U.S. District Judge Clark Waddoups upheld the governor's decision in a Dec. 22 ruling, but he allowed the money to keep flowing through the end of the year.
In its appeal of the decision, Planned Parenthood asked the Denver-based appeals court to keep the money on track as it considers whether to uphold or reverse Waddoups' ruling.
Herbert's spokesman, Jon Cox, issued a statement Wednesday evening in reaction to the ruling.
"The governor is confident that once the 10th Circuit Court of Appeals has the opportunity to look closely at the legal issues in this case, like Judge Waddoups, they will reach the same decision and agree that it is contrary to the public's best interest to remove the governor's discretion to make contract decisions on behalf on the state," Cox said.
Planned Parenthood CEO Karrie Galloway said in a statement that the Wednesday decision "will allow our trusted health care providers and educators to continue serving the thousands of Utahns who depend on us as the appeals process proceeds."
The Utah attorney general's office had no comment on the ruling.
Galloway's organization sued the Republican governor in September, saying Herbert — who announced his order the day before the state GOP convention — violated the group's right to free speech, due process and equal protection for his own political gain.
Peggy Tomsic, a Salt Lake City attorney who's leading the case for Planned Parenthood, pointed out that congressional investigations found no wrongdoing by Planned Parenthood and the Utah chapter has followed the law. "It's not their job to pass judgment on federal funding that has nothing to do with abortion," Tomsic, who fought Utah's gay-marriage ban, said in September.
But state attorneys said Herbert had authority to end contracts with a group whose national affiliate was accused of breaking the law. Waddoups sided with the state last week, saying in a written order that the state had a right to avoid appearing corrupt.