By Sarah Martinson

Law360 (August 27, 2020, 4:50 PM EDT) -- A California federal court preliminarily blocked the Trump administration from diverting millions in COVID-19 relief funding from public schools to private ones, finding that the states and school districts suing the government will likely succeed on the merits of their claims.

U.S. District Judge James Donato said Wednesday that the Coronavirus Aid, Relief, and Economic Security Act unambiguously mandates that local educational agencies determine how much relief funding private and public schools should receive based on the amount of low-income students attending private schools.

Section 18005(a) of the CARES Act clearly states that the formula in Section 1117 of the Elementary and Secondary Education Act, used to allocate public funding to private schools, should also be used to distribute COVID-19 relief funding to private schools, according to the order. The order temporarily prevents the U.S. Department of Education from enforcing its rule instructing local educational agencies to distribute roughly $16 billion in CARES Act funding based not on the number of low-income students but on the total number of students attending public and private schools until Judge Donato rules on the full merits of the suit's claims.

"The words Congress used in Section 18005(a) of the CARES Act are familiar and uncomplicated, to say the least," the judge said.

The states and school districts, led by Michigan and California, sued the DOE and Secretary of Education Betsy DeVos in July over the department's interim rule, arguing that the DOE misinterpreted Section 18005(a) of the CARES Act by not using the formula in section 1117 of ESEA.

In response, the Education Department contended that how CARES Act funding designated for schools should be distributed is unclear and that, under the 2015 Supreme Court ruling in King v. Burwell , it has the authority to interpret how funding should be allocated based on the context of the law. According to the DOE, when the CARES Act is taken into context, funding for schools was intended to benefit all students in public and private schools.

But Judge Donato, who presided over a virtual preliminary injunction hearing on Aug. 18, said that the King case over tax credits under the Affordable Care Act doesn't give government agencies the authority to outright ignore statutory language.

"The department misreads King as granting agencies the freedom to disregard Congress's words based on the gestalt of a statute," Judge Donato said, adding that "nothing in King supports such a radical revision of administrative law."

He also concluded that the states and school districts would likely be irreparably harmed if the DOE's rule goes into effect, noting that in Michigan private schools would receive more than four times as much funding as public schools.

Michigan Attorney General Dana Nessel said in a Thursday statement they are pleased with Judge Donato's ruling "and will continue to fight against the unlawful approach taken by Secretary DeVos to redirect pandemic relief money from public schools to serve her own political agenda."

"By Congress' own design, that money was meant to assist the nation's public schools that are most in need of financial support, but Secretary DeVos' unlawful rule does the exact opposite," Nessel said.

DOE Press Secretary Angela Morabito told Law360 in a Thursday statement that the department doesn't comment on pending litigation, but that "the secretary has said many times this pandemic affected all students, and the CARES Act requires that funding should be used to help all students."

"Since public schools want to use the money to benefit all of their students, there's no reason to think that private schools shouldn't be able to do the same," Morabito said, adding that it's "simply wrong to discriminate against kids and their taxpaying parents solely because they chose a school that worked for them instead of the state-run option."

The states and the District of Columbia are represented by Michael Newman, Sarah E. Belton, Rebekah A. Fretz, James F. Zahradka II and Garrett M. Lindsey of the California Attorney General's Office, Toni L. Harris, Fadwa Hammoud and Neil Giovanatti of the Michigan Department of Attorney General, Kathleen Konopka and Nicole Hill of the Office of the Attorney General for the District of Columbia, Aaron M. Frey and Sarah A. Forster of the Maine Attorney General's Office, P. Cholla Khoury and Lisa Giandomenico of the New Mexico Attorney General's Office, Hannah S. Jurss and Joshua L. Kaul of the Wisconsin Department of Justice, Kevin M. Richardson of the Hawaii Department of the Attorney General, and Steven M. Sullivan of the Office of the Attorney General for Maryland.

DeVos and the DOE are represented by William K. Lane III, Ethan P. Davis, David Morrell and Jennifer Ricketts of the U.S. Department of Justice's Civil Division.

The case is State of Michigan et al. v. DeVos et al., case number 3:20-cv-04478, in the U.S. District Court for the Northern District of California.

--Additional reporting by Hannah Albarazi and Hailey Konnath. Editing by Adam LoBelia.

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