What Is the Hudson River Gateway Project Lawsuit?
The Hudson River Gateway Project lawsuit is a federal case over a funding freeze on the $16 billion Hudson Tunnel Project. New Jersey and New York sued the U.S. Department of Transportation in Manhattan federal court on February 3, 2026. Judge Jeannette A. Vargas ruled for the states on June 29, 2026.
The Hudson Tunnel Project is the centerpiece of the wider Gateway Program. It would build a new two-tube rail tunnel under the Hudson River and rehabilitate the 116-year-old North River Tunnel. Amtrak and NJ Transit trains use that tunnel to reach Penn Station.
Neither case discussed on this page is a class action or a multidistrict litigation. Governments and a public commission sued, and no group of similar claimants can join. A separate contract suit by the Gateway Development Commission (GDC), which builds the project, is covered in the case status section below.
“Suspending the funding for this monumental project based on the President's desire to punish political rivals violates the Administrative Procedure Act many times over. In this Complaint, Plaintiffs New Jersey and New York ask the Court to stay, vacate, declare unlawful, and enjoin the September 30 decision to suspend federal funding for the Project.”
Source: U.S. District Court, S.D.N.Y., State of New Jersey and State of New York v. U.S. Department of Transportation et al., No. 1:26-cv-00939, Complaint, Document 1, paragraph 15 (filed Feb. 3, 2026)
Why Was the Hudson River Gateway Project Lawsuit Filed?
The Hudson River Gateway Project lawsuit was filed because the U.S. Department of Transportation suspended federal payments to the project on September 30, 2025. The states' complaint says the department acted without warning while it reviewed the project's contracting with disadvantaged business enterprises.
Russell Vought, the White House budget director, said the pause was meant to keep money from supporting what he called unconstitutional DEI principles. The Gateway Development Commission said it had followed the federal contracting rules.
The commission kept building on its operating budget and credit until the money ran out. On December 1, 2025, the department told the commission it would resume payments if the commission certified certain steps. The commission certified on December 8 and again on January 8, 2026. The complaint says the department never answered and never resumed payments.
The states sued alongside the commission because they argued the commission's contract suit could not recover their own harms. Those harms include the cost of keeping idle sites safe and the loss of reliable rail service.
What Harms Does the Hudson River Gateway Project Lawsuit Allege?
The Hudson River Gateway Project lawsuit alleges four harms. They are an unlawful funding suspension, political retribution, a construction shutdown with job losses, and added risk to the aging North River Tunnel. Each item below comes from the parties' filings and statements.
Judge Vargas ruled on the legal claim in June 2026. The reports reviewed for this page do not describe a finding on political motive.
Unlawful Funding Suspension
Under the Administrative Procedure Act, a federal court can set aside agency action that is arbitrary, capricious or contrary to law.
The states say the September 30 suspension broke the procedural rules that limit when a transportation agency can withhold funds on awarded grants. They also call the decision arbitrary and capricious.
Judge Vargas agreed that the suspension was contrary to law as far as it stopped disbursements. She vacated the decision, which means the court set it aside.
Political Retribution
A claim of political retribution alleges that an agency acted from a punitive motive instead of a lawful, stated reason.
The complaint alleges the freeze punished political rivals. It points to public statements by President Donald Trump that are quoted in the evidence section below.
The Department of Transportation says its review concerns contracting rules, not politics. The reporting reviewed shows no court ruling on the motive question.
Construction Shutdown and Job Loss
A construction shutdown is a halt of active work at project sites, usually caused by a funding gap or a safety order.
Work stopped on February 6, 2026 and about 1,000 workers lost their jobs for roughly three weeks. The commission said a longer pause could put about 11,000 construction jobs at risk.
The New Jersey Attorney General's office told the court that a stop would force the states to pay to maintain active sites. It said that money could never be recovered.
Risk to the North River Tunnel
The North River Tunnel is the existing two-tube rail tunnel under the Hudson River, in service since 1910.
The complaint says the tunnel carries about 425 trains and more than 200,000 passengers each weekday. It says Superstorm Sandy flooding in 2012 left chemical residues that weaken the tunnel.
The commission warned that a long delay on the new tunnel raises the chance that the old one fails. Officials have not said when that could happen.
What Is the Current Status of the Hudson River Gateway Project Lawsuit?
The current status of the Hudson River Gateway Project lawsuit is that the states won in the district court and the federal appeal was reportedly dismissed in September 2026. Judge Vargas ruled on June 29, 2026 that the funding suspension was contrary to law.
ROI-NJ reported on September 21, 2026 that the federal government agreed on September 18 to drop its Second Circuit appeal. This page could not view the appeals docket, so it treats that report as a single-source finding.
