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Key takeaways
- On February 21, 2025, the U.S. District Court for the District of Maryland blocked the government from terminating any equity-related grants or contracts and from forcing contractors and grantees to certify that they are not promoting DEI.
- The decision does not prevent DOJ, agencies, or state attorneys general from voluntarily investigating or bringing legal claims based on DEI initiatives or programming.
- This is just the first decision of likely many across several cases, and it is anticipated that the US Supreme Court will have the final say.
- Federal contractors and grant recipients should continue conducting privileged assessments of their DEI programming and policies.
Here’s what happened
The U.S. District Court for the District of Maryland issued a preliminary injunction on February 21, 2025, temporarily halting the Trump administration’s enforcement of three provisions of its recent executive orders (EOs) targeting “illegal” diversity, equity, and inclusion (DEI) programming and policies. The ruling pertains to two EOs:
- EO 14151, titled “Ending Radical and Wasteful Government DEI Programs and Preferences,” which, on January 20, 2025, ordered federal agencies to end all “equity-related” grants or contracts within 60 days.
- EO 14173, titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” which, on January 21, 2025, directed agencies to include a provision in every contract or grant award requiring the counterparty or grant recipient to acknowledge that its compliance with all applicable federal anti-discrimination laws is essential to the government’s payment decisions, including under the False Claims Act (FCA). EO 14173 also tasked the attorney general with creating a plan to encourage the private sector to eliminate “illegal DEI.”
In a 63-page opinion, issued in a case brought by the City of Baltimore and other interested advocacy groups challenging the EOs, the district court ruled that the plaintiffs were likely to succeed in establishing that the termination provision, the certification provision, and a portion of the enforcement provision violate the Constitution. Specifically, the court found that the termination provision was unconstitutionally vague, and that the FCA certification and enforcement provisions constituted a violation of free speech. Critically, the district court’s order temporarily blocks the administration from terminating any federal contracts or grants related to DEI, and it also blocks the mandate for federal contractors and grant recipients to certify compliance with the prohibition on promoting DEI. Complicating the administration’s plan to use DOJ to target private sector entities, the court’s ruling may be followed by other federal district courts ruling on the same, and the administration will almost certainly appeal this decision.
So what now?
Despite the temporary relief from the enforcement aspects of these EOs, the decision does not necessarily prevent DOJ, agencies, or state attorneys general from independently pursuing legal claims or investigations targeting DEI initiatives or programming, and enforcement agencies can still investigate or take action against violations of Title VII or other civil rights laws on bases other than “illegal DEI.”
Federal contractors and grant recipients should continue to work with their legal counsel to conduct privileged assessments of their DEI programming and policies as this litigation proceeds. Reed Smith’s Government Contracts and Grants team will monitor developments and provide clients with the strategic counsel necessary to stay compliant and mitigate risk.
Client Alert 2025-062
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