages of materials “largely justified such extra-record
discovery as occurred.” Id. at 782. Considering the entirety of the record—including the
extra-record discovery—the Court held that “unlike a typical case in which an agency may
have both stated and unstated reasons for a decision, here the VRA enforcement rationale—
the sole stated reason—seems to have been contrived.” Id. at 784. The Court ordered the
matter remanded to the agency. Id. at 785.
Here, Minnesota identifies essentially three reasons why the agency’s justifications
for the deferral are pretext for political retribution, but none has sufficient support in this
record to conclude that Minnesota is likely to prevail on the merits of its § 706(2)(A) claim.
Minnesota first alleges that evidence shows the deferral was unnecessary because CMS
already possessed the information it needed and hadn’t reviewed that information before
issuing the deferral notice. ECF No. 4 at 28; see ECF No. 7 ¶ 3 (“The Deferral states that
more information is needed from the state, but CMS has told us that it has not been able to
review what has been provided.”). 	CMS says something different. 	In a declaration, its
Director of the Division of Financial Operations West, Dorothy Ferguson, testified that
“CMS, with contractor support, conducted an initial analysis of the data” Minnesota
submitted “before issuing the deferral,” that the deferral was grounded in concerns
identified through that analysis, and that “CMS could not determine the allowability of the
associated claims without further information from the State.” ECF No. 23 ¶¶ 27, 29. In
other words, Director Ferguson testified that CMS reviewed at least some of the data
Minnesota submitted and required additional information to assess the claims’ allowability.
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See id. 	No specific reason has been identified to question or reject Director Ferguson’s
testimony.
Second, Minnesota argues that Administrator Oz and Vice President Vance’s public
comments show the deferral—which is intended to be backward-looking—was motivated
by future considerations. See Compl. ¶ 53 (“Defendant Oz and Vice President Vance made
clear that the only way for Plaintiffs to recoup the withheld money is for Plaintiff DHS to
act on a corrective action plan that meets their approval, with CMS deferring a billion
dollars this year if Defendants withhold their approval.”). 	Administrator Oz and Vice
President Vance’s comments concern the possibility of future deferrals and sometimes
seem to muddle the regulatory distinctions between deferrals and withholdings. 	Their
comments do not support “a strong showing of bad faith or improper behavior,” and, if
they did, under Department of Commerce, that would show only that an inquiry and extra-
record discovery may be warranted, not a preliminary injunction. 588 U.S. at 781.
Third, Minnesota argues that the deferral’s historical uniqueness shows pretext. To
support this contention, Minnesota alleges that the deferral’s amount is “unprecedented”
and that a deferral ordinarily is intended to serve as an auditing tool focused on a specific
“claim or any portion of a claim,” “not . . . wide swaths of Medicaid funding.” ECF No. 4
at 15. Minnesota also claims that it is unusual for CMS to have initiated a withholding and
a deferral at the same time. Compl. ¶ 38; see also ECF No. 4 at 22. I have no reason to
doubt Minnesota’s assertions regarding the historical uses or character of deferrals. These
facts do not warrant 	finding pretext because, whatever the historical practice, the
regulations do not limit the amount of funds CMS may subject to a deferral. Nor do they
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prohibit CMS from pursuing deferral and withholding concurrently with respect to the
same state.
Minnesota’s second theory—that the deferral notice was insufficient—would not
justify entry of a preliminary injunction, either. 	The regulation imposes only high-level
requirements regarding the notice’s content. 	Under the regulations, the notice must
(1) “[i]dentif[y] the type . . . of the deferred claim”; (2) “[i]dentif[y] the . . . amount of the
deferred claim”; (3) “specif[y] the reason for deferral”; and (4) “[r]equest[] the State to
make available all the documents and materials [CMS] then believes are necessary to
determine the allowability of the claim.” 42 C.F.R. § 430.40(b)(1)(i)–(ii). Regarding the
amounts that are the subject of this case, the deferral notice (1) identified the types of claims
subject to the deferral as “practitioner, personal care, and home and community-based
services lines” and claims submitted by specific providers;12 (2) identified the amounts
associated 	with 	these 	categories 	as 	$164,198,916 	and 	$79,591,344, 	respectively;
(3) identified fraud and abuse as the reasons for the deferrals; and (4) requested Minnesota
“provide additional state and provider documentation to support the allowability of these
claims, including through CMS sample-based reviews.” ECF No. 5-1 at 53.
