A federal judge in Chicago has ordered the U.S. Department of Transportation and Federal Transit Administration to resume processing grant payments for two major rail construction programs, clearing the way for work to continue after a March 27 deadline that transit officials warned would have forced contractors to walk away.
U.S. District Judge Thomas M. Durkin granted the Chicago Transit Authority a temporary restraining order on March 24, finding that the agency’s retroactive application of a new disadvantaged business enterprise (DBE) rule is likely illegal under federal law. The order had been suspended until March 27 at 10 a.m. and with no further court action extending that pause, the ruling now allows the CTA to resume federal refunds, pending any response from the government.
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That’s about $2.1 billion in federal funding that has been frozen to support the CTA’s Red Line extension and the Red and Purple modernization program.
The Red Line extension is a 5.5-mile extension from 95th Street to 130th Street with four new stations, a rail yard and maintenance facilities, with a total project cost of approximately $3.75 billion with a federal share approaching $2 billion.
The Red and Purple Modernization Program, a multi-year rebuild of the North Side track and stations, is nearing substantial completion, but it continues to rely on federal reimbursements for the remaining work.
The court determines selective enforcement
Judge Durkin issued the order after a hearing in which federal attorneys acknowledged that the DOT had applied its October 2025 interim final rule retroactively only to beneficiaries connected to Chicago and New York, out of hundreds of transit grants issued nationwide.
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The court found that the guidance “indicates that reviews for compliance with antidiscrimination laws are pretextually based” for purposes unrelated to the agency’s stated rationale.
Based on this finding, the DOT provided no further guidance between December 2025, when it informed the CTA that its administrative review was complete and funding would resume after certification, and March 2026, even though the CTA had met those conditions.
Justice Durkin identified this silence as an independent basis for finding the agency’s conduct likely arbitrary and capricious.
The DOT did not respond to ENR’s request for comment.
The federal government has not publicly indicated whether it intends to seek a stay from the United States Court of Appeals for the Seventh Circuit.
Jurisdiction and merits
The map shows the preferred alignment for the Chicago Transit Authority’s Red Line extension from 95th Street to 130th Street, including the locations of the proposed rail yard and station, one of two projects affected by the federal funding dispute.
Map courtesy of Chicago Transit Authority
The government argued that the dispute belonged to the United States Court of Federal Claims under the Tucker Act, but Judge Durkin rejected that, citing jurisdiction under Title VI of the Civil Rights Act, which allows federal district courts to review agency decisions that withhold financial aid, the same authority DOT used to justify the initial freeze.
On the merits, which the government largely did not contest, the court found that the CTA could succeed on four grounds: that the retroactive application of the rule was arbitrary and capricious; that DOT ignored the APA’s notice and comment requirements and delayed effectiveness requirements without identifying an emergency; that the agency did not follow the mandatory procedural steps of Title VI before suspending payments; and that DOT violated federal grant management regulations under 2 CFR Part 200 by withholding reimbursements without identifying specific violations or providing CTA with an opportunity to respond. CTA filed requests for payment in early October 2025; more than five months later, the court found that the DOT had failed to act on them.
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Contractors stay on the job
The ruling eliminates the immediate risk of a work stoppage in both programs. Design-build contractor Walsh-VINCI Transit Community Partners, which is leading the $2.9 billion Red Line extension, had already mobilized workers, project offices, field facilities and specialized equipment along the corridor.
CTA said hundreds of companies on the two projects rely on federal reimbursements, with workforce continuity and construction sequencing tied directly to sustained payment streams.
The case joins similar disputes over the second phase of New York’s Second Avenue subway and the Gateway Hudson Tunnel, collectively testing whether federal agencies can cut off reimbursement streams on projects already funded and under construction.