The commission's separate contract suit is still open on two counts, based on the last reporting found, from March 2026.
State of New Jersey and State of New York v. U.S. Department of Transportation
This is the states' Administrative Procedure Act case. The docket sits in the Southern District of New York and is listed as terminated on June 30, 2026.
| Court | U.S. District Court, Southern District of New York |
| Case Number | 1:26-cv-00939 |
| Judge | District Judge Jeannette A. Vargas |
| Filed | February 3, 2026 |
| Plaintiffs | State of New Jersey and State of New York, through Acting Attorney General Jennifer Davenport and Attorney General Letitia James |
| Defendants | U.S. Department of Transportation, Secretary Sean Duffy, the Federal Railroad Administration, the Federal Transit Administration, the Build America Bureau, and the heads of those agencies |
| Relief Sought | Declaratory and injunctive relief to stay, vacate and enjoin the September 30, 2025 suspension |
| Key Ruling | June 29, 2026 order vacating the suspension as contrary to law insofar as it stopped disbursements |
| Appeal | Notice announced August 28, 2026; reported agreed dismissal September 18, 2026 (Second Circuit) |
An earlier appeal over the February temporary order was docketed in the Second Circuit as No. 26-282, according to CourtListener.
Gateway Development Commission v. United States
This is the commission's breach of contract suit under the Tucker Act. It is a different proceeding from the states' case, with its own judge and its own remaining claims.
| Court | U.S. Court of Federal Claims |
| Case Number | 1:26-cv-00176 |
| Judge | Judge Richard A. Hertling |
| Filed | February 2, 2026 |
| Plaintiff | Gateway Development Commission |
| Defendant | United States |
| Amount Sought | $205,275,358 in withheld reimbursements, plus damages for a work stoppage in an amount to be set at trial |
| March 12, 2026 Ruling | Most counts moot after the money was paid; two counts on stoppage damages and good faith left open |
| Latest Step Found | Status conference set for March 24, 2026; no later ruling found |
Judge Hertling said he agreed the government breached its contract but found an order to pay pointless because the money had already been paid.
Is There a Settlement in the Hudson River Gateway Project Lawsuit?
No. The Hudson River Gateway Project lawsuit has no monetary settlement, and the states did not sue for damages. They asked the court to set aside the suspension and order funding to continue.
This page does not estimate what any related claim could be worth. Outcomes in government funding cases depend on the facts, the agreements involved and the court. Only a qualified attorney reviewing the records can assess them.
The money at issue is a funding stream, not a damages award. The $205 million the commission sued for was reimbursement for work it had already done, and the federal government released it in February 2026.
The federal share of the project is large. The commission signed a full funding agreement for $6.88 billion in federal funding on July 8, 2024. New Jersey and New York agreed in July 2022 to pay 25 percent each, with the federal government paying 50 percent.
The only open money claim found is the commission's request for damages from the February stoppage. The amount has not been set, and the Court of Federal Claims has not ruled on it in the reporting reviewed.
Hudson River Gateway Project Lawsuit Updates and Case Status
Here is the current status of the Hudson River Gateway Project lawsuit, updated with new filings and rulings as they are confirmed. The states won in the district court, and the federal appeal was reportedly dropped in September 2026.
The timeline below covers every verified development, in order, across both court cases.
Hudson River Gateway Project Lawsuit Timeline
Gateway Development Commission Launches the First Tunnel Boring Machine
The Gateway Development Commission held a ceremonial launch of the first Hudson Tunnel Project tunnel boring machine in North Bergen, New Jersey, on September 28, 2026. Reports say digging would begin within days, after federal funding resumed earlier in the year.
Federal Government Agrees to Dismiss Its Second Circuit Appeal
ROI-NJ reported that the federal government, New Jersey and New York agreed on September 18, 2026 to dismiss the federal appeal of Judge Vargas's June ruling. The court's order did not explain how the parties reached the agreement, and this page could not view the Second Circuit docket.
Trump Administration Announces an Appeal of the June Ruling
The Trump administration told Judge Vargas on August 28, 2026 that it was appealing her June order in the Hudson River Gateway Project funding case to the Second Circuit. New Jersey Monitor reported the notice.
Southern District Docket Lists the States' Case as Terminated
CourtListener lists State of New Jersey v. U.S. Department of Transportation, No. 1:26-cv-00939, as terminated on June 30, 2026, the day after Judge Vargas issued her merits order.
Judge Vargas Vacates the Funding Suspension
Judge Jeannette A. Vargas of the Southern District of New York ruled on June 29, 2026 that the Department of Transportation acted contrary to law when it suspended disbursements to the Hudson Tunnel Project. The 59-page order vacated the September 30, 2025 decision.
