California High-Speed Rail: Judge Allows Trump Funding Lawsuit

SACRAMENTO, CA – A U.S. federal judge has delivered a critical victory to the California High-Speed Rail Authority (CHSRA), rejecting the Trump administration’s attempt to dismiss a lawsuit challenging the cancellation of over USD 4 billion in federal funding. The ruling allows the case to proceed, prolonging the high-stakes battle over the future of America’s most ambitious and controversial infrastructure project.

In a detailed ruling, Judge Dale Drozd of the U.S. District Court in Sacramento affirmed that his court has jurisdiction over the dispute. He dismissed the Justice Department’s argument that the case was a simple contract dispute belonging in the U.S. Court of Federal Claims. Judge Drozd reasoned that the funding agreements between the Federal Railroad Administration (FRA) and CHSRA are “cooperation agreements” governed by statute, not traditional contracts. This interpretation is crucial, as it means California’s claims are rooted in statutory and constitutional rights, allowing for a broader judicial review. The judge specifically noted that the FRA’s decision to de-obligate funds is not an action “left solely to the discretion of the agency” and can be challenged under the Administrative Procedure Act if deemed “arbitrary and capricious.”

The legal challenge from CHSRA stems from the Trump administration’s decision in July, announced by Transportation Secretary Sean Duffy, to cancel more than USD 4 billion in grants and claw back an additional USD 175 million intended for related projects. The state authority argues this move was a politically motivated abuse of power and that the FRA failed to follow contractually obligated procedures, such as providing a formal notice of non-compliance and an opportunity to rectify any alleged issues. This claim is bolstered, Judge Drozd noted, by the project’s latest annual assessment from October 28, 2024, which identified no issues requiring corrective action. Despite this, the project remains a political target, with construction pressing forward on approximately 113 kilometers of guideway and over 50 major structures already completed in the Central Valley.

This legal confrontation is the latest chapter in a politically charged history for the project, which voters first approved via a USD 10 billion bond in 2008. The project’s timeline and budget have since expanded significantly, with commissioning now targeted for 2033 at a cost estimated between USD 89 billion and USD 128 billion. The current dispute mirrors a previous conflict during Donald Trump’s first term, when the administration revoked USD 929 million in 2019, only for the funds to be fully restored by the Biden administration in 2021. This pattern of political volatility has created profound uncertainty, even as CHSRA moves ahead with major procurements, including a recent USD 3.5 billion request for proposals for track and systems installation.

Key Takeaways

• Judicial Oversight Affirmed: The court’s ruling establishes that federal agency decisions to cancel major infrastructure funding are subject to judicial review and cannot be made at the agency’s sole discretion.
• Funding in Limbo: While a procedural victory for California, the ultimate fate of over USD 4 billion in federal funding remains uncertain, pending the full outcome of the lawsuit.
• Political Risk Highlighted: The case underscores the significant political risks facing long-term, multi-billion-dollar infrastructure projects in the United States, where shifting administrative priorities can jeopardize decades of planning and investment.

Editor’s Analysis

Judge Drozd’s decision is more than a regional legal victory; it’s a significant event for the global infrastructure market. This case serves as a crucial test of the stability of federal-state partnerships in an era of intense political polarization. For international engineering firms, rolling stock manufacturers, and institutional investors, the outcome will be a barometer for sovereign risk in the U.S. market. A final ruling that reinforces procedural integrity and limits arbitrary political interference could bolster confidence in future public-private partnerships. Conversely, if the funding cancellation is ultimately upheld, it could cast a long shadow over the bankability of any U.S. infrastructure project reliant on long-term federal commitments, potentially chilling foreign investment and technological partnerships.

Frequently Asked Questions

Why did the federal court allow California’s lawsuit to proceed?

Judge Dale Drozd ruled that the dispute was not a simple contract issue but involved statutory and constitutional rights. He determined the Federal Railroad Administration’s decision to cancel funding is subject to judicial review under the Administrative Procedure Act to ensure it was not “arbitrary and capricious.”

How much federal funding is at stake in this lawsuit?

The lawsuit aims to reinstate over USD 4 billion in federal grants for the main high-speed line, plus a separate USD 175 million designated for four related rail projects in California.

What is the current status and cost of the California high-speed rail project?

The project has been in development for 16 years, with approximately 113 kilometers of guideway infrastructure and over 50 structures completed. However, the estimated cost has risen from an initial USD 33 billion to a current range of USD 89 billion to USD 128 billion, with a projected service start in 2033.