If the notice violated the regulation’s content requirements—that is, if Minnesota
required 	more 	information 	to 	respond—the 	appropriate 	recourse 	would 	be 	greater
specificity from CMS, not a preliminary injunction forbidding CMS from proceeding with
12 	The “fourteen high-risk Medicaid service areas” identified in the deferral notice, see
ECF No. 5-1 at 53, are the same fourteen high-risk service types identified by Minnesota,
see ECF No. 6 ¶ 6. ECF No. 7 at 2 n.1. At a high level, in other words, CMS and Minnesota
were concerned about the same things.
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the deferral and restoring the deferred funds to Minnesota. Consistent with this idea, CMS
has since provided Minnesota with additional information regarding the documents it
seeks. See ECF No. 25-1.
3
Minnesota is not likely to prevail on the merits of its spending-power claim. “[I]n
exercising its spending power, Congress may offer funds to the States, and may condition
those offers on compliance with specified conditions.” 	Nat’l Fed’n of Indep. Bus. v.
Sebelius, 567 U.S. 519, 537 (2012). “[L]egislation enacted pursuant to the spending power
is much in the nature of a contract: in return for federal funds, the States agree to comply
with federally imposed conditions.” Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S.
1, 17 (1981). A state must “voluntarily and knowingly accept[] the terms of the ‘contract.’”
Id. Naturally, there can “be no knowing acceptance if a State is unaware of the conditions
or is unable to ascertain what is expected of it. Accordingly, if Congress intends to impose
a condition on the grant of federal moneys, it must do so unambiguously.” 	Id.; accord
Arlington Cent. Sch. Dist. Bd. of Educ. v. Murphy, 548 U.S. 291, 296 (2006).
Minnesota has not shown that the deferral imposed a new condition on the federal
government’s grant of Medicaid funds to Minnesota. The claim is based on the idea that
the deferral is unlawful for many reasons. 	See ECF No. 4 at 34 (arguing that Minnesota
was unaware CMS “could immediately defer hundreds of millions of dollars every quarter,
with no due process, based purely on Defendants’ desire for Minnesota to create, and
comply with, a corrective action plan that meets Defendants’ ever-changing standards and
regardless of DHS’s relentless efforts to collaborate with CMS as encouraged by the
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regulations”). 	These broad contentions seem ill-suited to showing a spending-power
violation. 	Regardless, I’ve already concluded that, on this record, the deferral did not
violate the governing regulations.
4
Minnesota is not likely to succeed on the merits of its ultra vires claim. A claim of
ultra vires agency action is a claim to “equitable relief where an agency’s action was ultra
vires—that is, ‘unauthorized by any law and . . . in violation of the rights of the
individual.’” 	Nuclear Regul. Comm’n v. Texas, 605 U.S. 665, 680 (2025) (alteration in
original) (quoting Am. Sch. of Magnetic Healing v. McAnnulty, 187 U.S. 94, 110 (1902)).
However, recognizing that ultra vires review is susceptible to becoming an “end-run”
around limitations imposed by judicial-review statutes (like the APA), the Supreme Court
has “strictly limited nonstatutory ultra vires review” to instances where “an agency has
taken action entirely in excess of its delegated powers and contrary to a specific prohibition
in a statute.” 	Id. at 681 (citation modified). 	Ultra vires review is not available “simply
because an agency has arguably reached ‘a conclusion which does not comport with the
law.’” 	Id. (quoting Boire v. Greyhound Corp., 376 U.S. 473, 481 (1964)). 	“Ultra vires
review is also unavailable if, as is usually the case, a statutory review scheme provides
aggrieved persons with a meaningful and adequate opportunity for judicial review, or if a
statutory review scheme forecloses all other forms of judicial review.” 	Id. (citation
modified). The Eighth Circuit understands the specific-prohibition rule to require a “plain
violation of an unambiguous and mandatory provision of the statute.” 	Key Med. Supply,
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Inc. v. Burwell, 764 F.3d 955, 962 (8th Cir. 2014) (quoting Neb. State Legis. Bd., United
Transp. Union v. Slater, 245 F.3d 656, 659 (8th Cir. 2001)).
Minnesota’s ultra vires claim likely does not meet these standards. 	Minnesota
addresses this claim only in a footnote in its brief. ECF No. 4 at 30 n.12. There, it argued
that the “specific prohibition” essential to the claim appears in the deferral regulation. Id.
As Minnesota put it, “[t]he regulation . . . prohibits CMS from conditioning the lifting of a
deferral on anything other than the state providing documentation for the claim.” Id. (citing
42 C.F.R. § 430.40(a)). The cited provision does not say that. It says CMS may initiate a
claim deferral if it “questions its allowability and needs additional information to resolve
the question.” 	42 C.F.R. § 430.40(a)(1). 	The provision does not address what happens
after CMS receives documentation, and subsequent provisions make clear that deferred
amounts may be disallowed. See id. § 430.40(c)(4), (e)(2). Put differently, the provision
Minnesota cited does not prohibit the deferral, much less specifically or plainly.
