On February 6, 2026, Judge Jeannette A. Vargas of the U.S. District Court for the Southern District of New York granted a temporary restraining order (“TRO”) blocking the U.S. Department of Transportation’s (“DOT”) suspension of federal funding for the $16 billion Hudson Tunnel Project (the “Project”). The Project involves the construction of a new rail tunnel under the Hudson River and the rehabilitation of the existing North River Tunnel (“NRT”), which carries approximately 200,000 daily passengers and is one of the nation’s most critical infrastructure projects following significant damage and disruption experienced during Hurricane Sandy in 2012.
On September 30, 2025, the DOT suspended all disbursements to the Project pending a compliance review related to the Disadvantaged Business Enterprise program. After the Project sponsor, the Gateway Development Commission (“GDC”), provided requested compliance certifications in December 2025, the DOT did not resume funding. GDC financed continued construction through its line of credit, but by late January 2026, its credit facilities were nearing exhaustion. In turn, GDC notified contractors that it would be suspending work beginning on February 6, 2026, unless federal funding resumed.
New York and New Jersey (“States”) filed suit seeking emergency relief. The Court held that the States were likely to succeed on the merits of their claims that the freeze was improper without DOT first finding a clear violation, determining the violation was incapable of being remedied, and providing an opportunity to appeal. The Court also found that the States adequately showed that the funding freeze posed a risk of irreparable harm, given the danger of massive, abruptly inactive construction sites and the corresponding costs to secure them.
This ruling, by definition, is “temporary” and will be the subject of further litigation, which contractors in the Tri-State Area will be watching intently. In the interim, this should serve as a reminder to evaluate upstream and downstream contracting risk allocation with respect to funding disruptions, including resulting liability for impacts and associated costs.
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