An association representing major universities has won more than $450,000 in legal fees from the United States government after a federal judge ruled against the Department of Defense’s attempt to cap reimbursement rates on federally funded research. The decision comes from US District Judge Brian Murphy in Boston, who ordered the government to pay the Association of American Universities to cover costs incurred during the lawsuit. The case centered on a Defense Department policy that sought to limit the reimbursement of “indirect costs” — which cover facilities, equipment, and shared research staff — to 15%. Twelve universities and three academic trade groups, including the AAU, filed suit in May 2025 after the policy was announced. Judge Murphy initially issued a temporary restraining order in June 2025 and entered judgment for the plaintiffs in December. The department appealed the ruling, but eventually abandoned the appeal, clearing the way for the final fee award.
Murphy’s ruling relied on the Equal Access to Justice Act, a 1980 statute that allows litigants to recover costs from federal agencies when the government’s position in the underlying case was not “substantially justified.” The judge found the Defense Department’s justification lacking. He noted that the agency cited comparable rate caps announced by the National Institutes of Health and the Department of Energy, but failed to acknowledge that other judges had already blocked those specific caps. Murphy described this omission as unreasonable, a comparison that effectively likened the agency’s approach to an ostrich burying its head in the sand. He also rejected a Justice Department argument suggesting the AAU should be disqualified from recovering fees because its membership includes wealthy institutions like Harvard and Yale. Murphy found that the AAU had independently funded the litigation, spending more than $2 million of its own money. The judge did trim the AAU’s original request of $530,000 as slightly excessive, settling on a final figure of just over $450,000.
While the AAU was represented by attorneys from Clement & Murphy and Jenner & Block, neither firm responded to requests for comment. Spokespeople for the AAU and the Defense Department also did not provide statements. The decision provides a new data point for courts assessing the “substantially justified” standard and the reasonableness of fee requests. University general counsel tracking parallel disputes with the National Institutes of Health and the Department of Energy now have a specific ruling to reference when evaluating similar cases. Firms currently litigating those separate caps are expected to cite Murphy’s reasoning as they approach the fee-recovery stage of their own proceedings. This outcome mirrors recent enforcement actions where the government faced significant financial penalties for similar policy failures. [1] Care home firm fined nearly 100000 also highlights how regulatory bodies can be held accountable for excessive penalties.