B
“Irreparable harm occurs when a party has no adequate remedy at law, typically
because its injuries cannot be fully compensated through an award of damages.” 	Gen.
Motors Corp. v. Harry Brown’s, LLC, 563 F.3d 312, 319 (8th Cir. 2009). 	“To show
irreparable harm, ‘a party must show that the harm is certain and great and of such
imminence that there is a clear and present need for equitable relief.’” Morehouse Enters.,
LLC v. Bureau of Alcohol, Tobacco, Firearms & Explosives, 78 F.4th 1011, 1017 (8th Cir.
2023) (quoting Dakotans for Health v. Noem, 52 F.4th 381, 392 (8th Cir. 2022)). 	A
plaintiff must show “the harm is ‘not merely a possibility’ but is likely to occur absent
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preliminary injunctive relief.” 	Id. (quoting Tumey v. Mycroft AI, Inc., 27 F.4th 657, 665
(8th Cir. 2022)). “Speculative harm does not support a preliminary injunction.” S.J.W. ex
rel. Wilson v. Lee’s Summit R-7 Sch. Dist., 696 F.3d 771, 779 (8th Cir. 2012); see Berkley
Risk Adm’rs Co. v. Accident Fund Holdings, Inc., No. 16-cv-2671 (DSD/KMM), 2016 WL
4472943, at *4 (D. Minn. Aug. 24, 2016) (“[A] plaintiff cannot simply establish a risk of
irreparable harm. 	There must be a ‘clear showing of immediate irreparable injury.’”
(quoting Internet Inc. v. Tensar Polytechnologies, Inc., No. 05-cv-317 (RHK/AJB), 2005
WL 2453170, at *5 (D. Minn. Oct. 3, 2005))). 	“Failure to show irreparable harm is an
independently sufficient ground upon which to deny a preliminary injunction.” Watkins
Inc. v. Lewis, 346 F.3d 841, 844 (8th Cir. 2003); see Gamble v. Minn. State Indus., No.
16-cv-2720 (JRT/KMM), 2017 WL 6611570, at *2 (D. Minn. Dec. 1, 2017) (collecting
cases).
Though purely monetary harm is not ordinarily irreparable, there are exceptions.
For example, courts find monetary harm to be irreparable when it risks putting an
organization out of business, Packard Elevator v. ICC, 782 F.2d 112, 115 (8th Cir. 1986),
where “the defendant is likely to be insolvent at the time of judgment,” Teradyne, Inc. v.
Mostek Corp., 797 F.2d 43, 52 (1st Cir. 1986) (citing Deckert v. Indep. Shares Corp., 311
U.S. 282 (1940)), or where a damages amount cannot be ascertained, see Triebwasser &
Katz v. Am. Tel. & Tel. Co., 535 F.2d 1356, 1359 (2d Cir. 1976). 	And courts have
recognized that the follow-on effects of a federal-funding freeze may constitute irreparable
harm. For example, in New York v. Trump, the First Circuit upheld a district court’s finding
of irreparable harm where a funding freeze would result in “catastrophic disruption to
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student instruction; possible layoffs, reductions in service, and closures of childcare
programs; and significant impediments to the delivery of basic health care services to
vulnerable populations, and upending state budgets and leading states to incur debts due to
the unanticipated loss of obligated funds.” 	--- F.4th ---, Nos. 25-1236 & 25-1413, 2026
WL 734941, at *14 (1st Cir. Mar. 16, 2026) (citation modified). Other courts have made
comparable findings. 	See, e.g., Maine v. U.S. Dep’t of Agric., 778 F. Supp. 3d 200, 234
(D. Me. 2025) (finding irreparable harm where federal funding freeze risked “loss of
program integrity, including inconsistent meal quality and reduced outreach to low-income
families, thus widening the gaps in access to healthy meals for children who depend on
these programs”); Washington v. U.S. Dep’t of Transp., 792 F. Supp. 3d 1147, 1188–91
(W.D. Wash. 2025) (finding irreparable harm where funding freeze threatened the
existence of state’s electronic vehicle infrastructure program); New York v. Admin. for
Child. & Fams., No. 26-CV-172 (VSB), 2026 WL 673848, at *25–26 (S.D.N.Y. Mar. 10,
2026) (finding irreparable harm where “states’ budgets rely on the prompt disbursement of
. . . funds” and “[d]elays or the specter of a potential loss of funding could exclude
participants from services . . . and effectively end certain social services programs”); City
and County of San Francisco v. Trump, 783 F. Supp. 3d 1148, 1186 (N.D. Cal. 2025)
(finding irreparable harm where at-issue federal funding “ke[pt] many of [plaintiffs’]
safety-net services afloat,” including “healthcare, disease control, emergency management,
public benefits, and law enforcement programs”).