Court of Federal Claims Finds Most of the Commission's Suit Moot
Judge Richard A. Hertling ruled on March 12, 2026 that most counts in Gateway Development Commission v. United States were moot because the $205 million had been paid. He said he agreed the government breached its contract and left two counts open.
Second Circuit Rejects the Government's Bid to Restore the Freeze
Reporting dated March 11, 2026 says the Second Circuit rejected the Trump administration's attempt to halt payments while the states' case continued. Funding stayed in place and work continued at the project sites.
Commission Says Construction Is Resuming
The Gateway Development Commission said on February 24, 2026 that construction would resume that week and that nearly 1,000 affected jobs would be restored. The work pause had begun on February 6.
Federal Government Releases the Rest of the $205 Million
The Gateway Development Commission announced on February 18, 2026 that the federal government had released the remainder of the $205 million in withheld reimbursements.
First Federal Payment of $30 Million Arrives
The Gateway Development Commission said on February 13, 2026 that it received a first $30 million payment from the federal government. It expected to receive the full $205 million.
Second Circuit Declines to Overrule Judge Vargas's Order
The Second Circuit declined on February 12, 2026 to block Judge Vargas's temporary order requiring the government to resume funding. It scheduled arguments for the week of February 23.
Federal Government Files Notice of Appeal of the Temporary Order
ROI-NJ dates the federal government's notice of appeal of Judge Vargas's temporary order to February 8, 2026. CourtListener lists the Second Circuit appeal as No. 26-282, filed February 9.
Judge Vargas Orders Funding to Resume as Construction Stops
Judge Jeannette A. Vargas issued a temporary order on February 6, 2026 requiring the Department of Transportation to resume reimbursement payments. She found the states would suffer irreparable harm. The Gateway Development Commission had already stopped work at its five active sites.
New Jersey and New York Sue the Department of Transportation
New Jersey Acting Attorney General Jennifer Davenport and New York Attorney General Letitia James filed State of New Jersey v. U.S. Department of Transportation in the Southern District of New York on February 3, 2026. The 29-page complaint seeks declaratory and injunctive relief.
Gateway Development Commission Sues in the Court of Federal Claims
The Gateway Development Commission filed a 75-page breach of contract suit against the United States in the Court of Federal Claims on February 2, 2026. It sought $205,275,358 in withheld reimbursements plus damages for any construction pause.
Commission Warns Contractors That Work Will Pause on February 6
The Gateway Development Commission notified its contractors on January 26, 2026 that all work on the Hudson Tunnel Project would pause on February 6 unless federal funding resumed, according to the states' complaint.
Commission Confirms It Met Every Federal Request
The Gateway Development Commission wrote to the federal government again on January 8, 2026, confirming that it had complied with every request. The states' complaint says the Department of Transportation had not responded by the filing date.
Commission Provides the Certification the Department Requested
The Gateway Development Commission sent the Department of Transportation a letter on December 8, 2025 certifying that it would take the steps the department had requested a week earlier.
Department Offers to Resume Payments Against a Certification
The Department of Transportation told the Gateway Development Commission on December 1, 2025 that it would resume federal disbursements if the commission certified certain actions tied to the department's compliance review.
President Trump Repeats the Statement That the Project Is Dead
President Donald Trump posted again two days later, on October 17, 2025, that cuts to Democrat programs were permanent and that the Gateway project was close to dead, as quoted in the states' complaint.
President Trump Posts That the Project Is Terminated
President Donald Trump wrote on Truth Social on October 15, 2025 that the Manhattan project was terminated and tied it to Senator Chuck Schumer, according to the states' complaint.
White House Budget Director Announces the Freeze Publicly
Office of Management and Budget director Russell Vought withheld a combined $18 billion for the Hudson Tunnel Project and the Second Avenue Subway Phase 2 project on October 1, 2025, citing concerns about diversity, equity and inclusion practices.
Department of Transportation Suspends Payments to the Project
The U.S. Department of Transportation announced a decision on September 30, 2025 to suspend payment of all Hudson Tunnel Project funds pending a review of disadvantaged business enterprise compliance. The states' complaint calls this the September 30 Suspension.
Commission Signs a $6.88 Billion Federal Funding Agreement
The Gateway Development Commission signed a full funding grant agreement with the Federal Transit Administration on July 8, 2024 for $6.88 billion in federal funding for the Hudson Tunnel Project.
Hudson Tunnel Construction Begins
Construction on the Hudson Tunnel Project began on November 8, 2023. The new tunnel is scheduled to open in 2035, and rehabilitation of the North River Tunnel is scheduled to finish in 2038.
