Colorado is joining 13 other states in a lawsuit seeking money damages from the U.S. Department of Labor, arguing the federal agency improperly canceled grants for modernizing state unemployment insurance systems and preventing fraud. The Colorado Attorney General’s Office said the grant terminations cost the state $3.7 million. Colorado has received more than $10 million through the grants since 2021, according to the lawsuit. Congress established the funding during the pandemic. The Labor Department awarded more than $780 million to states through six grant programs. In May 2025, the department notified states it would end all the agreements, saying the programs no longer aligned with its funding priorities. The states contend that the department broke its grant agreements by ending projects before their scheduled completion. They say the decision forced states to find other funding, reduce the scope of projects or abandon them. The lawsuit also alleges the department imposed new conditions, misinterpreted the laws authorizing the grants and failed to give states formal notice and a chance to object. Colorado Attorney General Phil Weiser said the agreements did not give the department authority to end the grants solely because the administration’s priorities changed. He said the state is seeking funding it believes it was promised. Weiser described the case as his 87th lawsuit against the Trump administration. The coalition is seeking financial damages; the allegations have not been resolved in court.