Court Blocks Trump’s DEI Funding Restrictions

In a District Court ruling on Halloween, a Federal District Court ruled against the Trump Administration’s attempt to strip funding from a recipient of federal financial assistance.  GovSpring has previously written about the Trump Administration’s executive orders prohibited Diversity, Equity, and Inclusion in federal grants and contracts. In the most recent decision out of the Western District of Washington, the court granted the City of Seattle’s request for a preliminary injunction preventing the enforcement of two Executive Orders: EO No. 14168 “Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government” and EO No. 14173 “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.”  Under EO 14168 (“Protecting Women”), agencies are required to “assess grant conditions and grantee preferences and ensure grant funds do not promote gender ideology.”  Under EO 14173 (“Ending Illegal Discrimination”), agencies are required to include terms in grants and contracts that state compliance with Federal anti-discrimination laws is “material to the government’s payment decisions” and requires certification that recipients don’t promote DEI.  These latter terms have been the source of concern for recipients and contractors, since they explicitly include the potential for False Claims Act (“FCA”) liability for having a DEI program. 

            The court enjoined enforcement of both orders under the Administrative Procedure Act (“APA”) as unconstitutional and in excess of statutory authority.  The orders were unconstitutional since they attempted to limit funding based on conditions not authorized by Congress, who is granted the spending power.  Additionally, the Court found that the DEI order expanded the definition of “federal anti-discrimination laws” as codified under Title VI of the Civil Rights Act of 1964 and the definition of “material” under the False Claims Act.  This constituted an unauthorized expansion of the legislation cited as the basis for conditioning funding.  The Court cited its prior decision from August, 2025 in King County, et al. v. Turner, 2025 WL 2322763, *12-13 (W.D. Wash. Aug. 12, 2025).  In that case, the Department of Housing and Urban Development rejected King County’s continued funding application due to the County’s use of “equity,” “migrant,” and “immigrant” throughout the plan.  The Court similarly enjoined HUD from imposing or enforcing similar conditions in grants, finding that a significant portion of case law contradicted the Administration’s interpretation of the antidiscrimination laws.  For example, the use of those terms in a continued funding application does not run afoul of anti-discrimination laws.  More fundamentally, as explained by the Court in the Seattle decision, “the DEI Order does not simply require that grant recipients comply with federal antidiscrimination laws; rather, the Order is meant to advance the Trump Administration’s own interpretation of ‘discrimination’ through the threat of the loss of federal funding and/or FCA investigations and penalties.”  In other words, the enforcement action is an attempt to impose a new definition of discrimination that is not supported by any anti-discrimination statute. 

            The injunction may be upheld on appeal, although it is not clear based on a preceding case appealed to the Ninth Circuit.  In August, in Thakur v. Trump, the Ninth Circuit found that the termination of several grants due to their promotion of DEI, DEIA, or environmental justice was “in violation of the bedrock principle that the government cannot ‘leverage its power to award subsidies on the basis of subjective criteria into a penalty on disfavored viewpoints’ or ‘aim at the suppression of dangerous ideas’ in the provision of subsidies.”[1]  Although the Court of Appeals upheld the lower court’s injunction based on First Amendment grounds, not separation of powers grounds, they only did so because the District Court failed to reach the separation of powers arguments since Plaintiffs (terminated grantees) had shown a likelihood of success on their First Amendment claims. 

            While there are several reasons to remain cautious as a grant recipient or contractor who values diversity, if your grant or contract funding is cut, you should consider challenging those cuts.  It appears that several DEI orders do not adequately track Federal anti-discrimination law, impose new requirements not authorized by Congress, or fail to follow steps required under the Civil Rights Act and implementing regulations.  GovSpring is available to help contractors and companies understand how legal developments may impact current and future contracts. Click here to schedule a consultation or fill out our online contact form to be contacted by our Managing Attorney.

[1] Thakur v. Trump, 148 F.4th 1096, 1107 (9th Cir. 2025).