New Jersey, New York and the Federal Government Agree on a Cost Split
New Jersey and New York each agreed on July 5, 2022 to pay 25 percent of the Hudson Tunnel Project's cost, and the federal government agreed to pay 50 percent. The commission later set the total cost at $16.1 billion.
What Evidence Supports the Hudson River Gateway Project Lawsuit?
The evidence in the Hudson River Gateway Project lawsuit consists of the commission's certification letters, public statements by the President, and the department's own conduct. The states' complaint relies on the items below.
| Type of evidence | What it shows |
|---|---|
| Public statements | On October 15, 2025 the President wrote that the project was terminated. Two days later he wrote that the project was close to dead. |
| Certification letters | The commission's letters of December 8, 2025 and January 8, 2026 show it did what the department asked. |
| Lack of a response | The complaint says the department never replied to either letter or resumed payments. |
| Court questioning | Judge Hertling asked how the department could take over five months to decide on compliance. A Justice Department lawyer had no information on the review's status. |
| Contract documents | Grant and loan agreements signed in July 2024 set the federal payment obligations at issue. |
The department's own filings say the review concerns contracting rules. Those filings are summarized in the section on the department's arguments below.
What Did the Department of Transportation Argue in the Hudson River Gateway Project Lawsuit?
The Department of Transportation argued that its review of the commission's contracting program justified the pause. A department spokesperson said it was committed to making sure taxpayer dollars do not fund unconstitutional, discriminatory contracting practices.
Department lawyers also challenged where the case belonged. They argued that a contract dispute over grant money may belong in the Court of Federal Claims. Judge Vargas acknowledged these were serious arguments and still granted relief.
| Argument | Department of Transportation position | How the court responded |
|---|---|---|
| Compliance review | The pause allowed time to review disadvantaged business enterprise rules | Judge Hertling asked why the review took over five months and got no answer on its status |
| Wrong court | A contract funding dispute may belong in the Court of Federal Claims | Judge Vargas granted the states relief and later vacated the suspension |
| No irreparable harm | The commission had enough funds for a few more weeks | Judge Vargas found the states would suffer irreparable harm without an order |
| Money cannot be recovered | Paying about $200 million now could not be undone if the government won on appeal | The Second Circuit declined to block the order in February 2026 |
How Does the Hudson River Gateway Project Lawsuit Compare to Related Cases?
Two other lawsuits touch the same project but raise different questions. Neither one challenges the September 2025 funding suspension.
| Case | Allegation | Reported status |
|---|---|---|
| Gateway Development Commission v. United States (Court of Federal Claims) | Breach of the federal grant and loan agreements; described in the case status section above | Two counts open as of March 2026, no later ruling found |
| George Harms Construction Co. lawsuit against the Gateway Development Commission (D.N.J.) | A project labor agreement unlawfully shuts out bidders such as Harms, a United Steelworkers employer, from the New Jersey Surface Alignment Project | Filed November 18, 2025; no ruling found in the reporting reviewed |
The Harms suit names the commission's members, the Federal Transit Administration and the Department of Transportation. The commission said no bidder is excluded as long as the bidder's unions sign the labor agreement.
Frequently Asked Questions
What is the Hudson River Gateway Project lawsuit about?
The Hudson River Gateway Project lawsuit is about a federal funding freeze on the $16 billion Hudson Tunnel Project. New Jersey and New York sued the Department of Transportation on February 3, 2026 after it suspended payments on September 30, 2025.
Is the Hudson River Gateway Project lawsuit a class action?
No, the Hudson River Gateway Project lawsuit is not a class action or an MDL. Two states sued a federal department, and a separate suit by the Gateway Development Commission is a contract case.
Who won the Hudson River Gateway Project lawsuit?
The states won the Hudson River Gateway Project lawsuit in the district court. Judge Vargas ruled on June 29, 2026 that the funding suspension was contrary to law, and she vacated it.
Did the Trump administration appeal the Gateway tunnel ruling?
The Trump administration announced an appeal on August 28, 2026, and ROI-NJ reported that the parties agreed on September 18 to dismiss it. This page could not view the Second Circuit docket to confirm the dismissal order.
Is there a settlement in the Hudson River Gateway Project lawsuit?
No monetary settlement exists in the Hudson River Gateway Project lawsuit, because the states sought relief from the freeze and not damages. The commission's separate suit had an open damages claim for the February 2026 work stoppage at its last reported ruling.
Is the Gateway Development Commission lawsuit the same as the states' lawsuit?
No, the Gateway Development Commission lawsuit is a different case from the states' lawsuit. The commission sued in the Court of Federal Claims on February 2, 2026 under case 1:26-cv-00176, while the states sued in the Southern District of New York.