Whether Minnesota has shown irreparable harm on this record is a close issue, but
I conclude it has not. Much of Minnesota’s evidence shows possible future harm, not likely
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imminent harm. 	For example, Deputy Medicaid Director Hultman testified that he is
“concerned” that CMS will prolong the deferral process. ECF No. 7 ¶ 8. He testified that
“CMS regularly evades the 90-day deadline by claiming that the state’s submissions are
insufficient or by demanding additional information so that the 90-day deadline never
begins,” inferring he is concerned that will happen here also. 	Id. 	Without more, the
possibility of these events occurring is too uncertain to show a likelihood of irreparable
harm. 	Also uncertain are the effects the deferral may have on the State’s budget and
Medicaid services. There is no question the deferred amounts fund vital services. Deputy
Commissioner 	Connolly 	testified 	that 	the 	entire 	deferred 	amount—$259 	million—
represents “a complete quarterly federal funding for Assertive Community Treatment
Mental 	Health 	Services, 	Adult 	Rehabilitative 	Mental 	Health 	Services, 	Intensive
Residential Treatment Services, and Nonemergency Medical Transportation Services,” and
that “[t]hese programs provide services to 160,000 Minnesotans.” 	ECF No. 6 ¶ 18. 	But
Minnesota’s witnesses testified that cuts to these services would depend on a variety of
considerations. These include the deferral proceeding’s duration, whether further deferrals
occur, and whether the legislature appropriates amounts to cover the shortfall. See id.; see
also ECF No. 8 ¶ 3.
To the extent the record evidence shows present harms, those harms are not great
and somewhat difficult to assess. 	Though a large sum, the deferred amount represents
roughly 1.8% of projected federal Medicaid funding in 2026. 	ECF No. 8 ¶ 3. 	It is not
difficult to understand why that percentage poses problems for Minnesota. It is difficult to
understand how that percentage shows irreparable harm. 	And Minnesota at least shares
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the blame for ongoing service cuts. Minnesota’s “aggressive anti-fraud efforts have placed
many legitimate and law-abiding providers in a precarious financial position.” 	ECF No.
24 at 9. Put another way, it is difficult to separate the present consequences of Minnesota’s
own actions from what service-related consequences may follow from the deferral. 	The
better answer is that the record does not show injunction-worthy irreparable harm.
C
The final two Dataphase factors are neutral and do not change things. The balance-
of-harms factor involves “assess[ing] the harm the movant would suffer absent an
injunction,” as well as the harm the other parties “would experience if the injunction
issued.” Katch, LLC v. Sweetser, 143 F. Supp. 3d 854, 875 (D. Minn. 2015). For practical
purposes, the public interest and balance of harm factors “merge” when a plaintiff seeks
injunctive relief against the government. Nken v. Holder, 556 U.S. 418, 435 (2009); accord
Morehouse Enters., 78 F.4th at 1018.
“[T]here is a substantial public interest in ensuring that the poor and uninsured
receive [necessary] healthcare services.” Cedar-Riverside People’s Ctr. v. Minn. Dep’t of
Hum. Servs., No. 09-cv-768 (DSD/SRN), 2009 WL 1955440, at *3 (D. Minn. July 6, 2009).
The public also has a “strong interest in ensuring that states use federal funds for their
designated purpose,” id., not for fraudulent purposes. These interests are equally weighty,
especially considering that Minnesota has recognized it has a serious fraud problem. See
ECF No. 5-1 at 2–5. Minnesota argues that “there is substantial public interest in a federal
agency following its own regulations . . . and in Americans trusting their own government
to follow the rule of law.” 	ECF No. 4 at 36 (quoting Shaik v. Noem, No. 25-cv-1584
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(JRT/DJF), 2025 WL 1170447, at *3 (D. Minn. Apr. 22, 2025)). 	At least at this stage,
Minnesota has not shown that Defendants have failed to follow the rule of law.
ORDER
Therefore, based on the foregoing, and on all the files, records, and proceedings
herein, IT IS ORDERED THAT Plaintiffs’ Motion for Temporary Restraining Order and
Expedited Preliminary Injunction [ECF No. 2] is DENIED.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: April 6, 2026 	s/ Eric C. Tostrud
Eric C. Tostrud
United States District Court
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